New Delhi 5 June 2004

At a pre-budget meeting today with the Finance Minister, Mr P. Chidambaram, CUTS Secretary General, Pradeep S. Mehta submitted that if the government adopts a policy of ‘conservation and productivity for growth’ and takes measures to curb wastages in the economy, about Rs.200,000 crores can be saved and contribute to the national income by 8.9%.

Mehta was invited to the pre-budget meeting with economists, as CUTS International, a leading NGO works actively on economic policy issues in India and abroad. Earlier, when the Finance Minister used to invite interest groups, Mehta presented his views in the pre-budget consultations with consumer groups. But, in view of paucity of time, the Ministry has restricted the consultations to agriculturalists, industrialists, trade union leaders and economists in this year.

In the matter of not inviting consumer groups, Mehta told the Finance Minister, that this will give a wrong signal to the country as he had invited trade and industry, while the countervailing power was not given their rightful space. Mehta suggested that the Minister could, at the least, write to select consumer groups and get their views for formulating a pro-consumer and green budget.

Mehta pointed out that while the new government speaks about achieving 7-8% growth over the next few years, hardly anyone speaks about how national income can be increased and accelerated by efficiency, conservation and savings.

He highlighted wastages in the economy, such as transmission & distribution losses in the power sector, which account for about 1.5% of GDP, while the economic cost on account of road accidents a whopping 3% of the GDP. Further non-merit subsidies amount to over Rs.20,600 crores, where the delivery mechanism is poor and most often undeserving get a significant share.

The government loses about Rs.41,000 crores due to delays in implementing projects. He cited the case of the Ganga Action Plan, which was started in 1985 and scheduled to be completed by March 1990. However it has now been extended to December 2008, clearly indicating the extremely slow pace of development work being done for the past 18 years.

Mehta suggested the government must ensure a proper project management system to ensure timely implementation of works, which would also deliver the crucial multiplier effect on the economy.

On core governance, issues relating to accountability and transparency were highlighted. Mehta argued for setting performance benchmarks and instituting a performance-based management system in government that rewards the good and punishes the bad. For this purpose, the Minister can create an incentive cum disincentive scheme in the budget and thus send a strong message. “For good performers who complete projects in time and within the estimated cost a bonus should be awarded. For this purpose, the annual budget should provide a fund”.

Mehta also suggested that Competition Act, 2002 should be implemented effectively to ensure significant gains to the national income. He added that a study in Australia has shown an annual addition of 5.5% to the GDP when competition policy measures were adopted effectively over a period of time.