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

Vote-on-account vs full Budget

December 30, 2003

There are many advantages of a vote-on-account from a government that is due to go for a general election in the span of a few months. Finance Minister Jaswant Singh may not like the idea as he will lose an opportunity of presenting a full-fledged Budget -- his second in a row.

Finance Secretary D C Gupta will be even more upset, as his wait for the first Budget in his new capacity would be longer and closer to the day of his retirement in October. But personal likes and dislikes apart, the idea of a vote-on-account instead of a regular Budget in a year when elections are due has a lot of merit.

Technically, though, it is not necessary for a government to present a vote-on-account in an election year. For instance, if the Vajpayee government holds the elections in August-September, it can easily proceed with a regular Budget next February.

Even if the elections are advanced to April-May, as is being considered now, the Vajpayee government can present a full Budget, cancel the fortnight-long recess in March, expedite the completion of the Budget's scrutiny by the parliamentary standing committees and target for the Budget's passage by the first week of April. And then elections could be held by May-end.

But ask bureaucrats in the finance ministry, you will know why a vote-on account is a better option. Mind you, a vote-on-account increases their workload. Yet they prefer a vote-on-account in an election year because they know from experience that a full Budget just before the elections make a mockery of the whole exercise.

Economic policy imperatives are ignored. Populism is what determines the tenor of the Budget. The damage to the economy can be huge and it is not even certain if that exercise will pay the ruling party the political dividends the ruling party seeks.

A vote-on-account, on the other hand, is a safe option. Politically also, it can be very useful. What is a vote-on-account? This is primarily a finance minister's statement to seek Parliament's approval of the obligatory expenditure that the government has to incur for the first three or four months of a financial year.

In addition to this, there are also the revised estimates of the expenditure incurred by the government during the year that is coming to an end. These estimates provide an assessment of how efficiently and promptly has the government spent its resources. There are also the revised estimates of the government revenue from different sources.

So, a vote-on-account gives you an idea of the tax compliance, tax buoyancy in different segments of the economy and of the effectiveness of the policies to mobilise tax as well as non-tax revenues.

Most importantly, the finance minister also makes a speech before seeking Parliament's approval of the vote-on-account. That speech can contain the finance minister's intentions on the economic policy front.

True, he cannot announce the government's decisions in a vote-on-account speech. But he can surely give enough indications of what he would like to do if given an opportunity to return to Parliament as finance minister after the elections.

Don't forget that Yashwant Sinha in 1991 presented a vote-on-account and announced the Chandra Shekhar government's plan for divestment of government equity in public sector undertakings. That was the first time anybody in the Indian government talked about PSU divestment.

Sinha's government could not return to power then, but the P V Narasimha Rao government that came in after the elections did implement that decision of PSU divestment and even took that forward.

So, at a time when the economy is doing well, India is "shining", expenditure has been kept under a tight leash, tax receipts are showing robust growth and divestment proceeds would exceed the target by about 25 per cent, why shouldn't Jaswant Singh present a vote-on-account and make a thundering speech about the economy's outstanding performance and his intentions of further reforms? Finance ministry bureaucrats also see in this a great opportunity.

A greater opportunity would be to present a full Budget for 2004-05 after the elections. Whichever political party comes to power, the new finance minister can be much more bold in view of a clear five-year tenure of the government.

The hesitating policy reforms of the past few years should then give way to a more determined thrust towards faster economic policy changes like introducing greater flexibility in the labour laws, speeding up the privatisation process and introducing the value-added tax regime and other tax reforms including removal of exemptions.

The decade of the 1980s saw only one vote-on-account presented by R Venkataraman. The 1990s was witness to three votes-on-account, reflecting the politically turbulent times we experienced during that decade.

Jaswant Singh may well present the first vote-on-account of the current decade. But the key difference will be that he will be presenting it at a time when the economic outlook has never been so rosy.

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