How far objective are we when it comes to development planning although it seems to be the pivotal aspect? It has been missed in planning for development and in pursuing targets thereafter. This country has seen enough Finance Ministers and witnessed their solutions. Obviously, each year, the government spending has increased and this is due to the increased volumes in spending.
Subsidies will also keep the farmers happy by assuring guaranteed prices. But the question is how funding for subsidies can be raised. That is how the unavoidable necessity to fill the blank by raising funds would arise. Foreign borrowings and treasury bills looked the most convenient and it was always a case of spending what was not earned and borrowing to keep the people happy
Subsidies and guaranteed prices
After Liberation Privatization and Globalization (LPG) model entered the domestic scene, another sensitive item got into the list. That way the task became more complicated. Then the task faced by the Finance Ministers got affected by the need to keep the people happy. As a result came subsidies. Subsidies for ‘consumer Items’ ease the burden of a citizen, but it serves only in keeping the people happy. Other subsidies may help to keep the prices low with regard to products like petroleum. Subsidies will also keep the farmers happy by assuring guaranteed prices. But the question is how funding for subsidies can be raised. That was how the unavoidable necessity to fill the blank by raising funds would arise. Foreign borrowings and treasury bills looked the most convenient and it was always a case of spending what was not earned, but borrowed to keep the people happy.
Imagine the plight when a government has to provide funding to increase or to maintain subsidies, assure guaranteed prices and in addition commit valuable foreign exchange to import commodities like rice to keep the prices low. This gives rise to two obvious negative measures.
Fertiliser subsidies became necessary as the import prices were too high, and a low rupee value made it unavoidable. Mostly the negative situation that became unavoidable helped in keeping petroleum prices low, but ironically that also added on to the general situation of increasing the burden of the government. Although hidden, the cost could not be avoided.
Inadequacies in the system
The ultimate outcome would be a situation where every day is spent on borrowed funds and time. In the meantime, the citizens get taxed in some form and life would become more difficult with every passing year. It is ample proof that the thinkers have to be more innovative and result oriented rather than play ‘sitting ducks’. The strange thing is that even in the very capitalist principles it is not acceptable as there is no profit in the whole operation.
In the same manner a normal and ordinary ‘business venture’ would fail if the ‘borrowing’ is for ‘consumption’, but not to support productivity. The same principle shall work even in running the economy of a country. Actually, it shall be worse as it will go out of control when it comes to the economy of a country. In one single business venture the ‘management’ would work hard to make it a profitable venture. However, in the case of the total economy, there is no way to control all the contributing sectors to become ‘goal or objective’ oriented. In a ‘Free Economy’ this is where the ‘Conflict of Interests’ would occur. While professing and promoting ‘Free Trading’ there cannot be ways to contain activities of individual companies. Imagine a company engaged in importing vehicle parts. The relevant ‘bank’ would open the L.C. without any hesitation as the particular company is a successful client. But the axels that company may have imported committing valuable foreign exchange would not be sold at all. Proof can be found in any yard of the vehicle parts importers.
Finance companies may help in vehicle leasing. We all know they can declare profits at the end. But the person who got a vehicle on lease crashes as he cannot make is money in transporting agricultural produce.
This is what happens with ‘traditional Budgeting’ in a Free Trading Economy where everything can go out of control, unless very seriously monitored. Freedom should be there, but only genuine and meaningful efforts should be promoted.
Where to draw the line
Free Trading is fine if it contributes meaningfully to the economy. Free use of foreign exchange should be available only to those who contribute towards building up and preserving foreign exchange resources.
Instead of offering ‘guaranteed prices’ farmers should be assisted in cutting down their costs, so that their profitability shall not be affected. For example, only about 30 percent will be benefited by the guaranteed prices for paddy. But, we must not forget that it becomes a compulsion on 70 percent who are compelled to buy their rice, to pay more. It is to satisfy that section of 70 percent, rice is imported committing valuable foreign exchange making the government pay twice for the same item.
Export marketing efforts should be rewarded as it is through that we shall get the strength to make our ‘rupee’ stronger. Import substitution shall help in conserving the hard earned foreign exchange and that also helps in making our ‘rupee’ stronger.
Enhanced national productivity shall reduce our costs, and that would be the best way to turn our country into a profitably-run ‘business venture’ and the profits gained nationally shall facilitate more benefits to the people.