Union Budget and the Common man

I recently read a quote about the union budget, “The common man can’t understand the union budget, and the union budget can’t understand the common man!!” Although our current finance minister would like to contest the second part of the phrase, there is still no doubt that the common man can’t understand the budget. First of all the budget is prepared in complete isolation and secrecy. It is kept a big secret until ‘budget day’ for mysterious reasons. When every issue of national importance is discussed in a transparent and open manner in the parliament, why should the budget be an exception? Why is it that the finance minister straight away comes to parliament and reads out his speech and how he and his assistants have planned things for the entire year. The point that Im pressing here is that of transparency in the budget making process. Now let us see why the common man can’t understand the budget or why is it that he is not much interested in it, which in my view is the real reason behind his not understanding it. It is lack of interest not intellect which determines this. When Nani Palkhivala eminent jurist and economist delivered a lecture on the budget in brebourne stadium in Bombay, thousands of people used to come to attend the program, and were interested in knowing what is in store for them in this budget. Palkhivala could actually make a dry and boring subject like the budget interesting and enjoyable and moreover could simplify it from the technical economic language, which drove people to listen to him. His budget speeches finally ended in 1994. Today there are many people who deliver a similar lecture on the budget, lawyers, Charted Accountants, tax consultants; financial experts all express their opinions and views about the budget and its implications for the various segments of the population. But these people cater to a very niche audience. These are lectures where, businessmen, management experts, industrialists go and attend. It is difficult to find the common man here, who once sat in brebourne stadium and intently listened. After interest comes knowledge of economics or atleast elementary economics. Arindham Chaudhuri says “Economics is complex, mathematised, pseudo intellectual, quite unfit for the common man, around whom economics should actually revolve”. Reading and understanding the budget definitely requires good understanding of simple macro economics nothing more. And finally comes the role of the media in spreading the analysis of the budget far and wide. The print media does a very good job in analyzing the budget. ‘The Times Of India’ made a good presentation of the budget, simplified most of the provisions, especially the ones related to income tax and other taxes. They even showed how various sectors are affected by the budget. But the problem is with the electronic media. On the day of the budget, I saw 4 programs on television, on CNN IBN, TIMES NOW, NDTV and CNBC. All these programs were good but the problem is that they were only and only in english, the hindi news channels dint seem to cover the budget as extensively as the english channels did. This straightaway means that only the english speaking urban people will be able to understand what the panelists are saying. The panel members were almost the same in all the programs. Why dint some of the eminent panel members like Sitaram Yechury, Kapil Sibal and other financial gurus go on to atleast one hindi channel where they can explain the details to a much larger audience.

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Economic growth a global trend……………

 

MS Swaminathan wrote an interesting article in the Times of India on 16/3/08. The article basically spoke about the high growth rates that India and many other countries experienced for about a year or so. He argues that the sudden high growth rate that we experienced is not only because of the government’s economic policies and efficiencies; it was actually a global trend which was originating from America. We know at the moment most Americans are living beyond their means, this is reflected in the sub prime crisis, the housing market slump and the mounting losses of financial companies due to increasing number of loan defaulters.  The demand for goods and services had tremendously increased for the past 2 years, which resulted in America having a trade deficit of $700 billion. China being the biggest exporter of electronic goods to America and India exporting various other goods and mainly services, thrived because of this one factor of excessive consumption in America. And because there was huge demand for goods there was automatically a huge demand for raw materials and semi finished goods which came from Africa and other less developed countries.  Hence even these countries immensely benefited. Therefore Swaminathan says that every country remotely associated with America enjoyed high economic growth, the African countries which were growing at 3% also started growing at 5%, similarly in India economic growth was 6% to 7% for many years it suddenly became 9%. If the above reasoning is true, then we have to ponder over a very important question, what is going to be the state of the Indian economy if there is a recession or slow down in the US economy which is very likely. There has already been a dip in the industrial production rate for the last 3 months. And the industrial production also determines the government’s collection of the excise duty. As it is as per the Union budget 2008 excise duty has been reduced from 18% to 16%, combine this with a fall in industrial production and it results in a loss of revenue for the government.