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progressive finance2 1 .pdf

Original filename: progressive finance2_1.pdf
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The setback to the Congress in the recent round of assembly elections means that the Union
Budget will be a populist one. The Finance Minister's hands will be tied by the party which will
not want to alienate voters further. That will be a recipe for disaster, as the economy, already
burdened by an unmanageable fiscal deficit, is crying out for corrective measures.
After a long period of inaction, this budget is an opportunity to take some hard decisions.
Lowering of subsidies, reducing fiscal deficit and reining in wasteful expenditure and corruption
are most important. It was also required to stop populist schemes and divert the funds to
infrastructure, health and education. It seems political compulsions will prevent the finance
minister from taking these measures, leave alone kick-start another urgently needed round of
economic reforms.
Although the country has been preoccupied with the exposure of recent high level scams and
progressive finance, corruption at grassroots level is more serious. An anecdote shows how the
government does not get what it should from taxes. Emperor Akbar once asked Birbal that
while the public at large complained about high taxes, why was it that the treasury did not have
enough money for welfare schemes? Birbal asked for a big slab of ice to be brought in Court.
Starting from the gate, the ice slab was passed by many officials and when it reached the
Emperor, it was almost half in size of the original.
The lower and middle bureaucracy is indulging in large-scale theft and corrupt practices to
either deprive the government its rightful quantum of taxes or to pocket funds meant for the
poor. On paper, the schemes are working fine. But does the benefit reach the people for whom
it was meant? Or even if it does, does it reach them in full?
There is talk of divestment of shares of public enterprises to generate funds. But these are
short-term and capital account measures, which, if not backed by serious revenue generation
efforts like pruning of subsidies and controlling of wasteful expenditure, might not give the
desired results. Further, having government management control over public enterprises is
neither desirable nor efficient. Public enterprises should be managed by professionals, if
required by handing over management control to the private sector.
Wasteful expenditure and outright theft of public funds by local politicians and officers, in
connivance with unscrupulous businessmen poses a serious threat to the economy. Another
anecdote needs telling here. Once, a team of villagers, led by the head of the gram panchayat
(or the village body), met the local SDO (Sub-divisional officer). They requested him for a pond

to be sanctioned for their area. The idea was not to have the pond really but to hive off the
money. The SDO got the needful done and the booty was shared all around.
The SDO was routinely transferred soon thereafter. Few years down the line, the new SDO was
touring the area but could not find the pond listed in the map. He called the head of the gram
panchayat for a meeting. They soon caught on what had happened. The SDO, in connivance
with the panchayat, sent a report that the pond needed to be filled up as the water had
become contaminated and villagers were falling sick. Again the booty was shared.

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