Economic Highlights

New Delhi, 11 April 2014

BJP’s Many Promises

VAGUE ON ECONOMIC REVIVAL

By Shivaji Sarkar

The BJP has voiced plenty of promises in its manifesto, but when it comes to revival of the economy it has hiccups. The party promises credibility and trust in Government, re-sowing confidence in the India story through containing price rise, “increasing” jobs and opportunities for entrepreneurship as also national agriculture market, eliminating the scope for corruption et al. But it remains vague on the paths to revive the economy.

It is virtually non-committal on the tax policy though it says it would end “tax terrorism” as well as rationalise and simplify the tax regime. However, it is silent on the process. Before the manifesto was cast, the Party had debated the issue -- from Nitin Gadkari and Subramaniam Swamy’s putting an end to personal income tax to Arun Jaitley’s opposition to it.

Swamy’s contention is simple. No more than three-odd crore people pay it and the tax rules itself turns much of hard earned actual white money into black. Refunds are too high to the tune of almost Rs 70,000 crore a year. This apart, tax collection mechanism is cumbersome and expensive. Every taxpayer instead of being extended some basic respect is looked at with suspicion. The abolition of tax would save much botheration to both citizens and the government. The BJP should have taken a stand on it. A clear approach would have created more confidence among the people and policy planners.

Notwithstanding the manifesto’s concern about autonomy of the States, its approach to goods and service tax (GST) does not reflect the reservations expressed by the State governments. This issue has sadly remained pending despite the UPA government’s adamant attitude on a uniform tax pattern across the country to suit the needs of the corporate. But the States have been protesting. Importantly, they are not against uniform rates but are clearly not in favour of its collection by the Central Government. The collection, they insist, must be decentralised at their levels. Perhaps, the BJP has deliberately not elaborated on it, simply to keep its different constituents guessing.

The previous NDA regime, as BJP claimed, had been able to break the cycle of high inflation and high interest rates. Its new course is short of instilling the required trust. The two methods suggested – special courts against black marketing and price stabilization fund – are controversial. With the dilution of the Essential Commodities Act by the previous NDA Government much of its teeth have been lost. A prosecution would have little sense except harassment of small traders.

Recall that the Price Stabilisation Fund (PSF) Scheme was launched in 2003 by the NDA for coffee, tea, natural rubber and tobacco to provide financial relief to the growers following prices of these commodities falling below a specified level, without resorting to the practice of procurement operations by Government agencies. Contribution to the members of PSF saving bank account by the PSF fund trust and/or the member, in a given year is on the basis of categorization of the year as boom/normal/distress year which is done on the basis of a price spectrum band, fixed and announced every year.

The growers received Rs 880,000 between 2007 and 2010 from the PSF. A total contribution of Rs. 643,000 towards enrollment fee under the PSF scheme was received from 46239 growers.

The consumer of any of these commodities did not benefit. Soon after the introduction of the PSF, coffee and tea prices had shot up and are continuously rising. Its implementation at the national level is not only difficult, it is doubtful that it would be beneficial for the consumer.

The proposal to unbundle Food Corporation of India (FCI) for greater efficiency in procurement and distribution is more sensible provided it is allowed to function as a market intervention agency. Evolving a national agriculture market seems a good proposition. It has to come with increase in public investment. The manifesto promises it. It would require changes in many laws and creation of an effective mechanism. Presently, it is restricted to the proposal to amend the APMC Act. The farmers are divided on it. Some of them shall benefit from it while others have problems. These steps would require detailed discussion else it might go against the consumers as in the case of PSF as prices instead of coming down are likely to go through the roof.

The road map for job creation is also not clear. After 10 years of jobless growth, the country needs a straight and firm path. The manifesto does not state how textile, footwear and electronics could become labour-intensive, if free imports from China and South Korea continue. Further, the manifesto is silent on growing imports, which is eating into the job market.

The statement on strengthening employment bases of agriculture and allied industries is a new orientation but needs a roadmap. There are many promises of every shade to farmers, including high priority to poverty alleviation in rural areas. One only wishes that such elaborate promises do not end up as just that for it is indeed difficult to comprehend how jobs would grow.

A hope is being seen in “national land use policy” through the creation of a National Land Use Authority, to regulate it. But there are already many regulators, each working more in the interest of certain groups with vested interest rather than the assigned task. It is difficult to fathom how this would protect the interest of farmers. It would have been it had just promised to create a land bank.

Similarly, the sop for the industry of simplifying the procedures and a single-window system of clearances does not eliminate the points of corruption that led to the 2G and Coalgate scams. The solution was suggested by the PHD Chamber of Commerce and Industry and FICCI. It was simple, for it only wanted that before handing over any project to a company, the Government itself should ensure that all clearances, including ecological, have been given to it. This would end the process of greasing the palms of officials and politicians at various levels.

Insofar as the working class is concerned, the BJP’s approach of strengthening pension and health insurance does not appear credible. It was the NDA Government that had demolished assured pension. The equity-linked National Pension Scheme is eroding savings of the workers and what the Party promises would make health services more expensive.

If the BJP really wants that people’s confidence is reposed in the Government, it needs to clarify many things that remain unsaid. Neither prices nor corruption would be contained by these prescriptions nor would the economy get a boost by half-baked measures. The manifesto may be well-intentioned document, but individual promises should have been weighed properly. Remember, discretion is the better part of valour. --- INFA

(Copyright, India News and Feature Alliance)