There is no denying that documents such as the Railway Budget and the Union Budget have a final impact on the average citizen, that is, someone who does not run a business, does not invest on a large scale, and is more likely than not a wage-earner whether in an office or a small establishment. If this is so, the all-important question should be: What does he want?

The answer is immediate and simple. He would like prices to come down so that he can live better, by being able to buy things which have been beyond his reach till now. In other words, his disposable income should increase.

How can this be done? If our citizen does not fall in the income-tax-paying bracket (that is, he hails from the largest segment of the economy’s working population), he would clearly want prices of essential items to go down after the two Budgets which, as we have noted, would make daily life somewhat easier for him.

As far as the Railways is concerned, he would want fares to become cheaper and an increase in the number of options before him when he is contemplating travel. If he is setting aside some money from his monthly earnings, he would also like the interest rate to go up.

Possibly, there is nothing more that our citizen would want from the two Budget exercises, and in all probability he would judge the “efficiency” of the Government in power on whether it has been able to deliver on these very simplified lines.

The politicians who frame the two Budgets, being politicians first and last, should also be thinking along the same lines, especially if an election is round the corner. This is precisely what the situation is today, and going by theory both the Budgets should be citizen-friendly — at the grassroots level. In other words, rail fares should be lower, particularly in the sectors most relevant to the aam aadmi, and the price-effect of the Union Budget should be “positive”.

The Railways initiative should not be difficult to implement because the raising or lowering of fares is the result of an executive decision and is a direct measure. Yesterday’s Railway Budget has already acted in this sphere, and the job of the Railway Minister now is to ensure that the resultant decline in revenue from a reduction in fares will be adequately compensated by revenue increases in other spheres of Railway operations.

The case with the Union Budget is different because the final market prices are determined indirectly and after a time lag. If excise and Customs duties are lowered, they will require time to work their way to the marketplace; also, there is no foolproof guarantee that the intended price-effect of certain measures will in fact work out the way planned at the policymaking level.

In a run-up to elections, this is a great disadvantage for the Government of the day because a reduction in prices is the best way to make voters happy — and that does not happen quickly. And yet, an immediate impact has to be made to attain the political objective, which (in the case of the forthcoming Union Budget) will possibly be accomplished by a revision of the income-tax slabs, which will project the impression of a tax reduction.

Only time will tell us whether the 2008-09 Union Budget will be more of a political exercise than one based on economic prudence, the chances being that the former will triumph over the latter.

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