Budget Mysteries

44 Comments

We never celebrated Valentine’s Day growing up. But that doesn’t mean our Februaries were fallow. Because we always had the Union Budget.

A little background. My father is (was, he is retired as of March 1) a professor of Economics at IIMC and my mother is a Masters in Economics from the University of Rochester. Thus watching the budget was a family ritual—-Baba would be taking down notes, Ma would be engrossed in the proceedings while I counted the seconds as to when this torture would end.

Its not that I did not like the Budget—-but that was only because following the Budget, Baba would be asked by newspapers for analytical articles and then there was the occasional television/radio interview where Baba would explain to the laymen the inner workings of the government’s fiscal policy in the same gentle tone that he used to teach me. Except that he did not threaten to stop explaining when the other panelists disagreed. He almost always did that with me. Of course to be fair to Baba, the panelists did not throw temper tantrums.

Coming back to the main point, I personally never understood the Budget process or why the entire nation should go ga-ga over it. It always seemed to me to be a kind of a socialistic hangover (like the Five Year Plans) where the assumption was that national economy was guided more by government policy (i.e. its system of tariffs) and less by the market. Of course this opinion could be because of my naiveté in economics—I never studied it—only smelt the tomes of Samuelson, Jones, Mckenzie et al as they sat on the bookshelves near the TV.

Also each Budget to me sounded just like the one before. The reactions to it were also unfailingly similar—-the ruling party would call it a “dream budget”, ” a budget for the common man” while the opposition would call it “anti-people”. The Communists always dubbed it as “written by the World Bank”—even when they were nominally supporting the government. One big-name politician-economist-pressman reportedly had a template for his budget-analysis he used every year: half of it would be “pre-filled” depending on which government was in power.

“Anal”-ysis indeed.

The biggest mystery however were the articles on which tariffs were imposed/removed each year. Let’s see whats cheaper this year. Pasta. Now why would “pasta” need to be made cheaper?

Okay issue solved. Sonia Gandhi, India’s de-facto ruler, made some phone calls.

Actually I understand why some articles have tariffs reduced—lobbies greasing appropriate palms. Which is why seemingly random articles are selected—following no apparent rhyme or reason. There was the case in the 80s when a company with extensive “links” in the government got import duties waived on a very specific kind of machinery for a few days, brought in their equipment , after which the government again clamped the old duty so as to prevent its competitors from availing of the same advantage.

So the lowering of duties I understand. But what about the articles that will cost more? Do their selection follow any logic?

Sometimes it does. For instance, the government increases tariff on Internet telephony even though calling India is way too expensive from US even with Internet telephony compared to say China. The reason is simple: it wants to protect its bloated telecom companies by levying surcharges on internet telephony.But some things—-I don’t understand where they come from.

For instance, why does “Henna powder” cost more this year? Which demented mind in the ministry thought…hmmm which goods can be taxed more…let’s see let’s see………aha…Henna powder. Was it because he was dissatisfied with the Henna he was using and decided “screw the industry”.

Could it be that a roadside Romeo, who works in the Finance Ministry, got beaten up by a gallant, old gentleman with his walking stick? For which he retaliated by increased tariffs on walking sticks. Yes. Walking sticks are going to cost more this year.

A few years ago, when the government levied a tariff on zari (the sparking thing on the lining of a sari)—-was it because of an official’s disgust with Shefali Zariwala’s thong show in “Kaanta Laga”? Was it the same reason why tariffs on hosiery also went up that year?

Or are the folks at the FM more benign—they just have a million chits with names of products on them, throw them into a gigantic hat and get Ram Singh, the official Parliamentary monkey to choose winners (losers in this case) ?

I never asked Baba these questions. Maybe it’s time I did.

Happy Retirement, Baba. Many more happy budgets to you.

I am sure you are proud of your son’s understanding of economics.

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44 thoughts on “Budget Mysteries

  1. “The reactions to it were also unfailingly similar—-the ruling party would call it a “dream budget”, ” a budget for the common man” while the opposition would call it “anti-people”.

    Its been the same this year too, for me. I have never understood budget – but I have seen that thats the only dad watches television from morning till night; yeah, it was a morning till night torture.

    Pasta – LOL – Henna Powder – Certainly chindambaram is bereft of Ideas here. Though I must say that I have never heard of Cigarettes becoming cheaper! I mean dont those guys have any lobbies hehe! And to prove we are IT nation, now computers, IP telephony and computer components all be costlier… except DVD Drives hehe!

    Enjoyed this post!

    Suyog

  2. Arnab:

    Never understood economics and I guess never will. Once I had the chance to hear Nani Palkhivala’s post-budget analysis in Calcutta. People waxed lyrical over his analysis although it left me cold, You’re spot on with the arbit nature of the tariff thing. Perhaps Chidambaram’s bahu had an allergic reaction to henna.

  3. Pingback: Global Voices Online » Blog Archive » India: Why bother with the budget

  4. Walking sticks and henna powder? I tell you it is the work of a sinister cabal of electric scooter(the kind fat and old people ride inside supermarkets) manufacturers and Hair Dye companies.

    Also perplexing is the increase in the prices of tableware. I did not know people still bought them. I mean I thought all Indian families were done with tableware 10 years ago. They bought it and displayed it in the living room “showcase” and told their children it was for special occasions which never happened.

  5. [GreatBong] Hilarious !!! I fell off the chair as I usually do reading your posts.. Did the cost of Italian products go down ? Maybe now you can buy a Ferrari in India !!

    Best wishes to your father on his retirement.

    GHE

  6. hi Arnab,

    This is my first comment. Came to your blog while searching for something else, and found the review for Zinda. Since then have read all your blogs, even the archived ones, and thoroughly enjoyed each one of them.

    Its funny how none of us understands budgets but unfailingly all dads scramble for the television on budget day. May be you should ask you dad after all.

  7. Hi Arnab, you’ve got a way with words, keep them flowing.
    A road Romeo getting beaten up by the old man with the walking stick……that was hilarious…….Wondering if any of the post budget discussions will ever care to discuss why seemingly inconsequential things like walking sticks and henna powder were chosen…probably Ram Singh is to be blamed…..and India is being touted to be the superpower in the near future….sigh…..

  8. the budget is increasingly becoming a non-event … two conclusions one can draw from that: a. result of coalition politics, b. india moving from being a developing nation to a developed nation …

  9. wats it with pasta ,henna , walking sticks ?and wats it with P C’s wife giving him 10 on 10 ?
    u made a non event enjoyable!

  10. There’s more! They have levied service tax on ADDITIONAL services, and today the Service Tax Department advertised the list of applicable services. In that there is, and I kid you not, Erection, Commissioning and Installation Services. So I’m thinking all of them Viagra products are now costlier. This is, I can only imagine, the handiwork of the finance ministry official who can still get it up and wants to raise the bar, not quite literally, for his dysfunctional colleagues.

    And small cars are going to be cheaper. This is obviously from the 45 year olds in the ministry, whose children are of the age where they’re demanding their parents buy ’em a car.

    Taxes are also cut for Idlis and Dosas and Coke/Pepsi, presumably this is some combination that runs the finance ministry. We have not noticed any drop in taxes for sarson da saag and makki di roti, so presumably the FM wasn’t too keen on keeping our Prime Minister’s home state as happy as his own. But then Punjab isn’t going to elections this year.

    Keep it rolling, awesome post!

  11. It always seemed to me to be a kind of a socialistic hangover (like the Five Year Plans) where the assumption was that national economy was guided more by government policy (i.e. its system of tariffs) and less by the market.

    Bingo. When you say you dont understand econ, are you saying it with a straight face?;-).

    On the other hand, the budget ironically reminds me of a feudal setup where the ruling patriarch gives away various gifts on the occasion of a festival or something. The entire district would be fawning at him, and discussing how his whims will turn out this year.

  12. Arnab, let’s just christen it All Pseuds Day: Feb 28, and then print some cards with our undertsandings of the budget. What says? Great economic sense?

  13. Hi Arnab,

    Good job as always!

    First came across your blog through a forwarded link. Since then have read every single entry! Am half-bong myself (other half is oriya – does that disqualify me from hon-bong status?) and am always tickled by your take on all things bong. Long live mithunda! Growing up in Dubai (yes there are tons of Bongs there!) , I had a true-blue bong neighbour (aged 5) who got the EXACT same gold suit of MithunDa’s in disco dancer stitched for Pujo! We bongs have our priorities right 😉

    Really enjoy reading your posts with a personal vein like the one above. Sort of helps your readers who have never met you (and probably never will) to feel that tiny bit closer to ‘knowing’ you/your past. Though all things bong and bollywood are your strong points, I say keep exploring new topics n spread your wings. Your devoted fan-base shall remain devoted!

    Cheers,

    Sonia

  14. Something has been done to Umbrellas too – I think they’re cheaper now.

    PC had some good explanations, though as to why such arbid things were chosen – he did say lobbying was instrumental. And to a question asked as to whether the govt should be deciding on such things which affect consumer preferences..he says…why not?

  15. Hi Greatbong
    What I find surprising in the Indian tax system is that the taxes rates vary by each good or service instead of being basically uniform. Placing a special tax on pasta? Who would have thought of that?

    This kind of taxation is extremely wasteful because it encourages rent-seeking and corruption. Let me give a simple analogy. Suppose that there is a uniform 1% on real estate- which there is where I live. Homeowners might grumble but no one has a special incentive to try to convince the finance minister (or equivalent) to reduce the rate since it is uniform for everyone.

    But suppose instead the the finance minister went to each home and decided this one pays 1.5% and that one 0.5%. What will happen? Half of the city’s homeowners will be camped infront of of the finance minister’s door asking the reasonable question: “Why is my tax higher than my neighbor’s?” And some will offer bribes to have it lowered.

    With such a system, manufacturers can make more money spending a week lobbying the finance minister for a tax cut than they can make spending that time trying to make a better product. But the former activity (rent-seeking) doesn’t add a bit to the GNP.

  16. A good break for all the budget banal-ysis in print, electronic media and worse, blogs. It is just another event hyped to strato-spheric levels to fill in the airtime and 100 pink pages.

  17. I get pasta, i get coldrinks, i get mild steel but i did not know wether there was any organized umbrella “industry” to lobby or that the consumption was large enough to demand tinkering with the price structure of the umbrellas. I shudder to think of the finance ministry babu who was alloted the ardous task of studying the umbrella effect.

    Great work Bong, another gem.

  18. Hi Arnab Da..
    have been reading ur blog for a week now..and finished reading most of the archive..
    hehe..and how much i njoyed…cant tell..
    thats why I am asking ur permission to post a link of ur blog on my yahoo 360 page..
    as u read this..i might have already posted(m so eager to share it with my 360 friends), but if u have any objections, will remove it asap..
    do mail me back..whenever u hve time..

  19. from the budget i only know how to compute my income tax.of cricket ,i know upto the rope 4 over it 6 and umpire raising a finger is out bcos it is the index finger.somehow i know sachin is GOD,am gungho about dhoni bcos 2 matches i saw he rushed india to a win.
    HOW COME U KNOW everyyhing of everything that too so well thought or incredibly hilarious ????????????

  20. In the days of one/two channel DD, the budget, especially live telecast of it was a big thing. But I do remember that one particular budget in the early 90s when our present prime minister announced major reforms. That generated much excitement.

  21. Hi GreatBong

    This time, a critique, if you don’t mind…

    Great read as always, but why are we always so dismissive?

    There’s something that goes for prices rising/falling for pasta, walking sticks, henna, etc. All these things have something called an excise duty, and since such duties exist, we must agree they will go up/down. All that the media does nowadays is to make things simpler, and point out household terms (henna, umbrellas, etc) to make the Budget simpler and herd it into familiar territory.

    Saying so, am not trying to punch out the humour in your post, which, like all of them before, has pulled me like a magnet 🙂

  22. A rationale for goggles ? Could it be that people in the ministrry have something against eye protection ? Notice that HIV/Cancer drugs are cheaper too. Any idea if there is a change on condoms ? 🙂

    Great blog, came across it via Mithunism.. A fellow fan will find soulmates 😛
    A friend is reviewing Mithun movies ->http://dirtscapes.blogspot.com; Just a tid-bit for a fellow devout.

  23. YOURFAN writes:
    @Radhika: You wrote: “all dads scramble for the television on budget day. May be you should ask you dad after all.” I know the answer. All dads(now moms too) watch the budget because they are eternally afraid of how much extra income tax or any other taxes are to be paid.

    @GB: I agree with Venu who wrote “When you say you dont understand econ, are you saying it with a straight face?;-)”. It seems you do understand eco – may be not as good as your father and mother but at least more than ordinary lay person.

    Did you know that when NDTV asked office goers in Mumbai about whether they know the importance of 28th Feb? The one that stole my brain was a lady who said that on that day Abhisek Bachchan is going to marry Aiswaria.!!!
    Nice to see that another of your reader (Sonia) shares the exactly same view (which I expressed early) like mine by writing: “Sort of helps your readers who have never met you (and probably never will) to feel that tiny bit closer to ‘knowing’ you/your past.”
    I enjoyed this post just like other posts of yours.

  24. @Suyog: Cigarettes is a vice. And our government cannot be seen to support it. They do have lobbies no doubt—but they work in unobtrusive ways. Plus they know that they can always pass on the cost to the customer who is, in any case, addicted.

    @Soumya: With due respects, I never used to hear of Nani Palkivala any other time of the year—except after the budget after which he again went into hybernation.

    @Anil: There are two kinds of tableware: the good kind which is left in the showcase never to be used and then their is the bad kind which is given at weddings to people you don’t really care for.

    @GHE: Ferraris on Indian roads…man…one autowalah rams you and the doors never open out Ferrari-style.

    @Radhika: Its a generational thing—perhaps reflecting a time when budgets really were important—the time when red tape held the country together.

    @Aditya: Yes I wonder noone ever discusses why “henna powder” was chosen this year and not the year before?

    @Bonatellis: It still gets a lot of media space….

    @Varsha: Well I am sure the PC’s wife gave him 10 on 10 in something else….

    @Deepak: A tax on erections? Amar Kahani Man is gonna protest this one….

    @Venu: Exactly. Whims. That’s whats it all about. Our sarkar maharaj decides to throw alms at the beggars…

    @Priya: Good idea…one more money-spinner for Hallmarks.

    @Sonia: Thank you Sonia…aah that gold suit…I have always wanted that myself…sigh….

    @Pranav: Yes why not…that is a good “umbrella” answer.

    @Michael: This structure is intentionally kept—so that palms may be greased. And that the government does not have to explain preferntial, ad-hoc treatment to different industries based on extra-economic compulsions.

    @Shashikant: Well pre-90s it was veryyy important.

    @Ripu: Didnt you know that the nation’s progress depends on properly taxing the “umbrella” sector—last heard there was an additional levy of 2% on colored umbrellas. However having polka dots made it exempt again.

    @Kite: Go ahead….you dont need any permission to link.

    @Varsha: I ‘pretend’ to know a lot—which is why I am a blogger.

    @Bongpondit: Oh of course those early 90s budgets were crucial—when the government ultimately relaxed some controls….reportedly at the behest of the world bank.

    @Bonatellis: Didnt understand the question….lady below Ritu?

    @Patient Portnoy: The problem has been excellently expressed in Michael’s comment. It’s the lack of transparency and the ad-hocness that is the problem.

    @SEV: Our ministers are all for protection—-for the efficient Indian industry which has given them suitcases of cash through the ages so that their long term interests are not tampered with.

    @HP:  Go figure.

     @Yourfan: Thank you and that one about Ash and Little B: hilarious. Reminds me of this time when the CPM were doing a huge rally for the October Revolution and one of the pesky presswallahs asked one of the “for-hire” crowd what this was for and he pointed at Lenin’s statue said “Onar jonmodin” (“It’s his birthday”).

  25. You are absolutely right. I also wondered whose brainwave made walking sticks and umbrellas dearer and pasta cheaper this time. Only explanation possible is lobbying or just the habit of tinkering and feeling self-importance on the part of the backroom “experts” behind the budget (otherwise they become irrelevant).

    I have to admit that you do have some understanding of Economics – notwithstanding your aversion to it.

    Thanks for your retirement wish. Love,
    Baba

  26. Oops, was that your Dad, your real Dad who replied to this post?

    Yes reminds me of my Dad but he was of the same opinion as you. Said its all an eyewash. The salaried class can never get a better deal. Its all old wine in new bottle.

  27. Hi Greatbong
    That is wonderful that your father reads your blog and comments on it. My own wife and parents find my blog too boring to bother with. Which reminds me, I better ask my wife’s permission to attend next weeks’ blogger meeting.

    You know that your father reads your blog regularly and you can still write and post something like your (in)famous Desibaba post or 1-900-Hotties (both classics)? One has to admire that!

  28. Arnab,
    Dying to read an article about Greg Chappel and his “I won” attitude towards Saurav. Please do write for our sake.
    Sandip

  29. i am a housewife. so, things i need, chaal and daal and gas and …… everything goes boink!

    i dont use henna, i am nicely greying, thank you.

    my brolly is two years old, in fact all our brollies are lovingly repaired.
    use and throw lifestyle has yet to permiate this corner of india

    we do have a couple of heritge walking sticks. the people they belonged to passed away in 1975 and 1993.

    the budget is watched by people who are expected to comment on it. your pa does it professionally, my worse half does it to show off before his friends in the paarar chaier dokaan.

    as machiavelli said — governence is pasta, good governence is the sauce that tops it.

    hence, this year pasta. next year, maybe the heinz people will be lobbying like billy-o!

    real people with real worries leading horribly wretched lives go one way while the budget is an exercise in protecting vested interests.

    i always feel that heads they win, tails i lose.

    would reading economics have helped?

  30. Arnab,

    Yet another gem! Ever since I stumbled upon the Zinda review, I am hooked!! And you have no idea how many many non-bloggers have been introduced to your Mithunda article!

    I don’t understand economics, neither do I try! I’m the artsy type you see 🙂 I’m officially close to middle age, yet I cannot recall a single time the Union budget has affected my life!!!

    Pasta is cheaper!! Yippppppy!! Now I can feed my son 10 min pasta instead of 2 min noodles more often! Who has the time to cook anyway!

    I think the reason why they made Henna more expensive is to control the sudden conversion of brunettes to redheads among the Indian female population!! Only someone should have told PC that Henna is not the culprit here…Loreal, Garnier and other brands making hair colours should have borne the burden instead of the Henna powder making industry!!

    This year on Feb 28 my son and my father-in-law had a huge fight! Dad was monopolizing the TV and son wanted to watch Tom & Jerry. Couldn’t make my son understand how a man in white mundu and shirt talking for hours with little or no expression on his face could be more interesting than a cat and mouse chase interspersed with graphic violence!!!

    Oh well, one more year, one more budget…what difference does it make anyway!

    Keep up the good work!

  31. @Michael: Thats the topic for another post. In short, my parents are very liberal.

    @Sandip: Written.

    @Swati: No I dont think it would have.

    @Nautilus:

    Couldn’t make my son understand how a man in white mundu and shirt talking for hours with little or no expression on his face could be more interesting than a cat and mouse chase interspersed with graphic violence!!!

    Priceless.

    @Bonatellis: That’s Priyanka Chopra…thats taken from a picture of her chatting with “Sarboharar Neta”

  32. Hi! Chanced upon your blog – its sperb, to say the least! The budget scramble was hillarious! Hi to your Baba! Will come back and read your blog regularly – find you v adda sort of guy…lovely! I am new to the blog world, but LOVING it….thanks for making it worthwhile….

  33. Thanks to Indibloggies for pointing out yr blog. Congrats.

    Economics baffle me. I guess it’s the only subject where the same statistics can be interpreted both ways.

  34. I chanced upon this blog archive when I “ran out” of current posts. And suddenly realized, you are Prof. Alok Ray’s son??

    As an alumnus of IIMC (been your father’s student!) what I found most interesting – actually hilarious – was your description of your father’s reaction when he doesn’t like something. Brings back memories from some of the first year Eco classes and the “discussions” we had with Prof. Ray 🙂

  35. I never get economics either….and I am supposed to be graduating in the subject in a matter of two more years (if the calcutta university does not reel in shock when they realise my understanding of the subject is possibly nil and i actually chose the subject because my mum was convinced psychology would make me demented and my dad was convinced english would make me a penniless reporter and i was convinced education was not really my idea of survival but what the hell…eco is as bad as the next subject)….the day i understand the budget i will probably go and write a thesis on it and get an undeserved ph.d (this is what really happens to us faux economists)….as about the henna powder…i strongly suspect its a conspiracy of the loreal group of industries who are trying to target india as the next hair colouring and streaking market and decided to remove henna…its only true competitor….they probably bribed the lot by promising them hair replacement

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