Every Government that assumes power on the back of a resounding popular mandate feels the need to make a decisive mark. The Narendra Modi Government is no exception and more so because the people’s thumbs-up was on the strength of a promise to usher happier times for the people of India.
The Budget to be presented by Finance Minister Arun Jaitley on July 10 will be the first test of its political resolve to translate promise into action. Yet, while formulating his revenue and expenditure proposals, Jaitley may have found that the Government’s eagerness to get on with the job of getting India back to productive work will be hamstrung by its inheritance. In plain language, the Modi Government has been burdened by a fiscal deficit which, if left unmanaged, will trigger a financial crisis of monumental proportions. In short, unless the gap between what the Government earns and what it spends is not reduced to more acceptable levels, the Modi Government will devote the next five years in crisis management rather than building a better India.
Common sense and the normal rules of household accountancy tell us that the gap can be narrowed by raising revenue and reducing the quantum of expenditure. Revenues can be enhanced by raising taxes, ensuring better compliance, a measure of disinvestment and overall, by ensuring that the pace of economic activity picks up significantly. Since the BJP is committed to a low tax culture, it is likely that the revenue optimisation programme will focus on the proceeds of disinvestment and improving the business environment by lessening State-sponsored obstacles to entrepreneurship.
Although there may be seemingly bitter disputes over specific new taxes and the principle of disinvestment of public sector undertakings, the real political battles are fought over the expenditure side of the Budget. Traditionally, Finance Ministers have earned cheap (but not necessarily politically rewarding) popularity by announcing significant hikes in the spending budgets of departments. Tables are thumped generously when the Finance Minister grandly announces that the allocation for, say, the welfare of the poorest of the poor has been upped by a few hundred or even thousands of crores.
Since Independence, successive Governments have used the Budget to increase the scope and size of the State sector to the point where Indians instinctively look to a paternalist, ma-baap sarkar to resolve life’s problems. Ironically, this emotional over-dependence on the State is accompanied by the belief that India is over-taxed and over-regulated. Although economists believe that India is actually under-taxed, they cannot deny that there is an overall public resistance to paying taxes. In reality, there is no real contradiction. The reason people grudgingly pay taxes or plot truly innovative schemes of tax evasion is because of the perception that the money is either wasted and badly utilised or diverted into the private coffers of a parasitic political, bureaucratic and contractor class.
The complaint isn’t unjustified. Experience, anecdotal evidence, CAG reports and media exposes constantly remind the country that there is very little quality control of Government expenditure. A substantial proportion of the money paid in taxes is wasted.
last week, to take a random example, a RTI query revealed that the taxpayers paid for the purchase, maintenance and the running of 31 air-conditioners, 15 desert coolers and 25 water heaters that were installed in the Government accommodation provided to Sheila Dikshit when she was Chief Minister of Delhi.
If you add gardeners, watchmen, peons, drivers and God knows what else to the list, it would seem that taxes are paid to maintain the hugely opulent lifestyle of India’s political class. I am not for a moment suggesting that people entrusted with political responsibilities should be exemplars of simple living and high thinking, but surely there has to be a more realistic definition of what constitutes comfortable living.
The recklessness associated with the use of State resources has become a feature of the governance culture in India. Nor is this confined to the personal lifestyles of ministers in lutyens’ Delhi and the State capitals. last month, during a visit to Britain, I was quite astonished to discover that the Government of India spends something in the region of Rs 80 crore underwriting British universities. These include projects such as the Rajiv Gandhi Centre for Innovation and Entrepreneurship at london’s Imperial College, the Indira Gandhi Centre for Sustainable Development at Somerville College in Oxford and the Tagore Centre for Global Thought at King’s College, london. Many academics I spoke to were quite clear that important as the “Centres” were for earning goodwill for the Nehru family and the UPA dispensation, they were of little tangible benefit to India-centric studies.
These are not isolated cases of Government expenditure being determined by flights of whimsy. There are umpteen examples within India of Government money being used for avoidable purposes. In the coming days, the Modi Government must initiate a rigorous audit to determine whether every rupee spent is strictly necessary and to what end. In the short-term, Jaitley would be making a significant mark on the culture of governance if the Budget decrees that the Government must tighten its belt and shed a lot of flab. It is time to check the indiscriminate and wasteful expansion of State-sponsored schemes. What India needs is the purposeful use of tax revenues. For the sake of happier times for the many, dark days must descend on the few.