President’s speech has no specifics, hopefully Budget will
Apart from the reference to increasing FDI levels in defence production, there is little in the President’s address to Parliament that tells us of the likely policies the government intends to pursue. Perhaps looking for specifics is a bad idea in a speech that covers everything from a national mission on the Himalayas to cleaning up the Ganga, with provision of toilets and promotion of sports through a national talent search system thrown in between. At some point soon, in the Budget next month perhaps, the government will have to come out with a lot more specifics, though the details will obviously have to be left to line departments. On the retrospective tax—perhaps the most important issue as far as international investors are concerned—as our lead story today points out, the government is still struggling to come out with a coherent plan on how to deal with the subject. The worry, it appears, is that were the tax to be made prospective—in which case, several tens of thousand crore of tax demands will come to nought—this will give the comatose Opposition a lease of life and, more importantly, the CAG could come after the government for presumptive losses. Since the retrospective tax was a bad idea, surely repealing it has to be a good one?
More important, if the government is to take tough decisions, or to professionalise PSUs and give them autonomy, it has to deal with the issue of not just the CAG, but the CBI and the CVC as well—all the bodies have to do their jobs, but if this interferes with the legitimate functioning of government/PSUs, this has to be dealt with; it cannot be made an excuse for inaction. Presumably the amendment to the Prevention of Corruption Act that is being contemplated—CBI will have to show pecuniary benefits to babus before booking them—is for this very purpose.
While it is all right for the President’s speech to blithely talk of increasing agriculture investment, the Budget will have to outline how this is to take place—taxes aren’t going to grow fast in a stagnant economy and the poor monsoon will mean more expenses. Is this to be done by cutting food/fertiliser subsidies and using this money for irrigation, is the MSP-based policy to be replaced over a period of time by a per-acre cash subsidy? The prime minister spoke, on Sunday, of how India needs a new energy revolution of the US-type right now, so does this mean market-pricing for all fuels with a cap on subsidies—that’s what the Vajpayee government announced. Will fruits and vegetables production be encouraged by subsidies for creating cold storages, will information highways—think i-ways, not highways, the PM said on Sunday—be made possible by making more spectrum available and with more reasonable telecom cesses? The line ministries will have the details, but the Budget needs to outline the broad plan in major areas. It is a sobering thought that, as of now, without a chief economic advisor, the budget-making process itself has a major handicap.