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Home > Business > Columnists > Guest Column > A K Bhattacharya


Budget: Why the small print counts

December 02, 2003

With less than 13 weeks to go for Finance Minister Jaswant Singh's second Budget, the focus is once again back on the Budget Division in the finance ministry.

The Budget team is in place, with Finance Secretary D C Gupta in charge of the department of economic affairs. The team is now busy holding consultations to finalise the revised estimates for the expenditure that different ministries and departments would incur during the current financial year.

Jaswant Singh's first Budget last year saw two new developments. One, he discarded the time-honoured convention of holding formal consultations with groups of industrialists, industry association presidents, trade representatives, agriculturists, trade union leaders, economists and even economic journalists.

This year too, he has no intention of holding these meetings. He would, of course, continue to get suggestions from industry associations and other interest groups through written memoranda.

The second development pertained to a welcome change in the presentation of his Budget speech. For weeks before the Budget day, there was a lot of speculation about the duration of his speech. Some said his speech would last only for half an hour, compared to nearly two hours that most of his predecessors took.

Eventually, however, Singh took almost as long as his predecessors in reading out the Budget speech. But where he differed -- and made a notable contribution, was the introduction of an index at the end of his printed speech. The five-page index alphabetically listed out all the key issues and sectors covered by the speech and gave the page numbers where they could be located.

This was an effort that was welcomed by all quarters. Locating a specific statement of the finance minister on a particular issue or sector in a speech that is as long as 30 to 35 pages used to be a difficult job. An index, therefore, was a big help. In his second Budget in February 2004, the finance minister should improve upon it.

Instead of just the page numbers, he could add the paragraph numbers as well. This will make the job of locating a sector or an issue referred to in the Budget speech even more easy.

In fact, the finance minister should take a close look at the Budget documents of the past few years. It would not take long for him to notice how, over the years, finance ministry officials have removed from the Budget documents vital pieces of information and data that used to be there earlier, meeting the requirements of researchers and analysts. Singh should put an end to this practice and ensure that all those data are reintroduced.

In the good old days, the memorandum explaining the provisions in the Finance Bill used to indicate the revenue effect of each proposal for a change in the indirect tax regime.

Thus, if the import duty on pig iron is reduced by five percentage points, the memorandum would indicate the loss of revenue on account of that proposal. So, the tax proposals and their revenue effects became more transparent and easy to understand. But some time during the early 1990s, the finance ministry decided to stop giving out this information.

Then there used to be a table at the end of the memorandum indicating the amount of additional revenue different sectors would generate as a result of the new tax proposals. Similarly, there would be a table indicating the amount of revenue loss the government would suffer in different sectors as a result of the reduction in indirect taxes. This too has been withdrawn from the Budget documents.

Till the 2000-01 Budget, you could get the commodity-wise details of revenue from the customs duty and the central excise duty. True, that these details did not take into account the effect of the new tax proposals.

But they captured the normal revenue growth in each commodity and gave you a fair idea of how feasible the government's revenue estimates are. But since 2001-02, the Budget documents have stopped carrying these commodity-wise details of revenue from indirect taxes.

For the past two years, the finance ministry has stopped giving another vital piece of information. During the 1990s, the "Budget At A Glance" used to carry a small table outlining the total impact of new tax proposals on the government's receipts.

That was the only place where you could get a sense of the impact of direct tax changes on revenue collections during the coming year. The last time this table got carried was in the 2001-02 Budget document. Since then, this information can be collated only from what the finance minister says in his Budget speech.

But there is no reason why the details, which could be given out by earlier finance ministers in the Budget documents, cannot be reintroduced now. Officials in the revenue department may not like to be subjected to any scrutiny following the publication of these details.

But transparency and governance demand that the finance ministry must lay bare its estimates of revenue collections to the people of this country. Come February 2004, Jaswant Singh has an opportunity to make amends for his predecessors.

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