Finance is the most critical pillar of any government. Logically, therefore, the Union Finance Ministry should be professionally staffed, particularly at the senior management and apex levels. It ought to be aware of the demands of development and suitably dynamic in the task of reorienting the direction, pace and quality of government expenditure to subserve the best public interest… rather than lead repeated media slugfests advancing grossly unlettered opinions and perspectives.
The 13th Finance Commission raised the level of central financial assistance and share of Union taxes by over Rs. 3 lakh crore. The 14th FC, five years later, increased the existing transfers by a paltry Rs. 1.78 lakh crore. If inflation at a conservative rate of 12 per cent per annum were compounded and the 13th FC&’s formula maintained, this figure ought to have been 76 per cent higher at around Rs 5.50 lakh crore or nearly three times more than what the 14th FC granted. Even among states, the distribution of funds was dictated by elections that are scheduled later this year and in 2016.
Furthermore, the Government of India stopped funding critical developmental schemes. All this happened while the Finance Ministry was blowing its trumpet to emphasise how its heart was larger than that of the UPA government&’s. Since May 2014, the buyers of divested government holdings in central PSUs were, in the largest majority, central public sector financial institutions. In other words, sale proceeds of CPSUs in one pocket equalled the divestment revenues of the central government.
Modification of the bank lending interest rates is now a topic of public discourse. The business camp views rate cuts as the panacea for all our economic woes. Where were they when rates were low, subsidies squandered or pilfered and loans of over Rs 5 lakh crore not repaid ? The RBI Governor sensibly opposes a rate-cut. The investor-friendly Finance Ministry plays the Benevolent Samaritan, batting on behalf of big business. Cash-rich CPSUs are not part of rate-cut deliberations with private industry when CPSUs account for 10-15 per cent of India&’s GDP. Nor is any closure or merger of sick PSUs visible although these eat away a third of the turnover of the healthier ones every year. Instead there are newer ones being established with Finance Ministry concurrence, but without any attempt to leverage the strength of healthy CPSUs.
When Indian exports account for a bare fifth of our GDP, the Finance Ministry should have devoted singular attention to stoking consumer demand in the vast market. Yet, this ought to have been done without ignoring the plight of the fixed-income group that survives on stable interest rates and have no inflation-indexed dearness allowance/relief to fall back upon. Given the unabated high food inflation, few salary earners or pensioners would invest in a new car or TV or cooking range, assuming that manufacturing picks up with rate-cuts. Is this good governance or examples of personal differences among India&’s leading economic tsars?
There is nothing to suggest that measures are on the anvil to widen the personal tax base from hapless salary and pension earners, while vast swathes of the taxable population remain outside the tax net. Similarly, there is no working evidence of the Centre raising additional out-of-the-box large fiscal resources, away from fresh or additional taxes, for investing in India to revive a flagged economy when it has a controlling share in almost every economic activity. I wonder how many would invest in gold bonds when there is no lifetime legal immunity from prosecution for previous non-disclosure.
Even if the interest rate is reduced, there is no assurance that lack of consumer demand, post-rate cut, will not become yet another reason for NPAs to pile up further. In the meantime, the unstated premium on bank lending steadily rises from crowding out of private borrowing by mainly, almost entirely, unproductive government borrowings. Interestingly, NPAs of PSBs have risen by 12-15 per cent since May 2014. Obviously PSBs sanctioned more bad loans under the nose of the Department of Financial Services, a constituent of the Union Finance Ministry. There is no word about punitive measures to prevent the recurrence of such glaring lapses. Yet the Union Finance Minister, in a press briefing on 24 August said: “Except currency all other parameters are on sound footing.” The nation is still searching for invisible yet sound parameters.
Take the case of OROP. A relatively easier and cheaper option would have been to raise the basic pension (all types) to 70 per cent of last pay earned and 50 per cent for family pensioners after 20 years of service for all civilian employees, civil and defence, except for Other Ranks in the defence services for which the pensionable service should have been 15 years. I believe all civilian service associations are waiting for OROP&’s formal orders to be issued and then deluge the Supreme Court with their petitions, several hundred of them. Why is it that 40 per cent of the vacancies in the Government of India cannot be earmarked for trained de-mobbed servicemen? After all, defence service and CPMF personnel are already trained and much more disciplined than what the SSC and UPSC currently recruit.
Why does the Government of India outsource secretarial, office management, security, I-T and other duties only on the basis of open tenders? Instead, why can wage rates not be fixed for superannuated defence and CPMF personnel and ministries/departments mandated to employ these retired personnel up to 40 per cent of sanctioned posts? What steps have the Centre taken to form cooperative societies of retired defence and CPMF personnel and their qualified dependents to render contract services to the government? Have any steps been taken to absorb retired defence personnel in CPMFs, instead of wholesale reliance on often controversial fresh recruitment? Was it not incumbent upon the Finance Ministry to suggest these measures?
It is entirely possible to form a PSU to offer services ranging from road-building to infrastructure, O&M, security and sanitation to telecom and I-T, staffed by retired defence and CPMF personnel and their qualified dependents, supported by competent managers contracted from non-government professionals. Why can’t the Government not provide the opening Rs. 5000-10000 crore share capital to set up this PSU, instead of bankrolling, say, a terminally sick Air India? Why not provide an interest subsidy of say 5 per cent on the bank lending rate and sponsor ex-servicemen wishing to set up shop on their own?
Some vignettes from the Union Budget 2015-16 would amplify the Finance Ministry&’s role. Of a total Rs. 13 lakh crore non-Plan expenditure in 2015-16, 33 per cent represent interest payment; 17 per cent to repayment of principal and 19 per cent to subsidies. No wonder that government borrowing is crowding out private capital needs and driving them into high-cost foreign finance. Sixty per cent of the Government of India&’s revenue receipts are eaten away by repayment of debt and interest payment. No wonder the GoI is fast sinking. The postal deficit of approximately Rs. 6600 crore is best met by reverting to the former concessionaire model with postal employees’ cooperatives taking over the business for a share of the profits. A sum of Rs. 10852 crore is the budget provision, mainly for constructing/acquiring government buildings.
About Rs. 1000 crore is provided for CBEC and CBDT&’s office and residential buildings and Rs. 700 crore for CPWD buildings, oblivious to their huge capital, O&M costs. Interest subvention for providing short-term credit to farmers gets Rs. 13000 crore. Yet there is no word on the actual beneficiaries. Transfer to the newly constituted Social and Infrastructure Development Fund is a token provision of Rs. one lakh, while the Finance Ministry pontificates on further accretions.
Simultaneously, subsidy for operation of Haj Charters of Rs 500 crore clearly proves the State&’s malefic intent in promoting communal disharmony for the vote. Barebone foreign assistance to other countries/institutions of Rs 9735.82 crore in a volatile neighbourhood is nothing compared to China&’s recent $47 billion infrastructure push to Pakistan. The Finance Ministry also provides a whopping Rs. 52000 crore for central police and investigation when law and order is a state subject.
In addition, the Centre&’s Plan budget document states: “In comparison to capital spending of Rs 192378 crore in RE 2014-15, the capital spending will be Rs 241431 crore in 2015-16. This will be a growth of 25.5 per cent”. Lofty claims when savings are often 90 per cent-plus and re-appropriated to meet burgeoning non-Plan costs by the Finance Ministry and patently by false accounting entries and surreptitious transfers outside the government account to book expenditure without actual physical progress. And part of the money finds its way to the unauthorized purchase or hiring of Toyota Corollas, Honda City, Maruti Ciaz, and myriad more luxury vehicles for the bada babus… again under the nose of the Union Finance Ministry.
(To be concluded)