Tuesday 26 February 2008

Railway Budget 2008

Railway Budget 2008

It is quite fashionable to criticise any budget exercise (especially when it comes from our own Lalu Yadav).

I was watching the railway budget on TV (without completely understanding due to both the din and the "Hindi" factor).

We must remember that any budget making exercise involves finding a common ground between politics and economics, and is not necessarily meant only to push the Sensex upwards. We must further remember that the mere fact of presenting a "populist" budget does not necessarily make it a bad budget.

Here are a few of my observations based on my limited understanding (and my memory, as I'm writing this after a few hours after the speech):
{BP - Budget Proposal; PI - Political Impact; EI - Economic/Financial Impact}
  • BP - Reduction in passenger fares
    • PI - More votes from the voters who will be happy that they can travel at lower prices and that there will be lesser inflation to that extent
    • EI - Reduction in AC Fares is an excellent competitive move to wean away traffic (at least partially) from low cost airlines. The financial impact due to reduction in fares, can to a large extent, be taken care of by improving productivity
  • BP - Reduction in freight fares for several items like petrol, diesel, fly ash, etc.
    • PI - This is Lalu's contribution to reduce commodity prices all round, and hence in keeping inflation under check - Sure to be popular with the "Aam Admi" as there will be no runaway price increases due to increase in freight fares.
    • EI - Will keep inflation under control. Will help in retaining market share vis-a-vis competition from road transport, for instance.
  • BP - Competitive (Read "Lower") freight fares on the "return leg" of commodity movements
    • PI - Neutral
    • EI - Makes a lot of commercial sense - Instead of coming back with empty wagons, can generate valuable additional revenue
  • BP - Declaration of 70 days bonus
    • PI - Obviously pleases all railway employees, and hence the vote bank. Also a nice friendly gesture towards Left parties, keeping in mind the forthcoming general elections
    • EI - Recognition of the genuine contribution of the employees in the remarkable turnaround over the past couple of years, which would have been impossible without the active contribution of the employees. Will also help in "Buying in" their support for a lot of private-public partnerships being introduced, introduction of technology, etc.
  • BP - Announcement of several (53) new trains, including 10 Garib Raths. 
    • PI - Appeases a lot of MLAs, MPs, their parties and the general public - Keeps everyone happy.
    • EI - Whenever a new train is launched through a slightly different route between two cities, it generates a whole lot of unforeseen positive economic forces. The economic activity involved in launching a new train, by itself, generates a lot of temporary/permanent secondary and tertiary employment. Further, at every stop on the way to the final destination of the new train, there is scope for conversion of a village into a small town, a small town into a larger town, a Tier 3 city into a Tier 2 city, etc. This is precisely how urbanisation (and development) takes place. But for the British building the railway network, we would not have had as many cities and towns today as we have as of now!
  • BP - Announcement of 20000 new wagons, conversion of all wagons gradually into stainless steel, etc. Green toilets, modular toilets, etc.
    • PI - Highly populist as it involves a lot of CAPEX, and can be counted as "investment" in the destination state. (Ask how happy Karnataka is about the InfoTech industry investing there or about how happy TN is about the various automobile companies investing in TN!)
    • EI - Much needed modernisation of the infrastructure. Is also likely to provide better trains (and hence improved customer satisfaction) and increased productivity
  • BP - Smart Cards for Bombay Suburban Train Passengers
    • PI - Good political response to keep "Mumbaikers" happy after the recent tug-of-war with Raj Thackarey. Can claim to be a good Samaritan and a statesman who does not believe in "retaliating cheaply" just because "some Marathi politician" has wrongly attacked Biharis.
    • EI - Introduction of modern technologies is bound to improve productivity phenomenally (freeing up lakhs of passengers from purchasing season / daily tickets, freeing up counter clerks, saving time for lakhs of passengers daily, reducing ticket-less travel, etc.)
  • BP - Anti-collision devices, Building of elevators, escalators, Multi-level parking facilities, upgradation of stations, etc.
    • PI - "Care and concern" for safety of passengers and hence good for the vote bank!
    • EI - Modernisation, attracting more global investors into India, Reduction in accidents, convenience for passengers, additional advertisement revenues, etc.
  • BP - Outsourcing maintenance of trains, starting with major trains like Rajdhanis
    • PI - Tag of reformist, with potential for promotion as Prime Minister in the future!
    • EI - Backdoor entry of the Private Sector at an increasing pace.

Last, but not the least, why should we be bothered about the Railway Budget or about the General Budget? Some reasons:

  • Got to have general awareness
  • Be conscious of both prospective benefits and prospective legal duties (for instance, benefits to senior women citizens in case of today's railway budget and responsibilities like last date of filing income tax returns, Annual Information Returns, etc. in case of the general budget)
  • Make the blog topical and interesting so that you people continue to read the so-called "educative" posts regularly.

Do give me your feedback regularly to keep me motivated to post equally regularly!

Regards,

N


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