Every year, for the last 30-odd years, in the four or five weeks preceding the budget, the finance minister meets economists and heads of large business houses. Sometimes, the prime minister also meets them. This year has been no different.
Until 1987, I was also invited. Since then the government has stopped inviting me. I think I know why, but it’s only a guess, likely a correct one. It rankled for a few years. Then I realised that none of my friends cared. And the government, of course, didn’t. For it, the exercise is anyway pointless chore.
I agree because these meetings take place so close to the budget that it is doubtful if they influence it in any way. The influencing happens through private channels, well beforehand. But the motions have to be gone through, nevertheless. Hence these meetings.
The guests talk. The hosts listen, often with bored expressions. After a coupe of hours the guests go away with a warm glow at being able to tell their friends “I told the FM or PM”, as the case may be. The hosts leave, glad to be able to get back to work.
Over the years, as my interactions with both sides have grown wider and deeper, I have come to understand why this is a dialogue of the deaf. What troubles me is that neither side has shown any willingness to change. So there are three changes that I would like to propose, in the national interest. Hopefully, if accepted, they will turn the dialogue into a semi-deaf one, which is the most we can hope for.
First, the meetings must be held in the first week of November after the kharif crop is in, and rabi sowing has just started and the budget has had seven months of life. This is important for two reasons. One, by the end of October everyone who watches the economy knows what’s what, even if the data are very preliminary. Two, given that five months are still left in the financial year, there’s still enough time to make the necessary adjustments.
Second, economists must realise that governments function within extensive economic, administrative and political constraints. There’s absolutely no point in suggesting impractical things at such meetings. This is what bores the ministers and bureaucrats stiff.
It doesn’t matter if the idea is an excellent one. Indeed, I get one every day. But the pre-budget meetings are neither the time nor the place for them.
Economists must also realise the importance of relevance. No FM or PM likes being lectured to on economic theory. That’s best left to private meetings with Chief Economic Advisers who, usually, have been lacking in that department. They are only good at running mindless regressions.
Third, the bureaucrats in the economic ministries must stop thinking they know everything merely because they work for the government. What they know is what the minister wants, not what the economy needs. They are servitors, not domain experts.
This means they must interact with economists throughout the year in a structured way so that their lack of knowledge of economics is made up. This can only help the budget’s tax proposals which currently make little economic sense.
In short, interaction between the government and the economists must be continuous and at the appropriate level.