It's that time of the year again, when economic policy wonks and tax experts start to labour and fret over the upcoming Union Budget. Many acres of newsprint are devoted to budget expectations and speculations with respect to tax and policy measures, while financial channels go into a tizzy with daily analyses of rumoured measures that may or may not be announced by the Finance Minister. In the meantime, many employees of the Ministry of Finance are locked up in a basement to ensure that no details are leaked. In short the budgetary circus comes to town.
The annual budget in independent India was first presented in the month of November 1947 and in what was then, economically, a very different country, with the subsequent planning commissions and a huge investment being made in the public sector by the government. Post-liberalisation, the country has moved on from a government-led and controlled economy to a market one.
Many years on, the planning commission has been scrapped. Yet not much has changed in the way we treat the Union Budget. Each year, it is the star attraction for financial policy makers and tax consultants. It is sold by all and sundry as the annual panacea to all economic ills, the Kumbh Mela to wash the sins of subsidies past, an inflection point in the growth of a country which by the sheer power of its announcement brings about a 2-3% upward shift in the gross domestic product. And sure enough, as soon as the Finance Minister finishes his budget speech, anyone who is anyone or has the delusions of being someone worth their salt will offer their opinion on it. News channels will feature hyperventilating panellists, the stock markets will perform a mini referendum, the spokespersons of opposition parties will generally release a press statement deriding the budget and calling it "anti-farmer", "unimaginative", "having nothing in it for the poor Indian" regardless of who is in power. And sure as clockwork, tax guys such as yours truly will hit the talk circuit to promote their own expertise and insight and explain the tax measures to businesses big and small who would want an analysis of the fine print, fearing another Vodafone-style sucker punch.
In the midst of this brouhaha we should pause and ask ourselves: Is reform a singular annual event? Should the government have to wait for the end of February to prescribe remedies for the failings that plague our economy? Is it necessary to waste political and human capital over what is in effect the announcement of the fiscal vision for the country? Why not institutionalise on-going reforms in our policy making? Would it not enable better and more effective policies? To be sure, fiscal policy has to be spelt out for the next 12 months to avoid uncertainty among businesses, while regulatory and general policy measures are better off being staggered through the remainder of the year.
Our economy is delightfully complex, like everything associated with us. Perhaps it would be much better if reforms were a continuous series of incremental steps that offer room for correction and ensure that we are going in the right direction rather than the proverbial big bang that all seem to be gunning for. Announcing required but unpopular policy steps is also easier when the eyes of the entire nation are not focussed on you. The government has already made a few steps in this direction by decontrolling fuel prices at the earliest opportunity and announcing a raft of other small but significant policy measures aimed at growth. Perhaps the Prime Minister can set the record straight and let it be known that his government shall aim to continue this policy and not attempt to change the world on budget day. Perhaps folks like me will then be able to take vacations during the month of February.