Budget 2020-21
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The budget 2020-21 assumes unusual
importance both politically and economically to live up to the expectations of the
people domestically and expert economists
internationally ensuring fastest economic growth in the backdrop of slowdown of
the economy witnessed all around the world. The challenge the Finance Minister
faces is though thrilling and defiant but definitely manageable with the resources
potential the economy has and the support the Government enjoys from the right
thinking of vast majority of the masses aspiring for all round welfare. The
only hurdle perhaps is the laxity in Governance, planning and execution of
various reforms reflecting in the poor achievement of results from all well
intended grand reforms and very bold policies of the Government Viz, Demonetisation,
GST and well meaning welfare measures for the downtrodden who had been ignored
for decades and now made part of the inclusive economic development obviously
pursued since 2014.
The so called economic Growth
engine and the Compartments the engine supposed to pull need to be well aligned
and placed on very strong laid parallel lines viz Fiscal Policy and Monetary Policy.
While the broad economic policies should encompass the major reforms so far found
to be elusive in the areas of land labour and legal
with strong administrative and political will to get them implemented
expeditiously, the fiscal policies and monetary policies need to be closely
coordinated to strengthen the Financial System consisting of all broad Markets,
Institutions and Instruments under meaningful and transparent regulatory and
supervisory arrangement accountable to Parliament. The need for drastic, considerable
and visible change in the major macro economic factors Viz GDP, Employment and
Inflation is paramount to make the ambitious target of $ 5 Trillion for the
Indian economy a reality not only to meet the political and economic
aspirations of the Government but also to make the Country powerful and
noticeable among the economic super powers of the world.
The ensuing budget is an
opportunity to turn the tables and reset the Economy the way the Government
desires, people aspire and the world wonder. Some of the measures which can perhaps do the
trick inter alia include the following.
The very fact that the slowdown
of the economy though has not materially altered the living conditions of the
people and the standards of living of large segments of the population by and
large in reality particularly those coming under upper middle class , the data captured,
presented officially and publicised widely do not reflect the ground reality and
present an all round gloomy picture is a proof that the informal economy is
more strong than the formal economy and the policies announced and pursued do not
bring in the desired results officially. The economic Liberalisation of
the1990s seem to have let lose the administration, regulation and supervision
paving way for non accountability, freedom to indulge in activities unethical
and erosion of values all around, leading to amassing of wealth at any cost by
a few and getting away with all sorts of frauds, scams and unheard of
atrocities in the society.
The Leakage
of data on production, services and employment and the consequent leakage of
income accruing to the Government kitty despite the best of technology
in vogue needs to be officially and administratively
recognised and this needs to be plugged by all possible means involving,
Panchayats, Municipalities, Corporations, all administrative set ups, Financial
Institutions, service providers and Social groups. The failure of collection
of data in the overall governance is beyond justification causing
embarrassment to the Government and missing all the intended results under
various major policy initiatives. No doubt, the task is easier said than done
but it is time to think out of the box and fix the problem. Earlier it is done
the better for the economic and social development. The National Registrar of
Citizens as and when introduced, The Aadhar Cards, PAN Numbers, Bank accounts,
real estate deals, employment Numbers, various pension, insurance provident
funds, subsidy claims from various
segments, etc can provide some links and leads to generate the required data on
employment, services and leakage of revenue to the Government. The very fact
that Cities and Villages do not get both skilled and unskilled workers is an
indication that there is no unemployment and poverty as such and the economic
slowdown needs to be captured elsewhere perhaps by innovative statistical
designs covering informal economy spread throughout the length and breadth of
the Country and even having international connections. Contract labour concept,
underemployment, low income, uncertainty of a steady income and low demand may
perhaps have caused a bit to slow down the economy but is definitely not
insurmountable and can be tackled through the budget.
The Fiscal Policy to augment tax
revenues through GST, Direct Taxes and other avenues like Railways, auctions of
essential resources like coal, power and other energies needs to be thoroughly
and constantly reviewed to ensure that whatever is envisaged is collected and
it reaches the Government Kitty without
much of time gap and preferably instantly without pilferage. The leakage of revenues seems to be untraceable and this
needs to be tracked. This again requires data integrity, expeditious
flow and Checks and balances to ensure against pilferage and evasion through
ingenious means. Unfortunately even Technology is largely understood to be
abused and misused over and above the dishonesty and unethical practices
already in vogue. This calls for the effective Governance Standards and
transparent accountability. Knowingly or unknowingly, the erosion of values in
the pursuit of making money by reducing costs and maximising profitability at
the cost of investment, employment, production and distribution of national
wealth seem to have set in, in the
society throwing to the winds the good objectives and long standing value
additions to the economy through prudential means. Time has come to arrest this
tendency and restore the values through the budgetary measures.
The fear of tax should be literally absent
among the people and tax compliance should be a pleasure. This is possible only
through intelligent and proper mix of taxation policy with Technology and human
resources capable of handling abnormal situations and circumstances gently and
amicably. Make GST a very Good and Simple Tax attracting everyone to
voluntarily comply. Let the taxpaying public satisfy themselves about the
merits of GST, the way they are collected and spent for socio economic
development of the Country.GST should gradually emerge as the Only Tax
replacing all other levies over a period lessening the gap between the Rich and
the Poor. Evasion of GST by any one should be a national Crime and it should be
accordingly dealt with.
The Income tax presently levied
has to be totally revamped in such a way that it gets completely eliminated
over a period with appropriate GST replacing it. The fact that only about eight crores of the
total population of about 135 crores come under Income Tax net simply cannot be
true by any reckoning going by the number of cars, the number of flats, the
number of people well employed and well placed both in the organised sector and
unorganised sector as well, number of real estate deals in the country, number
of people travelling abroad and domestically by flights in particular, number
of people operating in the share markets, etc. This number alone should reflect
on the inefficiency with which our tax collection machinery functions despite
the best of Technology the Country has and is proud of being known internationally.
Further, the Security Transaction Tax
needs to be made more dynamic and attractive to strengthen the entire Financial
Market which should include among other things foreign exchange, derivative and
commodity markets.STT being non inflationary in Character and its collection is
instant and hassle free from administrative point of view, it should emerge as
a an important tool to regulate and supervise the entire Financial market and
make the market free from undue volatility, speculation, insider trading etc. Even
the capital gains tax which creates some sort of anathema now can be well
managed and collected through STT without incurring the wrath of the affected
and without loss of revenue to the Government.
Monetary Policy:
The Financial system which is the
foundation to build up the economy strong and vibrant needs better understanding and support through
convincing and pragmatic policies by bringing in more of professionalism and
expertise with added vigilance,
supervision , transparency and accountability in managing the system. The
Infrastructure development, the industrial growth, the agricultural growth,
storage, transportation and marketing of
products , their pricing and distribution to ensure their reach and supply in
the length and vast breadth of the country containing inflation and all sorts
of mal distribution through corrupt practices to manipulate prices through shortage
and surpluses of seasonal agricultural products etc require strong administration,
linkages with technology to capture essential data , flow of information to
support with appropriate policy initiatives. The bureaucrats and professionals
manning various institutions have to play a key role in ensuring that the
monetary policies bring in the desired results minimising the time lag and benefiting
all stake holders of the economy.
The Trust in Banking needs to be
re-established at the earliest. The banks cannot and should not be the source
of loot of tax payers’ and depositors’ money and this awareness among
professionals, bureaucrats and politicians needs to be well incorporated in the
budgetary provisions .The banks’ borrowers in particular and other stake
holders of banks in general have a moral responsibility to safeguard the banks
from collapse. The menace of Non-performing assets which is unfortunately man
made is crippling both the banks and the economy as well, needs to be tackled
with strong in built mechanism to
identify the problem at its incipient stage and liquidate it without passing on
the loss to others under any circumstances. Definitely the ensuing budget can
do that. The Whole Economy cannot be made to suffer perennially to satisfy the
greed of some borrowers who collude with some powers that be to loot the banks
and take away the credibility and the TRUST in the whole financial system. The
triple balance sheets problem of Banks, NBFCs and Corporates caused because of
bad borrowers’ behaviour needs to be arrested by all means and the Confidence
in our Banking Systems’ ability to give a boost to the economy at this hour of
crisis needs to be restored at the earliest.
The Contribution of National Bank
for Agriculture and Rural Development since its inception in 1982 needs to be
evaluated in the context of continuous decline seen in Agricultural and rural
segment in terms of agricultural growth,
income, employment, economic and social developments in the rural areas. Similarly
the role of Urban Cooperative Banks in metropolitan and urban areas in the
background of mushroom growth of commercial banks both in the public and
private sector, spread of branches, ATMs, mobile banking etc needs to be
studied in detail and suitable changes can be thought of to strengthen the
Cooperative Banks in rural areas significantly. These banks can definitely be spared
from Urban and metropolitan centres as they have a better role and
responsibility elsewhere.
Gold Bank.
The need of the hour is to find
the financial resources to take the economy forward without any strain on the
fiscal deficit anymore and without adding any tax burden on the people. The
best and the most sensible way is to monetise the vast Gold reserves of the
Country estimated to be around 20000 and odd tonnes by setting up a Gold Bank under the auspices
of the Reserve Bank. The Gold Bank would eventually turn out to be a goldmine
of resources to meet all the economic developments envisaged and also would
help to strengthen the foreign exchange market in particular among other broad
objectives the Country has. The Country can turn out to be a Pioneer in the field in the process.
The need to ensure fast and
equitable growth of the economy is paramount and with all the needed resources
the Country has, Why not we work for that and be the Super Economic Power of
the world. Time has come to recognise
the Nations’ ability to achieve what has been missing us so far. I would like
to conclude here with a quote by Robert Half “There is something that is much
more than scarce, something rarer than ability. It is the ability to recognise
ability.” Let this Budget exhibit to the whole world the ability of the Country
to perform and excel.
Dr T V Gopalakrishnan
17/12/2019.
