SubscriberWrites: India’s fiscal management requires an overhaul. Civic consensus and public consciousness crucial

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So, when Karnataka’s revenue surplus of Rupees 401 crores, and its fiscal deficit of 2.6% of GDSP this year, no one noticed.   No one cared of Gujarat’s fiscal deficit of 1.51% and UP’s 4.3% of GDSP this year which is less than what was expected or Punjab’s whopping 5.65% almost twice of accepted norms. All these got no attention and was drowned by identity politics, Ramacharithamanas, Hijab and Tipu outrage, whose hands Rahul Gandhi hold in BJY and of course KL Rahul should play or not.

In broad strokes, Modi Administration is managing its budget with a bit of restraint and what we can call swim above the waterline. State governments finances are submerged, and they breathe through reed. Particularly Rajasthan, Kerala, Punjab, Bihar, West Bengal, AP and Tamilnadu are violating all principles of financial prudence, though PTR Planivel Rajan, FM of TN is seemingly less reckless.

The economic collapse of countries around India – Pakistan, Sri Lanka and to some extent impending one of Nepal, Bangladesh should have sent shock waves. Pakistan ruined itself so much   that it cannot download medicines for lack of funds from Karachi port.  Sri Lanka’s protest and the long line for petrol should give us shivers. Nothing moved.

Politicians will not rein in budget unless the civic consensus and political conscious is created that there is a negative consequence for poor fiscal management for them. There should independent body like US OMB that analyse each state/ provide analysis of benefits of spending on different heads. The media, intellectuals and academics must build a consciousness around perils of the poor budget management. We must call out the profligacy of spending and curtailing of revenue almost like a Banana Republic and some of it are: 

1. There are 18000 State Government Public sectors that make loss/less profit and 450 of them are not even functioning. We need to close, privatise, partner with private sector, and make them self sustaining.
2. Most of the states Electricity Boards and Public Transport Makes huge losses and unsustainable. As a first the government should slowly privatise EB to reduce the theft that is about 40% of loss.
3. Hiring government employees has bloated the government to a point 70-90% budget is salary. Goad political parties to stop OPS talk now and not hire anyone.
4. Stop freebies – 1000 rupees for woman, farm loan waiver and free items for Pongal etc are unproductive expense.
5. Reduce debt interest burden (20-50% of budget) and debt itself by running surplus budget and pay off debt

Revenue Management

1. For a house that gets a rent of 30000 / month, tax rate is 2000 /year. Lowest in the world. With visible improvement in amenities, municipality should increase tax rates.
2. Rich farmers do not pay tax at all. We need to differentiate a rich farmer and landless farmer and tax rich farmer.
3. Make tax compliance an important governance parameter.

Civic Consensus and conscious 

The civic conscious is not against the individual welfare of free food, education, or health insurance. But beyond food, education and health others should be treated as subsidiary and must be carefully evaluated for negative impact.

For example, a free bus pass for woman and unsustainable lower fare will lead to very unreliable bus service, limited routes forcing huge private bus travel at 6 times the railway fare. A prudent policy is fair price and subsidiary for rural travel and force the transport companies to be efficient, useful and revenue neutral. 

Removal of free electricity, fair price and efficient revenue neutral with rural ‘light bulb’ and top up ‘night pump’ subsidiary for agriculture will make electricity board deliver  power 24/7, 365 days in environmentally friendly power plants that has working electrostatic precipitator.

Digging through each inefficient area, we will find that the subsidiary, freebie, and public enterprise is a source of public drain and corruption, and money is siphoned off by rich farmer, businessman and politician (sometimes same person) and government employee. Freebies gets votes and lots of corruption monies.

We should create a culture of fiscally responsible government at all levels including its public sector and call out the ills of spending money from future. Also, how wastage will drag development and public good and how it will lead to a dangerous precipice of Sri Lanka/ Pakistan like situation. A well managed budget can create roads, metro, Industry Zones, civic amenities for which each one has to pay to use  and well thought out plan for Education, Health and food security for all ( Of course with fair price)