a day ago
MoF: Accept or reject, don't ignore
On June 19, 2025, the Ministry of Finance (MoF) convened a rare meeting of the Consultative Committee for the Ministry of Finance. I think it was the first meeting since the constitution of the 18th Lok Sabha in June 2024. The members are MPs of both Houses representing all parties nominated to the Committee. It is a useful mechanism if the government intends to use it. The finance minister (FM) presides over the meeting.
The meeting on June 19 was formal — in fact, too formal and stiff. The chief economic adviser (CEA) made a 19-slide power point presentation (PPT), members were invited to make their comments and observations, the finance secretary summarized — literally encapsulated — the comments but offered no answers or clarifications, and the FM made her closing remarks. On no issue was there a consultation.
Fortunately, in the 19th slide of his PPT, the CEA requested suggestions from members on four issues:
For further improving farm productivity;
Agenda for deregulation to reduce compliance burdens esp. for industry;
Adapting our skilling programmes to AI and tech-driven disruptions; and
How to accelerate formalization of the economy.
I did not wish to make off-the-cuff suggestions at the meeting. I have since thought about the four issues and here are my suggestions:
One of the slides mentioned MSP, PM-Kisan, PM-Fasal Bima, KCC, e-NAM and Food Parks: these are intended to increase efficiency and consequently boost productivity. In another slide on 'empowering farmers', the data on increase in yield per acre for major crops has been given. In each major crop, the increase in yield per hectare between 2013-14 and 2023-24 has been in double-digits. In fact, we have been on the right path since the days of the green revolution beginning 1965 and not only since 2013-14. However, productivity must be measured against world standards:
Crop India Global Avg Best in average (Kg per the World /best hectare)
Wheat 3,559 3,548 EU/Egypt
/5,045 6,500-7,700
Rice 2,882 4,700 China 6,500
/4,516
Maize 3,351 5,824 USA 10,532
/6,239
Sugarcane 84,906 75,000 Brazil 75,000
/105,000
Cotton 443/602 1,040 China 2,252
There is another metric of productivity: productivity per farmer/farm worker. 58 per cent of the Indian population (as against 22 per cent in China) depends on agriculture and agriculture-related activities. Hence, the productivity per farmer is very low in India, and the average farmer is not only poor but is also burdened by debt.
The way to accelerate productivity per farmer is to create non-farm jobs and to wean millions away from agriculture into non-farm jobs. However, because of high urban unemployment and the lamentable state of the manufacturing sector, that process has been in a start-stop mode; actually, there is data that in recent years labour has moved back to the agriculture sector.
Suggestion: Accelerate the growth rate and expansion of the manufacturing sector.
After 2014-15, the Modi government has re-established more control. RBI, SEBI, Ministry of Company Affairs, Ministry of Commerce, the Income-tax department, UGC and every other Ministry or arm of government have made hundreds of pages of rules and regulations. The old control regime has come back as 'regulations'. Government authorities exert power and control through disputation and litigation. Doing business in India means challenging regulations and orders, and seeking redress in courts and tribunals.
The GST laws have added to the burdens of business. The high and multiple rates of GST are per se bad. The rules, regulations, notifications, forms and compliances under the GST laws are worse. Together with the manner in which the laws are interpreted and applied by the Income-tax, Customs, DGFT and GST departments, it is a nightmare for any business. The CBI, ED, DRI, GST enforcement and SFIO seem to regard every businessperson as a suspect and every chartered accountant and lawyer as an accomplice. If trade and industry have to be the prime drivers of the economy, the suffocating environment in which they find themselves must be removed.
Suggestion: Light a bonfire every quarter, there is enough rubbish to burn.
Read the Annual Status of Education Reports (ASER). The appalling levels of reading, writing and arithmetic skills of school children virtually rule out a technologically- empowered society. The triumvirate of UGC, NTA and NAAC have robbed the Universities of the essential character of a University — autonomy, inquiry and strive for excellence. They have driven serious teachers, scholars and researchers to foreign lands. The central and state governments have tied Universities hand and foot by starving them of funds. Thousands of teaching posts in Universities are vacant. According to a reply in Parliament, as on October 31, 2024, there were 5,182 teaching posts in central universities that were unfilled. I am afraid the way forward on this vexed issue lies far outside the ambit of MoF.
Suggestion: CEA may delete this issue from his to-do list.
What does the CEA mean by 'formalization of the economy'? Does he want more economic activities that are carried on in the 'informal' economy (e.g. part-time maid services in middle class homes) formalized?
Suggestion: Absent clarity, I have none.
Please accept the suggestions; or reject them; do not ignore them.
