Open Budget

The budget’s always been a cloak and dagger affair (to the extent that any ship that leaks at the top, er, government operation can be kept secret). And so, when the curtain is raised every year and people’s guesses are proved right or wrong, stocks would go up or down; and we’d know if our take home would increase or decrease; whether a new avenue had opened up to cut down on taxes or if an existing avenue no longer existed. That is also why the budget gets so much coverage.

But the current budget looks like it may be the first non-secret budget we’ll have. Chidambaram has been going around the world indicating what the budget will contain; the intent to cut fiscal deficit with specific figures stated; measures like possible increases in tax rates for the super-rich; the intent to not fiddle with tax rates for companies and the rest of us because it creates uncertainty and scares away investments etc.

You might be inclined to dismiss this as empty talk or at best the government’s attempt to test the waters before taking certain measures, but nope, it’s not so bad. Here are just two such indicators:

-         Global credit rating agencies have stopped threatening to reduce India’s rating to junk status (the irony here is that those same credit agencies won’t cut any Western country’s rating even when it stares at a fiscal cliff and they used to rate all those investment banks as top notch right until the recession broke out. Unfortunately, crooked or incompetent though they are, their rating does matter).

-         Previously unthinkable measures like periodic diesel price hikes have been announced.

This new approach of not keeping it a secret, of declaring long term goals that may span years, of stating measures that are likely and others that are very unlikely (such as not fiddling with tax rates every year) is apparently closer to the American way. Sure, there will still be populism and the reluctance to take the tough measures, but at least everyone knows (roughly) what to expect.

It may make the budget a non-event; but doesn’t this new approach align with how individuals plan their own finances? As individuals, it makes sense to have long term goals, not drunken flip flops every year, so isn’t it time the country was run the same way?