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: If the first 100 days of this government are spent on creative policymaking in the following six areas, UPA II will have made an excellent beginning. First area: monetary and fiscal institutions. These institutions were designed in the middle of the 20th century. They need to be overhauled. This calls for, among other things, FRBM-II, which should ensure that the debt/GDP ratio does not stray beyond 60% of GDP, which ends the off-budget borrowing, and yields deficits that go down in good times. Investment banking for the government is, at present, done by RBI, which also regulates banks and sets the short-term interest rate. These functions produce conflicts, as was sharply visible with the difficulties of government borrowing in recent months. So, quickly set up the Debt Management Office. Regulation and supervision of financial markets in India is fragmented between Sebi (stock market and corporate bond market), FMC (commodity futures) and RBI (currency and interest rate markets). There should be one agency for all of this, as is best global practice. It is also finally time to pass the PFRDA Bill, and properly setup the New Pension System, aiming to get 10 million individuals into the NPS within the coming five years. Banking reforms should not be considered unthinkable. At the least barriers against opening new banks or branches should go. And a meaningful deposit insurance corporation must be set up.
Second area: public finance. In the long run, fiscal prudence and the FRBM-II can bring debt down. But for the coming five years, if the UPA wants to spend money, fiscal space will have to be created through asset sales. There should be no confusion on this. The goods and services tax (GST) must be a priority. GST will end distortionary taxes such as stamp duty, octroi, electricity duty, etc. The challenge will be coordinated movement by the Centre and the states towards a single system. A lot can be learnt from the work NSDL has done for automation of income tax. While GST will end some bad taxes, it will not end others such as FBT, the securities transaction tax and the cess. The UPA needs to announce that central tax revenue will only come from the income tax and GST. Third area: core public goods. Core public goods are international relations, defence, police and judiciary. Whether it is the 26/11 attacks, or the safety of CEOs in Noida,...
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