By Pradeep S Mehta
Astrong national market backed
by clean procurement policies and realistic fiscal
management can take us there
While the general mood in the
country seems buoyant, the business sentiment is not quite
in sync. The reasons are well known, but there is ardent
hope for progress under Narendra Modi. We need to cross the
Rubicon of 5 per cent-plus growth rate and aim for at least
6 per cent in the new financial year, with the goal of
turning India into a $10 trillion economy by 2030 in
absolute terms.
There are many things to do, but
let me focus on some critical areas that come under the
purview of the finance and corporate affairs ministries.
Introducing reforms in four crucial areas can help the
country in achieving optimal growth, while protecting the
needs of vulnerable consumers, and bringing transparency and
accountability in economic governance.
The areas are: competition,
public procurement, financial consumer protection and fiscal
management.
Phase two reforms
Implementing the Goods and
Services Tax (GST) can help the government achieve game
changing competition reform and step forward to a single,
common market.
However, to become much more
competitive and launch the second big wave of economic
reforms, we need to adopt the draft National Competition
Policy (NCP). The draft has been lying on the website of the
Department of Corporate Affairs since November 2011.
The policy encourages adherence
to competition principles in policies, laws and procedures
of the central and state governments, sub-state authorities,
optimising efficiency, achieving high growth, reducing
inflation, maximising consumer welfare, and a common
national market.
It also seeks to promote
regulatory impact assessments to get rid of the arcane and
irrational laws and policies.
As with VAT or GST, states
should get fiscal incentives to facilitate adoption of NCP.
I am sure the NITI Aayog will also look into it.
Transparency in procurement
Public procurement in India
accounts for almost 30 per cent of the total GDP worth $536
billion annually and, thus, there is a need to usher
transparency and efficiency in this area.
It would also promote good
governance by curbing corruption in public procurement,
something the government is keen to do.
An early adoption and
implementation of the pending Public Procurement Bill is
called for. In addition, a national public procurement
policy should also be adopted to address interfaces between
public procurement and related macroeconomic policies. These
include trade policy, competition policy, sustainable
procurement policy, fiscal policy and the new manufacturing
policy, among others, to ensure coherence.
For finance consumers
Today, several Ponzi schemes
have pushed people to the brink. A holistic approach is
needed to to deal with them. While the country has taken
long leaps in other areas, including being part of the G20
agenda, financial consumer protection has historically been
subjected to short shrift.
Financial consumers have to deal
with traditional problems such as hidden and inflated
charges, unfair contract terms and conditions, undisclosed
levels of financial risk, and problems arising out of
advancement of technology, such as unauthorised fund
transfers, fraudulent withdrawals from ATMs, phishing, etc.
Moreover, the country remains a laggard with respect to
achieving high financial inclusion.
We need to adopt and implement
an omnibus financial consumer protection Act.
Such a law must take into
account the practices implemented by various states and
comparable jurisdictions.
It should establish a new
national single financial consumer protection mechanism
(regulator), having state units, thus covering the entire
country. This has also been recommended by the Financial
Sector Legislative Reforms Commission (FSLRC).
For fiscal common sense
With a direct tax shortfall of
over ₹8 lakh crore this year, the government has resorted to
sweeping, unhealthy budgetary cuts. Over time, harmful
practices of over-budgeting and under-budgeting have cropped
up in fiscal management. Consistent diversions of around 20
per cent have been recorded over the years.
In addition, the government has
been ready to sacrifice social sector and rural development
expenditure at the altar of fiscal deficit, but shies away
from avoiding unproductive populist expenditure on
subsidies, pay revisions etc.
We need a comprehensive review
of government planning and budgetary practices, and the
long-term strategy to contain fiscal deficit. A possible
start could be establishment of a Parliamentary Budget
Office, an independent fiscal watchdog to provide research
and review support for budget, and adoption of ‘balanced
budget’ principle.
States could be given greater
role in planning and implementation of welfare schemes, as
has been envisaged in the agenda for NITI Aayog. Also, a
clear distinction must be made between merit and non-merit
subsidies and the latter should be gradually reduced. One
hopes that the Expenditure Management Commission will
address these issues and the government will bite the
bullet.
The writer is the secretary
general of CUTS International
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