The budget is not just a collection of numbers, but an expression of our values and aspirations.
— Jacob Lew
While the world over February connotes a certain excitement because of Valentine’s Day, in India the month ushers in the country’s financial budget, with the Finance Minister presenting the Union Budget on February 1.
The electronic media usually reflect the financial fever by providing wide coverage through pre- and post-Budget sessions. Innumerable panel discussions highlight the views and expectations of industry leaders before the Budget, and their reflections and feedback after its presentation. The Budget, along with the Economic Survey, showcases the vision of the government. It estimates the income of the government, in terms of taxation and other proposals, and expenditure by way of allocation of government funds to various priority sectors, departments, and so on.
While industry leaders endeavour to analyse the Budget and look ‘beyond the wall’ to predict the country’s financial health for the next year, how do the young managers, tomorrow’s leaders, view the budget? Is it important to them or of no great consequence to their career? My first-time tryst with the Union Budget is an experience I will always remember, as it was my first learning in the corporate world.
After completing my Masters in 1994 I started my career as a campus recruit. My first day at work also happened to be Union Budget day. In the mid-1990s, the Budget used to be presented in the evening, at 5.30 pm, a colonial hangover that bore in mind the need to align with midday in the United Kingdom.
Like any first day at work, I was primarily engaged in completing the joining formalities after participating in the corporate orientation session. I was scheduled to meet the Founder and Managing Director of the organisation in the evening. This meeting did not happen, and I was told the super boss had left for the day, my meeting with him being re-scheduled for next day.
Industry impact
I was happy as I had more time to prepare for the meeting and, eager to make a good first impression, I prepared well and rehearsed responses for all probable questions. The MD, an intense and intimidating personality, wasted no time on small talk. He directly posed his first question: What is your view about the Budget? Totally unprepared for this salvo, I mumbled some very apparent, superficial comments that I could manage, based on my hurried reading of newspaper that morning. Not surprisingly, he looked unimpressed.
He then elaborated his question further: ‘What would the impact on the Budget proposals be on our industry?’ A complete googly that left me speechless and flabbergasted! The next 15 minutes I was grilled with incisive questions while I sat dumbfounded, squirming in my seat. The freshly minted MBA ego was totally punctured, and I learnt a valuable, indeed unforgettable, lesson with respect to the importance of Budget, or any current event that would have a likely impact on market and business — a lesson that has stood me in good stead in work and life.
Dream budgets, epochal budgets
The Union Budget has been in existence from Independence. So, by now, about 80 budgets; full-fledged and interim, also known as vote on account, have been presented by successive finance ministers since Independence. All Budgets are important, but some are more important than others. And, certain budgets signify a new direction for the economy and the country.
While the nationalisation of general insurance companies happened in the 1973 Budget proposal, economic liberalisation was the key component of the 1991 Budget. The Budgets of the 1960s and 1970s were more oriented to higher levels of taxation and protection. However, in the more liberalised economy, we have seen a moderation in tax rates, as budgets have focussed more on providing significant impetus to economic growth. We have thus witnessed a gradual shift from the conservative approach to a progressive perspective in budgeting at the national level.
Why it is important
Budget proposals impact every citizen’s economic well-being, positively or negatively. The government can increase or decrease the income-tax, introduce or withdraw tax exemptions. All this has a direct impact on our earnings and our spending/saving capacity. Similarly, the government can hike or lower duties on goods and services as well as tariffs, which will, in turn, increase our cost of living. Therefore, such changes to duties and tariffs will have a cascading effect across the economy.
For a long time, India had a railway budget independent of the general budget. This practice was abolished a few years back, and we now have one integrated budget.
Budget days are eagerly anticipated by the financial markets and the stock markets wildly celebrate by sky-rocketing or crashing in reaction to the proposals. If you are an investor in the financial markets it is good to track the Budget and the way it will impact various sectors.
Major highlight or mere hype?
A former colleague, a UK national who has worked in the US and European markets, happened to visit India once during a Budget week. He was quite intrigued and amused by the heightened levels of interest in the budget exercise that pervaded the country. The media was covering the Budget extensively and this permeated to business establishments and homes as well. He commented that hardly anybody pays close attention to government budgets in the economies he was familiar with.
The reason could be that in the more developed and mature markets the policies and tax proposals are relatively stable. There might not be many shifts or changes at the fundamental level. But we are still a young democracy and yet evolving as a market economy. We will continue through this transitional phase of excitement that also witnesses Budget-related rises and falls in share prices with fluctuations in stock market behaviour.
The Union Budget is not something that happens in the government alone. It is by the government for the people and the country. Students and young managers will gain immensely by following the Budget presentation closely to understand and appreciate its importance and the impact it will have on their personal and professional lives.
At a superficial level it is what erstwhile US President, George W Bush had described: “It’s clearly a budget. It’s got a lot of numbers in it!” The need is to look beyond the veneer of large numbers and understand what they entail. This is important for every young professional.