Annual Budgets and Annual Reactions!

In the days following the Annual budget last week, I saw a clip going viral on WhatsApp which had Uddhav Thackeray, the Shiv Sena Chief and Chief Minister of Maharashtra speaking in a CNBC function to felicitate Finance Minister Nirmala Sitharaman. This clip (watch here) must be couple of years old. In the clip, Thackeray in a very self-deprecating manner, talks about his tryst with giving budget reactions. He says that for few years he tried to understand what’s in a budget but by the time he could do so, it was time for the next budget! But, since as the party chief he had to give some reaction to the budget, he developed a template response which was “This is a budget which will make poor poorer and rich richer” and more often this response for every budget landed well with his constituency. You would notice that even today, this response has a lot of owners among politicians! In today’s article in the Times of India, columnist and now a MP Swapan Das Gupta has mentioned that Vajpayee while in opposition had a stock reaction to any budget which was “Garib ke pet lat” (Kick in the stomach for the poor)!

If there are Annual budgets, there are equal and opposite Annual reactions! It’s therefore clear that one cannot go by the reactions of politicians on the budget to conclude how the budget has been. If leaders of parties and politicians cannot figure out what’s there in the budget how can we expect the common man to understand how it is going to impact him? While we all know that provisions in the budget have a huge impact on the livelihood of millions of people in the country who remain below the poverty line, during the budget week what we hear is only responses of people to whom budgets don’t matter. Those who are impacted by the budget are not in a position to comment because it is beyond their comprehension.

Here’s where I feel that the Budget presentation and the speech needs to be simplified if we want the common man to fully appreciate the implications of announcements being made by the FM on behalf of the government of the day. And here is my wish list on some of the changes I would like to see in my lifetime (I might have articulated some of this before also):

  • Articulation of what matters: In the run up to this year’s budget, the buzz was on jobs. We all know that in the last two years of the pandemic jobs got hit badly. In a double whammy, the pandemic led to a cut in existing jobs and slow addition of new jobs. Human/Contact facing service industry faced the worst hit. So, the expectation was that there will be clear actions to revive the job market. However in the budget speech, there was no explicit mention of job creation. In the post budget interactions, the FM and her team took pains to explain that the government has taken the route of propping up growth by spending which will lead to job creation. For example, they said that the huge 35% increase in outlay towards infrastructure and capital expenditure is a step towards reviving consumption in sectors like steel, cement etc. and jobs. This is logical.  Yet commentators continue to mention about the lack of focus on jobs in the budget.  And Aam Admi obviously feels the same.
    • Now considering that there was an overall anxiety and expectations about jobs among common people particularly those below the poverty line, what if the speech mentioned the estimated number of jobs that would be created due to the outlay? For example, “National Highways network to be expanded by 25000 km in 22-23 resulting in an estimated number of “X” jobs during the year”! 100 PM Gati Shakti Cargo terminals for multimodal logistics facilities which is expected to create “Y” number of jobs!
    • The same outlay but with a clear articulation of what matters like “jobs” this year, I think would generate a lot of confidence and comfort to the people for whom these announcements matter.
  • Putting out Outcomes of last year outlay before announcement of new outlays: During the entire budget speech the FM keeps announcing crores and lakhs of Rupees as outlays for different initiatives much to the loud cheers of the party MPs. But as public, we don’t get to know what was achieved with previous year outlays for the same initiatives to appreciate the new outlay.
    • For example, the health sector has been allocated a 16% higher outlay of Rs. 86200 Crore in this budget compared to last year outlay of Rs. 72931 crores. Now we don’t get to understand details of how the outlay of RS 72931 crores was spent and what was achieved. Another example – During the UPA regime, after the horrific Nirbhaya incident, an announcement was made of a “Nirbhaya fund”. I have no idea if that fund still exists and how the same is being put to use.
    • If we understand that, then we will be in a better position to appreciate the increased outlay for the next year.
  • Articulation of what went wrong: In the budget speech we never get to hear of anything that went wrong on the outlays or the outcomes in the previous year.
    • For example, the targets for disinvestment have been missed for few years now. But we don’t get to understand what went wrong and why those numbers were missed. It could be the procedural delays or timing issues (Bull Vs Bear market) or it could be pandemic related delays. This could be a very utopian thought but if the government of the day articulates the reasons for the miss, it will go in a long way building credibility in the budget process.
  • Articulation of how taxes work: Present a summary of how the taxes that have been collected have been put to use in the current year.
    • Many years ago, on a trip to Colombo, I saw at the heart of the city, some major repair work was going on with the roads and traffic was diverted. There I saw a board which said “Take Diversion. Your Tax money at work”! This was in the early 90’s. The fact that I still remember it and recall it here says about the impact of such earnest disclosures from the government side. What if at the beginning of the speech the FM says, “With the taxes collected last year, we could lay X kms. of roads, build Y number of new hospitals, open Z number of Colleges and schools and so on just focussing on the physical assets created with the taxes this year? Don’t you think that this kind of commentary will once for all remove the clamour for income tax reduction or slab changes or rants for paying taxes year after year?
    • I firmly believe that the common people who earn and can afford to pay the taxes must be co-opted in the nation building process. Such small gestures of earnest disclosures, I believe will go a long way in this.
  • Keep the jargons for The Economic Survey: The speech and announcements are supposed to pick up threads from the Annual Economic Survey. My suggestion is that Economic Survey being a reference document prepared by economists can and should use jargons like “Crowding in”, “Virtuous cycle”, “Animal Spirits of the economy” and “JAM Trinity” etc. while the budget speech should be left simple free of lofty jargons and acronyms.

This is the ace cartoonist R.K.Laxman’s cartoon way back in 1989 post the budget!

This could very well play out the same way even today. The only way to change the same is to simplify the budget speech and ensure that the common people are co-opted into the budget comprehension process.

6 thoughts on “Annual Budgets and Annual Reactions!

  1. Manoj Kottil says:

    Anand, I am with you on this.
    Magnitude of investment outlays and resulting opportunities are not understood from the the budget.
    Budget bashing happens for three days and then it is forgotten.
    Only wish that atleast 75%of outlay gets deployed.i think this is the bigger problem

    Liked by 1 person

  2. Mukund says:

    Very good way of articulating budget analysis 👏👏
    For someone like me, who doesn’t fully understand n follow technicalities in the budget, this blog is quite informative.
    No doubt the budget has assumed ritualistic proportions over the years and so does the commentary 😊

    Liked by 1 person

  3. Jayant Masti says:

    This article touches upon the core fact that those commenting on the budget have no clue on what it is all about & Udhav Thackeray has been honest about it when he so joked along. I would not be surprised if the budget presentation was delayed due to some technicalty on the day by a few hours, the Reactions of the Commentators about the Budget would have preceded the presentation of the Budget itself as so set & predictable are the reactions.
    And yes, it is an excellent Communication idea of telling the people how thier money is being spent in layman terms vis a vis the Taxes collected. Hope the PMO reads the same

    Liked by 1 person

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