Thank you for asking me to take on this role
I’d like to set out a few high level principles that set out how AltFinMin can contribute to your government. The specifics will have to await detailed analysis and consultations with people.
We can only spend what we earn. Govt’s can only spend (i.e consume) what we collect in taxes.
That doesn’t mean we cannot borrow to spend more than we earn/collect in taxes. But borrowing has to be fiscally responsible and prudent; for
Govt borrowing crowds out credit for private business enterprises
Govts in general tend to be profligate with borrowed money. It gets even worse when Govt borrows long term because Govts tend to think short term. So the rule is: Borrow only to invest not to consume.
It is only exports that can sustainably pay for imports. If exports consistently undershoot imports then, all other things being equal, the value of the Rupee falls. That may or may not always be a bad thing.
Exporting means we have to be competitive in world markets. We can only be competitive in world markets if our businesses and industries are exposed to world class standards even when they do not necessarily rely on exports.
The need to export and to be competitive means our businesses and industries need 5 things:
An educated ready-to-be-trained, healthy workforce
Energy, land and transport networks
A regulatory system that is easy to understand and consistently enforced.
A culture where contracts and agreements are easily enforced through an efficient legal system
A business tax regime that is as transparent and simple as it can be and is seen as fair, consistent and simple.
The tax system should be based on the old dictum; “The art of the tax collector is to so pluck the goose as to collect the maximum amount of feathers with the minimum of hissing”
On the Expenditure side
Governments always love to spend – especially on big ticket items; it is not their money after all and the glory is reflected on Ministers. But we must be principled and agree criteria in advance how to prioritise budgetary allocations.
Principle 1. The opportunity cost principle. The real cost of Project X is the benefit forgone by not spending the same money on the next best idea.
Principle 2. A given sum can only be spent once so forethought planning and careful analysis helps avoid waste. We commit in haste and rue at leisure.
Principle 3. All spending ministries tend to waste money. Programme budgets are not reviewed, goalposts are shifted, unintended benefits are presented as successes, and failure are hidden while gains are exaggerated. One role of the AltFinMin will be to set up systems to audit expenditure plans against success criteria.
Principle 4. The main criteria for prioritising expenditure must be that it seeks to help the poorest and weakest sections of society.
We must think differently. India grows richer as Indians grow richer, not the other way round. It’s the people we must concern ourselves with for they define the country.
And finally, an over-riding principle of the new AltFin Min, and indeed of your Government, should be that the only thing that matters in policy making is the welfare of the people. We must not allow that objective to be held hostage to
dogma of any kind,
prejudice and preference driven by persoinal taste and professional boundaries
Preconceived notions or prior assumptions. Pragmatism should rule.