It is great to be able to party at someone else’s expense. Politicians, as a class, love to dip their grubby hands into others’ pockets, especially close to election time, when they promise the earth to curry favour with the electorate.

Do the math on the latest scheme, by Rahul Gandhi, offering ₹72,000 per annum to some five crore of the poorest families. This works out to ₹3.6 lakh crore, or 2.6 per cent of India’s GDP. India allocated ₹4.3 lakh crore on defence.

So to raise ₹3.6 lakh crore, either the defence (or other) budgets would need to be cut, or the fiscal deficit will go through the roof, and India’s rating through the floor!

It would be a good idea to pass a law for such hare-brained schemes. Simply ask the political party proposing it, to pay, say, 10 per cent of the cost, upfront. The most effective way to prevent people from offering free drinks on the house is to make them pay for it.

The ludicrity of the suggestion gets magnified looking to the 15 per cent shortfall, as announced by CBDT, in the ₹12-lakh crore tax collection target a week before year-end. That is ₹1.8 lakh crore. It’s not as if India has a cornucopia of resources to delve into.

The government, on its part, is misusing its powers to raise resources to meet the tax collection shortfall.

Take its effort to ‘disinvest’ its holding in government companies. This is for two purposes. One, to raise resources. Two, to get out of business, leaving it to the private sector which would, presumably, bring in more efficiency.

Yet the government only concentrates on the first, ignoring the second. IDBI Bank was sold to LIC, which has no business buying a bank using money entrusted by its policy holders to whom it owes a fiduciary duty. HPCL was sold to ONGC, and retained as two separate companies, denying the benefits of synergies through merger.

We have not learnt lessons from other countries. Venezuela’s upstream oil company, PDVSA, was used by Hugo Chavez as an ATM to spend on his favourite schemes. It is now bankrupt, as is the country, in the midst of a political, economic and social turmoil. PDVSA has the oil reserves, but no money to extract them. Do we wish ONGC to go down the same path?

CBDT’s bizarre demand

Even more bizarre is the ₹5,872-crore demand by CBDT, in its desperate quest for resources, to tax Grasim when it merged two companies, in a reorganisation. The CBDT taxed the shares allotted to Grasim as a dividend, and sought tax on it! This is truly an out of the carton, not box, interpretation.

The Insolvency & Bankruptcy Code (IBC) has succeeded in resulting in a massive sale of corporate assets, which will improve the health of the banking sector. Essar Steel of the Ruias is sold to Arcelor Mittal, others are Bhushan group, Jaypee group, Lanco group, and others.

Nitin Gadkari is striving to use bio fuels for transportation, to replace imported fossil fuels. This would reduce our CAD, provide income for farmers and strengthen the economy.

Not only the economic system, the safety of our defence system got a boost with the demonstrated ability to shoot down low orbiting satellite, a signal achievement so far proven by only three other countries.

So, the India story would be an appealing one, except for the pre-election splurge, and wastage, of economic resources, which inhibits any future government’s ability to kickstart the investment cycle. Hence, the stock market is unlikely to run away until such time as fiscal prudence is restored.

(The writer is India Head — Finance Asia/Haymarket. The views are personal.)

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