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Young World
Within the budget
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The annual exercise in February grabs the attention of the media and the people more than the India - Zimbabwe cricket match and the prospects of Lagaan clinching an Oscar. A cursory look at what it is to budget for a billion people.
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Now that this year's budget has been presented in Parliament, there is a lot of discussion on this annual exercise. You were probably puzzled by the importance given to the event: newspapers giving so much space to the speech by the Union Finance Minister, television channels airing programmes, with experts commenting on the announcements made and your parents discussing the impact on household expenditure.
``Well, the price of cooking gas has gone up!'' a dismayed mother would have sighed. Another familiar refrain would have been, ``on top of it, there'll be more taxes to be paid''. Here's a happy voice: ``at least the prices of petrol has come down''.
The experts on television would have talked about `growth rates', `public expenditure' `tax revenues' and `deepening of reforms'. So, what does all this mean? And, why in the wild world is this seemingly trite exercise, an overdose of words and a jumble of figures, occupying more attention than, let us say, the India-Zimbabwe cricket match, the fate of ``Lagaan'' at the Oscars or the excitement over Ravi Shankar winning a Grammy?
It feels nice, at times, to be clueless. Especially when it comes to issues that you have no control over. Your school fees has been paid. Transport arranged. Shelter provided. Daily needs taken care of. In short, you do not have those `big' decisions to make: `How much to spend on clothing?' `Where do I find the money to pay the rent?'
Perhaps, a few of the older ones among you, those say, in the school- leaving stage, are already in control over those rupee notes and coins that come to you, may be as monthly pocket-money. You probably will relate better to a budget. ``How much do you have to spend, what are the requirements you will have to meet, how much more will you need if you wanted your dreams, how much shortfall do you face and how do you propose to make that up.''
Simple questions, but answers are complex: especially if the exercise has to meet the diverse requirements of over a billion people. This is where the national budget comes in.
The Government needs money — a range of services, paying salary to its staff, providing support to the more unfortunate citizens, <147,1,0>maintaining internal security and keeping external threats at bay. To meet expenses, so it has to collect money, which it does by way of taxes and other charges.
This is where public finance, the larger box into which the smaller box, the annual budget, fits in. By public finance we mean revenues and expenditures of governments. Who gives the administration the right to collect money? In democracies such as ours, it is the elected representatives — the Parliament in the case of the Union Government or the State Legislative Assemblies, in the case of the States. If I come asking you for money, don't you have the right to ask me what I am going to spend it on? To cut the process short, I come to you with a detailed plan of what I have spent earlier, what I propose to do during the coming year and from where I plan to get the money. In simple terms, this is what a Finance Minister's budget presentation is all about.
The large box, public finance, is inside an even larger box, economic policy. That larger one sets out the kind of role the government has to play in economic activities. Therefore, the shape of the two other boxes - the public finance and the budget — will have to be consistent with the shape of the economic policy box.
For over a decade now, the Government has been going through a process of change. The change is the gradual withdrawal of the Government from as many economic activities as possible because it could not bear the costs of doing so.
The budget documents, especially the speech by the Finance Minister, give a snapshot of how the economy worked during the year, and how it could during the coming year.
Before the budget is presented, the Government presents an Economic Survey, which gives a detailed picture of the economy along with telling statistics. These are important public documents that are also available on the Internet (http://indiabudget.nic.in).
On the right track
Another important annual exercise is the Railway Budget. The 150-year-old Indian railway network is a part of the Union Government, but unlike other Ministries (telecommunication, posts, or civil aviation, to name a few) it presents its budget separately. There is a historic reason for this. The Acworth Committee, appointed in 1920, recommended that the finances of the railways be taken out of the general category and be presented separately. Since 1924, the Railway budget is presented separately.
During Railway Budgets, the Railway Minister presents a broad picture of how the Indian Railways performed during the past year, lists new proposals and carries out changes in the tariff structure.
The Indian Railways performs several operations below the actual costs. These are called `social obligations'. Movement of essential commodities is an example. One important financial aspect is that passenger fares are subsidised by freight costs. Simply put, passengers pay less than the actual cost incurred by the Railways and those who use the railways to move commodities pay a little more to make up for what is not recovered from the common man. This is being corrected within this year's Railway Budget, through the passenger fare hike.
V. S. SAMBANDAN
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