General sense fine, tweaks needed
We are passing through times which require some bit of recalibration of directions. These directions are assuredly correct, as the Union Budget has held
Quite understandably, the media has been flooded with opinions and commentaries on the Union Budget. As is the pattern, some of them are professional others are political. It is obvious that the Budget itself is a product of a political system.
Much has been made of the demonetisation process and the scrutinies to follow. This is an administrative domain and is best left to the administrators to handle. The administrators will obviously have an opinion but will be guided by the policy direction the political masters give.
Be that as it may, certain gross realities are not determined by politics. The real world has to contend with it and is affected by it. It is no secret that the level of clarity in income tax and corporate tax laws needs to improve many folds. Drafting new income tax law cannot be a factor of the street-smart individuals with correct foreign antecedents and impressive domestic linkages with the people who matter. What is not often noticed is how the heads of some of the important finance related committees have a track record of significant political bias and have not been exactly the models of cleanliness in their financial track records.
As we look around, we need a definite plan on Government expenditure not only to rebut the often misplaced criticism of the individuals with loud visibility in the opposition but also at an ideological level. It is now being stated that instead of taxing the production processes the attempt is to tax consumption.
If consumption is not encouraged, not taxing production enough is not really going to help in getting the desired goals. This model of economic growth is responsible for creating gaps which were avoidable. Some of the gaps could be plugged in by a planned promotion of export. This is not to fault the budget but to flag a sense of direction of what could be achieved in course of the discussion. Private spending and exports are the consumption wing of inputs and production.
The tripping outlined above could be bridged by the forex factor. Our foreign exchange reserves are robust and for long there has been an argument made out on putting it to good use for developmental purposes. This has yet to get the operational nod of the functional elite of the decision making circles. The decline in the fiscal deficit and the current account deficit deserve compliments. The use of rising equity mutual funds requires sense of direction.
We need a plan not only for the banks but the bulging non-performing assets. Arguably there would be organisational issues. But the Government has to lay the foundations of a policy frame. Cases like that of IDBI cannot be repeated. The alleged Agrawal-Mallya-Amitabh episode is not the only one of its type. Arrests make a point. But the problem needs a more basic solution.
The instrumentality of one time settlement has to be handled in a more comprehensive manner than just ensuring fair play. It cannot be tackled just by the approach of getting rid of the problem. It requires to be assessed at the level of adequacy. In India if one does goes through the contents of the remarks that have been made since February 1, there has been competitive bidding by many corporate leaders to sing praises to the government. Perhaps this is the case for many lending support to the process of digitisation, also.
The backlash on globalisation proved that the gains unevenly distributed cause an amnesia. The likes of Jadish Bhagwati are nowhere to be seen. The same could be the story of digitization.
Among the real gainers of the digitization process would be the manufacture of the digitisation related instruments and those in the business of infrastructure. These may not necessarily be the Indian companies. It may have been wise to apply the Make in India principle first to the manufacture of the digitisation-related equipment and ensure that Indian companies gained from creating the related infrastructure.