The Central Budget In India – Promise vs Performance !!

The annual ritual of our central budget exercise from its run up till its implementation during the year thereafter is generally a story of dreams turning sour , at least in the recent years after the euphoria created in the last decade when we opted for a market driven economy .  May be the people expect more than what is realistic  in fiscal terms.

While the main purpose of a budget is to create a frame work  to allocate  funds  against expected income  , the budget also gives out the direction of growth , desired by the government  based on its own priorities to meet social  and monetary obligations and also to keep the promises made in the ruling party ‘s election manifesto.

The intensity of the drama played out and the  impact  it has on the society , market  and the industry  is significant  and we have a plethora of analysts  taking  the stage on this day in many TV Studios across the country to do a post mortem of the fiscal wonder -we call a budget . The economic survey which precedes the budget gives an overall direction but it comes too close to the Real Punch.

Is there a different way of doing this exercise ? . Do we need this every year in such details ? Can it be announced for 5 or 10 years in one go  and passed by two thirds majority in the parliament with inbuilt  mechanism for annual corrections based on global economic trends ? Or can the central government lay down only broad   monetary boundary conditions and allocate funds  once in 5 years for the state governments  to work on annual  budgets ?

In the present annual budgets , there is always a tendency to  over spend towards the end of the financial year for fear of funds getting lapsed  –  the Defence being a culprit many times as funds for Defence are allocated based on threat perceptions rather than Peace Time requirements  .  Similarly  there is also a possibility of shortfall in planned  expenditure  because of inflated projections or leakages in the political system.

A time has come to revisit the budget exercise to align it more to long term goals at the central level and supplement it with annual corrections at the state level to meet short term goals.