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Mainstream, VOL LVI No 8 New Delhi February 10, 2018

Budgets Need Greater Transparency

Tuesday 13 February 2018, by Bharat Dogra


When the Budget speech of the Finance Minister ended this year, it was clear to most people that the most important measures announced in this speech related to a health insurance scheme for 50 crore people and the raising of the procurement price for a wide range of crops along lines which appeared to be in keeping with the long pending demands of the farmers’ organisations. However, as it was not clear in the Budget speech how much resources have been allocated for this, they searched in the Budget documents for this but they could not find this as no clear allocations had been made in the context of these two most important announcements.

To ensure better understanding of Budgets and also to fulfil the most important requirement of relating schemes and programmes clearly to allocations, the Budget demands should have greater clarity and transparency. In addition, when changes in Budget account-keeping and presentation are made, at the same time clarifications should be provided to enable comparisons with previous years and to improve the understanding of emerging trends. According to a document titled, ‘What do the Numbers Tell?’ prepared by the Centre for Budget and Governance Accountability, “It is also important to point out that due to the merging of the planned and non-planned expenditure in the Union Budget 2017-18, there has been a change in the Budget statement providing the details of transfer of resources to the States. The figures provided for certain components of resources transferred to States have been disaggregated by components that are not easily available for the previous years. This of course creates an issue of non-compatibility of these figures for a time series analysis and, in such a process, affects transparency and simplification of budgetary data in an adverse manner.”

The same document also tells us that a reduction in Revenue Forgone as shown in the Budget for 2017-18 is largely a result of following different procedures. To quote, “However, as mentioned in the Union Budget 2017-18, this decline is mainly due to the change in the methodology for estimating revenue forgone in excise and customs. Therefore, the revenue forgone estimates for the years up to 2014-15 are not strictly comparable with the estimates for the subsequent years.”

If names of existing schemes are changed or if these are shifted from one department or Ministry to another or if one scheme is merged in others then such changes should be explained very clearly. One or two years back an allocation made earlier under the Finance Ministry was merely shifted to the Agriculture Ministry and on this basis the allocation for agriculture was artificially inflated. Before this could be found out, several TV channels had already announced a pro-farmer Budget based on this inflated estimate.

Another serious aspect of concern regarding diminishing transparency of the Union Budget has been revealed by Mythili Bhusnurmath in her article titled ‘Invaluable first lessons’ published in the Economic Times (February 5, 2018). According to her, “the amendment to the Fiscal Responsibility and Budget Management (FRBM) Act 2003, which is part of the Finance Bill 2018, proposes to drop the words, “achieving sufficient revenue surplus”, from the long title of the Act. Further, any reference to the sustainability of the “balance between revenue receipts and revenue expenditure” that is presently required to be furnished in the Medium Term Fiscal Policy Statement under Section 3(3) (i) of the Act is to be omitted.

“Thus, future Budgets will not be obliged to give any information on whether GoI borrowing has been used for investment or for current consumption. This has huge implications not only for transparency in government accounts but, more importantly, for inter-generational equity and debt sustainability.”

Prominent social activists, Nikhil Dey and Aruna Roy, have pointed out in a recent review of this year’s Budget (published in The Wire dated February 5 2018), “The Budget has been a far too secretive and hidden exercise. While there might be certain matters of fiscal policy that need to be kept confidential till the Budget is announced, social sector expenditure and allocations related to policy announcements should be matters of open ongoing debate. In fact, the Budget should follow the pre-legislative consultative process, ignored by the govern-ment, mandated by the Ministry of Law in 2014, for all laws and subordinate legislation. The Budget should be considered an integral part of all legislation, as it determines the efficacy of most legislative measures. Building a pre-budget consultative policy for budgets would help in numerous ways: it would allow for people to give their suggestions and inputs, help the executive get feedback and ideas from a cross section of people, and enable them and the legislature to make more informed choices.”

The author is a freelance journalist who has been involved with several social movements and initiatives.

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