MUMBAI – Finance Minister Pranab Mukherjee finally put an end to his silence prompted by the record low of the Indian rupee (INR) against the U.S. dollar. The FM promises to take serious steps to improve government finances that will likely strengthen the economy and the rupee. But the bitter truth is even if the FM is very serious about taking measures; it will hardly help the INR.
Any strict measures taken at this point of time will work as an anti-growth and if the measures involve cutting back on vital expenditure, the INR will extend its fall. Moreover the measures taken will only push INR to 60 plus to U.S. dollars sooner than later.
It’s high time for the government at the centre to comprehend that alterations are the only option that will strengthen the economy and the INR. Improvement in subsides, improvement in taxes, alterations in PSUs and making state politicians accountable to the people are the way forward. Subsidy is the only factor that has made the government bankrupt. India’s subsidy bill in 2011-12 was the highest ever at 216, 297 crore, and this does not take into account the cross-subsidy borne by ONGC, which is over 40, 000 crore.
he second point in the agenda is tan reforms. Over the last 10 years the Indian government’s tax to GDP has not any improvement from 10 percent level. The things can get a better shape with the implementation of much awaited GST (goods and service tax). The taxation treaties have to be doubled which are being misused. The government has to make PSUs (public sector units) shareholder and investor-friendly. Once PSUs are made shareholder-friendly, the government can easily get better valuations and lower its stake in these companies.
Therefore if tax, subsidy and PSU alterations are put together, it will be equal to the INR at 40 to the U.S. dollar that is 25 percent plus gain from current level of 54 to the U.S. dollars.
