Playing 'Economic' Moneyball - The Union Budget 2012-13

Guest , Last updated: 19 March 2012  

In 'Moneyball', Billy Beane the General Manager of the Oakland Athletics, a small town baseball team with a tiny budget, faces the challenge of winning games in Major League Baseball beating teams such as the New York Yankees whose budget is about three times of the A's. As they hunt for the right players to buy to build the team, Billy suggests a radical idea - hunt out inefficiently priced players in the market whose contributions will help the A's win games even if they are not superstars or conventionally good players. His baseball scouts oppose him holding on to decades old dogma that a player has to 'look like a ballplayer' to succeed and the A's should be trying to buy such talent that they can afford. Ultimately, Billy and his computer database analyzing assistant GM Paul DePodesta (in the film version, he's named Peter Brand), have the last laugh putting together a team on a shoestring budget that goes on to win the most games that season including an American League all time record of 20 consecutive wins. 

Billy Mukherjee or Pranab Beane he may not be, but India's finance minister faces the challenge of an economics version of 'Moneyball' with the Union Budget this year. He has to deliver economic growth (think of it as the wins in baseball) but as high powered rivals with fatter purses try out the conventional strategies like increasing government spending (think China and its major fiscal push), Pranab Da's dilemma is that he simply cannot afford to do that in the face of an uncertain economic climate and worsening government finances. And there are the dogmatic preachers (just like the baseball scouts refusing to change their mind) who continuously are predicting doom for the economy unless the government manages to spend more and are vehemently opposed to privatization.

In this respect, the FM and the Oakland A's GM face the same predicament. They would like to change the rules of the game and show that it can succeed, but nobody is buying their story. The key difference is, our FM doesn't have the decision making autonomy that Billy Beane did and with coalition pressures weighing in as usual, he's left very little to work with. But the path to reform is always painful. The A's didn't start winning immediately after they started this strategy. In fact, they had a poor start to the season. And success in baseball is finish a long and arduous season with a winning record which means delivering over the long run. Similarly, in the economy, growth and development over the long run should count for more than temporary populist measures that are ruinous (case in point, the rollback demand on the fare increases in the railway budget).

So, did Pranab Da swing for the fences this year? Let's face it - nobody expected the FM to be bold or radical. He was pragmatic and modest. But that doesn't mean he was a sissy. The budget needed to address the problem of a growing fiscal deficit (the gap between government spending and receipts) and the FM indicated a path to trim that gap - lowering subsidies (a major expense for the government) to less than 2% of the GDP in the next three years but in the same vein it also talked about infrastructure investment (some of it through the private sector). The increase in service tax (from 10% to 12%) is also a step to increase government revenues. 

In baseball, you score if you make a hit and cover all the four bases by running. If you hit the ball out of the park you get the runs in one shot. But often, such short cuts are not available in the economic sense, or just like the possibility of swinging and missing, carry a high risk. The other way to score is accumulate hits or walks (getting on base without a hit because the pitcher threw too many balls, much like wides in cricket) and run the bases in installments (or increments) to cobble together a run. It may not look pretty (or sell hot dogs at the stadium as Billy Beane says in the movie 'Money ball') but it then paves the way for wins. To do that you have to be patient and endure a lot of hard times.

Sometimes when you manage a team, similar situations arise where you constantly face resource constraints and are held hostage to 'conventional wisdom'. The 'moneyball' approach kind of urges you to look beyond the obvious and figure out the inefficiencies that others have overlooked and take advantage of it. Perhaps the budget this year sends such a message. At the same time though, remember that intent isn't everything, most failures are distinguished from success because of one decisive factor - execution or implementation. That's where the FM faces his biggest challenge. 

Mastering 'economic moneyball' isn't easy. The FM will need to focus on the less appreciated but effective measures (like Billy placed his faith in players who weren't superstar material but had solid relevant stats that indicated they would score runs - and scoring runs, not looking cool, wins you games) and take the leap of faith. And for that he'll have to rely just as ruthlessly as Mr. Beane on crunching the right numbers.


Tareque Laskar

Tareque Laskar is a professional in the education and learning space with close to a decade of diverse experience in the complementary fields of teaching, research, writing and developing academic content. He was the Associate Dean (Academics) and head of Management Intelligence Center, the research and content development arm at IIPM, Bangalore and currently is a research and training consultant at Greycaps India. Tareque is also the Senior Writer for the national newsweekly, The Sunday Indian, and teaches postgraduate management students in the areas of economics and quantitative techniques.

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