Budget making in India has never been just an accounting exercise. It has been an economic appraisal of the past and assessment of the future. It keeps stating, restating and revising, from time to time, the philosophy of economics and development themes in vogue.

It was hybrid economics in the 1950s; socialist economics in the 1970s; modern capitalist in the 1990s. After the economic meltdown and its fallout, there is need to revise the economic philosophy now in fashion.

First, the Budget philosophy must explicitly factor in the emerging global view that the modern theories of economics developed by the US-West are ‘useless at best' or ‘positively harmful at worst' (Paul Krugman, Nobel Prize winner 2008); that the crisis has changed much of what economics is known to be (Barry Eichengreen, economic historian) and it is actually economics in crisis.

Modern economics is now doubted as Anglo-Saxon, socially and culturally. Dr Manmohan Singh imported this to deal with an emergency situation and the country is stuck with it. All talk of second and third generation reforms is based on this economics. The world is reviewing this ageing idea. India also needs to initiate a review. Otherwise, the Budget will be just another holding operation.

Development model

Second, the Budget will have to start national introspection about the very model of development. It should focus on keeping the Indian society largely self-reliant, instead of turning it into government-dependent or market-enslaved. Likewise, the country should not be made extremely export- or import- dependent; it should remain largely domestic-driven.

Third, the policy of seeing India as just a nation of small group of employers and mass of employees who are further divided into primary and tertiary employees should change. Most Indian families are self-employed. India does not fit into stereotypes.

For example, NSSO 2006 estimates that there are 43 million unregistered, non-farming enterprises giving livelihood to almost 100 million people. But they get just 1.5 per cent of the organised finance! Skill-sets of India — from carpentry to masonry to diamond cutting to gold-smithy — are developed in these units.

For instance, indigenous diamond-cutting skill made India a diamond trade power at the global level. It is no less than software as an economic engine; but less known, even less celebrated. This sector uses little or less energy. There should be total tax shelter, bank loans and an inspection-free regime for this sector.

Fourth, educational sector and industry should partner and certify all uncertified skilled persons in India. Most traditional skills that form the backbone of our economy remain unrecognised, uncertified. The skilled are even certified as unskilled in their passports, while an arts graduate is certified as skilled! The National Skill Development Corporation should work bottom-upwards; not, like now, top-downwards. This will improve India's Human Development Index itself.

‘Lagaan' approach

Fifth, the agricultural crisis in India is not just wrong economics, as many think. It is a product of wrong social psychology and policies. A huge field-level study done by Mr Govindacharya and Mr Basavaraj Patil for almost six-seven years in the four districts of Andhra Pradesh and Karnataka, around Gulbarga, and unveiled in December 2010, has brought out the dangerous state of not even one student among lakhs opting for agriculture or rural living.

Unless rural living becomes sociologically respectable, agriculture will never become fashionable. A huge shift in national mindset is needed from projecting the jeans-clad Indian as the exclusive future Indian model. They are of course important. But this exclusivist mindset tends to make the rural youth exotic an appendage of his urban cousin. To shift from this, we need to have the Lagaan approach to modernity — like the rural youth (Amir Khan) playing modern cricket. The Budget policies must promote this national psychology.

Sixth, the modern economic theories have adopted urbanisation as the index of development; this has shifted the resources to urban areas; market economics has deepened this process.

Rural investments steeply declined as a result. There is a need to reverse this by adopting counter-policies such as anti-cyclical business policies. This will help to address the rural and agricultural issues also.

Savings models

Seventh, India is, will be and should be bank-led in savings and investment models, like most Asian nations including Japan. The Budget should promote, not discount the bank-led model. A Goldman Sachs study factoring in the RBI data shows that not more than 6 per cent of Indian savings will find its way to the stock market, and that India will have net bank savings of $800 billion by 2016 which is equal to all of bank advances today.

Before the crisis of 2008, bank-led finance was considered an outdated economic model, not now. Pure state-led models and pure market-led models have failed. Bank-led model works with the families and society, not erode them. The Budget should therefore promote banking more than it encourages stock markets.

Eighth, the Budget must begin the process of recognising family as the primary economic unit, not the individual. The Anglo-Saxon economic thinking based on methodological individualism, that negated the family and community, has never worked in India, nor will it ever. Taxation system for non-corporate business and trade should begin recognising families as economic units.

Ninth, to recover the lost revenue on the 2G-spectrum the government must auction the spectrum allocated to all with discount for the existing operators.

Finally, bring in a law to declare that all undeclared assets held by or for Indian nationals abroad are the property of the people of India, with a rider that anyone who proves the source of his assets as genuine will get it less tax.

A suggestion beyond Budget: The Budget discourse has got reduced to either debate on tax or discussion on reforms. In either case, it is elitistin character. It should transform into a socio-economic debate. The pre-Budget period should be used to promote intense debate on socio-economic issues, not just Budget-related topics. The media must take lead in this. The political system must co-operate.

This will also mean education for the political system. Without the political system adequately educated on socio-economic issues, no worthwhile policy-making will evolve. In either case, the economic discourse becomes political without becoming economic.

QED : The pre- and post-Budget debates can be evolved to deepen the process of opinion-making, which will be in the larger interest of policy-making for the country.

(The author is a Chennai-based corporate consultant).

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