Government budgets reflect public policy and carry the authority of the law. These are very critical because they are the product of the political deliberations and consist of the government’s most important decisions. It determines what activities and initiatives are supported, and which are not.
However, we are in an era where annual government budgets are becoming increasingly irrelevant, and for the right reasons. Businesses make huge capital outlays with long-term prospects in mind. That needs consistency and stability in government policies and plans.
Gone are the days when budget announcements was a highly exciting event, with many important announcements in terms of tax and duties being made. Many a times, they would make a huge difference to various businesses. Senior corporate executives would be completely glued to the TV during budget announcements.
Annual budgets reflect and carry forward the long-term thinking of the government and hence, are becoming a mere predictable extension of that long-term plan.
In many Western nations, with a capitalistic approach of leaving things to the market forces and the philosophy that it is not the business of government to be in business, government budgets do not matter much.
In the Indian context, however, annual budgets continue to be relatively important as government policies are not for long-term stabilities and government involvement in business is high.
Typically, our budgets consist of the following points:
~~ Resource allocation
~~ Reduction of inequality across sections of society and regions
~~ Economic stability and growth
~~ Management of government-owned corporations
From a young manager’s point of view, it is important to understand budget from the following perspectives:
~~ How does it affect the industry one belongs to?
~~ How does it affect adjacent industry or the buyer or supplier industry?
~~ How does it affect the economy?
~~ How does it affect savings and investments at a sectoral, and overall level?
~~ How does it affect personal income and savings?
With specific context to the Budget that is coming up, the challenge for the government will be finding a balance between welfare measure funding and austerity measures needed to contain the galloping deficit.