With GST Doing Half The Job, FM Can Cut His B-Day Speech To Under An Hour; Time To Debunk Verbosity

As the countdown to the 2018-19 Union budget begins, it is worth speculating on what is in store. Three things seem certain: one, with farms in distress, a major part of the budget will be about increasing farm incomes and/or subsidies to the rural and agro-industry sector; two, since jobs are a perennial source of worry, more direct sops may be offered to job creating sectors, and to formal sector employers to hire more; and three, the Bharatiya Janata Party’s (BJP’s) key support base – the middle classes – will be offered tax reliefs of some kind.

However, it is not worth speculating in greater detail, since this government has made it impossible to read the lips of ministers and bureaucrats. For the first time in history, the Narendra Modi government has almost completely sealed leaks in regard to proposals in the Union budget – scheduled for 1 February. Normally, around this time every year the pink press would have been choc-a-bloc with speculative stories on which product taxes may be cut, and which may be raised. But this year we have had almost no story in any newspaper indicating what the Finance Minister may be thinking.

However, the budget – the first one to be unveiled after the introduction of the goods and services tax (GST) – will be unique for three reasons. One is that it will have almost no reference to new indirect tax rates, since most of that is now being taken care of in the GST Council. The indirect taxes part of the old Union budget is now becoming a budget-in-instalments, with major changes being announced at regular intervals by Arun Jaitley after each meeting of the GST Council. In November 2017, GST rates were cut for more than 175 products. On 18 January, rates were again cut for 29 items and 53 services.

Secondly, since this could be the last full budget of the National Democratic Alliance (NDA) government before the 2019 general elections, it will have to make it count. Since the government has broadly stuck to fiscal rectitude, one can also rule out wild populism.

Thirdly, we can safely predict that the first part of the speech will be much longer than the second, since most of the indirect tax bits will be left out. Jaitley may well settle for the shortest budget speech made in recent times. In the first part, the Finance Minister will prefer to make political announcements since 2018 is a major election year. Seven states go to the polls this year, including many north-eastern states in February itself, with the big ones to follow later (Karnataka in May, and MP, Rajasthan and Chhattisgarh in the last quarter of the calendar year).

Budget speeches tend to drone on for more than two hours, and if Jaitley manages to keep his speech limited to around one hour, he will be making a break from past verbosity. Jaitley probably holds a wordage record for budget speeches in recent years. In the first Modi government budget of 2014, his speech ran to over 16,500 words. He even had to take a break in the middle of the speech – an unprecedented event. The earlier long speeches were by Yashwant Sinha in 2002-03 (15,882 words), and Jaswant Singh in 2003-04 (15,081 words).

But Jaitley has probably decided that long speeches are not worth the effort, and last year he managed to keep it shorter at 12,628 words. He did this by shifting large parts of the speech to annexures and appendices in the 2017-18 budget. Next year’s budget will hopefully keep the wordage under 10,000 and one hour – which will be a useful precedent.

An interesting point to note is that NDA governments have been making most of the significant changes in budget delivery. In the Vajpayee-led NDA, the time for the presentation of the budget was moved from 5pm – created in the colonial era when the speech in India had to coincide with London’s waking hours – to 11 am. During NDA-2, under Modi, many more innovations have been carried out. One was to remove the distinction between plan and non-plan expenditure, with only revenue and capital expenditure being shown separately. In 2017-18, the railway budget was subsumed in the Union budget – a really big move. Another change related to bringing forward the budget date to 1 February, which enabled the government to get it passed before March and start the year’s spending by 1 April.

A committee, led by former Chief Economic Advisor Shankar Acharya, has examined the need for a change in the financial year which currently runs from April to March. The idea is that budgets can run from January to December, which will synchronise with most of the world, barring the US and UK, which follow October-September and April-March cycles respectively. But a clear majority of countries, including those in the EU and China, use the calendar year as the fiscal year.

If the government of India also moves to a calendar year, assuming Shankar Acharya has suggested this in his report to the Finance Minister, future Union budgets will get presented towards the end of October or early November. That would be one more big change in the budget-making process, and would have the additional advantage of the Finance Minister knowing the impact of the monsoon on the year’s economic growth.

One small thing to look forward to: if the budget year is changed to calendar year in 2019, it means we could have another budget this year in November, well before the general election code of conduct kicks in from around February-March 2019. This may raise a political outcry, since the NDA would then get to present five-and-a-half budgets, with the 2018-19 budget being terminated early, but in any transition year this is bound to happen.

Opinion on how well the Modi government has performed in terms of economic outcomes vary, depending on who is making the claims, but at least in the area of the budget-making processes, it has turned the world upside down.

(A part of this article was first written for DB Post)