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  • Open Letter to Mr. FM...

    July 09, 2014

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    Dear Mr. Finance Minister,

    There are tons of opinions out there as to what should be done. Here is one more piece on the same.

    • Listen to the Prime Minister's campaign promise.
      Seriously. “Minimum Government – Maximum Governance” is what our country needs. Define what the government need to do. Things like Law and Order, National Security, Basic Education and Healthcare, Primary Infrastructure and so on. GET OUT of everything else. For instance, it is inexplicable as to why the Government should operate an airline or phone companies or petrol stations or 70% of the country's banking system. Getting out of unwanted sectors will give immediate benefit in terms of capital raising for needed expenditure and at the same time reduce the demands for subsidies and price controls. Ever wonder why people and MP's demand cheaper petrol but not cheaper cars? It is because PSUs sell the former and not the latter. Eliminate the Public Sector waste completely.

    • Administer homeopathic doses.
      Almost everyone wants a T20 match. I would urge you to play a test match. Administer homeopathic doses. Learn from the experience of the Railways minister who had to roll back large price increases in the suburban railway pass fares. Increase administered prices if you must but do it outside the budget. Do it in small steps (like the successful diesel price hikes) and do not make much noise about it. The stock market will be disappointed but let it be. Use homeopathic doses to completely eliminate petroleum products related subsidies. Wherever necessary (like kerosene) use direct money transfers to the beneficiaries bank accounts. I know that this is an UPA idea but so what?

    • Ask “Why?”
      This used to be a part of Enron's commercials (which is unfortunate). The practice of asking “Why?” is inherently good. “Why?” for example should we manufacture our own Urea. Natural Gas prices in India are among the most expensive if we consider the factory gate prices for spot imported LNG. Urea can be made in a much more cost effective manner at the well head in gas rich countries of the Middle East / USA / Australia. We can import that fertiliser cheaply as compared to importing gas and then making fertiliser. We already have a successful project here.

      The OMIFCO or the Oman India Fertiliser Company is a Joint Venture between Oman and Kribhco (a farmers co-operative society). Scale this model and reduce the fertiliser subsidy bill. Also remove the imbalances in fertiliser subsidy and bring back the Nitrogen Phosphorous and Potassium balance (NPK balance) to improve farm productivity.

    • Avoid the Demographic Disaster
      A lot of people are excited about India's demographic dividend where it is said that India will have the most working age people in the world and how that will transform India's economy. We people talk about demographic dividend, I fear a Demographic Disaster. The dividend can rapidly turn into disaster if not channelised properly.

      To reap the dividend one will have to have a well trained work force and not just working age people. All the money earned from dis-investments and saved on subsidies should go to one area and that is education of people and the workforce.

    • Make Budgets boring.
      Seriously....Lay out the tax rates and tax laws for the next 5 years at one go. If there is one thing that improves business confidence, it is predictability. This would render the annual ritual of budget making a more boring exercise but it would give a strong fillip to the economy.

    I am not hopeful that all these measures will find a place in your budget speech tomorrow but I would be happy if at least some of these are...

    Sincerely,
    Parag Parikh

    The original article could be seen here.
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