Budget 2018: A People’s Check List

By all counts, India is passing through an economic crisis. Wages – both rural and industrial – are stagnating, job growth is negligible, agricultural and manufacturing output is faltering, indebtedness among farmers is growing even as their incomes are falling, private investment is not growing, exports are not growing, and within the economy, inequality is sharply rising.

Although this needs a much more comprehensive remedy than just tinkering around with government spending and revenue, the Budget for 2018-19 (to be presented tomorrow in Parliament) does present an opportunity for the govt. to do something worthwhile, something that will help the people of the country rather than just a handful of big tycoons.

There is frenzied speculation in mainstream media about how much relief will be given to individuals and companies from taxation, whether this or that ‘big bang’ reforms (like privatization of national assets) will finally be declared, and so on. Diverse lobbies of powerful interests have  undoubtedly been pressuring the FM for more ‘relief’ and ‘concessions’. But all this is for the 1%. What about the rest of us, the 99% of India?

Here is a quick list of things that should be included in the Budget to address and perhaps soothe the distress and pain spread out across India by years of neglect. Keep it handy to cross check with tomorrow’s pronouncements in Parliament. Then you will know whether this govt. is really concerned about India and her citizens or is it just an executive committee for big corporate and land owners.

Boost Govt. Spending

This is a strict no-no for the ruling elite, but actually there is no way the govt. can avoid this and yet tide over the present crisis. Once money is put in the hands of people, and in tandem, their current out of pocket spending on essentials like food, health, education, social security is replaced by state guarantees, then only will production get a boost with growing demand. Abandon thinking that spending by the 1% on luxury brands will boost the system. It is only the spending by common farmers, workers, employees that number in hundreds of millions can the death spiral of the present times be arrested.

So, welfare schemes like MGNREGS, ICDS, etc. should receive a significant boost in the Budget. More importantly, the universalisation of Public Distribution System (PDS) should be announced with the funds to rapidly implement it. The PDS should be expanded to cover many more essential commodities. Their availability at cheap prices will not only redirect precious resources of families to other purposes, state procurement at fixed remunerative prices will also give much needed succor to deeply distressed farmers.

The agriculture sector however needs much more than higher prices for farm produce. So, public spending on a slew of measures needs to be undertaken – irrigation works, cold storages, accessibility roads, warehouses, R&D on developing better crops, extension services so that fruits of research are translated into reality in the fields, etc.

Govt. spending on the National Health Mission needs to be stepped up substantially and with thought given to ensuring that it reaches down to the most far flung areas. It should be about 3-4% of the GDP to have a significant impact on curbing out of pocket expenditures that are amongst the highest in the world in India, and are often the cause of catastrophic destruction of families’ budgets in medical emergencies.

Spending also needs to be stepped up on education. With nearly half of the students in the country now under private managed schools, spending on fees and other heads has passed all limits. It is becoming one of the biggest heads of non-food expenditure for families along with transport and health. Education needs at least 6% of the GDP.

Social security spending by the govt. is practically nil by the govt. considering the large population that needs this safety net that all modern societies should give. Included in this are old age pensions for all, disability pensions, other special needs pensions, unemployment allowance, maternity benefits, etc.

Use National Resources Rather Than Selling Them Off

A bizarre ideology that grips ruling elites in India and elsewhere leads them to sell off national resources and assets to private parties as a means of raising revenue. Won’t it be much more profitable and sustainable to deploy these resources intelligently and for the good of people? There is no need to privatise the power distribution sector, or aviation sector, or various other public sector enterprises. Besides providing secure jobs (including for socially and economically disadvantaged sections) these PSEs are the backbone of self reliance and hence of economic freedom. It is argued that disinvestment is one way of raising much needed resources. Nothing could be farther from truth – there are umpteen ways of raising resources (see later) but only one way of going bankrupt by selling off national resources.

In this connection, the sell off of other public resources like mines and land, or even water, too needs to be stopped. These can be put to much better, more productive, more scientific and definitely more sustainable use under public domain than under unscrupulous private hands.

Some Tips on Raising Resources

There is universal hand wringing among apologists of the ruling economic dogma when it comes to raising resources. They can only see one thing: govt. is spending too much. What they don’t say is this: let us, private profit-makers, do what you are doing so that we can fatten our wallets at the cost of the people. This needs to be chucked and a totally different way of raising resources adopted. In this, the primary emphasis will be on raising resources through taxation of those who are wealthy and owners of vast property as well as profit sources. Some examples:

Corporate income tax: You may be surprised to learn that according to last year’s Budget companies were supposed to pay an average tax of 34.47% on their income but actually paid tax of 28.24%. In fact, 298 companies with more than Rs.500 crore profit each, which make up over half of all the profit earned by all companies, paid tax at just 25.9%! They evaded the statutory tax rate by a host of escape routes provided by the govt. itself. The country lost about Rs.83,000 crore because of this. All these concessions should be withdrawn and tax should be strictly implemented.

Wealth Tax: India is one of the few countries in the world that has no Wealth Tax. It was abolished by the present govt. in 2016. It should be re-established and again strictly implemented.

Customs and Excise Duties: Customs duty is a kind of tax on importing goods while Excise duty is for production within the country. Together, over Rs.1.54 lakh crore worth of these duties were exempted by the govt. in the name of all kinds of schemes and incentives. These should be reviewed and unless absolutely exceptional circumstances demand, no such concessions need be given.

Recover NPAs: It is estimated that corporate owe some Rs.9 lakh crore to public sector banks. These are called ‘non-productive assets’ or bad loans, that is, the borrowers are claiming that they are unable to return the loans and interest accrued due to various reasons. This is nothing but loot of public resources. The govt. should crack down on these entities and confiscate their property to recover all the amounts
due.

There you have it: precious resources can be raised and spending on essential items can be increased – provided the government is willing to do so. Mr.Jaitley (and Mr.Modi) should think about this alternative path – or they are going to go down the same way as the previous Congress govt. did.