Budget and Constitution

Author: 
Nantoo Banerjee

Attorney General Mukul Rohatgi is absolutely right. Presentation of national budget by a government is a “constitutional work”.  Selection of state election dates by the Election Commission can’t disturb or disrupt the government’s annual budget presentation, authorizing its annual expenditure and collection of tax and non-tax revenues, including borrowings, to pay for the expenditure. Budget making by the government is a constitutional process. Under the constitution, budget proposals, once passed by Lok Sabha, constituted of direct representatives of the country’s eligible adult citizens, can’t be stopped or amended even by the upper house of Parliament, Rajya Sabha, and the President of India.

Union budget passed by Parliament and consented by the president becomes the Finance Act and is valid for a year. The national budget authorizes the government for all its approved expenditures, including salaries, establishment expenses and new projects, of all government departments and the eligible constitutional bodies, including the judiciary, legislature, state governments, union territories, auditors (CAG) and the election commission. In the national annual budget, tax proposals together cover hardly 50 per cent of the government’s total expenditure. Yet, tax proposals are extremely important to move the economy and the comfort of the people. Logically, no other constitutional authority, including the election commission, can restrain the Lok Sabha, the house of people’s representatives, on its budgetary function.

In the past, India’s democracy had witnessed highly regressive direct and indirect tax systems under all governments, irrespective of their political colour and affiliations, until 1990, when the highest level of income tax, including surcharges, ruled at over 90 per cent and indirect tax, including import levy upto above 200 per cent. Such high rates of taxes led to large scale tax evasion and black money generation in the country over a period of 40 years since 1950. Ever since the end of Emergency in 1977, elections in the country, including mid-term, are held almost every year. However, they hardly disturbed the union government’s national budget presentation, including the ‘vote-on-account’ to continue with the provisions of the previous year’s budget for three months, before due date.

Over a period, all political parties in power in the national government fiddled with the tax rates ostensibly to push the country’s economic growth and the well being of its citizens. It is absolutely wrong to say that tax rates, direct or indirect, can influence the state or national elections. This is more so when only 1.5 per cent of the country’s population pays any income-tax to the government. Agricultural income, covering nearly 40 per cent of the population, has always remained tax free. Thus, It is almost sinister to link taxation rates, pro-development provisions in budget with the Election Commission’s ‘model code of conduct.’ Some of the political parties contesting ensuing elections in five of India’s 29 states, accounting for just about 20 per cent of the country’s population, have objected to the government’s budget presentation scheduled For February 1,  days before the five states go on the election mode. These political parties have approached both the Election Commission and the President of India to prevent the national budget presentation before the state elections. The demand is unfair as also illogical.

The government’s tax collection figures until last November have shown noticeable improvement in revenue income indicating a much higher tax compliance rate ahead of economic down-turn following high-value currency demonetisation leading to a severe cash crunch across the country. If the government relaxes taxation rates to improve the tax compliance rate further, it should be free to do so to benefit certain sections of tax payers in the interest of the economy and the market. Such measures, if provided in the next financial year’s budget, will have little influence on voters in the five states while this may help improve the spending ability of the masses, boosting demand and supplies leading higher GDP growth. It seems those political parties are only concerned about their own fortunes and not about those who they seek to represent.

It may be worth noting that the Election Commission does not seem to be in any hurry to act on the representation by those political parties to get the proposed budget presentation by the government deferred or postponed till March 8, when the last phase of polls in UP is scheduled. "We have received the representation and started deliberations on it. We were extremely busy in chalking out a schedule for the five states in consultation with large number of stakeholders for conducting a smooth and peaceful elections in the five states. We will take time to deliberate on the representations seeking postponement of budget," Chief Election Commissioner Nasim Zaidi had reportedly said. Finance Minister Arun Jaitley, on the other hand, defended the government's decision to stick to the plan to present the Budget on February 1 saying that the annual budget presentation “is a Constitutional requirement." Incidentally, an interim union budget was presented by the UPA government just a few days before the last Lok Sabha elections. No one complained.

It is time that political parties shun personal pettiness to raise themselves as protector of public interest and expectations to endear themselves to voters.   They should do so at all times – whether in power or in opposition. By stopping or delaying normal budget presentation by the union or a state government before elections, they will only disrespect the people’s expectations and the government’s discretions to tinker with budget provisions for the benefit of the people and economy. (IPA) 

Friday, 13 January, 2017