Millennium Post

Govt expenses overburden economy

Govt expenses overburden economy

The rapid pace of expenditure of the Government and the asymmetrical taxation appear to be a cause of concern for the nation. The size of the Union Budget which was Rs.336 crore in 1950 has now escalated to Rs 21.5 lakh crore. Take this: last year, indirect tax (Excise duty, Customs and Service tax) collections surpassed direct tax (Income-tax) collections for the first time since fiscal 2006-07. In an economy like India, where the manufacturing contributes less than 15 per cent of the GDP, if indirect tax collections go over the direct tax collections then – it is apparent that India's indirect tax rates are increasing at a killing speed. The case of petrol proves it, which is sold at Rs 80 per litre though the landed cost is Rs 31 per litre. The main reason for the swelling Government expenditure, however, appears to be the available over-the-hill funds – which often get spent in a haphazard manner, instead of a well-planned utilisation. A classic example is the Integrated Child Development Scheme (ICDS) running in all the states.

Thousands of crores have so far been disbursed by the Centre to all the state governments, but providing supplementary nutrition, growth monitoring, nutrition and health education, immunisation, referral and pre-school education to every child under the age of 6, all pregnant women and lactating mothers and all adolescent girls is still a mirage for many of them. The reason is known to all: The state government spent most of the funds on infrastructure development, but the core mission of the ICDS was overlooked deliberately. Though the Centre had understandably expressed worries over the falling private investment in the economy, but the higher taxation has even hit the backbone of individuals and business houses having disposable incomes. Even the diving investment in the economy had created a major slowdown in India's growth rate with a near zero jobs on the cards. Our policy-makers have no full-proof course of action that could attract the foreign investors. Looking at Government expenditure, the current Budget is funding about 100 major schemes with a sum of Rs 6.75 lakh crore. Surprisingly, apart from some flagship schemes, the outcome of the remaining schemes is even worth mentioning.

The governments appear more concerned about renaming or relaunching of schemes to hog the headlines, but on the implantation front – they often missed the mark. It is really shameful for a nation where Gorakhpur sort of incidents took place despite crores of crores had been spent on the National Health Mission every year. Since India is one of the most unpopular countries for the foreign investors, the time has come to find the home-grown solutions for the economic slowdown. A simple solution appears to be cutting down taxes with a simultaneous decrease in government expenditure. It could not only result in expansion and investment in businesses as the existing businesses would have some surpluses with them, rather it might also change the mentality of Indian businessmen contemplating to move abroad. Another thing needed to stabilise the economy is to check the old 'trial and error' doctrine of armchair bureaucrats sitting in countless 'mantralayas' in the Lutyens' Delhi. They would have to understand that action without contemplation is not less than abortion. Even the auxiliary and staff agencies need to be trained that they do not rule out the deserving cases.

In fact, planning should flow from bottom to top and not top to bottom. The bureaucrats must be sent to the field, to figure out the problems and possible solutions, before chalking out any policy. A decentralised planning can reduce expenditure as it would categorise the needs and legitimacy of expenses. If it would not take place soon, no wonder the undersized taxpayers may succumb to the escalating pace of government expenditure. In an over-populated country like India – where the poor are in majority – majestic statues and bullet trains do not appear of much use. Instead, we all have to remember Mahatma Gandhi's advice: "Recall the face of the poorest and the weakest man whom you may have seen, and ask yourself if the step you contemplate is going to be of any use to him."

Next Story
Share it