N C Saxena: Demonetisation and after: Did PM miss out on key issues?

He should have dwelt on rental housing for the poor and abolished the dual-pricing system in PDS

The fact that almost the entire Rs 15 lakh crore of old currency has come back to the banks proves how the noble intention of our Prime Minister has been frustrated by many corrupt bank officials. Much of the hoarded black money from corrupt government officials and others has been deposited not in the hoarders’ accounts, but in bogus Jan Dhan and shell company accounts that are totally under the control of bank officials. The existence of such accounts is common knowledge, as a report some months back revealed how bank officials were quietly depositing one rupee from their pockets to erase zero-balance accounts. Crores of valid currency in shiny new bundles have been taken out from these accounts and is back with the same corrupt government official or businessman. I suspect out of Rs six lakh crore of new printed currency at least Rs 2.5 lakh crore is not in circulation and is with the same people whom the surgical action was aimed at. This could have been checked had the RBI been transparent and announced how much of the new currency is being doled out every day to each branch in these two months, so that the crowd standing outside the bank could have protested against being given only Rs 4,000, and bulk being siphoned off somewhere else.

Net Central Tax Revenue has been increasing at a rate of 10.7 per cent annually between 2010-11 and 2015-16. Therefore the Finance Minister’s announcement that the increase would be 14 per cent in the current year is no big deal. However one understands political compulsions for the PM to announce certain sops in view of the forthcoming Assembly elections. He promised strict action against the corrupt, but to what extent reduction in interest on loans on various farm sector schemes would enthuse the farmers is difficult to say. Such interest subsidies have been part of Central Budget for the last three decades with little impact.

His best announcement was to make the existing scheme of Maternity benefit of Rs 6,000 to pregnant and lactating women universal, as is already mandated in the National Food Security Act, 2013. As of now the scheme runs in only 53 districts which amounted to violation of the Act.

His interest subsidies in the housing sector would, unfortunately, cover only those who would want to own a house. However the poorest in urban India, such as rickshaw pullers, rag-pickers and unskilled wage earners, have no financial capacity to own a flat, as no bank would give them a loan. The PM should have focussed on provision of rental housing stock for the urban poor and migrant population. PM Aawas Yojana must include government-owned rental units, as well as dormitory and night shelter options. Such shelters should be built close to place of employment, as the poorest cannot afford travelling by even public transport.

The old-age pension amount and coverage have not been enhanced during the past five years. The PM should have increased the amount to Rs 400 a month with the condition that states must contribute at least Rs 200, so that the minimum increases from Rs 200 to 600 a month. As regards entitlement, all elderly who are drawing subsidised rations should be included in the scheme, which would double the number of pension holders.

Whereas the national wage for NREGA has increased from Rs 82 a day in 2009-10 to Rs 190 in 2015-16, the overall Central Government expenditure on the programme has fallen during this period from Rs 37,905 crore to Rs 35,975 crore, signifying a big fall in actual employment created. Moreover, in 2015-16, the Government spent Rs 9,045 under NREGA on each rural poor in Kerala -- the least poor state in India -– as against a paltry Rs 320 in Bihar and Rs 485 in Uttar Pradesh! GOI needs to earmark NREGA funds for states on the basis of poverty, just as PMGSY allocations are in proportion to state-wise shortage of rural roads. A ‘free-for-all’ approach punishes poorer states as they are not able to compete with better-governed states in attracting funds from GOI.

The Government should abolish the dual-pricing system in PDS and sell stocks to the fair price shop dealer at the market price, say Rs 20 for wheat. The consumer would go to him with only Rs two in cash as before and use her/his UID card to pay the remaining Rs 18, to buy a kg of wheat. This will vastly reduce leakages and also improve the dealer’s attitude towards the buyer. It would also ensure ‘entitlement portability’ that will allow PDS entitlements to be accessed anywhere in the country and greatly help the poor migrant worker.

Lastly, the PM could have announced a new legal entitlement of Universal Health Coverage on the lines of the Right to Education Act.

It is a matter of concern that India’s pace of improving the social indicators is much slower than countries poorer than India, such as Bangladesh and Vietnam. The overall expenditure on social sector is constrained by the low tax collection due to the pernicious parallel economy, as the Tax:GDP ratio in India is just about 17 per cent, as opposed to 31 per cent in South Africa, 32 per cent in Russia, and 34 per cent in Brazil. This is the main factor why investment in health, education and social protection in India does not reach the level of other middle-income countries. Let us hope our government launches a strong drive to improve tax collection, and implement GST.

The writer is a former NAC member and former secretary of Planning Commission of India