BackOpinion | No moral or ethical reason not to present regular budget
Democracies should shun the idea that govts must stop governing few months ahead of polls
-k7lB--621x414@LiveMint_1548788908581.jpg "Photo: Mint")
PremiumIs the budget to be presented on 1 February an interim budget or a regular one? Few people think it will be a vote-on-account, which would authorize spending at the same rate as in 2018-19 over the first three months of fiscal 2020 till a new government is formed. The Congress party has demanded that the finance minister should not present a regular budget. There is no moral or ethical reason to not present a regular budget, especially if it can be passed before the election code of conduct kicks in.
There is some validity to the fear that budgets presented before an election could be populist and hence governments should be restrained from doing so. But even if we assume that freebies and giveaways can influence the coming vote, there is little constitutional basis to refuse a government the right to present whatever budget it wants. Elected governments have a mandate till the next election alters that mandate in some way. Till then, they are free to act in whatever they believe is the broader interest.
Mature democracies should move away from the idea that governments must stop governing a few months ahead of elections. If there is a war on, one does not expect a lame-duck or caretaker government to fight an “interim" war. In 1999, the government fell and the Kargil war was on. But that did not stop Atal Bihari Vajpayee from fighting the war as it had to be fought in the national interest? One must therefore ask why management of the economy must be abandoned a few months ahead of elections.
There is also a larger point to discuss here. In theory, governments present only one budget a year, but appropriations and revenue proposals are made all the year round. For example, goods and services tax (GST) proposals have been changed frequently over the last year and a half; petroleum taxes have been raised and lowered outside the budget, both to recoup windfall gains to oil marketing companies when global oil prices decline and to provide relief to consumers when the opposite is the case. Other kinds of taxes and duty cuts (especially in customs) are levied or given whenever sectoral conditions so warrant. When taxes, duties, cesses and other elements of revenue, and also expenses, outlays and allocations change often, what is the sanctity of the idea that budgets must be presented only once a year, and in an election year not at all?
The finance minister’s job is not to keep tweaking things constantly to make the entire taxation structure arbitrary and unpredictable. But helping sectors in trouble (or withdrawing help when it isn’t needed) is par for the course. For example, we know that the telecom industry is in financial trouble. So what is the harm in changing the rules to reduce spectrum usage charges to ease the burden? Rahul Gandhi says he wants immediate relief to farmers, who are in distress. So what is the harm in doing precisely that? Does the proximity of an election make relief to the deserving somehow wrong? This is not to suggest that relief to the farm sector must be attempted in the 1 February budget, but the principle matters. When the need arises, the budget can and must be tweaked, election or no election.
Any budget consists of three elements: one is the finance minister’s view of the economy, the challenges it faces, and how the government intends to address them. The second part is about revenues and taxation. A third part is about spending in the coming year.
In the case of any budget presented before an election, the appropriations sought will usually cover spending proposals in the first four months on the presumption that a new government may want to present its own new budget. So it is the spending part that needs reining in before an election, not the revenue part, or the speech. But spending is precisely the part that can easily be fudged by rolling over some expenses or bringing forward others. A government that wants to play ducks and drakes with fiscal rectitude can do so in its last four months of power. P. Chidambaram and his predecessor often rolled over subsidy bills pertaining to one year to the next in order to show a good fiscal number. Till governments shift to an accrual-based system of accounting—as corporates do—all finance ministers, whether they present an interim budget or a full one, have leeway to fiddle with the accounts. They can incur spends and leave the bills for their successors to pay.
The moral case for letting governments govern is the fact that they are elected for five full years, and not four-and-a-half or four-and-three-quarters. In India, we have major state or central elections almost every year, and governments feel forced to pause difficult or unpopular decisions whenever elections are at hand anywhere. Election codes additionally restrict the scope for decision-making. Put another way, the space for economic governance is shrinking due to the constant pandering to electoral codes and expectations.
There is no need to artificially curtail budgets in the name of elections. In the case of 2019, there is no constitutional, moral or other imperative that calls for imposing this restriction, since the budget will be passed well before the election schedule will be announced.
R. Jagannathan is editorial director, ‘Swarajya’ magazine.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
