Macro-Economic policies: Paradigm Shift – By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran


It is India’s time to think out of the box. The last 10 years of the UPA government have left gaping holes in the economy; increasing Non-Performing Assets of banks, highest level of corruption are some of their hallmarks of achievement. Where and how does the new government start to fix some if not all of these problems? Speculative money from overseas in the meanwhile is pushing our stock markets to a historic high, which is not based upon a realistic valuation. If this trend continues we will have a bubble that will eventually burst destroying individual investor’s wealth. This was experienced in 2008 during the sub-prime crisis.

Let us start with the forth coming Indian budget scheduled for early July. Is the govt going to rely on Mr. Chidambaram’s last budget as the source document? The UPA budget document is 10 years old. The items in the budget never changed except for the amounts to be received and to be allocated. A careful study of it will reveal that this document is completely political and the interest payment on previously borrowed loans took away a significant portion of the budget. Development was given a lip service. The document does not include the state deficits. If they are added our govt will get the banana republic status soon.

What then should the new govt do to avoid this?

1)      Start with zero based budgeting. Every cost must be justified

2)      Monitor on a weekly basis the growth of deficit to ensure that the budget limits are not exceeded

3)      For every Rupee of expenditure in the budget, the govt must make sure that the benefits go to the targeted beneficiaries and prevent leaks and pilferages.

4)      Bang for the buck. The government should check whether sufficient returns are obtained from the investments.

5)      Find new sources of funding. Demanding additional taxes from the 3 crore who file tax returns is cruelty. Go after those free loaders and tax cheaters.

6)      Keep a continuous watch of the true inflation rate and fight it ruthlessly.

7)      Should people’s savings go to the stock market or to help the govt combat its finances? The government Should ensure that the money becomes available to it to deal with the cash flow problem and not encourage the money to be speculated.

Mr. Prime Minister Sir! Prudence and conservatism, if persisted for a sufficiently long time will certainly change the direction of the economy and the mind set of people. Indians are worried about the real inflation rate and are desperately trying to beat it by assuming higher risks. We need a compassionate society where the regulation and legal systems should protect the common man. We know you can deliver it and we look forward to it.

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