Column : Where the rupee really goes

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: Budget documents released by the finance ministry have one long-standing flourish. Where the rupee comes from and where the rupee goes to! I could not find a date in our budget history from where the rhetorical flourish developed, but the shape of the rupee and the pie chart formats have become budget lore.

Between the two of them it is where the rupee comes from, basically the tax and non-tax receipts that occupy the budget analysis. Parliament, media and the financial markets have always responded with alacrity on the diagram. But it is the second of the two pie charts, where the rupee goes to—the expenditure shuffle that will determine how well finance minister Pranab Mukherjee has responded to the economic crisis.

Taxes will hog the limelight, for the impact they have on everyone’s purse. Yet this time, it is very difficult to think of any reason for which Mukherjee can offer any substantial give away to any sector, despite the clear analysis made by the Economic Survey of how private consumption has declined in the economy as a result of people basically becoming poorer.

It is therefore the expenditure plan made by the budget that will carry more import. Here too there is an important distinction. There will be two varieties of spending. There will be those made by the government departments and those made by the public sector companies. Since the public sector is cumulatively sitting on a cash balance of approximately Rs 2,50,000 crore, one can surmise that they will have little to contribute as additional investment in the economy this year.

The shape of our economic recovery, as a U or W, ie a brief downturn followed by a consistent upturn, or phases of successive ups and downs will therefore be guided by how well the expenditure plans of the government departments are etched in the budget.

There is a problem here. The government puts in a decent amount of economic analysis to judge the impact of tax plans, but spends just nothing on the economic logic of any of the expenditure pattern. Every time I have pored over the ministry files explaining the rationale for these plans, it has been a very disappointing experience.