BLOG: Why it’s important to understand how budgets are dressed up

Every year when the Budget is presented, I remember Rev Fr Walter Proost, our Principal at St. Xavier’s College in Ranchi. He was also the Head of the Department of Economics. What little of Economics I understand or follow is largely because of him.

He towered over us at nearly six feet. His eyes behind the thick glasses always glinted in amusement or in fury. They could also turn very cold. A cheroot would generally be stuck between his lips as he went on his rounds, the whiff of tobacco in the corridor would alert us of his presence a little before he appeared. Let us just say it was helpful. I can’t say he was a terror. But he could be stern when he wanted.

On the first day of our Economics (Hons) class, he took the roll call and moodily looked out of the window. We held our breath and waited. After what seemed an eternity, he turned to look at us. A doctor, he said to our surprise, earned much less than Helen earned for a cabaret dance. We looked at each other quizzically while he again turned his gaze to look beyond the window. A few seconds later, he turned towards us and asked, “Why?”. We froze and frowned and stared at the wall in deep concentration. Nobody spoke.

He at some point decided to offer the answer himself. “Because there is only one Helen but there are so many doctors,” he explained, “It’s demand and supply and that’s what Economics is all about”. It sounded funny then but as years passed, that simple statement of his made more and more sense.

He of course was right. It was all about demand and supply, demand and production, demand and supply of capital, of labour, of land and of water, of foodgrains and is availability. There was a cost to everything and a price that you paid.

There were other lessons we learnt from Fr Proost. Ahead of our first internal exam at the end of the term, he told us that if we tried to explain economic theory with diagrams, we would get zero. We protested. What was wrong with diagrams and weren’t they all over our text books ? Unimpressed, he declared, “Any fool can explain anything with diagrams.” We resented the ‘fatwa’ then but it helped us understand economics a little better.

That is why budget documents leave me cold. The surfeit of diagrams and figures, I suspect, are designed to hide more than reveal. And budget speeches similarly would bore most people other than stock brokers, investors, businessmen and business writers. Very often they make little sense.

Industrialist Harsh Goenka was right this week when he tweeted that for most of us, budget speeches are, well Greek ! See his tweet below and have a laugh or two. Finance Minister Nirmala Sitharaman could well have spoken in Gujarati and no damage would have been done.

The Finance Minister was quoted by a TV channel as informing the Parliament that 35 Crore LED bulbs had been sold or distributed. A smart aleck calculated that it would translate to 280 bulbs for each Indian ! So, you get what I mean ?

And yet it is important to understand the Budget and its process. Because the poorest Indians pay the Government tax to spend. And people need to know how the money is being spent. The Government obviously gets the money from the people, from tax payers. And the poorest person who buys salt, a little oil and a Roti contributes to the pool. The budget is where the Government explains what it plans to do with our money.

Let me take a leaf from Fr Proost and explain what I mean. If the Union Government spent four Rupees in 2004, it spent, say Rs 24 last year (a closer approximation will be four lakh Crore of Rupes and 24 lakh Crore of Rupees). This in an economy of 270 Rupees (make it 270 lakh Crore). Which means that the Union Government’s budget is less than 10 per cent of the economy.

But more importantly a six-fold increase in expenditure by the Government in 15 years should point to a robust economy. Has Government spending gone up by six times since 2004 in every sector ? Not really, because half the central budget or more is being utilized to maintain the Government itself. Salary, wages, pension, establishment, travel, events, publicity…the list is endless. Can this be rationalised? You bet.

But the Government has fallen short of revenue. And it now wants to borrow funds from abroad because the interest rates are lower there. But we are not asking questions. The Government has imposed fresh cess on petrol and diesel and the proceeds will go entirely to the Centre because cess is not shared with the states. Again, no questions are being asked.

Our future may well depend on questions like these. And Indian Television, more than any other medium, need to raise them because the ordinary Indian is influenced much more by TV.

I wonder what Fr proost would have made of the Union Budget. And what he would have felt about TV coverage of the budget.