Budget making is essentially the art of reconciling contradictions. When people come and ask you for expenditure to be enhanced in their areas of interest and at the same time demand that they should get some tax concessions, the obvious question is — where will the money come from? That’s the question the finance minister has to answer. The process of finding the answer begins as early as November, when the expenditure department of the finance ministry calls for projected expenditure figures from all ministries. This is followed by a series of bilateral discussions between the finance minister and major stakeholders like the defence ministry, the planning commission, HRD ministry and so on. The first part of the Budget to be finalized is the expenditure Budget and it is generally sewn up some time in January.
In the first week of January, the finance minister starts a series of consultations with sectoral representatives — farmers, small scale industry, exporters, industrialists, trade unions and so on. The idea is to get their inputs both on the expenditure side as well as on the demands for tax concessions that they invariably will have.
This is when the contradictions really begin to emerge. For instance, farmers will typically ask for, say, higher expenditure on farm subsidies or inputs. You ask them where the money will come from and they will tell you, “tax industrialists, they can afford to pay more”. Then you talk to the small scale sector representatives. They will want duty concessions and expenditure on schemes to support their sector. You ask where will the money come from and they will point to the big industrialist. When you meet representatives of big business, they also have similar demands. Where is the money to come from? “Tax farm incomes and stop pampering the small scale guys,” will be their refrain.
Some time in January, the FM asks for the first “blue sheet” from the Budget division. The blue sheet is essentially a single sheet of paper giving the broad numbers — how much expenditure is needed, how much revenue is expected and what the deficit will look like. This is only the first of many blue sheets. Each blue sheet is discussed by the Budget group and destroyed the day discussion on it ends. No record of these sheets is maintained.
The Budget group has a core team of five members — the finance minister, finance secretary, revenue secretary, expenditure secretary and the chief economic advisor. Aiding them are the additional secretary, Budget and the chairmen of the two tax boards, the Central Board of Direct Taxes and Central Board of Excise and Customs. This group discusses the tax changes that can be made.
After the FM has decided on the broad numbers, he goes to the PM for a first round of consultations. The PM might suggest some broad changes. You come back, incorporate them and have a second round with the Prime Minister in greater detail, where you will also look at the new schemes carefully. A third round of discussions is on the tax proposals. Finally, you might have a fourth round with the PM on the actual speech.
Since we have this extraordinary level of secrecy surrounding the Budget, the speech has to be fiercely protected. It is kept with the additional secretary, Budget. When the FM wants to work on it, he asks for the speech, but can't take it home with him or lock it up in his own drawer. At the end of each day, it must be returned to the additional secretary, Budget, for safekeeping.
The secrecy fetish means that once the documents start getting printed in the basement of North Block, people involved with the printing are “quarantined” for almost three weeks starting from about February 10. Some people can enter and leave even during this period — basically the core Budget group. But even the FM needs a pass to enter the basement and every entry and exit is recorded.
It is high time we ended this secrecy. In most democracies, Budget proposals are not a secret. They are debated and discussed in public.
