My wish list for the budget, cut taxes and cut Govt spending

There was a reason why spending limits (via FRBM) were introduced in the first place. So that the Government which is generally an inefficient spender does not mis-utilise National resources. It is also meant to resist temptations of the kind we see now when the economy has slowed down. My simple point is if you really think excess spending is good for the economy, please do make an argument either for new limits or for removing spending limits (via FRBM) altogether. Note the statistics below

NDA 1: Gap between Tax growth and growth in per Capita GDP: + 2.8%

UPA 1, 2: Gap between Tax growth and growth in per Capita GDP: + 2.2%

NDA 2: Gap between Tax growth and growth in per Capita GDP: + 3.8%

It is bizarre that Government tax growth and spending has always been growing faster than per capita GDP. It is even more bizarre that this has increased over the last 5 years. The recent GDP growth numbers are clear indication that such greed is not really helping the economy.

Coming to my wish list -

On taxes side

1. Cut taxes on Fuel. In a poor country like ours with massive penetration of two wheelers such taxes take away money that can contribute both in terms of more money for consumption and also for lower cost of running the business
2. There is almost universal agreement that personal income taxes must be cut. I agree, leave more money in the hands of consumers, let them figure where to spend the money

On Spending side

1. Cut spending on National Highways: Either the Government spends money efficiently or not spend at all. Last 5 year, the Govt has overloaded spending in a couple of regions and there is no evidence those regions are delivering any additional economic value to either those States or to the country. Unless highways are increasing commute efficiency significantly, no point in just adding them for the sake of trying to be like China
2. Change Poverty Criteria: No doubt that Food Subsidy has some advantages. However spending nearly 2 lakh crores when the economy has more than doubled in the last 6 years is plain wrong. One way the Government can cut spending is tightening the poverty criteria. It should aim to cut spending this year an eventually bring it down by half in the next 5 years.
3. Move all PSUs to a separate Entity: This may appear to be a non-budget decision but it has serious implications on the budget. One of the main challenges with PSUs is that they mis-utilise national resources quite a bit due to management inefficiencies. I believe, it is time to remove direct ministry control of PSU companies and move them under a new entity. This new entity can then be listed for Individual shareholders and directors of this new entity are independent non-bureaucratic directors. This new organisation can employ a whole set of new talent akin to any private holding firm.
4. Launch a National Apprentice scheme covering 10 million youth a year where companies (of a certain size) will have to provide apprenticeship to the youth under 22 years of age. The Government can pay the youth directly (3 months, Rs 6000 per month). This will help some youth get absorbed in the company they are training with while most others will gather some work experience

Why I believe this will work?

a. More money in the hands of consumers will mean more spending which is good for both manufacturers and service providers. In particular it will help local businesses who will be able to create jobs and invest back in the community

b. Efficient Government spending whether on Highways or on PSUs will improve productivity of money spent in the country thereby delivering better income growth for the country as a whole

c. Less support on Food security will push more people to work. In many states (if not all), lazy subsidies are encouraging many to stay out of work or work less thereby increasing the cost to businesses apart from reducing productivity overall.

d. Apprenticeship program will help our youth gather real life work experience that can be extremely valuable in their search for jobs. It will also give our businesses an opportunity to access and evaluate talent.