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“Ask not what the budget can do for you” March 2, 2007

Posted by Sharath Rao in America, india, politics, reminisces-1990s, reminisces-2000.
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[ Arjun, my LittleRock buddy who inconspicuously hangs around on this blog once a while wrote in asking what I thought about the Budget 2007; what started off that way ended up like this. Although I am almost as good as a layperson and not anywhere like being an expert of budget matters, I hope to atleast reveal my ignorance in a later post. What embarrassment ! Sorry man Arjun, but I am glad you at least made me write a long post on something ]

….and ofcourse, don’t even ask what you can do for the budget !

I remember sitting down before the TV every last week of February for several years in the late 90s and early this decade. For several years since independence it used to happen in the evenings but suddenly earlier this decade it was shifted to the early afternoon. There was a certain excitement about the budget at home partly because my dad and mom have been avid investors and then because every middle-class tax paying family hopes that the taxes are coming down (or at least not going up)

 

I think I just summarized it – the main concern was just that – are the taxes coming down at least this time? Are any new taxes going to be introduced? How will the market react to this tomorrow? Should I be prepared to sell/buy something? The questions that interested my mom would again be similar to the above in addition to whether LPG prices are going to rise/fall ( they almost always never fell). Once a while if a major purchase ( PC/TV etc. ) was due there would some interest as to which way consumer goods prices went (they almost always never fell).

 

These were the questions that interested my father and after this part of the budget he would generally walk off much to my surprise while I would sit there trying to absorb that piece of text with large numbers and complicated jargon. This is no urban legend but I think India’s economic situation must be assessed by the number of digits one gets when one expands every large number in that humongous document. I don’t obviously think I got much of what I read and my understanding today is improved, the budget is still a document which very few people understand (or are even interested ) in the whole.

 

Every person has a limited interest in the budget – limited both in time and space. That is, after a while people adjust their spending patterns such that they are back to square one ; thus the budget having lesser impact over time. And most are interested in a part of the document that concerns them. For example, my dad couldn’t care less about how much is allocated to fighting HIV in the north-east (which certain NGOs might) or some tax relief to the steel industry to start a plant in a backward district of Orissa. This of course is true of the corporates as well though to a lesser extent since they might be interested in overall growth of the economy.

 

Looking back, the middle class had a point and their point was that people in the middle class don’t get SOPs that others do (like “Govt to provide 1 lakh jobs for physically disabled with a salary limit of Rs 25,000 a month” or “Backward Regions Grant Fund to be raised to Rs 5800 crore” ) and so there is not a whole lot that budget can do. The least they could ask is that if you don’t give me anything (through SOPs), at least don’t take away (through tax). Overall macroeconomic growth figures were less of a concern although they do realize that these have a bearing on the stock market and certainly on the overall quality of life. I hope I am not generalizing from just one example of my household but I remember discussions at home with visitors etc. where the talk of budget would be restricted to the taxes and excise/customs duties (which have an impact on the prices) It would help if you have gotten reading till here to relate (in the comments section) how things have been at your home to see if my observations extend beyond the biases sample of middle-class bankers I am talking about.

 

Well, atleast people knew such a thing as the budget exists, when its presented and followed selective sections. What about here in the US ? I don’t know – in the past 2.5 years I haven’t come across anything like a day when the budget being presented in the congress and a few million people switch on their TV sets, get their popcorn (!), watch it, call friends to talk about it, follow it in the newspaper the next day and call friends again ! There is obviously a budget but not eagerly anticipated by the middle-class or so. They would rather watch something of no economic consequence and essentially political like the “State of the Union Address” delivered end of every January and count the number of times the speech was interrupted by applause (!) or contained the word “Iraq” compared to last year.

 

I don’t want to speculate but a possible reason for the above might be just this – Americans hate government. Republicans hate government because they think the government is doing too much – collecting too much taxes and engaging in income redistribution (generally helping minorities ) ; and democrats hate it because they think the government is not doing enough – not taxing the ( generally richer ) republicans enough and in the process increasing equality. On one hand, there is an inherent belief especially among the middle class that the government can’t really do anything for them – it’s just got to be done by ourselves. On the other, there is a deep suspicion of the government that runs in their blood – the idea that government takes “their” money so that it can give it to “others”.

 

People argue that the Indian middle class is going this way too – perhaps not for reasons of individual freedoms that form the basis in America – at least for cynical reasons – that the Indian government/bureaucracy is no good because it is essentially corrupt. Either way, I am glad if this is true. In fact, the government is corrupt because we have given it way too much power. I agree with Amit Varma when he says :

The mistake some of us made when we talk about the budget is in assuming that government spending can solve all our problems. The government may spend more on education, but that doesn’t mean that Indian kids will get anywhere near the education they should, or that the education system will become better. Our mai-baap sarkar may announce a safety net for workers, but that doesn’t mean that workers will benefit. It may extend the REGB, but that doesn’t mean that it is doing anything to enable the growth of employment in this country. In some cases, it might actually be harming the cause of those it claims to benefit, by spending money inefficiently that, had it never been taxed in the first place, would have done more good for the economy.

Its high time we realize that the government (with the bureaucracy) is not the panacea, not an entity that is magically endowed with powers ( and intentions ) of upliftment. Think about it. It is merely a bunch of people who spend others’ (read yours) money for sometimes dubious ends of their political masters as a part of their full-time day job.

Its likely your dad had figured it all long ago without watching this or reading this.

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Comments»

1. Aswin - March 2, 2007

That’s an interesting point there. The Indian middle class looks at the government as an institution that couldn’t possibly help them with anything.

Anything remotely ‘government’ affiliated immediately translates to – poor quality, bad service, bribes/corruption – in other words ‘Inconvenience’. It is probably only the minorities that have a favourable view of the Indian government.

2. I-BIBLIOPHILE - April 24, 2007

GREAT ARTICLE…. KEEP IT UP


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