Monday, February 8, 2010

Does anyone lobby for the common man in the budget?

(This article was adjudged as two of the best entries by Mint newspaper, Hindustan Times Media Ltd from all over India for this topic related to Budget 2010)

What does a common man expect from the budget? Lower inflation, lower tax rates, more avenues to save taxes, extension of the social security net, emphasis on health, education & infrastructure and above all a budget that is comprehensive and transparent in nature.

But what do they get? Some populist declarations that are unlikely to be sustainable (Ricardian equivalence ensures that we fear the future rather than enjoy the present), changes in direct taxes that benefit the business class much more than the common man (doing away with the standard deduction: salaried class had once again taken a hit compared with businesspeople, who could continue to write off business expenses), further shrinkage of social security net (lowering of interest rates on PF being debated every now and then), indirect taxes like service tax that ensure that the price that he has to pay shoots up. Wasn’t it true during the financial meltdown when the government was busy doling out sops to the industry, the FMCG companies were increasing the prices as well as decreasing the quantity of their offerings. It was not a surprise that they raked in mullahs while the common man suffered again. Reforms like GST wait because it creates a system too transparent and efficient for the industry. Imposition of education cess, leakages in the development schemes, rising interest rates or inflation etc in the end are borne by the common man.

So, we can say that though the industry looks most concerned as well as vocal, the one who suffers silently is the common man. He might benefit here or there by some populist measures (esp. when the election are round the corner), but it’s too short lived. So, when a industrialist or a politician can defend one's turf effectively using jargons like deficit, WPI etc why would somebody lobby for the common man in the budget? It’s not a surprise that nobody does.


  1. First of all congratulations for your livemint thing. I would like to quote Jack Nicholson from the movie Departed, "No one gives it to you , you have to take it", this is the message for the common man from the government and the common man must learn to live with it. People need to adapt to the reformed system and plan according to it, now when the government decides to free the petroleum prices, the common man will again complain not knowing that its for the long-term benefits of the country. The common man complained when the steel prices were deregulated and now we can all see that it proved better.
    The common man must stop complaining and learn to fight , this is a country where our leaders are ready to talk to foreigners armed with nukes and ready to blast us anyday; but refuse to talk to our own people who are fighting for their rights. What can you expect from them?

  2. First of all, congratulations for being invited for panel discussion at the oberoi.(followed by cocktails and dinner :)).

    Lets see what budget 2009 meant for common man in India:
    - The basic exemption limit was increased to INR 160,000 from INR 150,000 for all taxpayers (other than women below the age of sixty-five, in which case, the basic exemption limit increased at INR 190,000).
    - Agriculture debt waiver extended by six months
    - Allocation for Bharat Nirman scheme increased by 45 percent
    - Rs.20,000 crore for rural housing
    - Rural electrification scheme got Rs.7,000 crore more
    - Agriculture development fund increased from Rs.2.87 lakh crore to Rs.3.25 lakh crore
    - Allocation for urban poor schemes was raised to Rs.39,730 crore
    - Duties on life saving drugs was reduced
    - Banking services in under-banked areas were increased.

    so it cannot be said that there will be nothing for common man in budget 2010. The finance minister has plans to speed infrastructure development and increase spending for farmers and the poor.

  3. Congratulations .. once again :) It is really great to see somebody taking economics beyond textbooks. Looking forward to more enlightenment from you. However, I think most government decisions are to serve two groups of power people. One, the business class. And two, the poor agricultural class which is powerful due to two reasons - one, their sheer number and two, their voting regularity. So when we say common middle class suffers, it also comes down to the fact that they have never made themselves a force in electoral mandates which is all that budget-makers care about. True, they have been neglected and probably will be in the future. But, again it is because they have allowed themselves to be exploited by voting as yadavs, kurmis or bhumihars and sadly not as "common men".

  4. Parag, I feel you have hit the right tone though I would also like to add that the poor agricultural class though targeted by many schemes like NREGS, RED CARD, SUBSIDIES etc, don't benefit by them as those in power mainly belong to the section that benefits by the status quo. So, middle class should go beyond just voting sensibly. May be contesting elections is one way.
    Thanks to all those who read or posted. It was really enlightening. Hopefully some common man amongst us might be the change that we are looking for.

  5. Budget making is basically a central policy of gathering and allocating money to different activities/programs. I think when implementation goes wrong, it is not really their fault. I am not saying implementation is not an issue, it definitely is. But the blame for it should be borne by the whole political and administrative class, and even by the people to some degree. Blaming the budget makers for poor implementation is not quite fair. Correct me if I am wrong.

  6. Of course, the implementing agencies should be held accountable but the budget makers must take into consideration the leakages that exist in the system or their vision has to have a sustainable aspect. Take the case of NREGS, it is being implemented throughout the country without tackling some obvious shortcomings. Due to non-existent banking penetration, the money being dispatched to backward areas is not reaching the targeted people. Even the asset creation is not happening as the projects mainly concern digging ponds and well. So, where is the vision? Its as good as doling out money to gain political mileage that too without ensuring that the beneficiaries are the aggrieved not the implementors. You can't always rely on failures to be your pillars of success. Sometime you are better off doing it right the first time.

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