The Union Budget for 2013-14 is to be tabled in the Parliament on the 28th of February 2013. This budget will be the last full budget of the UPA government before elections in 2014. The Finance Minister (FM) Mr. P. Chidambaram will present the budget on the 28th of February.
Budget presentations are like a reality show on TV. The lead up to the event has a huge amount of noise as everyone from media to experts try and cash in on the fuss made on the event. The budget day itself is like a Reality show final, with the participants doing their utmost to win votes of the Judges. The participants in the budget are the government who is represented by the FM, government’s allies in the parliament and the opposition. The speaker is moderator of the event. The public are the viewers of the show.
The judges of the budget event are the media, market experts, economists, professors, students and the housewife who gets to have her say on TV. Once the event is over and the marks are awarded it is back to business the next day.
The budget is a necessary exercise to show the intentions of the government. One should not expect the budget maths to come out right, it never does. The FM cannot help the economy through one budget, especially a budget just before elections next year. The FM can only guide the judges on what to expect from the government in the coming fiscal year.
Budget numbers are consistently off target both on the higher side and on the lower side. Last year’s budget was off the mark by a wide margin on GDP growth for 2012-13. The budget estimate for GDP growth was 7.6% and the actual number is expected at around 5.5%. The estimate for CAD (Current Account Deficit) was 3.6% of GDP and the actual CAD is expected at around 4.6% of GDP. The estimate for Fiscal Deficit was 5.1% of GDP and the actual figure is expected at 5.3% of GDP. The government surprisingly got the inflation number right at 6.5% and inflation is expected at around 6.5% for March 2013.
The government is like a listed corporate looking to increase shareholder value. A corporate when it throws out bad numbers will say the future looks bright and when it throws out good numbers will say the future looks brighter. It is up to the analysts and investors to forecast the future of the corporate.
The same is the case with the government. The government will say growth is a priority, inflation management is a priority, deficits are a priority, FII’s are a priority, industry and agriculture are a priority and voters are a priority. Ultimately the government is interested in the voter and it will do whatever it believes is right to get the voter to vote for the government in the elections.
The government will be optimistic on its forecasts for 2013-14 and it is left to the judges to analyse whether the forecasts will be better than budgeted or worse than budgeted. The government will show higher GDP growth, lower fiscal deficit, lower CAD and lower inflation in its forecasts for the coming fiscal. The question the judges have to ask is whether the numbers are achievable or not.
The viewers of the reality show are interested on whether their investments will do well, whether they have to pay more or less taxes, whether their children can get jobs after college and whether prices will rise at a slower rate than it did last year. The judges will have to give the right answers to the viewers leaving out any bias and this is what we will attempt to do in the Budget Reality Show series of analysis.