The Wire Staff 
New Delhi: The People’s Commission on Public Sector and Public Services, a policy consultations body, has urged the Union government to use the budget – which is due to be presented later this month – to reconsider its tax policy and undertake capital investments in public sector undertakings as a means of promoting sustainable and equitable growth.
Of the government’s tax policy, the Commission said it had deviated from “a fundamental canon of tax policy that it not be regressive – that is, a tax policy that burdens the poor instead of the rich”.
It said that schemes like the performance-linked incentive program “[favour] sections of Big Business without resulting in any significant increase in national capacity or result in promoting self-reliance” and urged the government to “abandon” its policy of disinvestment in public enterprises.
It also recommended that the government “make a commitment towards meeting the demands of peasant organisations that [it] adhere to its promise to fully implement the recommendations of the Farmers’ Commission headed by the late M.S. Swaminathan,” adding that the minimum support prices it announced are inadequate.
The Commission’s statement is reproduced below.
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There is widespread consensus today that deep and widening economic inequality, compounded by the mounting burden of unemployment lies at the root of India’s economic problems. These problems worsened significantly during the pandemic, particularly because of the government’s failure to use fiscal policy as a tool to provide support to an ailing economy. Thus, a budget that fails to correct course would be deemed a failure.
The unequal nature of economic growth since the pandemic – what several notable economists have referred to as being “K-shaped” in nature – requires the Union finance ministry to adopt measures that promote economic growth while simultaneously providing a measure of relief to large sections of people who have been bypassed by the growth process in the last few years.
In the realm of fiscal policy the Commission urges the government to reverse the deviation from a fundamental canon of tax policy that it not be regressive – that is, a tax policy that burdens the poor instead of the rich. This implies that the growing dependence of the government, particularly in the last ten years, on indirect taxes – most notably the Goods and Services Tax (GST) and other levies – while reducing the emphasis on direct taxes, must be reversed immediately because this reflects a regressive tax structure. The Commission also draws attention to the empirical fact that the tax structure is also regressive because it results in smaller companies paying a much higher tax rate than large corporate entities. Given the series of catastrophes smaller units have faced – demonetisation (2016), the GST (2017) and the pandemic (2020-2022) – this urgently requires attention in the Union Budget.
The Commission notes that schemes like the Performance Linked Incentive (PLI) scheme favours sections of Big Business without resulting in any significant increase in national capacity or result in promoting self-reliance. Even more importantly, as the Commission has emphasised several times in the past, there is an urgent need to use capacities available with Indian PSUs and undertakings such as the Indian Railways to kickstart economic activity. This is particularly important because the Indian private sector, despite much pleading and cajoling by the political establishment, has refused to budge.
The recent spate of railway accidents, to which the Commission has drawn attention to in the past, is indicative of a much bigger malaise – the prolonged failure to renew and build Indian railway capacity that is stretched to its limits. Investments in the Railways would have a significant economic multiplier effect – a fact that a chief economic adviser during the early years of the first Narendra Modi government had drawn attention to in the Economic Survey.
The Commission urges the government to undertake capital investments in PSUs via the budget as a means of promoting growth that is not only sustainable but also qualitatively better and potentially more equitable. Such investments would be far better than sops like the PLI scheme.
A natural corollary of a course correction on the lines we have suggested would require the government to abandon the policy of disinvestment in public enterprises or the pursuit of the policy of “monetisation” of national public assets, a euphemism for the allowing parasitic private players to flog national assets in return for paltry sums. The Commission reiterates that every single instance of privatisation, including the ones by the current regime, has been scandalous. In fact, the pressure from employees’ associations and civil society representatives that thwarted the privatisation of CEL and Pawan Hans on scandalous terms. Privatisation neither enhances national capacity nor promotes growth; in fact, it hinders both.
Thus, while expanding the reach of the public welfare programmes such as the MNREGS and those aimed at food and social security and higher provisions for education, the Budget ought to also make a commitment towards meeting the demands of peasant organisations that the government adhere to its promise to fully implement the recommendations of the Farmers’ Commission headed by the late M.S. Swaminathan, in both letter and spirit. The Commission draws attention to recent evidence that shows that the minimum support price (MSP) announced by the government trails by a significant margin the rise in cost of inputs paid by farmers. The Budget would be the occasion for the government to redeem its pledge to farmers.
In sum, the Commission urges the government to use the Budget, the primary instrument of fiscal policy, to set India on a more sustainable and equitable path. That this would require a significant course correction – indeed a U-turn – would appear to be obvious.
People’s Commission on Public Sector and Public Services
About the Peoples’ Commission on Public Sector and Public Services (PCPSPS): Peoples’ Commission on Public Sector and Services includes eminent academics, jurists, erstwhile administrators, trade unionists and social activists. PCPSPS intends to have in-depth consultations with all stakeholders and people concerned with the process of policy making and those against the government’s decision to monetise, disinvest and privatise public assets/enterprises and produce several sectoral reports before coming out with a final report. Here is the first interim report of the commission – Privatisation: An Affront to the Indian Constitution.