Thursday, January 2, 2025

Budget 2025-26 Some Thoughts

 Budget 2025–26: Some Thoughts


An egalitarian society cannot thrive if wealth is concentrated in the hands of a few while many remain in poverty. 


As our Honourable Finance Minister Mrs. Nirmala Sitharaman prepares to present her seventh budget, the nation is abuzz with hope, anticipation, and excitement. Everyone—from industry leaders to small farmers, from corporations to everyday citizens—wonders how the budget will shape their future.So far, successive budgets  from the finance Minister have proven beneficial and prudent to the economy  keeping the fiscal deficit under control and propelling the economy towards fast growth. Thanks to a disciplined fiscal stance by the Government of India and innovative monetary policies by the Reserve Bank of India, our nation has weathered global challenges, from the COVID-19 pandemic to geopolitical upheavals. While the achievements are significant and point toward the goal of becoming a top global economy by 2047, we must also acknowledge the widening gap between the rich and the poor. Ensuring that growth uplifts all sections of society remains our collective responsibility.

With this background, there is immense optimism that the upcoming budget could be a true “dream budget,” accelerating progress for everyone. Here are some thoughts which can make a meaningful difference in realising our vision of “Viksit Bharat.”

1. Stimulating Mass Consumption to Drive Growth

Mass consumption of goods and services sparks the virtuous cycle of investment, employment, production, demand, and supply. To sustain this cycle,  there is an urgent need to control Production Costs, Keeping costs low and encouraging  both local and foreign investment.

Manage Inflation: Stable or moderate inflation ensures that increased incomes truly benefit people.

Balance Resource Needs: While the government must mobilise funds for infrastructure and public services, it should do so without unduly burdening ordinary citizens.Achieving this balance is challenging but essential if we want to fulfil our dream of a developed India.

2. Rationalising and Strengthening Tax Policies

To finance our ambitious development agenda, the government needs robust revenue. This calls for:

Review of Tax Rates and Structures: Simplify and rationalise taxes to ensure fairness and sufficient revenue.Curbing Tax Evasion by embracing Technology, Artificial Intelligence, and better regulatory oversight to clamp down on elusive  tendencies and  practices.Promoting Tax Awareness by  educating citizens, businesses, and other stakeholders on the importance of tax compliance , incentivising tax payers,  eliciting cooperation of  informed and enthusiastic  public is key to broadening the tax base.A participative approach—where policymakers, professionals, academics, and industry leaders collaborate—can help craft pragmatic and inclusive policies.

3. Bridging the Gap Between Cost of Production and Cost of Living ; Keeping the cost of production low is a specialised art based on linkages of lots of variables, like, cost of land, materials, labour, interest, time and all connected logistics till the products reach the consumers. The impact of inflation on cost of production is also a factor which cannot be overlooked. Cascading effect of costs on various variables has an inflationary impact affecting the prices, the demand and supply.

 When inflation, particularly in essential commodities, remains high, it disproportionately hurts the less privileged. Aligning Incomes and Inflation is  crucial to ensure wage growth keeping  pace with the rising cost of living so that economic gains reach every household. 

4. Fostering Wealth Creation with Responsible Distribution

While the country’s GDP growth, though a bit low, is impressive, it should translate into tangible benefits for all.Encouraging Wealth creation and its Redistribution calls for all round attention and continuous monitoring. National wealth creation must go hand-in-hand with ensuring equitable distribution. Tax policies should reflect this commitment in letter and spirit. The budget should address narrowing the Rich-Poor Divide by creating an environment that fosters growth for every segment of society, not just the affluent.  Special and very conscious efforts have to be  taken to  address all sorts of Indirect costs, misuse of public funds, corruption, black money, and losses from underperforming institutions that weigh heavily on taxpayers and drive up inflation. Tackling these effectively will free resources for vital public investments.

5. Unleashing the Power of Demand

High-sounding numbers and statistical jugglery have limited effect if people can’t afford the goods and services they need. We must promote Financial Inclusion. Banks and financial institutions should be proactive in expanding credit and supporting enterprises  particularly at grassroots levels.

Boost Consumer Confidence: When consumers have the means to spend, the entire economic cycle—from producers to sellers—thrives, fuelling employment and further consumption.

Leverage Technology: Harness AI and digital solutions to streamline operations and make credit flows quicker, safer, and more inclusive.The budget can introduce targeted incentives for both financiers and borrowers to keep this virtuous cycle running smoothly.

6. Simplifying the Tax Regime

A simpler, more transparent tax system would benefit everyone:

Fewer Tax Categories: Consider consolidating taxes so that citizens face fewer rates and rules.

Transaction Tax + Comprehensive GST: A single transaction tax on all receipts and payments, supported by a holistic and definitely not hostile as at present  GST, could reduce complexity, widen the tax base, and curb evasive practices. People should welcome and volunteer to pay taxes for the nation's progress. 

Income Tax as a Supplement: Let income tax remain only as an additional resource, applied in a clear, justifiable manner.

7. Strengthening Governance and Accountability

Tax collection and distribution should be transparent, traceable, and accountable. This calls for:

Strong Bureaucracy and Efficient Administration: Build a mechanism that ensures fair allocation of tax revenues among states, infrastructure, security, and other national priorities.Disincentive freebies by all means to bring in meaningful and healthy fiscal prudence. Result-Oriented Governance can bring in huge benefits all around.  Link revenue collection and public expenditure to tangible, measurable benefits for citizens. Robust Vigilance and Technology: Leverage advanced tools to eliminate fraud and corruption, thereby safeguarding both citizens and the national exchequer.

8. Embedding Ethical Values in Business and Public Life

High ethical standards—rooted in our cultural heritage—are key to sustainable development. We should:

Encourage Responsible Pricing and Customer Care: Service sectors, from travel to hospitality, must be fair and people-centric.

Reward Compliance and Discourage Freebies: Offer incentives for honest tax practices while disincentivizing wasteful public spending that imposes an unfair burden on taxpayers.

Integrate Social Audits: Eminent social reformers and experienced professionals should help monitor and evaluate the moral and social impact of businesses and public institutions.

When institutions and individuals alike commit to these ethics, the country’s global image and societal well-being both thrive.

Conclusion

To build a strong and equitable economy, we need a budget that inspires all citizens—across every socioeconomic level—to participate in nation-building. By combining technological innovation, simplified tax structures, ethical governance, and a genuine commitment to uplift every Indian, we can ensure that The economy performs , grows equitably and all the segments of the society benefit by minimising  the ugly rich and uplifting the poorest of the poor.  May the budget  bring benefits and welfare measures for all.  

Wish every one a very happy  and wonderful new year 2025.

Loka samastha Sukhino Bhavanthu  


T V Gopalakrishnan

Bengaluru. 

( This article got published in Money Life dt 31/12/2024)

Monday, December 30, 2024

India needs tighten its belt too

 Don't DOGE It. India needs tighten belt too. 


This refers to Don't DOGE It. India needs to  tighten  belt  too (ATM Dec 22). Our  Democratic set up of the Government is no way different from that of the US in broader terms but the  standards of culture, education, legislation, judiciary and execution vary vastly is a fact which cannot be overlooked. The Political, Economic , Social and Technology  (PEST ) Control Treatment obtained in the US and In India also unfortunately does not match, is the ground reality. No doubt, anything  good anywhere if copied and implemented verbatim in India can improve the welfare of the people  and bring in all round socio economic development, why not do it ? After all, people expect only Good Governance, Peace, comfort and  welfare from the Government. As ends justify the means, the enhancement of the status of  our  Economy on par with advanced Economy is possible only through very Efficient Fiscal Management. 

T V Gopalakrishnan
Bengaluru.   

( This letter is sent to TOI  in response to the Article Dont Doge that  appeared in Sunday Times Dec 22, 2024)      

Thursday, December 26, 2024

Fuel Check, Tyre Pressure Check

 This refers to ' RBI,Get a Green Thumb'  by Arunabha Ghosh and Dhruba Purkayastha (Dec24). Sanjay Malhotra's job will be rendered easy as he will have to only manage the smooth drive expected of him in a very heavy traffic jungle sitting in a very high end vehicle RBI with his vast experience and economic and political influence. The   shocks and risks macro , climate , financial are to a  great extent manageable once the financial system is made strong, stable and resilient to inflation pressures. The  fact that RBI has  successfully survived for 90 years tackling the political economic , social, technological risks would itself provide the confidence  needed to take the economy forward  The new Governor will  learn to drive independently only by following the traffic rules .


T.V.Gopalakrishnan

( This letter appeared in ET dated 26/12/24) 

Thursday, December 12, 2024

Bring Down Food Inflation - Let the people be happy and Motivated


                                      Bring down Food Inflation -Let the people be happy and motivated.

                                                       Annadatha Sukhi Bhava. 

 President-elect Donald Trump says Americans not being able to afford groceries will be a relic of the past. “They’re going to be affording their groceries very soon,” he said Thursday before ringing the opening bell at the New York Stock Exchange, where he was honored as Time’s “Person of the Year.”

 The  belief  Annadatha Sukhi Bhava is in practice for ages and this is considered to be the most satisfying and fulfilling experience of  both the giver and the taker of food  equally. "Nothing can substitute feeding of hungry" is true to the core and this only can help the people to remain motivated emotionally and in all other respects.Very high Food Inflation, Taxes and other Charges do not make living Comfortable for majority of the population. All their happiness, peace and contentment are first attached to food first and then only they think of other comforts like shelter, clothing, medical, pursuit of education, travel for social visits, for pleasure, sight seeing, pilgrimages etc etc. The whole life should not be left only for calculating subsistence and existence levels linked to income and cost of living. Majority have to come out of that situation and dream of a developed world and reaching their minimum standard  standards of life.

The Government in power and other authorities have moral, social, economic and emotional responsibility to keep the food prices under check by all means and make food available within the affordability of all. The  first and foremost objective of  both Fiscal and monetary policy should be to ensure that the food items are produced /imported  adequately at minimum cost and available to all within a reasonable price. Politics cannot and should not interfere in the pricing of food products and should not dictate terms in the production, storage, transportation, distribution and  their reachability to all. Politicians can have all welfare policies but the administration has to necessarily execute the policies in such a way that they do not affect the sentiments and urge to have  two square meals for the entire population irrespective of their incomes and affordability. Basic Need cannot be mixed with Luxury. The economic policies consisting of  Monetary and Fiscal Policies determine the generation and distribution of wealth based on the economic and social conditions of the entire population taking into consideration the availability of natural resources and other potentials of the country apart from geopolitical conditions of the whole universe, play a key role in regulating the food inflation, cost of production and giving the momentum of growth and keeping the population happy, motivated and aspiring for peace, safety and all round progress. Many of the ills of the economy emanate from poverty , very high food prices and high cost of living. Widening inequality adds fuel to fire.  

The success of democracy should be judged on the availability of food to all always and at reasonable prices without any linkage to affordability. It is easier said than done as the very administrative set up essential to ensure the availability of food to all at affordable prices unfortunately remains manipulative, corrupt, inefficient, exploitative and greedy beyond any justification either morally, ethically, legally and empathetically.

The  high inflation not only widens the gap between the Rich and the Poor, but it also affects the poor physically, financially, psychologically, emotionally and socially. High inflation in the absence of affordability  among majority of the people  to survive unfortunately takes away the very  happiness and welfare among the masses but adds to the very existential crisis which is not desirable in Nation's interest and long term stability of the economic progress and its continued sustenance. It is very apt to quote here the Kantar's Report that appeared in ET dated 6/12/24 which says"Urban middle Class Household Shrink, Rich Club Sees Big Jump. Incomes not able to keep pace with inflation. One needs to introspect and find ways and means to find some tangible solution to avoid such situations in the long term interest of the economy and welfare of the people.  

Removal of taxes and levies, malpractices prevalent in the form of corruption both in kind and cash in the production of  agricultural goods and  all logistics related services in the procurement, movement, storage  marketing , distribution and final destination of these to  people all around will definitely go a long way in reducing the food prices and making the people happy and motivated. Any sacrifice made in containing food inflation will prove to be a great boon to boost the economic growth and ensure universal welfare of people. Time for all authorities concerned to think afresh and coordinate policies and their successful implementation keeping the objective of ensuring food products at affordable prices and their availability irrespective of seasonal variations including political manipulations. Any cost to bring down the cost of food to majority of the people cannot be considered as cost , as the benefits that can accrue from this to the economy and the Government can definitely outweigh the COST.      

The only way to contain food inflation is to have a different approach by creating a' Food Inflation  Neutralisation and Stabilisation fund ' under the auspices of Reserve Bank , NABARD and the Banking System to administer  effectively the supply chain management of the sensitive food commodities particularly, Tomato, Potato and Onion and other vegetables and fruits , involving state Governments. The production and supply chain management keeping the influence of cost as the main factor in inflation control should be made more transparent and free from all possible manipulations by any force at the ground level. The need to activate RBI Local Boards in the matter is very  paramount It is high time MPC and RBI local Boards coordinate and think of some concrete measures to contain the food inflation which remains broadly undefined and defiant.  Man-made inflation cannot be controlled by the Monetary theory policies alone is a proven fact as inflation inter- alia is also a creation of poor administration with active support of unhealthy politics and tolerance of unethical and all sorts of malpractices. RBI has been providing the best of accommodative policies for years and has strengthened the financial and Banking system stability perhaps unheard of so far, but still the inflation continues to be a major challenge, stumbling block in the economic  growth which cannot be allowed any more to realise the dream of India becoming an advanced economy by 2047. The peoples' aspirations to see India as a welfare nation can be  fulfilled  only by adopting and adhering to some very dynamic and untried policies and approaches. No advanced economies suffer from very high inflation and the standards of Life have some enviable quality.

 Loka Samastha Sukhino Bhavanthu starts with food for all at affordable prices. Once this is taken care of,  all other  challenges for economic development are within our reach with all our  own natural and best of human resources.    

 TVG Krishnan

( personal Views).  


Sunday, December 8, 2024

Inflation Control Why not have a different approach

 Monetary policy Why not have a different approach to contain Inflation.

Dear Sir,


Apropos your editorial RBI’s not too much behind the curve, (ET 7 Dec) the fact remains that RBI has done its best to retain the policy rates unchanged and maintain its accommodative monetary policy neutral, despite the continued persistence of high  food inflation and not so encouraging economic growth as targeted.Two members of the MPC had a different view on policy rates is itself an indication that  seeing the historical trend in containing the inflation which is beyond the fiscal and monetary measures a unanimous view on Price Stability and economic growth cannot be  sensible/ possible / practicable. However, as a matter of great relief RBI cut the CRR rate by 50 basis points  in two tranches, to neutralise its  neutral policy stance and provide some comforts to  banks and economy by easing the availability of liquidity to expand credit to the needy segments of the economy.Even though CRR cut itself is inflationary ,the overall approach of RBI seems to be obviously limited to contain the food inflation which remains defiant and unresolvable easily by monetary policy alone. It is time to seriously introspect  by policy makers to identify the causes of continued persistence of food inflation year after year which requires it to be tackled diligently, politically, fiscally, administratively and monetarily.

T V Gopalakrishnan

Bengaluru

( Letter sent to ET on 7th Dec )

Wednesday, December 4, 2024

Block Oxygen to this circulation.

 


This refers to  your editorial Visible Withdrawal  Symptoms of ATMs (Dec 4),   The informal economy , corruption , and offer of cash at  election times fuel  the withdrawal of cash through the ATMs. Since digitalisation has picked up considerably among the retailers, the poor, lower and middle middle class  the need for ATMs particularly for small denomination notes  will  decline.With  the requirement of high denomination notes rising  because of real estate deals involving black money and other reasons , there is a need to review  maintenance of  ATMs at a high cost.  Gradually eliminate black money and  high denomination notes through better fiscal , monetary and other administrative measures.    

T.V.Gopalakrishnan
Bengaluru.
( This letter appeared in ET dated 5th Dec 2024.) 

Wednesday, November 20, 2024

Manage Food Inflation Differently.

 

This refers to the news report "Centre-RBI disagreement deepens over inflation and rates cuts"that appeared in BL dated 20th Nov 2024. The best and only way to contain food inflation is to have a different approach by creating a' Food Inflation  Neutralisation and Stabilisation fund ' under the auspices of Reserve Bank , NABARD and the Banking System administering effectively the supply chain management of the sensitive food commodities particularly, Tomato, Potato and Onion and other vegetables and fruits , involving state Governments. The need to activate RBI Local Boards in the matter is very  paramount . It is high time MPC and RBI local Boards coordinate and think of some concrete measures to contain the food inflation which remains  broadly undefined and defiant.  Man made inflation cannot be controlled by the Monetary theory policies alone is a proven fact as inflation inter- alia  is a creation of poor administration with active support of unhealthy politics and tolerance of unethical  and all sorts of malpractices . RBI has been providing the best of accommodative policies for years and has strengthened the financial and Banking system stability perhaps unheard of so far , but still the inflation continues  to be a major stumbling block in the economic  growth which cannot be allowed any more to realise the dream of India becoming an advanced economy by 2047. The peoples' aspirations to see India as a welfare nation can be  fulfilled  only by adopting and adhering to some very dynamic and untried policies and approaches. 

T V Gopalakrishnan

( Sent to Hindu Business Line )