Open Letter to the Finance Minister, Govt. Of India Dated: 11th February’15
Dear Shri Arun Jaitleyji,
As you embark to give the outlines of the budget for the year 2015, let me take your attention to some of the vital areas plaguing the economy; “supply” is one big stumbling block of the economy that needs deeper focus. Looking at debottlenecking supply issues for the country, seems to be counter-intuitive if one goes by the importance this has been accorded in the 10th to 12th Five Year Plans. While we set lofty goals on the GDP, discombobulated claims on how this growth would be facilitated and by what instruments has been the hallmark of previous discourses. The whole of the 12th Five Year Plan has a passing mention on the needs for infrastructure development and how these needs would be fulfilled by what measured poise leaves a lot to be desired.
Say’s Law, Supply finds its own demand, cannot be more true than in India, where lack of supply disallows basic needs to be taken care of. To know India, one must just step down from any highway and take a walk in any direction and it would need a few kilometers to unravel in what pitiful state the economy of this vast country is entrenched in. From absence of a motor-able road, to running water or toilets, the list would include basic housing needs to primary schools where more than 200 days of classes in a year has been clocked. More urbane requirements or pleasures of a better life could extend to basic health and hygiene to leisure, which could also be the fundamental right of every citizen of this country.
How could this supply chain of needs be developed when the basic infrastructure would be so poor that it would take days to reach these places of depravity?
Sir, I am only asking for motor-able roads to be built and railway network to be extended, before we think of any other development need for this country. This would mean that all ports and cities to be connected in the same manner so that goods and services could be reached at a cost that would be affordable.
There is a huge bonanza this year with substantial reduction in the Oil import bill due to sharp drop in the world oil prices. Every $10-a-barrel change in oil price changes fuel subsidy in India by $6.5 billion (0.3 per cent of GDP). For calculation of fiscal deficit, assuming the government’s share in subsidy burden at 50 per cent (oil subsidy burden is shared by the government and oil marketing companies), a change of $10 a barrel will affect the fiscal deficit by $3.25 billion, or 0.15 per cent of GDP. This means with the price drop of $50, we could expect the fuel subsidy to be reduced by $32.5 Billion and fiscal deficit to be reduced by $16.25 Billion.
This bonanza needs to be redistributed to the infrastructure sector and Railways perhaps needs 50% of this as a natural allotment and balance could be shared by all the other infrastructure areas.
Yours Truly,
Procyon Mukherjee, Mumbai
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