What's in a name? Is an Interim Budget, like the one that’s being presented today, the same as a Vote on Account, as some commentators who should know better are suggesting? For clarity, we need to look at where the terms come from.
Vote on Account is explicitly mentioned in the Constitution’s Article 116. Parliamentary approval is required for expenditure out of the Consolidated Fund (Articles 113, 114). When this is not possible and the prescribed procedures cannot be followed, Article 116 provides a temporary reprieve. After all, the government cannot cease to function because it has no money. This provision is used when elections have been called and the incumbent government is a caretaker.
In this particular case, we know there will be elections, but no elections have actually been called so far. Therefore, the expression ‘Vote on Account’ is a misnomer—it, naturally, cannot have changes in taxes and expenditure. In contrast, the expression Interim Budget doesn’t figure in the Constitution, just as deputy prime minister doesn’t.
There won’t be sufficient time to pass a Finance Bill before the election results are known. Besides, it is only fair that the new government decides on its own taxation and expenditure proposals, not just for 2024-25, but also as a framework for 2024-29. In other words, there can be changes in taxes and expenditure proposals in an Interim Budget, but they are not intended to be substantial. Nirmala Sitharaman’s Interim Budget for 2024 has already been dissected. Since the political composition of the new government in May 2024 is likely to be the same as the present one, one might as well wait for the full Budget for 2024-25.
Traditionally, the Union Budget has been associated with the Economic Survey. (This is equally true of state budgets and associated surveys.) The Economic Survey is not a constitutional requirement. Let me quote from John Mathai’s Budget speech for 1950-51: “All that I propose to do at this stage is to give the honourable members a broad outline of the budgetary position and the general economic background of the Budget. This Budget is being presented under the new Constitution.”
Accordingly, the Budget speech had a long review of the economy. It continued in that way till 1958-59. That was the first year when we had a separate Economic Survey delinked from the Budget, but presented in parallel. The Budget speech naturally still has references to economic developments, but there is much greater detail in the Survey. Down the years, the Survey has expanded in size and coverage. It is presented two days before the Budget because there used to be a Railway Budget one day before the Budget.
What purpose does the Survey serve? Remember, under the Fiscal Responsibility and Budget Management Act of 2003, there are several other documents presented along with the Budget—the macroeconomic framework statement, fiscal policy strategy statement and medium-term fiscal policy statement. But these never attract the kind of attention the Survey does, probably because these documents are eclipsed by the Budget; more importantly, because the Survey is directly identified with the persona of the Chief Economic Adviser (CEA) and his office.
If you go down the list of CEAs, traditionally, they were low-profile as long as they occupied that office. There was a Victorian adage to the effect that children should be seen and not heard. Altered to suit the context, CEAs should be heard (within the government), but not seen or heard otherwise. Somewhere down the line, media exploded and CEAs became much more visible. Often, this affected the nature of the Economic Survey.
The Survey reflects the views of the government—the finance ministry or the department of economic affairs, if you prefer—not those of an individual. That being the case, a certain set of core issues need to be covered, not subject to the whims and fancies of the incumbent CEA. A few recent CEAs have not quite believed in that proposition and have made the Survey individual-dependent, citing themselves profusely. Citations for purposes of analytical rigour are fine, but not if a CEA exhibits a bias towards quoting himself.
Many years ago, when I embarked on my professional career, the Survey used to be physical, not digital. And there was a frenetic rush to try and get hold of it. (Newspapers typically printed only the first chapter.) The Economic Survey is not a source of primary data. It is a secondary source, with the primary source somewhere else within government. But for people outside the government, the Survey was a primary source. Times have changed and there is plenty of data emerging independent of the Survey, including dashboards and other stuff from government. The data argument as a justification for the Survey is no longer as convincing as it used to be. Besides, with the timing of the Survey—this was true even before the date of the Budget presentation was changed—we never have a full year’s numbers.
Inertia and resistance to change runs deep, especially given the hype surrounding the Budget. Otherwise, like John Mathai, we could have had a brief sketch of the economy in the Budget speech, with the Survey moving to June/July. But this is wishful thinking. Besides, we do have something like that in the Monthly Economic Reviews. Since this is an Interim Budget, we don’t have an Economic Survey. That will have to wait for the full Budget. Instead, we have a document that is called a Review of the Indian economy.
In large measure, this document answers the question about why we need a Survey, whatever be its name. That’s because such a document tells us how the government looks at the economy, the problems, priorities and possible policies. Given that the Survey is two days before Budget, one should not presume the Survey gives us any indication about what the Budget has to offer. Historically, it will be difficult to establish such a correlation. Often, a Survey advocated reforms and was applauded, only to be refuted by the Budget. Sometimes, Survey was lambasted because of its lacklustre nature, but the Budget surprised everyone. As far as I recall, 1997-98 was one such instance.
In fairness, however, there has been no such dissonance between the Survey and the Budget with the two Narendra Modi governments, especially since 2018. Though this recent Review isn’t a full-fledged Survey, that’s how we should look at the issues it has flagged.
(Views are personal)
Bibek Debroy, Chairman, Economic Advisory Council to the PM