The sign of a truly liberalized, predictable, and business friendly economy is that the budget day shouldn’t matter as much. No one day of the year should impact the economy or lives of 1.4 billion people. Tax rates should remain stable and fiscal expenditures predictable. Broad capital expenditure, privatization and welfare programs should run as usual. Budgets need not have mic-drop moments, grand announcements, or a Santa’s bag of gifts. One could argue that the best budgets are the ones that are a little boring. Business as usual, let’s keep going, keep growing, done. No breaking news. No fiery debates. No controversy. Yawn. Gosh, what would our TV channels do?
However, this is India. We don’t do boring here. Nothing about our country is boring. Not our weddings, not our parliament, not our TV news, and not even our budget.
Seriously though, we are not at a stage where the economy is largely detached from government announcements. Neither is our budget announcement just that – a budget for the government to collect and spend its money. The budget day, for India, could be better termed as a reforms’ announcement day. To that extent, it is still important. It is also the day we get an insight into what the government is thinking at a strategic level. Are they opening the economy, or are they being politically cautious? Are they spending for the long-term, on infrastructure for instance, or want to give immediate sops, such as cash transfers? While announcements now happen all through the year, it is on budget day that we have a plethora of them.
Hence, not from the perspective of asking Santa for gifts, but from the prospective of budget being the ‘Annual Indian Reforms Day,’ here’s a wish list of practical, implementable, simple ideas that would make up a good budget day.
- Simplify the tax calculations – No more cess, surcharge, supplements, or whatever layers of taxation is applied to complicate formulae. It’s very 1980s to have a complicated calculation for taxes. I am not talking about a lowering of tax rate, but that of reforming it to have one simple tax rate, which is the current effective tax rate anyway. Simplicity matters. Not everyone is a CA.
- Prime land, long leases – A good way to increase revenue is to sell long leases (99-years or 999-years) on super prime land the government sits on around the country. With limited scope of tax increases, the government needs to come up with innovative ways to raise revenue. Vast tracts of prime land lie unused, and the government can sell long-leases to raise revenue. People would gladly pay for homes at better locations. It will cut commutes, make the cities more efficient, and raise money for the government. Win-Win-Win.
- Indian Special Administrative Region – One of the existing Indian cities can be converted into a world-class, fully liberal, different laws “Indian Special Administrative Region”. The ISAR will compete with Dubai, Singapore and Hong Kong. No, this does not mean we make a bunch of shiny buildings. It means we legal carve out a territory to do business and have new, ringfenced from the motherland laws which can enable this city to become the next Dubai or Singapore. This can add billions to our GDP and government revenues.
- The accelerator-or-brake policy test – In a car, you need both the brake and the accelerator. India’s focus on tax reforms in the last few years might have been necessary, but had a brake-like effect on the Indian economy car. If we do any policy now, we need to ask – is this a brakes-policy or an accelerator-policy. After so many years of brakes policies, we need accelerator policies. For instance, lowering GST on the tourism and transporation industry will give that industry a much needed boost. The acceleration would be worth the revenue lost.
- Minimum wage – Not every policy needs to be capitalist. It is about time India had a minimum wage for labor. Domestic help for instance, can be hired at any salary with no holidays all year around. That isn’t dignified and creates huge scope for exploitation. Anyone hiring an Indian must pay at least minimum wage, and give a weekly off. Dignity of people along with economic growth is a what makes a country truly developed, not just rich.
- Something for for farmers – This isn’t as much a wishlist item, but more a foregone conclusion and prediction. Major state elections are looming around the corner. The Farmer Bills were withdrawn. It is mostly expected that the budget will have something to make the farmers happy again. It may also have a few more freebies than usual, given the coming elections. If the government does have an overall reformist, acceleration-oriented budget otherwise, and the numbers are kept in check, there may well be scope to accommodate all this as well.
With just a few weeks to go, hopefully this budget will continue on India’s reformist agenda, press the accelerator harder and may still have room to please the farmers and voters as well.