Budget Fever -

"Honey, its that time of the year again," Editor said. Before you think its Valentine's Day, we are talking 'Budget which is a Big Bore'. Not so bad, but we do have an overkill when it is finally done.

One of the favourite obsessions of mainstream financial press - the kind of obsession that probably has no precedent in other economies and media. I even scheduled my Wedding after the Budget. Sigh..

(I had worked on the following last year - excerpts - have omitted personalities surrounding the budget - virtually the whole team has been replaced this year. Made a few changes so that it is relevant now)

(AAWWWWESOME headline - thank God for Bollywood)

Gurus who make Gurubhais
ET, Feb 2007

Next only to troop mobilisation - most important event in the annual calender for many in the country - The Budget, is round the corner. The Finance Minister's foot soldiers are on the move gearing up for the big day on February 28. Executing with unmatched military precision, these soldiers spend tireless days and even nights, and precious holidays giving shape to the eagerly waited document.

Months before the media builds up the frenzy for the budget, scores of number crunchers, analysts, researchers, are diligently working all year round. They work on ideas, test out tax proposals for raising much needed revenues for various programmes, study expenditure profiles of ministries and finally present the numbers to the nation.

Drawing from the directions of their commander-in-chief - the Finance Minister and vision of Prime Minister, the Team Budget will try to balance out the pulls and pressures of fiscal prudence and popular policies to deliver yet another 'dream budget'.

Though the layperson's only involvement with the Budget is limited to whether or not the tax rates would be increased or how much would that LPG cylinder cost or if excise duty on cars would go south, the mammoth exercise is much more complicated than it appears.

Leading the team is the very "hands-on" minister. The team comprises the Finance Secretary, the Revenue Secretary, Expenditure Secretary, in addition to a Chief Economic Adviser and an Adviser to the FM. This team will concretize the vision within the contours of the National Common Minimum Programme (NCMP) of the UPA govt.

Last year, the team had Dr Parthasarthi Shome as advisor to the FM. Dr Shome who breathes tax policies is truly a global citizen when it comes to tax matters. He has worked with various governments in the Latin America and Asean contributing to their tax polices and administration. Dr Shome's brought with him a unique repository of knowledge to ideate on the country's tax policies. Having written the tax policy report underscoring the flaws like tax exemptions – Dr Shome had the responsibility of phasing out tax exemptions. Dr Shome wass a craftsman, who knew his tools. As permanent nominee of Centre on Empowered committee of state finance ministers, he had been the driving force behind introduction of value added tax in the country and was working on rolling out of single Goods and Service Tax (GST) from 2010. This year, he left finmin ahead of the budget to render his services to the UK government.

The Finance Secretary (D Subba Rao this time round), in the team, is reckoned as "the first among equals" who makes an objective assessment balancing compulsions on both the revenue and expenditure fronts. He will have to be the point person who will have to strike a trade-off between yielding to the demands of various ministries and constraints on government revenues. The finance secretary has to draw a budget giving equal emphasis to both the sectors.

The king of tax collections - the richest man in North Bloc this year - is the revenue secretary. Despite the huge buoyancy in tax collections both on direct as well as indirect, its prudent that the purse strings of the government remain under control.

Secretary, expenditure, has the toughest job of first examining the expenditure profiles of each ministry within the constraints of the Fiscal Responsibility and Budgetary Management (FRBM) targets, limit on government borrowing and plan expenditure. He has to steer through the plethora of demands placed by various ministries and departments and strike out a balance in resource allocation. His signature will sanction more than Rs 5 lakh crore for government of India's expenditure, 80% which goes to meet interest payments, subsidies, defence, salaries and transfer to states.

Various ministries and departments flood the expenditure department with their "demands". The department then takes a view based on revenue projections and previous year's allocation. Deficit financing has been stamped out by FRBM commitments, the government can no longer borrow at will. For nearly a decade, the government has been planning to move to zero-based budgeting but has been unable to do so. By mid-February, the expenditure department seals the proposals and communicates it to the respective ministries.

But implementing the vision and giving the shape the budget, are the men and women of the Budget division under the department of economic affairs who move the government machinery while setting in motion the budget exercise itself. For a large part of the budget exercise, revenue and expenditure department work in near watertight departments. Within the framework of revenue projections and previous year's allocation, the numbers will have to be hammered out. In the high-octane drama of number crunching that unfolds every day in the budget division as it prepares demand for grants from 109 government departments.

For the revenue department generating more revenue and simplifying tax structures are cornerstones of formulating tax policies. It is driven by the implications of tax proposals on the economy as a whole, on individuals and on industries. The foot soldiers who translate the diktats of their senior officials at ground level are officials at the Tax Policy and Legislation Division (TPL) and Tax Research Unit (TRU). The team evaluates the various tax proposals which come from various industry bodies, government departments, weigh their implications and work out actual quantum of who is to pay how much on the income he earns.

On the indirect taxes front, senior officials at TRU will chalk out the future course of where the excise and customs duty structure is headed this budget. The team responsible for service tax would have to take a call on whether or not to increase the service tax rate from 12% to 14% to make up for the revenue loss as well as to align it with excise duty rate of 16% for the roll out of the GST by 2010.

The Establishment as such is open to new and innovative ideas, some of which may be germinating for months if not years. Most of the proposals are from external sources including think tanks like NFPIP, and various expert committees. While political figures and ministers with political clout, can to some extent communicate specific suggestions to the top brass in the finance ministry, a lot of it is in effect only "public posturing", knowing fully well that it cannot be accommodated given the limitations. Lobbying by various interest groups is part of the run up to the budget, providing photo-ops to journalists. In the United States of America for instance, these lobby groups are institutionalised.

Short of turning into a fortress with plain clothes Intelligence Bureau officials swarming North Block, the ministry of finance is closed for the media, two months in advance. No sooner than the Raisina Hill witnesses ‘The Beating Retreat’ as winter recedes, the budget fever reaches a peak inside North Bloc.
The printing of the documents starts about 7 days in advance. To hasten the process of printing, the staff involved are virtually under house arrest. Down below in the basement in the finance ministry's press, the budget division will deploy new machines this year. After the Team has firmed up the figures, tallied the numbers, the budget is sealed. As many as 100 faceless staff, give the Budget a physical form. Mind you there cannot be a single slip of a number in the Budget.

The Budget speech itself - invariably a personal stamp of the finance minister, is typical of his style and language. The speech is frozen at least 2 weeks ahead of the big day. Though there have been instances, where, the finance minister and his men stayed up till wee hours in the morning tinkering with the speech, to be read the next day. The department of economic affairs, is vested with the responsibility of the speech.

The morning of the budget is crucial not only because the FM "may rise to deliver the budget speech", but to be officially taken up by the cabinet. And finally to the Rashtrapati bhavan for the President's clearance for the introduction of the bill in Parliament.

Interesting that, there is no term called "budget" in the Constitution of India. It is called the finance bill or the finance act when it is approved. Barely would the dust on Raisina Hill have settled, they are at it again, germinating ideas half a year in advance.