Feb 23, 2007|
What taxpayers have the right to know...
'Budget' as defined in the Oxford dictionary is "an estimate, often itemized, of expected income and expense for a given period in the future." Every economic activity needs to be budgeted for, be it unstated and implicit like that of a household or stated and explicit like in the case of a company. As the size and complexity of operations increase, it becomes all the more necessary for an economic entity to structure, implement and review a budget. A nation-state is the most evolved form of an economic entity, and therefore needs a more 'refined' budget - one that not only accounts for the receipts and payments but also gives an insight into the capital budgeting. We in India certainly need one.
Union Budget days over the past couple of years have been witness to much speculation, debate, analysis and interpretations. It seems to evince interest from the housewives, salaried, businessmen, retirees and tax consultants alike. The 'interest' is, however, often associated with levy of taxes (or exemption thereof) and not its deployment.
While statistics with regard to GDP growth, revenue deficit, fiscal deficit, FRBM and the likes are widely quoted in pink papers and business journals, how much capital is being deployed in nation-building activities is seldom delved into. We are also told by economists and experts as to how viscous a burgeoning fiscal deficit (at the Centre and state levels) can be for the economy. But no one ever tells us if the funds in exchequer are being utilised in the most effective way so as to minimise such imbalances. Surely, we as citizens and taxpayers of the country have a right to know this. Infact, to make the point clear, a perfectly balanced revenue budget may have zero funds deployed for long-term investment in the country's infrastructure.
A lack of appreciation of the nation's capital needs has almost derailed the economy. While the 'concerned authorities' remain obsessed with the revenue books, ignorance with regard to capital investments has led India up the path of minimum investment in the country's infrastructure, with an abysmal figure of close to 3.5% of the GDP for about three decades. Debate and discussion on a publicly declared capital investment budget may have averted this serious under-investment.
Here we need to point out that we are by no means undermining the revenue budget. There is no denial of the fact that revenue and capital budgets are obviously inter-related just as a profit and loss account and balance sheet are. Surpluses and allocations from the revenue budget go towards capital (infrastructure) investments. Similarly, the servicing of long-term capital features in the revenue budget. If the planned infrastructure outlay in the next five years is US$ 350 bn (Source: IDFC), then the capital investment budget can enlighten the taxpayer as to the ways and means of achieving the same though the tax revenues. While this will not only help the taxpayers appreciate the rationale for the levy but may in some ways also deter the evasion of taxes. Also, recognising this reality through a capital budgeting process will indeed throw up some challenging issues. Issues relating to the quantum of planned infrastructure investment, their feasibility, the target duration of the projects, progress made on earlier projects and the sources of finance will be open to public debate and scrutiny.
What is further interesting is the fact that the debate here, unlike the usual ones, will be a more informed one. A good capital budgeting process would lead to far greater participation and consensus on key issues of nation building. More often than not it can prove to be a strong indicator of the ruling government's performance.
While we as taxpayers crib every time a new is levied and at the same time pride ourselves on being one of the lowest taxed nations, the very purpose of collecting the taxes is sidelined. Its time that the 'Right to Information Act' is well exercised by the honest tax-paying Indian citizen to ask the FM some interesting questions!
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 23, 2017
Nowhere was the darkness deeper than in the nation's capital. There, no light shone. No flicker of awareness...observation...learning...or reflection appeared.
Aug 22, 2017
It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.
Aug 22, 2017
Post demonetisation, a cut in bank savings deposits rates was in the offing.
Aug 22, 2017
Today, we are attacked by one preposterous thing after another, each of them even more absurd than the last.
More Views on News
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407