The excitement our media and entire financial industry display over the budget is baffling. Every year they hype the occasion, as if a life-altering event will occur when the finance minister opens his bag of tricks and makes some announcements.
For the politician, the budget is a chance to score political points. It is a chance to tell people how generous the government is, and how concerned they are about the welfare of the less fortunate. Of course, it is the people’s money in the first place that the government collects and spends. However, it does sound wonder-ful to announce, “We will spend thousands of crores for women and education.”
A population too naive to figure out what the budget is about will never get the budget they need to truly progress. Working out what the budget is about? That sounds terribly boring. Better we talk about the statue isn’t it?
However, if you are still reading, it is imperative every Indian understands what is going on with our finances, and what can be done to make our lives better. The budget is a blueprint of how the government will earn and spend its money.
In terms of numbers, the Centre earns around Rs 12 lakh crore a year. For simplicity’s sake, imagine the government to be a person called Gopi who earns Rs 12 lakh a year. Gopi’s salary has risen well, it is up from around Rs 9 lakh annually three years ago. However, Gopi always spends a lot more than he earns. Three years back he used to spend Rs 14 lakh a year. Today he spends Rs 18 lakh a year.
Every year, to fund this deficit, he borrows and prints money. This creates two major problems. One, it reduces the value of money, causing constant high inflation. Two, it increases interest rates for everyone else, making it expensive for business to borrow and prevents them from investing much.
Inflation, often the top issue for citizens, cannot be solved until this income vs expense gap is narrowed. To do this the government has to make more money and/or reduce expenses. Sadly, there is little wiggle room on expenses. Subsidies and defence, even though expensive, are too sensitive to touch. Interest payments based on previous borrowings can’t be reduced. These items are the bulk of expenses.
There is thus only one way to fix India’s inflation and growth woes. It is to improve business and consumer sentiment. The solutions have been prescribed everywhere — whether they are simpler taxes, easier regulations or the government stepping back from smothering business.
The coalition-hobbled, corruption-tainted UPA, people thought, was in an unfixable policy paralysis. However — in what was a surprise to many — even the current government didn’t announce measures that would dramatically improve business sentiment, at least in this budget.
The pro-development, pro-business, pro-youth, pro-growth sarkar also presented a budget that was more status quoist than revolutionary. It raises some existential questions. Is it so scary even for a government in absolute majority to change things in India, for fear of negative political fallout? Do Indians reward politicians who do not rock the boat? Do we citizens actually feel the budget is handout time, and not the time to truly fix what is wrong?
We must fix our finances. What is needed is a sure, solid sign of support for broad business acti-vity (not to be confused with government-business nexus). A low, simple and uniform GST will help. Reducing or perhaps even eliminating capital gains tax will make India a good investment destination. A few SEZs, which have laws as free and modern as the financial centres of the world, will help. For instance, it would be a wonderful gift to Seemandhra if we allowed them to make one of their cities the next Singapore.
Also, the government can divest and liquidate dead assets more. For instance, why does the government sit on so much land, especially when it is in a near-debt trap? Does the government really need to run each and every train in India?
The current budget did not answer all this to the extent required. The short time period since the government took over may be cited as a reason. However, it would be good to know a date after which we can consider the government settled in and open to judgment.
One only hopes the desire for control, hesitation to rock the boat and insecurity about political fallouts don’t prevent the government from performing to its full potential. In fact, radical but good decisions the government takes will find tremendous support in traditional and social media. The two-month-old government is playing its game too safe.
Today, not taking risks is the biggest risk. Go on, do something spectacular. India is waiting.
The writer is an acclaimed novelist.