Proper monetisation of assets can wipe off Budget deficits

If I was editing the Budget speech, I would make the third pillar — Inclusive Development for Aspirational India — the objective. I would have four pillars supporting this objective: health, infrastructure, human capital and an ecosystem for free enterprise. The last pillar is not simply ease of doing business but includes ease of entry into, and exit from, business. Observe that I have left out two of the pillars stated by the Finance Minister — dealing with innovation and the one on maximum governance and minimum government.

Indian business incumbents were highly protected all the way till 1991. There were problems regarding entry into business prior to 1991, but once they entered, they were tot­a­lly protected from both national and international competition. India’s experience in innovation and R&D during the first four decades of Independence has been non-existent.

Businesses do R&D to ward off threat from competitors. Potential entrants are, often, the more serious competitors and largely responsible for new value generation. The innovations we are looking for will come from new businesses and, hence, the focus should be on start-ups. The Budget correctly mentions start-ups, but this should come within the ambit of human capital operating within an ecosystem th­at encourages entrepreneurship. Viewed under this lens, encouraging start-ups is the same as freedom of entry into business.

As for minimum government and maximum governance, it is a slogan we could do without. India has one of the smallest governments in the world if we count the number of government personnel in healthcare, law and order and in other areas of governance. Instead, we have a government that employs 1.5 million people in the Railways and countless more in sectors where the government shouldn’t be. Optimising government is a better slogan.

The focus on health and human capital are, obviously, two great positives in the Budget. An increase of 137 per cent in the health Budget for this year, though on a small base, is commendable. Hopefully, it signals a break from the usual incremental approach to public health expenditure and is not simply a reaction to Covid-19.

India’s healthcare sector is woefully underdeveloped, provides a public good and could provide large amounts of employment over a wide spectrum of skills. It will take many years to build it up to the level required and a one-year expenditure splurge will not be enough.

Refreshingly, both in healthcare and infrastructure, the Finance Minister has talked about a plan that stretches well beyond a year. Along with education, these form the foundation for an economically active, inclusive society. However, most well-meaning government policies do not reach their goals because of faulty implementation. I sincerely hope that the administrative wings of the government will work out the right mechanisms to ensure the best use of the monies being allocated to laying a solid foundation.

But, perhaps the most exciting thing for me is the proposal to monetise the unused, or underutilised, assets with the government and its various public sector units and departments. Close to 10 years ago, I had co-authored a study on the extent of assets, like land, with the government. The amounts were not only staggeringly large; being in prime areas, they often hindered industrialisation, urbanisation and overall development. Properly monetised, they can wipe off Budget deficits for many years.

The one area I am a bit worried about is the raising of customs duties. Make in India makes sense only if it helps the citizens of India. Protecting businesses from foreign competition harms the consumers and lowers exports, and helps inefficient businesses to keep raking in profits. Unless, of course, the government has specific other plans to hold the “Make in India” businesses accountable to the consumers.  

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel