President’s Blog
Source of image: https://twitter.com/satishacharya/status/1620621670280237056
After the Finance Minister presented the budget for the financial year 2023-24, the media and corporate spokesmen have been making delirious statements about how the budget is in the interest of the common man and how it has tried to balance the need for ‘fiscal prudence’ and ‘macro-economic stability’ with the expectations of the people.
In the 2023-24 budget, social sector expenditure as a share of total expenditure is budgeted at 18%, the first time it has fallen below 20% since 2009, based on budget data from 2009 to 2023-24. Social sector expenditure is budgeted at Rs 8.28 lakh crore ($100.77 billion) in 2023-24, compared to revised estimates of Rs 8.84 lakh crore ($107.53 billion) in 2022-23.
While social expenditure has decreased, the outlay on military and debt servicing payments constitute a big chunk of the budget.
The graph below shows that 34% of the budget allocation comes from borrowings which would drastically increase the debt servicing burden in future years, thus reducing social expenditures.
Source: https://www.drishtiias.com/daily-updates/daily-news-analysis/union-budget-2023-24
The graph below shows that 20% of budget expenditure goes to debt servicing and another 8% to defence expenditure, taking away investments in job creation, health, education, nutrition and other pressing needs.
Governmental budgeting is more than managing income and expenditure. It is a political process by means of which decisions on taxation and other sources of revenue and allocation of resources are decided by a small coterie of decision makers in the Executive. These decisions put the interests of the big monopoly houses above that of the people. The usurpation of this power to decide on incomes and expenditures is historically rooted in the control of public finance by the Executive, who makes the budget and gets it approved by the Parliament using the majority votes of the ruling party, and then passes it off as a ‘people’s budget’.
During early political revolutions in Europe in the 17th century, the legislatures controlled by the representatives of the mercantile class seized the power of absolute monarchs’ fiscal decision-making. This was perhaps the starting point when the division of power between the hereditary sovereign and an elected parliament consisting of ‘people’s representatives’, but actually accountable to the mercantile and land owning classes, started. The condition set by Parliament in those times to accept Charles II as the monarch was that he renounce his claim to traditional feudal dues.
It is noteworthy how modern governments since then have spent very little on basic necessities of the people and a large ratio of revenue for military and debt servicing purposes. Since debts were the result of past unproductive expenses and debt charges, the cycle continued. Therefore control of public revenue and marginalising people from the budget making process was decisive for the ruling establishment. In 1947, hereditary privileges were abolished and financial powers were centralised in the central government. Just as the developments in the political revolutions in Europe, here too the people were betrayed.
The claim of governments that they have to resort to borrowings in order to meet the needs of people is not true. Further and further concentration of wealth (India’s top 1% owned more than 40.5% of its total wealth in 2021, according to a new report by Oxfam), dispels any doubt that the budgeting process actually redistributes wealth in favour of the wealthy. The ruling party which passes the budget praises it as ‘people friendly’, ‘amrit kaal’ etc. Opposition parties let loose ‘scathing remarks’ on the anti-people nature of the budget, hiding the fact that they did the same when in power.
Indian tradition of statecraft has always put the principles of dharma above the ruler’s self-interest. Time and again, ancient classics on governance such as Shantiparva, Arthashastra and Nitishastra have cautioned the ruler to put the welfare of the people above everything or face the consequences of a revolt. Arthashastra says:
“In the happiness of his subjects lies his happiness; in their welfare his welfare; whatever pleases himself he shall not consider as good, but whatever pleases his subjects he shall consider as good.”
The process of budgeting today only reflects the prevailing political process where the people are only helpless bystanders and have no role other than voting for this or that party. It is time that people demand mechanisms which will ensure that they have a say in making sure that the budget prioritises the needs of the people over that of the big business houses and vested interests.
