Budget 2015-16: Redrawing the plan on spending

In an earlier article on budget this scribe focused on prioritising two factors of our strength – (i) the ARMS and the (ii) LEGS. The ARMS are Agriculture (A), Ready-made garments (R), Manpower (M) and Second-best Sector (S), which are the vehicles of becoming wealthier. The LEGS are Liberty and Democracy (L), Education (E), Governance (G) and Seminal Infrastructure (S), which form the economic base of a nation. ARMS generate income directly while the LEGS help the nation stand to the feet. ARMS will not work even if there are adequate allocations, unless the LEGS are healthier and stronger, that means Liberty and Democratic practices are present, quality Education and good Governance are ensured and Seminal infrastructure like roads, railways and bridges is established to promote business and all other economic activities. The budget should focus on these ARMS and LEGS on a priority basis.
Why ARMS and LEGS: We may have a thousand political parties but we must have unity in the true sense of liberty so that we can hold our heads high on the world stage as one nation. We will have the freedom of speech that will ensure sound democratic practices. The liberty of thinking and expression will open the door of novelty and the democratic practices will help us find the avenues of economic and social progress. There is no alternative to quality education to turn our human resources into wealth so that we can compete on the world stage. If they are well educated or technically sound, they can work anywhere in the world.
Corruption arises, when there is the lack of good governance. Corruption eats up about 2.0-3.0 per cent of gross domestic product (GDP) each year. Good governance is needed to combat corruption. Without seminal infrastructure like roads, railways and bridges, which are needed for spurring business and other economic activities, no nation can register a good rate of growth. So, the focus should be on LEGS in the budget for the upcoming fiscal year 2015-16.
Our budget takes care of ARMS on a routine basis. Instead, it should be done under a reform plan. Our economic strength lies in agriculture, ready-made garments, manpower and some other sectors like jute, leather, renewable energy, tourism, information technology etc. So, the ARMS as a whole must be addressed under the reform plan, if we want to be sound technically and technologically with a view to achieving the competitive advantage compared to others in the world. In addition to the banking sector, private equity funds could be a good driver to help small and medium enterprises (SMEs) graduate from smaller ones to the next stage.
Implementation strategy to combat challenges: Implementation becomes difficult because of any non-structured process of revenue collection and expenses. Besides, corruption, inefficiency, political influence and the substandard process of financial management make the whole implementation process of the budget inefficient. As revenue is not collected as forecast, the government has to depend on foreign loans and donations or internal borrowings from banks to meet the planned budgetary expenses. Sometimes, the availability of foreign loans and donations becomes difficult and the government has to borrow from banks. Excessive borrowing from banks leads to a liquidity crisis, money market becomes unstable and the credit flow to the private sector gets reduced significantly hampering the growth of business and thus the GDP growth. So, the revenue plan should be drawn up on the basis of research on the tax net and the collection strategy should be devised based on this. With a view to spreading the tax net, the implementation strategy on revenue should cover (i) the analysis of avenues of income (for any particular profession or business, its industrial analysis and distribution of sector income), (ii) analysis of taxpayers (taxpayers, property taxpayers, gift taxpayers, professional taxpayers in any profession like doctors, lawyers, chartered accountants etc. and business sectors), (iii) a reformed tax administration process (technical manpower with the highest level of integrity in dealing with laws and taxpayers, proper survey and research), (iv) modernisation of laws ( to cover the untaxed area, tax evasion and an equitable taxation system for all sections of people), (v) strengthening the accounting practice making the concerned professionals more accountable,  and (vi) initiatives and efforts to fight corruption for posting healthier revenue income.
If expenses are made under a better plan, of course, the budget will see efficiency in fund spending. It could be bettered by (i) decentralisation of political power and the power of fund spending to the local government with transparent follow-up of implementation, (ii) making administration and project implementation process independent and free from any political influence, (iii) appropriate human resource management by following performance-based promotion and doing hiring and firing professionally, (iv) improving financial management and accountability.
The budget should realistically address the strategy of exploring all avenues of tax collection enhancement. In the same way the strategy on expenses and project implementation should be stated to ensure better efficiency and best use of resources.
The above revenue plan, especially tax, priority-based expenses and the budget implementation strategy, should be drawn up in line with the 7th five-year plan. The revenue plan, especially on tax, the sector-based priority under reform plans and implementations, should be addressed keeping in mind the aspirations and objectives as set under the Vision 2021. The financial year 2015-16 is the first year of the 7th five-year plan after the end of the 6th five-year plan on June 30 next. A sizable amount of revenue in the form of tax, a redrawn plan on expense based on priority of sectors, especially the ARMS and LEGS, and a suitable implementation strategy are essential for fulfilling the unmet aspirations under the 6th plan, if we want to meet all the aspirations under the Vision 2021.
The writer is an associate member of ICAB.
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