The Budget: Criminal Folly

We are into budget season and the entire country tries to make sense of economic gobbledygook. We all try and pretend to understand the economic jargon that gets dished out by TRP-hungry TV channels by anchors who sagely tell you “it was a good budget” and I give it a 6/10 rating (Duh, what does it mean?). If you notice, the leading channels that people watch during the budget have now become the “News” channels, rather than the Business channels (hint: the budget has merely become a big TV Tamasha).

Irrespective of the above cynical outlook (it is still mid-week and not a weekend), I do want to bring out certain aspects of the economic policy of this government, that can only be described as (and I will choose my words very carefully) “economic crimes” against the future generations of this country! People who are below 45 today are going to be asked by the future generations of this country, what were they doing when these atrocities were being committed, and yes, they will have to answer!

Before I get into the specific actions that I describe as economic crimes, please let us get a context of why “economic growth” is so important for us as a country at this stage of our development, and cannot be compromised for anything, and I repeat anything else!! Bill Clinton was bang-on (no pun intended) when he said “it’s the economy, stupid”!

World over, people are talking about the “demographic dividend” that India ostensibly is scheduled to reap over the next few decades. This is supposed to be our “ticket-out-of-poverty”, after over 250 years of economic bondage. A demographic dividend is supposed to be reaped by a country when two things happen, firstly it is young and has more people in the working age-group (25-60) than in the retired age-group (above 60), and that young population is gainfully employed (i.e. the people are skilled, and are at work, which they will be if the economy is growing).

So let’s take a look at how some of the major countries/regions of the world stack up as far as the average age of its population is concerned. Please see the table below:

Source: CIA World Factbook (God Bless the CIA)

The above table brings out some very interesting facts. India can encash its demographic dividend, given the fact that its average age is just 26.2. A wag said that China will become old before it becomes rich, precisely because it is at 35.5. The US, even though it’s average age is higher than China, will not face economic stagnation because it is a past master at attracting talent from all across the world, through immigration. Europe and Japan are both likely to start aging much faster and hence start stagnating, and more so since they are relatively more resistant to labour migration. Brazil is young; while Russia is not, but both are likely to reap the benefit of exploiting their natural resources only, and do not really have any other significant competitive advantage. South Africa is young, but largely an economic basket case (sorry, but it is true). The Middle East is again relatively young, but besides oil, has not got any other resource, and has not really invested much in its human resources also. They are a classic example of when people become rich without working for it, they become plain lazy and that can lead towards economic collapse, once the oil runs out. Pakistan is the most shocking example. They are amazingly young, but have a collapsed economy, no education, no governance, and hence the only “efficient industry” that they can boast of, is terrorism (are we really surprised?). The moral from Pakistan is that a young population, if not educated, caught in an economic slump, can become cannon-fodder for exploitation and that can lead to social, political and economic chaos!

Does this scenario sound a scary portent, in the sense that is there a risk that India can possibly veer off its growth track and head towards becoming a hundred times worse version of Pakistan? Don’t be so cock-sure that our democracy in itself will ensure that we will never do that.

First let’s get a sense of the “economic development clock” that we need to be conscious of. By 2030, it is estimated that two changes will happen, our average age will touch 35, and the number of people who are retired (above 60) will be more than the number of people who are in the labour pool (which means a lesser number of people will be working to support a larger number of retirees, which is the problem that Europe and Japan are facing today). This is when the demographic dividend can turn into a demographic curse!

The only way to avoid this is if we can become a middle income country by that time (which at today’s prices means a per capita income of between USD 4,000 – 10,000). We are currently at a per capita income of around USD 1,000. To have any chance of reaching this middle income stage by 2030, we need a consistent GDP growth of 10% or higher, every year, from the current year onwards!

So for those left-leaning people in this country, who say “big-deal”, let’s sacrifice growth for some more time, in favour of ostensibly “inclusive growth” or an entitlements economy, wake up and smell the coffee! We can’t!! Those who say that we can tolerate this bumbling government led by an “economist” PM for some more time, no we can’t! Those who say that we should be grateful that we are growing at 6%, when we know we can still grow at 9%, and need to grow at 10%, no we shouldn’t!

Let us understand one thing clearly, if we do not hit middle income status by 2030, we might never do so!! And guess, what, 2030, is not that far away, it is less than “four Lok Sabha” elections away! Scared? You should be!

Now let us come to the economic crimes that this government has been committing against the nation, one after the other, with brash impunity and asinine imperiousness! No one seems to be pointing this out to them, not the “corporate honchos” who pontificate during budget time, not the business media, not the “esteemed panel of economists” who advise the government, not the “NAC”, not the Opposition, and not the voters too!

The economic Crimes being committed against the country are as follows:

MNREGA: Now even if I discount the most common criticism against this, that it is being implemented by Congress as a “vote-garnering” ploy (which it is), this is a humongous waste of money, running into tens of thousands of crores. More than 50% of the amount allocated for MNREGA is officially spent in creating the “administrative infrastructure” for the projects to be executed. No permanent, worthwhile or productive infrastructure is being created on the ground and now with the latest provision of merging it with the MPLADS funds, the siphoning of funds will reach catastrophic levels. You might as well transfer ten thousand rupees to each and every BPL family per year, through their UID-linked Bank accounts, and you will still save some money in the process. The kind of labour market distortion this is creating has to be seen to be believed.

If a person can get subsistence wages by doing relatively “nothing” with no skills required, why would that person be driven to build skills. This scheme must be scrapped in toto. Development projects should be run by state governments or by the Panchayats, as per their development needs and not as per a central dictate for running any project. This is one of the most blatant organized loot that this country has seen on such a grand scale, since independence. The trouble is, and the Congress knows this, when you develop a powerful but fraudulent narrative around “inclusive growth” using this scheme, no one can question it, as it will be criticized as being “anti-poor” (just like no one can question “reservations”, but that is another story)! What a political master-stroke by the Congress, but what a disaster for the country!

Food Security Bill: if the above loot wasn’t enough (as it only helped them win the 2009 elections), they needed a more monumental opportunity to loot (this time for the 2014 elections). From what is a reasonably working scheme under the PDS (which also has its leakages, but is largely within limits), this is a mammoth exercise to cover more than 50% of the country. This is like ringing the dinner bell for the corruption hyenas to come and feast. Not only do we officially not have that much “food” as well as the infrastructure to store this food even if we could procure it, rogue commodity traders all over the world are literally licking their chops, waiting for India to declare this policy so that they can drive food prices into the stratosphere.

This one bill by India can distort food prices around the world! I hope that someone takes this government to the UN Human Rights Commission for attempted crimes against humanity. Even a normally pliant Sharad Pawar is balking at the audacity of this plan! The only silver lining is that this deficit-ridden government just doesn’t have the money to even think about this plan (hopefully)! Gulp!

Disinvestment Proceeds: The earlier NDA government created a special fund (National Investment Fund – NIF) for capturing the proceeds of disinvestment and channelizing them towards social sector schemes as well as capital investment in PSU’s. This was a laudable step, even if the proceeds were limited. What this government has done is to dramatically ratchet up the pace of disinvestment (which in itself is not bad) but is using the proceeds to balance its distorted budget. This is like selling your house (or car) so that you can go to a 5-Star hotel for a meal! I mean is this government off its rockers?

A law should be brought out so that all proceeds of sale of national assets (like PSU’s, Spectrum, etc.) are mandatorily channelized into the NIF and only used to retire long term, high cost debt of the country! We are heading into a debt trap (like Greece) and are merrily selling assets to balance our books, while ramping up unplanned social spending which we can’t afford or control its siphoning. Future generations will curse this government for the economic hell-hole it is pushing this country into.

PSU Emaciation: As if the reckless disinvestment (as mentioned above) wasn’t enough, this government has been emaciating PSU’s through a plethora of tricks of the trade, for benefiting their “crony-capitalists”. The Air India example is well known and covered by the media and the CAG report on this was very damning (of course the media has dropped this story since long). The misuse of LIC funds for ONGC share sale (basically a fraud on the LIC policy-holders) should have made SEBI take action, but can it afford to do so. The emaciation of BHEL (through reduced orders), Coal India (through the pricing issue), ONGC (on the Cairn issue), SBI (on Kingfisher), I mean the list is endless.

The government actually thinks that it can emaciate these PSU’s, disinvest in them, and sell the investors a lemon, and no one will notice? It takes a UK-based investor to threaten to sue Coal India, for us to see the blatant corporate governance abuse in these “listed PSU’s”, India’s so-called Navratnas. Shame on us for tolerating this.

Black Money: Enough has been written on black money to bear repetition here. The only key point I wanted to highlight is that this government has been taken to the cleaners on the issue of corruption. It has been forced to take some action, kicking and screaming, and even when it gets a list of people with illegal accounts (the HSBC list), all it can do is strike a behind-the-scenes deal with these people and treat it like a simple case of “tax-evasion”! They can pay a fine and keep the rest of their ill-gotten wealth! If this wealth was amassed through corruption, it is not “un-taxed” wealth, but “illicit” wealth, and needs to revert to the consolidated fund of India and the person should be put behind bars! Naming-and-shaming should be the bare minimum expected.

I mean, do you see that happening. These shameless economic criminals keep on merrily transferring their wealth from one tax haven to another, with impunity, with one click of the computer button, and we are not even able to raise “letters rogatory” in time! We are a shameless people to tolerate this nonsense!

Agricultural Tax: India’s tax to GDP ratio is one of the lowest in the world, and falling further. If we include the “parallel economy” into the GDP of the country (which is estimated to be as large as the legal economy), the tax collected ratio would fall into insignificance. The people who bear the major load of paying taxes to the nation are the long-suffering middle classes and Corporate India. Not taxing agricultural income is something which has led to an epidemic of people manipulating ill-gotten wealth and showing it as tax-free agricultural income.

Our very own “not-so-young” angry young man, is also apparently a “farmer” from UP! Like the way Service tax was introduced into the country as a presumptive tax (of around 1600 rupees a year, if I remember correctly), we need to declare that agri income of more than 1 crore in a year would be taxed, just like normal income! Now let’s see people like a “sleepy-goat” ex-PM who claimed to be a “poor farmer”, resist this measure! We need to reduce the tax burden and broaden the tax base!

I have written this piece with a lot of anger at the open loot going on around us, and hence apologize for any offence caused with my outbursts! My grandfather had said to me once, “never lose your passion”. Passion is the only thing that drives change! Keeping the emotionalisms in this piece aside, the points on the enormity of the economic crimes being committed by this government are true! We stand a very real risk of losing our “real tryst with destiny” as a nation, if we do not stop these crimes!

Now, here is the clincher, in my strong opinion, the only one who can stop these crimes from occurring is Narendra Modi! One who can ride rough-shod over all the people who would want to block the path of progress of this country, including the bureaucracy, politicians, media, and the special interest groups! He can do so only as the PM of India, and also if he heads a stable coalition. That is the responsibility of us voters to deliver, whenever the next LS elections are held!