Building a Better India – Part 7: How to control the deficit

External commercial borrowings or foreign investments in Indian debts and equities, or remittances by NRIs can only suppress the symptoms without treating the disease

Current Account Deficit:

The Current Account Deficit (CAD) for the last three years had alarmingly increased from $48.10 billion to $88.2 Billion. Unbridled and duty free gold import at extremely high rigged international prices from 2006 to 2011 along with rising crude oil import has played havoc with CAD and resulted in steep depreciation of rupee against dollar.
Reduced gold import in last few months has temporarily decreased the CAD but it’s permanent solution is that our exports have to be equal or more than the imports and this requires govt to turn India into a world manufacturing hub for every possible item on the lines of China, to curb all non essential imports and to encourage exports by all means. External commercial borrowings or foreign investments in Indian debts and equities, or remittances by NRIs can only suppress the symptoms without treating the disease. Even a small country like Bangladesh which imports all inputs for its industries has surplus CAD.

Emphasis on oil seed production to curb import

Edible oil import during 2012-13 was a massive $11.20 billion due to stagnant domestic production of oil seeds at around 31 million tons annually. No proper incentive is given to oil seed farmers whereas minimum support price (MSP) of food grains has been increased from an average Rs430 per quintal to Rs830. An increase of 93% in just the last four years. This populist measure has burdened Food Corp of India (FCI) with massive unsold or undistributed stock of almost 59 million tons.

Curb import of steel melting scrap

Steel melting scrap import was at 8.7 million tons during 2012-13, most unnecessarily at the cost of its direct substitute, sponge iron. Most sponge iron plants in the country are closed or underutilized due to scarcity and unaffordable prices of iron ore and coal. These problems need urgent resolution to cut scrap import and save foreign exchange. Import duty on steel scrap needs to increase from 2.5% to at least 10% to restrict its import.

Control over gold import and prevent gold as means of storage of black money

The hefty gold import of $53.8 billion during 2012-13 has now sharply declined due to a 10% import duty and a depreciated Rupee, but appetite for gold remains intact. Gold holding per individual can be fixed at max one kg.  And to curb black money getting invested in gold, strict KYC norms should be imposed and payment of any purchase above Rs25,000 should only be allowed through banking channels linked with a PAN card.

Foreign dividend and interest income

Such receipts of Indian companies from their investment in overseas subsidiary companies should be made permanently tax free to encourage them to bring back their foreign earnings without double taxation.

Control over import of white and electronic goods

India spent $31 billion during 2011-12, on import of consumer durables, white and electronic goods .Hence, suitabe increase of duty on them to restrict their import and encourage domestic production should be instituted. If this is not possible due to free trade pacts or World Trade Organisation (WTO) compulsions then anti-dumping duties must be applied.

The government should request and direct big Indian industrialists to set up large manufacturing bases of these consumer durables in all parts of the country along with chains of ancillary industries by providing adequate incentives including vat exemptions etc.

Foreign companies dumping white goods in India should also be forced to set up manufacturing bases in India with use of 100% indigenous components over three to four years. The free trade agreements signed with 10 East Asian countries has only helped those countries in dumping their goods in India with no real benefits to India or to Indian companies. After the green and white revolutions we need an electronic and white goods revolution in India.

Foreign direct investment-FDI

All sectors in India including education and defence production (except retailing of food grain, vegetables, fruits, spices and edible oil etc but bulk selling and multi-brand) should be thrown open for investment by foreign companies, this should be done under the automatic approval route with the rider that they have to operate by floating a subsidiary company in India and the said company must list on Indian bourses within a maximum period of three to four years by diluting at least 25% of their equity to Indian investors.

Such foreign investors should be provided all clearances, consents / registrations/ help under a single window system by Foreign Investment Promotion Board within the shortest possible time. The second rider should be that at least 90% of their staff should be Indians and they should indigenise their products within four to five years.

Restrictions on foreign education

Government must liberally allow and encourage top 200 foreign universities to set up permanent campuses in the country, so that Indian students need not go abroad for study. Why is this step being delayed?

Fiscal deficit

The government’s revenue deficit for 2013-14 estimated at Rs3.70 lakh crore would have been higher by another Rs1.15 lakh crore representing subsidies payable for this year but rolled over to next year. The fresh borrowings for the year of Rs5.25 lakh crore and interest payment  at Rs3.80  lakh crore meant that 72% of fresh borrowings have been utilized to service  government debt. The government’s  debt trap is due to massive uncontrolled revenue expenditure year after year, and the same for 2013-14 amounted to Rs13.99 lakh crore being spent on salaries, pensions, interest payments and various subsidies while the planned expenditure was reduced to only Rs5.55 lakh crore which includes amount spent on various government schemes, many of which are unproductive. Deficit financing is a booster for the economy if it is within limits and used for productive purposes.


Total control and restriction on wasteful and unnecessary government revenue expenditures with no fresh recruitment, unless unnecessary government departments both at centre and states are disbanded.

It is impossible for the government to control, manage, monitor or perform social audit of now reduced and restructured 66 Centrally sponsored schemes (The earlier number was 147), leading to wide scale leakages in the distribution chain due to rampant corruption and a weak delivery system. Hence ,the same need to be further reduced and consolidated into fewer, effective, essential and productive schemes like mid day meal scheme for school children.

National Rural Employment Guarantee Act (NREGA) Scheme is not creating permanent productive assets in rural areas, as it has no provision for inputs like cement, sand, bricks and bitumen. Hence, it needs to be suitably reviewed, modified and be applicable to only 200 most backward districts instead of all 640 districts of the country, with provisions of necessary inputs so that funds are productively utilized in creating productive employment, leading to creation of permanent assets in rural areas.

The urea/ fertiliser subsidy was Rs65,974 crore during 2012-13, this must be restricted to only poor and marginal farmers with no subsidy to rich farmers owning five acres or more of cultivable land. Better still, would be to abolish it as ground realities reveal that subsidized fertiliser is either cornered by rich farmers or sold in the black market by the dealer. Domestic production of fertilizer should be increased on a war footing by fresh capacity addition.

New food security scheme: The current Food Security Act is populist scheme provides that for 5kg of rice or wheat per person per month at Rs3 and Rs2 per kg. This is just equal to the storage, transport and distribution cost, meaning virtually free food grain to 70% of the population by cutting the quantity currently available to BPL card holders .This scheme is unviable and needs to be re-looked. The impending launch of this scheme in Karnataka is already facing many market related obstacles.

So, only provisions of free safe water to all citizens, and food subsidy which should also include sugar, pulses and edible oil to 20% most economically weaker citizens, should be made.

Tax on agricultural income:

 A good chunk of farmers in many states are more prosperous than say an income tax payee employed in Delhi or Mumbai .There is no logic in not taxing rich farmers. Strong political willpower is required to tax agricultural income; once introduced it will be accepted after initial protests. The total number of individual income tax payers in India as on 31 March 2012 was only 3.5 crore, meaning only 2.7% of the total population pays income tax as against 46% in USA .

Consider imposing 10% withholding tax (Final Tax with no further tax or formalities or enquiries or penalties) on interest income on bank deposits, NSC, PF, KVP, post office schemes and other similar savings instruments of individuals, to bring in one single stroke a wide section of people under the tax net. Exempt senior citizens above the age of 65 years.

Another voluntary disclosure scheme: Introduce once again, and for the last time a voluntary disclosure scheme for tax evaders. The unused black money lying in homes and in bank lockers is serving no purpose.  Strictest penalties should follow on those not availing this last opportunity.

You may also want to read...


Building a Better India-Part1: How to create a smaller and smarter government


Building a Better India-Part2: Transforming political landscape


Building a Better India – Part 3: Bringing systemic changes in constitutional bodies


Building a Better India – Part 4: Identifying tax issues


Building a Better India – Part 5: Bringing tax reforms

Building a Better India – Part 6: Fast track clearances

(Kolkata-based Dalbir Chhibbar practised as a CA till 1990 and later started his own buinsess)





Azad Singh

3 years ago

Your suggestion on " fertilizer subsidies, tax on agriculture, withholding tax, VDS" seems to be completely rhetoric & not researched at all.

Azad Singh

3 years ago

Your suggestion on " fertilizer subsidies, tax on agriculture, withholding tax, VDS" seems to be completely rhetoric & not researched at all.

Celebrating Father's day without comparing him with a mother

Gender bias in Indian society makes it difficult for fathers to get any sympathy or fair treatment. Some NGOs like Vaastav Foundation and Children's Rights Initiative for Shared Parenting or CRISP are taking a lead in making life a little easier for such 'troubled' fathers

That is the thankless position of the father in the family – the provider for all, and the enemy of all.”
                                           -J August Strindberg
True to this quote, fathers in India are generally neglected in all aspects of society and under-appreciated for their role in the family. Although considered a patriarchic society, a segment of men in broken marriages find themselves at the receiving end of tough divorce laws framed to protect women. The irony is that horrendous crimes against women remain undisclosed. The law is also creating a whole class of victims, especially in middle class families where women have been able to use the law to traumatise the whole family. Innumerable cases have come to light in recent times, indicating misuse of section 498a of the Indian Penal Code (IPC), which protects women against domestic violence and dowry, and the father or husband is misunderstood or simply framed for misconduct and domestic violence.

This is because of the gender biased laws in India, which are more inclined towards women than men. Vaastav Foundation, a non-profit, self-help, support group for misused domestic violence, dowry and dowry law (IPC Sec. 498a) not only honoured fatherhood, but also raised awareness on the misuse of gender biased laws in India. The Foundation organised special events to carry out the message on this years Father's day at Dadar in Mumbai.

Speaking on the issue, Amit Deshpande, president of Vaastav Foundation said, “Modernity has still not liberated men from their traditional role as protectors/ providers. We have a stifling definition of real men. In the quest of being the ideal protectors, men go through tremendous stress. Also, since men cannot be seen as weak, they are discouraged to share their woes. We provide a platform for men to express themselves without being judgemental about them.”

Apart from the woes of a married man and a father, another evident concept which was brought to light was the 'shared parenting concept'. In India, in most of the divorce or separation cases, the child's custody is given to the mother and the father, sometimes may not even be allowed to meet the child or participate in his nurture, while still providing for education and other financial needs for both the mother and the child. This concept is strictly biased as there are innumerable cases where mothers have abused this law to gain financial benefits from the husbands, feels the activist.

Commenting on shared parenting in India, Mr Deshpande says, “In India, there is no concept of shared parenting, in the absence of which both the child and the separated father suffer. Many times men commit suicide only because of their inability to meet their child. Every year 65,000 married men commit suicide in India and the number is increasing alarmingly according to the National Crime Records Bureau data by Ministry of Home Affairs. Men are still made to pay maintenance to adulterous, able bodied and educated wives. Apart from these, issues concerning men's health and their abuse from intimate partners do not receive adequate attention.”

A report from Children's Rights Initiative for Shared Parenting (CRISP), an NGO dedicated to promote shared parenting and father's rights, says, “The family courts have often shown extreme delay and reluctance in granting visitation rights to fathers and even when visitation orders are passed, there is no practical mechanism available to enforce the same or punish the custodial parent for violating such orders. While it is imperative that family courts grant open access to fathers  and facilitate them to see their children, such orders are a rarity instead of being a norm.”

The CRISP report highlights two famous Bollywood cases concerning Leander Paes and Sanjay Kapoor (the husband of Karisma Kapoor), who alleged that they were denied custody and visitation rights to their kids because the wives refused them. This suggests that even high-profile celebrities are subjected to gender biased laws and legal hassles to maintain equal rights as their spouse, with regard to their kids.

Michael Rutter in Maternal Deprivation Reassessed (1972), described by New Society as a 'classic in the field of child care', argued that research showed that it did not matter which parent the child got on well with as long as he got on well with one of them, that both parents influence their child's development and that which parent is more important varies with age, sex and temperamental development. He concluded, "For some aspects of development the same-sexed parent seems to have a special role, for some the person who plays and talks most with the child and for others the person who feeds the child. The father, the mother, brother and sisters, friends, school-teachers and others all have an impact on development, but their influences and importance differ for different aspects of development. A less exclusive focus on the mother is required. Children also have fathers!"

The event organised by Vaastav Foundation also included essay competitions and a play called “Kaun Banega Narakpati”, which highlighted social issues like AIDS and the rapidly increasing tendency of people to misuse biased laws like 498a (IPC). Underlining this issue, Mr Deshpande, president of Vaastav Foundation, informed the audience about present bias against men as fathers, by society. Other events included  a social awareness campaign on gender equality for harmony in society, social media awareness on neglect of fathers by society and other agencies.



nilesh sharma

3 years ago

Thanks to show your concern on Men's issues. I hope our govt. too awakes from the blind sleep take corrective steps to stop suicides of the young men, which will be a true step towards youth development by making gender neutral laws.

Who cares if a youth of a our country is under depression due to anti-men laws, no one supports him, but rather asks him to bow in front of adultery and games played by his partner for life.

Thanks to Save Indian Family and Amit Deshpande's Vaastav Foundation in Mumbai to support Men in distress.

A special Thanks to the editor.


3 years ago

Good and well researched article. Still a lots more to it than just stated.

But well written. Keep it up.


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