Rail Budget 2010

(This article was originally written for the CNN-IBN blog)

So, the first Railway Budget of the new decade is now out of the bag. It won’t be wrong to say that it is on expected lines considering the track record of the incumbent Railway Minister, Ms Mamta Banerjee i.e. High on populism.

The good news for the commuters is that the train fares have not been raised. Seven years without any increase in fare, must be some sort of a record in an inflation ridden world. The transportation of essential commodities like food grains, kerosene and fertilisers will attract lower freight rates. Commendable effort provided the benefits are passed onto the consumers.

Deregulation of Oil Prices in India

Raghu is a clerk by profession who lives with his wife and two daughters. He uses the city bus services to commute daily to his office. Though not highly educated, he loves going through the newspapers to keep him abreast of the latest happenings. He is especially fascinated by the news related to the ‘aam aadmi’ (a typical middle class person; the new rage amongst the TV channels and politicians). He was happy that the government was making special efforts to keep oil prices in check so that people like him could benefit. The efforts of the central government had helped him keep his household expense viz. LPG cylinder, bus tickets etc in check. 

But he was surprised how his neighbour Rajesh, a businessman, could afford the latest gas guzzling cars when the government was finding it so tough to keep the fuel prices in check. In order to satisfy this curiosity, he asked this question to Rajesh. Rajesh replied, “In the existing scenario when the international price of crude oil is constantly threatening the 100$ (per barrel) mark and in India you could still afford it for Rs 50 per litre, why not make the most of it?” After replying, Rajesh sped past him in his latest SUV. Raghu was puzzled. Was the government step really pro-aam aadmi or was it bad policy? For the past few days the news related to a panel headed by a gentleman named Kirit Parikh has caught his attention as it is related to “deregulation” of oil prices in India. He wonders what this topic is all about and how does it affect an average Indian? Let’s try to answer his question.

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.