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Dear FM, let Budget 2010 target meeting common man's expectations

JANUARY 27, 2010

By Subhashree Kishore

Legal Corner IconIT'S again that time of the year
Longing and hope mingle with fear
Yet another briefcase
Prudence and populism jostling for space
Men - moghul and menial try to keep pace
Wondering “ Will I miss or hit an ace? ”

BUDGETS do not inspire poetry yet people do wish to find a thing of beauty or intelligence in them. There seems to be lesser enthusiasm this time, probably because we had an overdose of budgets and stimulus in 2009-10. Yet there remain problems to be addressed and so long as statisticians, economists and politicians are active the corpus deliciti - the annual budget, well, exists. The plaintiff (common man) always cries for a better deal and the defendants - the ‘men with authority and influence' protest its propriety. No budget is claimed to be a complete success which means it was also a failure for the argument cuts both ways!

The usual plea for lower taxes and more incentives have appeared on the wish lists of the industry and agriculture lobbies. But that apart there seems to be no new direction or novel arguments. This may be due to the haze around the Direct Taxes Code and merger of various indirect taxes. The government has of course stated that it will use resources at its disposal - the glittering PSUs to increase social spending. So, should this budget be more of the same? Not necessary.

Sustaining agriculture

Agriculture, once derided as a less important portfolio is very much in news with over billion mouths to feed, Rs. 7000 crore organized dairy business, booming commodity index and ever increasing prices. Apart from the Third and perhaps the Fifth Five Year Plan there has been little focus on agriculture. We prefer cash cows to milch cows. Impetus to industrialisation and technological advancements and moving to a targeted rather than universal PDS have pushed us into food crisis. Agriculture is not about loan waivers, biofuels, FDI in processed food industry or aiming for higher productivity through GM crops which do not crossbreed and are vulnerable to new pests.

In this budget we could look at increased outlay for agriculture as opposed to the present below 3% levels, to improve productivity and crop diversity - encouraging indigenous varieties. We had the present FM saying that agriculture would do well if there was good rainfall, as late as February 2009. We need to do a better job of water management to avoid the paradox of the flood-hit and the drought hit. This might sound archaic but the sad truth is that over half a century of planning has still not rid agriculture of the old evils.

We could consider a sabbatical on trading in commodities. Food lends itself to speculation while hunger does not. The average Indian investor now executes a quixotic purchase of rice and pulses with profits made on trading in pepper or turmeric! The usual strategy to combat (complaints of) price rise to import or release buffer stocks is not sufficient. Increasing money supply in the hands of people by minimal tax cuts or raising threshold does not help. We may examine the concept of ‘maximum supportive price' - a counterpart to the ‘minimum support price' which protects the producers against loss. Government fixed rates are in vogue in property transactions. We have rent controls, risk assessors and surveyors, registered valuers and government run (fair price) liquor shops. It should not be difficult to fix a price beyond which essential commodities cannot be sold. The argument of value addition in salt/sugar or curd, greens and potatoes which necessitates price increase cuts no ice. We have survived on non-branded, less fancy rock salt or ‘ration' sugar. Units which are not able to hold the price line may get weeded out as dictated by purest of market economics.

Stimulating revenue

There have been pleas for continuing the stimulus (rather stimuli). “It has worked and should continue but it has not worked enough to pay taxes at present rate …”

“Recession has been arrested but industries still need to be pampered…”

“Inflation calls for tightening money supply but industry seeks greater purchasing power to push up demand for its goods…”

The state of economy is about as conclusive as the IPCC report! What is heartening is that in this respect we are on par with the USA. Stimulus has worked and the institutions have prospered enough to repay moneys borrowed but cannot pay tax on banker's bonus…regulatory oversight is acknowledged but that does not call for more regulation!

Saddled as it is with numerous demands on its resources the government cannot afford to extend the stimulus. Of course, it may lead to prices rising again. But if not tax, either currency futures, or oil prices or overheads are bound to push them up. So, no one is worse off for the discontinuance of stimulus.

Employment generation

The much-touted success of NREGA must be carried over to other sectors. Agriculture has been long accused of disguised and underemployment and about 90% of workforce is in the unorganized sector. The classic economic cycle begins with investment leading to employment then to income and consumption. The present trend of consumption fuelled growth leads to distortions as manifested by concentration of jobs in urban areas and migration of labour. The more lucrative job options seem to be in the service sector and we find graduates - polite and aproned waiting on us at restaurants or snappy ones accosting us with loan offers. We cannot even begin to think of job security, job satisfaction or social security for those employed thus. Real employment generation must be rooted in primary and secondary sectors.

Carbon footprints

Even if the summit was not quite a meeting place of minds, Copenhagen drew attention to the environment and earthy concerns. The debate on doomsday may be deathless but it doesn't hurt to be a little cautious. If we try we would find many ways to reduce our carbon footprints. Delhi's successful though not quite smooth transition to CNG should inspire us.

We have worked out calorie intake for individuals to keep them alive and healthy even if not happy or satiated. On similar lines, we could work out standards for energy requirement of individuals, households or commercial enterprises. The FM could introduce a new tax to target energy-guzzlers like individuals owning more than one luxury car, households using more AC's than there are members, public or political meetings, malls and commercial complexes lit like Christmas trees and so on.

If we are bold enough we would also discriminate between manufacturing units that we really need. We do not need another Plachimada.

Investing in the future

Forty years of dual economy and public enterprises have helped us to survive two decades of liberalisation. We must therefore create a few new navaratnas or maharatnas so that a few years down the line we will still have some bankable assets.

Despite pious clamour for free competition world over, companies try for monopoly and greater control as mergers and takeovers indicate. The spread and strength of telecom, banking and insurance owe much to the earlier protectionist tendencies. The government must now take such an initiative to improve the health care sector. Bulk of health care is provided by private sector which is costly and located mostly in urban areas. Greater FDI in health insurance or more insurance products is not an answer to healthcare, ending malnutrition or reducing preventable deaths and maternal mortality rates. We need one giant cohesive institution functioning towards the goals professed in Rastriya Swasthya Bima Yojana, National Rural Health Mission, ESIC to end ad hocism in service delivery and pricing.

Cost cutting

A panacea for all problems which receives a lot of lip service is austerity measures. Of course the pathetic attempts by elected representatives to be excused from such a measure on grounds of health (personal gymnasium) or peaceful work environment is still fresh in our minds. Yet we cannot have them raising their salaries and leading a life which many in their electorate cannot even dream about. Tracing black money and trimming of expenses on governmental departments (read marbled floors and ornate lighting), rooting out corruption - all of which push up costs in organized or white economy are permanent items on the common man's budget agenda.

Sensitivity

The new economic order has glorified the humble lemon juice and potato chips. We have billion dollar investments to make items which were earlier unleashed quietly from kitchens. There is no technology transfer or mutually beneficial asset building or inclusive growth involved. Basic needs do not change. It is food which is driving Qatar and Korea into land grabbing deals in Africa. The need for shelter has been overexploited in real estate bubbles.

Sensitivity should not be abridged as Sensex and market reaction cannot be more important than allocations, deficit management or growth. Sensex responds to speculative sentiments and has nothing to do with economic fundamentals. The budget therefore needs to be sensitive to basic needs rather than sobs of industry captains.


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