More than 50% of the wheat that we consume is imported. According to the 2006-7 data the share of agriculture in our GDP is 18.5% and 52% of the country’s workforce is engaged in agriculture. So I wonder how a loan cushion of Rs. 60,000 crores, declared in yesterday’s budget for the year, is going to help the farmers in particular and the country’s agriculture in general. The problem is, most of the farming population is extremely poor and has no means to approach banks and other lending institutions. They mostly depend upon local moneylenders. So this waiver, what a business standard article terms as “the mother of all loan waivers” is only going to make the rich farmers richer. There is nothing theoretically or ideologically wrong in making the rich farmers richer but when the exchequer has to pay for them in the name of helping the poor farmers it becomes a bit of a nag.
There are estimated to be 40 million farmers in the country and with Rs. 60,000 crores every farmer should ideally get Rs. 15,000. Is it really going to help? Even a child who has no basic knowledge of economics (I’m not trying to underestimate a child’s intelligence, it is just a hypothesis) would tell you that it would have really benefited the farmers if this amount of money could be used to build better infrastructure for the farmers, to make better, environment-friendly farming technologies available, and help them pay back the loans whether they had taken them from institutions or local moneylenders. Remember that Chinese proverb that give a fish to a man and you have fed him for a day and teach him how to fish and you have fed him for life?
Instead of loan waivers the farmers need better roads, telecommunications, enough water to irrigate their fields, uninterrupted power supply, and health and education for their loved ones. A one-time waiver doesn’t really solve the problem; it just creates a psychological mirage.
Anyway, this is a political move and no party in its right mind is going to oppose it. In fact the BJP is terming this gargantuan waiver as “too little too late”.
Some people are definitely going to be happy along with the farmers. Excise duty and customs have been reduced to curb the inflation. The tax limit too has been increased; people earning Rs. 500,000 per year will be able to save Rs. 50,000 per year now and that means some extra cash to buy things and this may spur the sluggish industrial growth.
What would I do were I given Rs. 7,50,884 crores to spend on the country? There are three areas of major concern: defense, infrastructure and human resources. The expenditure on defense and defense-related R&D cannot be underestimated. With Pakistan ready to create mischief perpetually and China comes knocking at our doors at the drop of a hat; defense is something we cannot ignore. So I would spend around 20% and not 14%. You can see for yourself how serious the government is for the safety of the country that it is waiving Rs. 60,000 (around $15 billion) crores and is allocating Rs 1,05,600 ($26.4 billion) to defense.
Then I would allocate 25% to education and health. Our country needs proper education both in terms of human resources as well as infrastructure, and we need healthy people. People in India are extremely weak and that is the major reason why as the country we don’t perform the way we should. There is some problem with our dieting habits because even economically well-off people in India don’t seem fit and healthy. Elementary health services would be totally free and foods that give us nourishment would be dirt cheap.
Our current education system might be producing better scientists and computer programmers but it is definitely not producing better and healthier citizens; something drastically lacks. This allocation would include world-class facilities to both students and teachers. We need more schools and higher pays for teachers so that just like management and technology teaching too becomes a financially satisfying career. Most of the people become teachers because either they are too lazy to do anything else or they don’t get a job anywhere else. I would also like the adult population to get educated or at least literate so I would provide financial incentives to the grown-ups for joining evening classes.
What are we left with now? 55%. 30% would go into developing countrywide infrastructure. This should include roads and railways, and other structures that make life easy as well as productive. This will not only improve quality of life in general it will also provide long-term employment to millions of people. I would invest more on technologies and methodologies that don’t screw up with environment and flora and fauna. Power and electricity and telecommunications are the backbone of any growing economy so they deserve more focus and investment.
5% would go towards improving internal security and 10% would go towards improving the law and order. In my economy people won’t need loan waivers and subsidies, not even as incentives.
The remaining 10% could go towards things that got left above. Seems like a silly list. Well, I’m not an economist.
[tags]budget 2008, indian budget[/tags]