ONLY IMF! That is the current slogan of the ruling political, economic and intellectual establishment in the country. And the attempt is to desperately evolve a popular national consensus around this slogan.
But are we really in such a desperate condition? The fact is that we are not going to the IMF because of any specific national or international development. We have not suffered any great natural calamity or any disastrous crop failure. We have not been at war. We are going to the IMF today because we went to the IMF in 1981, because we are hooked to following the economic line of IMF, because it has become a habit for the government to go to IMF to assure not just outsiders but also itself of its own viability.
And naturally any suggestion of an alternative approach is treated with a mocking disbelief and even sheer derision. For instance, the note on an alternative policy approach circulated by the West Bengal Government was rejected outright. True, for reasons best known to it, the Left Front government of West Bengal places an unfounded optimism about reversing the outflow of NRI money through a ‘strong appeal’, for it is well known that the big NRIs generally serve as fronts for commercial lenders and carry on proxy operations on behalf of the manipulative multinational capital. But nevertheless the note did raise quite a few valid and sensible points.
Here we present what could be the outline of a short-and-medium-term way out of the current economic mess and avoiding the lethal IMF package which is being thrust down our throats as the ‘only option’.
IMMEDIATE STEPS
Confiscate the assets of major economic offenders, bring back all Indian money stored abroad.
THE MEDIUM-TERM COURSE
■ Clamp Down On Imports.
Contrary to popular impression, the chief culprits behind the unprecedented inflation of our import bill are not oil and petroleum products and other essential consumption items like cereals, edible oil, pulses and sugar. The real villains are capital goods, export-related items and a vast number of assorted products dubbed in the import bill under the mysterious title “others”. A sample of ‘essential imports’ in this list includes perfumery, cosmetic, soap and polishes (Rs. 25 crore in 1986-87), watches and clocks (Rs. 47 crore in 1987-88), foreign liquor (Rs. 200 crore) and so on!
And then there is the import of armaments which is not even shown in official import statistics, but the Stockholm-based International Peace Research Institute reports that in the latter half of 80s India has emerged as by far the largest Third World importer of arms. During 1986 to 1988 Indian import of arms was very close to the combined arms purchase of even a warring Iraq and Iran. This absurdity must stop. In fact, the partial import curbs implemented by the Chandra Shekhar government, though half-hearted, did nevertheless bring about a marked improvement in our forex reserves without triggering off a recession in industries as prophesied.
Oil arid fertiliser imports can also be minimised by effecting appropriate shifts in our transport and energy policies and choosing cost-effective and resource-efficient technology for our industry. Over the years individualised, small and private transport have been promoted to the neglect of railways, a much more fuel-efficient and economical mode of transport. Neglect of electrification has led to a massive proliferation of diesel pumpsets and diesel-based captive power-generators. Then we flare up natural gas worth Rs. 2,000 crore a year, which could be effectively used as a fuel in many industries, for electricity generation in power plants, and as a feedstock in fertiliser and chemical industries. Many of the petro-based inputs now being used in chemical and other industries could also be easily replaced by coal-based inputs, for our coal reserves are far more comfortable than oil.
■ Declare War On Black Money
The amount of direct taxes raised in India is scandalously low. Its share in total tax revenue (Centre, states and local bodies) has steadily declined from a reasonable 35% in 1950-51 to an intriguing 14% in1988-89. Viewed in terms of GNP, while the share of direct taxes has declined from 2.5% to 2.4%, that of indirect taxes has risen sharply, from 4.6% to 14.5%. The picture of income tax collection can be best visualised from the following figures. In 1938-39 we had 2,72,000 people reporting an annual income above Rs. one lakh. And fifty years later, in 1988-89 we have only 21 lakh people with a declared income of over Rs. one lakh. This when the value of the rupee has declined dramatically and when we are witnessing a veritable consumerist explosion in the market. More incredibly, while in 1938-39, we had 17,841 people with a declared income above Rs. 5 lakh and 4,438 people above Rs. 10 lakh, in 1988-89 there were only 1,639 and 493 Indians respectively in these high-income brackets.
Amazing, but this is the state of affairs in the country. What is still more shocking is that while the government manages to deduct income tax directly from the salaries of employees and collect indirect taxes from every purchase made by the common man, large business houses get away even with a default of hundreds of crores of rupees, not to speak oi the huge evasion of taxes. In 1990-91, there was a shortfall of Rs. 1,314 crore in direct tax collection while in the case of indirect taxes the shortfall was only of the order of Rs. 303 crore.
Another telling commentary on the nature of tax revenues is that the contribution of the agrarian sector has fallen from 7% in 1951-52 to a pathetic 1.3% in 1988-89. On a global comparison, the Indian performance on the direct tax front (13.5% of total government revenue) stands out to be one of the poorest whether we Compare it with Thatcherite Britain (38.8%) or Reaganomic US (52.5%), or nearer home the Asian success-stories of Japan (67.2%) or South Korea (34.8%). Evidently, there is tremendous scope for raising our direct tax revenue through a better assessment and collection of existing taxes and new levies like taxes on ostentatious consumption, inheritance tax, emigration tax and the like.
■ Reorient Government Expenditure
There exists a very strong case for a reasonable reduction in the currently unsustainable level of expenditure on defence and internal security through a more sensible and realistic diplomacy with Pakistan and China, emphasis on finding political solutions to the problems in Punjab, Kashmir and North-East, improving the communal situation through an early negotiated settlement of the Ayodhya dispute, stopping the use of army in civilian affairs A lot of saving could also be brought about by curtailing the overt and covert subsidies benefiting the affluent and the corporate sector, and both economy and efficiency could be enhanced by promoting decentralisation of the operation of government departments and public sector undertakings and devolution of more power to the local bodies, fostering better formulation and implementation of development schemes.
The additional resources thus raised both through increased revenues and economisation of expenditure need to be urgently channelised in a big way to fund large-scale programmes of rural development, irrigation and rural employment generation, especially through schemes like food-for-work so as to reverse the growing budgetary tilt towards non-plan, non-productive expenditure and accelerate the pace of creation of real income-generating assets. According to a Planning Commission estimate a nationwide employment guarantee scheme in 1990 would have cost the exchequer Rs. 13,000 crore. And think of it, this is just around 15% of the total black money accumulated every year!
