Ex-Chief Statistician, Pronab Sen's advice to Nirmala Sitharaman

First, stop fudging numbers

At the moment, the fiscal numbers hide a lot more than they reveal. The headline fiscal number is far from presenting the true picture. The CAG said that the fiscal deficit number for 2017-18 was not 3.4% of GDP, as the government said, but above 5.8%. That problem is continuing. The government should not hesitate in stating even if the deficit is above 5.5% of the GDP. Most fudging is on the expenditure side. The government should determine how much expenditure should be cut. Then, it can take a call on which expenditures to cut, which to keep.

Launch no new schemes

Take a break from launching new schemes. Instead, expand existing ones, put more money into them, and accelerate their roll-out. Get the expenditure out quickly on programmes like PM-Kisan, MGNREGA and on infrastructure. These will have a multiplier effect and push up demand, growth and jobs.

Don’t cut income tax

Do not cut personal income tax to stimulate consumption. Do not make that mistake now. There is no fiscal space. Do it when the time is right. Government should have refrained from the corporate tax cut last year. It should have let the economy expand before giving these tax cuts. It has not helped, because with the overall slowdown, corporate profits, too, have slowed and so corporates are not spending. Similarly, tax cuts for the salaried at this juncture will not help a great deal. Instead, the revenues that would have been forgone in such an exercise should be used to raise expenditure on schemes that give a bigger boost to consumption in rural and urban India.

Focus on MSME, Agriculture

FM should focus on MSME and agriculture sectors. They are the biggest employment generators and their growth can contribute to the growth of other sectors. But first, realise what the problem is. In agriculture, the biggest problem is that demonetisation has broken its entire supply chain, impacted sales, transport, marketing and distribution. Announce more measures to enhance agri-trade.

Do not be unduly perturbed by the automobile sector, for which 2019 has been a curse because the stalemate in the auto sector is mostly because there is no demand from the middle class. The middle class has not been growing due to the slowdown. Once the economy recovers, the greenshoots will start appearing.

Monetise Assets

On the revenue side, disinvestment is not fetching much to the exchequer. Instead, monetise assets across sectors and go aggressive on them. The monetisation of airports, shipping assets and other infrastructure. Though there is low appetite from investors, monetisation is still easier than divestment. This year, the government is going to be seriously short on target but the groundwork it has laid should see big-ticket sales like BPCL, Container Corporation of India happening next year.

Set realistic tax target

Most importantly, set a realistic tax target in the Budget to avoid tax terrorism. There has been serious overestimation of tax targets in the last few Budgets. The non-realisation of tax revenues leads to further economic slowdown. Don’t hesitate to scale back the tax target.

On GST, focus on stability, simplifying process and procedure, rather than on collection. Frequent changes are complicating GST. Once the regime is stabilised, revenue will rise.

Boost exports

Announce some serious measures to boost slowing exports. Normally, when the domestic economy slows down, there is a tendency for exports to go up, but this has not happened in India’s case.

Pronab Sen