Ask not what budget can do for reforms, ask what we can do to reform way we look at it

In the immediate context of this budget, it would have been plain silly to expect the FM to announce reforms. The clue, if one missed it all these months, was there the day before the B-day: the Economic Survey, as this paper’s editorial noted yesterday, was relatively muted on standard first-best reformist solutions. If even the Survey, traditionally a forum for plenty of politically unconstrained reform rhetoric, was pulling punches, where’s the rational basis for expecting the budget to go big on liberal economics?

But keep aside current politics, and ask why should budgets be the prime locus of reforms any way. Budgets in early and mid-nineties were reformist documents because India was then trying to undo 40 years of a socialist state. The targets were big — industrial licensing, ridiculously high tax rates, Kafkaesque foreign exchange controls, etc — they needed a sword to be taken to them and the sword was entirely the Centre’s and especially the FM’s to wield.

What is the reform story now? The big dragons of socialism are slain. And the focus has in some way moved to states — Buddhadeb Bhattacharjee, Narendra Modi, YSR Reddy, M Karunanidhi all want elbow room on acquiring land for industry; many states have moved on pension reform even as the change remains frozen at the Central level, disinvestment goes on for state PSUs even though it is barred at the Centre. And in many reforms that can still only be done by the Centre, the remit of the proposed change extends far beyond that of the finance ministry.

Retail FDI, labour market flexibility, liberal agriculture policy, to name a few, are matters that require, even in a reform-friendly political environment, intense inter-departmental consultation. Why, it is logical to ask, should we want only the budget to announce them? Similarly, if states’ interface with liberal economic policies is becoming arguably the most crucial reform chapter, how can we assess reformist advance or regression by only looking at the Union budget?

Economics 101 textbooks say a budget is a tax and expenditure statement. We need to go back to that textbook so that we can grow up about how we look at budgets. Excitement about Union budgets was understandable when the Hindu rate of growth was still fresh in the memory. It is not terribly logical and a little silly when Chinese rates of growth are the benchmark.

Finally, consider this: if politics in Delhi is reforms-unfriendly, Union budgets can’t announce reforms; if politics in Delhi is reforms-friendly, Union budgets don’t need to announce reforms, there are 364 other days in the year for them.

What will we miss when we reform the way we look at budgets – the hoardings, probably.