Dear Members, As I write this communication the assembly elections are in their final phase. The results are expected on 6th March, and they will have an impact on the future of the UPA government. The election results will be followed by another mega event, the presentation of the Union Budget on 16th March, for the year 2012- 13. While it is true that much of the hype that surrounds a budget presentation is created by the media, its importance cannot be ignored. While there are many more ways in which a government can bring in policy reform, a budget is an indication of the thinking of the government.
At the Society we make a pre-budget representation to the government with regard to the direct and indirect tax proposals. At the beginning of the financial year it was felt that the Direct Tax code (DTC) would be passed and consequently there would be no significant amendments in the Finance Bill as far as direct taxes are concerned. The DTC now having been postponed by at least one year, some of the proposals contained therein may well find a place in the budget. The DTC proposals have already been extensively debated and the thinking of the finance minister in that regard will be known on 16th March. In this communication I am taking the opportunity to air my thoughts about what I would expect from the finance minister of this great country in regard to proposals other than those related to taxes.
The primary aspect of worry is the burgeoning fiscal deficit. The government needs to control and restrict its administrative expenditure severely. In terms of quantum the saving may not be significant but it sends a message to the public that the government is serious about controlling the deficit and keeping it within the range of budgeted figures. In the bureaucracy there is urgent need to cut flab. Successive pay commissions have made government emoluments attractive, but none of them have addressed the problem of the waning efficiency.
Subsidies, including fertiliser subsidies form a substantial part of the government’s outlay. I believe that it is time that the government did a serious rethink on its strategies in regard to subsidy. Most of the subsidies have turned out to be inefficient in as much as they are a drain on the exchequer and yet do not reach the intended beneficiaries. The existing system needs to be phased out and a system whereby monetary assistance flows directly to beneficiary must be put in place. The UID system may facilitate this process. This would reduce the levels of corruption and make subsidies effective.
Education and health need to get a substantially increased allocation on par with infrastructure. We constantly talk of India’s demographic advantage. That advantage can be converted into well distributed economic prosperity only if quality education is made affordable. The government has legislated on the Right to Education, but it must not remain only on records. Public health systems in most states are in disarray. In this regard Central assistance is the need particularly in the smaller states. These are state subjects but the necessary impetus must be given by the Centre.
On account of political compulsions many big-ticket reforms have been put on the back burner. Irrespective of the assembly results, the government must bite the bullet. The disinvestment process has suffered substantially on account of inaction by the Centre. I am a firm believer in the maxim that the government has no business to be in business. Most of the Public sector undertakings need enterprising leadership. The government must unlock its capital invested in these undertakings so that the funds for infrastructural development are easily available.
And finally the budget must give agriculture its due share. This does not mean giving a loan waiver as the government did some time ago. What it really means is a sustained reform process for modernisation of agriculture. While growth in the agricultural sector as well as its contribution to the GDP is not satisfactory, the importance of agriculture can never be understated. The land use for primary agriculture is constantly reducing. This has implications well beyond short term economics. A nation should be reasonably independent in respect of its food requirements if it is to retain its stature in global politics. This is one aspect that the finance minister needs to consider.
Apart from the above, another aspect that is in a way unrelated to the budgetary exercise is government accounting. Business is expected to follow global accounting norms and the latest accounting standards. In fact, a lot of the problems in regard to government finance and government expenditure would be in the public domain if it is shifted from the cash method of accounting to accrual. However, this will be the subject matter of a separate communication.
For the time being let me wish readers a Happy Holi, and let us hope that in my next piece I can welcome a path-breaking budget.
Honest disagreement is often a good sign of progress.
— Mahatma Gandhi
