The Telegraph
Since 1st March, 1999
Email This Page
- The budget is a marionette show whose lines cannot be changed

The finance minister rose to present the budget. He thanked the Prime Minister for making him finance minister. He noted with pleasure the low inflation, the rise in export growth, and the record set by stock prices. He proposed to set the economy on a sustained, equitable and job-creating growth path of 7-8 per cent. He promised to give 11 per cent more for the Plan, and 29 per cent more for defence. Credit to agriculture would be increased by 20 per cent. He stressed the government's commitment to reach the benefits of reforms to villagers, SC/ST and backward people, and to provide them with health, education, drinking water, housing and roads. He promised that 60,000 'habitations' and 30,000 schools would get drinking water in the next year. BPL people would be given 1.5 million houses. A task force would be appointed under an eminent person on women in the national economy. He would allow Indian companies greater access to ADRs/GDRs for acquiring foreign companies and becoming Indian Multinationals'

Sorry, sorry; I have been reading the wrong budget statement. The finance ministry has not yet put this year's budget speech on its website, and instead I read Yashwant Sinha's budget speech delivered on 29 February 2000. But why did I ever think it was P. Chidambaram's speech on 28 February 2005' Because large parts of the speech change little from year to year, except for the figures. It makes no difference where we are in time, and who rules us.

This should reassure us. Democracy ensures that governments focus on certain key concerns of the people; a functioning bureaucracy ensures rule of law and continuity whoever rules. It also reminds us that the scope for change, for innovation, for upsetting precedents however stupid, is limited in our government, whoever the finance minister.

But is it always so' Chidambaram himself presented two budgets in the 1990s; one was considered pedestrian, the second a dream budget. The Prime Minister he then served under had some understanding of foreign affairs and none of finance, and left the budget largely to his finance minister. Manmohan Singh presented five budgets; he overturned fiscal traditions of forty years. Economic straits compelled him to seek new ideas, new solutions; and his Prime Minister left him alone to implement them.

And now we have the dream team of Manmohan Singh and Chidambaram; why did we not see greater radicalism' It may be that they no longer have the urge to achieve; they are older and wiser, and see the wisdom of living in peace with their votebanks. It may be that they see the straitjacket of interests that surrounds the country's finances. Thousands of political foot-soldiers live on funds intercepted on the way from the treasury to intended beneficiaries; there is an unspoken compact between them and their leaders that their needs will be taken care of. Maybe, though, that is too cynical a thought. After all, the finance minister reeled off figures of the government's achievements: 110 million children got midday meals, 5.82 million farmers got loans, 15 million families got food, 125,000 villages got electricity, 560 banks financed 200,000 self-help groups, 172,000 kilometres of roads were given four lanes. Maybe our leaders believe these figures. And all we have to do to be happy is to believe the leaders.

But the leaders could make it easier for us to believe them. They could do so in three ways. One is to make accessible information that we could ourselves check. It is nice to know that thousands of miles of highways have been four-laned. But it would be even better if there was some way to know, without going to a government office and beseeching some clerk, whether the government is claiming to have repaired the road outside our house. Another is to get someone outside to check the information. The government has two organizations to do so: the Programme Evaluation Division of the Planning Commission, and the National Sample Survey. But both survey a fraction of the government, and publish a fraction of their findings after enormous delays in tracts that are difficult to get. It would be far better if all government expenditure proposals had an allocation for an independent, preferably a foreign body, to do a simultaneous audit, have power to stop a project if money is being stolen, and give a report to whoever wants it. A third is to appoint civil servants that inspire trust, to make them independent of politicians, and to have a service administration that throws out anyone remotely untrustworthy.

It is nice to dream, and having a dream team at the helm makes it easy. But one has to consider the possibility that our leaders are not capable of providing an open, transparent, honest government ' that they are involved in a marionette show whose lines cannot be changed. In which case, all we can do is to look at the revenue proposals, and review them like the marionettes called to television shows.

In that role, I welcome the fact that the finance minister has equalized the corporate tax rate and the maximum personal income tax rate. This will remove the incentive to pass off personal expenses as corporate ones. After doing that, it was quite unnecessary for the finance minister to tax corporate perquisites. For that will be double taxation. Such perquisites will bear both the corporation and the maximum personal income tax. If the finance minister persists in this folly, corporates will simply add all personal perquisites to salaries and save tax; the measure will achieve nothing.

The finance minister has shown courage in reducing the tax on matches made by big producers. We tried to do it in 1993 when I was in the finance ministry; we thought matches were a product used by the poorest and should not be taxed at all. But the order came promptly to desist: there was a cottage industry producing matches in Sivakasi, and the trade union in it was controlled by Jayalalithaa. She was an ally of the Congress then, so the duty on big producers could not be reduced. Now that she is no longer an ally, Chidambaram could have abolished the duty. But I guess this was the best compromise he could make.

Similarly, raising taxes on cigarettes and gutka is a political act. Over 80 per cent of tobacco is consumed in biris, which no finance minister can touch although biri-makers are amongst the country's richest people: after all, biris are a holy cottage industry. But if the finance minister were interested in improving people's health, he should forgo taxation of cigarettes, and place a heavy specific tax on raw tobacco.

And that tiny little tax on bank withdrawals over Rs 10,000. It will get little revenue, and it will not reduce generation of black money. There was a time when a friend used to beat me every time in Go, a Japanese board game. After every win he would say, 'Don't make weak moves.'

Email This Page