Politicising The Budget

Updated: Jan 30 2003, 05:30am hrs
Fiscal policy is all about politics in any democracy. Taxation, undoubtedly, is a political act and will be shaped by political considerations in any democracy. To say that the budgetary policy of any democratic government is influenced by political considerations is to state the obvious. However, in any mature democracy, especially a parliamentary democracy, there are ways and means by which such political shaping of fiscal policy should be undertaken. The Union finance ministry does not produce an annual budget in a political vacuum, it does so after due consultations within government, within the Union council of ministers, and that is where the political input comes in directly. Second, there are direct political inputs taken through pre-budget consultations. While previous finance ministers have had these consultations across the table, the present finance minister has opted for written inputs from a cross-section of public opinion. All this is acceptable political input into budgetmaking. What is unacceptable and sets a wrong precedent is for a political party to directly consult various interest groups, set up expert committees and then put forward a political agenda for the Union finance ministry. This politicises the budget excessively and runs the risk of allowing populist pressures and sectional interests to dominate the budgetmaking process.

To begin with, the decision of the Bharatiya Janata Party (BJP) president Venkaiah Naidu to set up the Rajnath Singh committee to vet the Kelkar Task Force reports on direct and indirect taxes was wrong. It has curtailed the options available to the finance minister and has created an avoidable political controversy on many issues that ought to have been resolved on more professional lines. Worse, Mr Naidu followed up this initiative by beginning a process of consultations with business chambers and other sectional interests on economic and fiscal policy. This will further constrain the margin for manoeuvre for the finance minister. By acquiescing to this political interference into his ministerial functioning, Union finance minister Jaswant Singh may have well opened a Pandoras Box that his successors may find that much more difficult to close. What now prevents the other constituents of the National Democratic Alliance to put forward their political demands and where then does this policy of fiscal management by political appeasement stop The relevant political arbiter is the Parliament. Every elected representative of the people has the right to participate in public debates in Parliament and suggest changes to the Union budget. Rather than allow that kind of public debate to shape budgetary policy, the BJP may be allowing hush-hush lobbying to take over the budgetmaking process. Ironically, while the finance minister has tried to push for transparency in policymaking and has invited comments via e-mail on his ministrys website, the BJP president is using closed door discussions to solicit political opinion on budget policy. This process can go out of control and politicise fiscal policy beyond repair.