Get rid of PDS, APMCs if Centre wants to double farmers' income, says economist Bhalla

Tax proposals in budget 2019 a farce: Surjit Bhalla
Surjit Bhalla speaks at the Malayala Manorama Budget Series held at Le Meridien, Kochi.

Kochi: Dump India's Public Distribution System (PDS) and Agricultural Produce Market Committees (APMCs) and abolish Essential Commodities Act if the government's ambitious plan to double farmers' income has to become a reality, said eminent economist Surjit S Bhalla here on Monday.

Delivering the 20th speech in the Malayala Manorama Budget series at Le Meridien Hotel here, Bhalla said the government was the largest procurer under the PDS and in the process of distributing the procured food-grains to the public, half of it vanishes in thin air. The grains don't just disappear, but it was fodder for corruption, he elaborated to explain his point.

Similarly, APMCs make it mandatory for farmers to go through a licensed market to sell their produce.

This takes away the freedom of a farmer to sell his produce wherever he wants.

Politicians and middlemen are the beneficiaries of the APMCs, he said.

The Essential Commodities Act also causes price controlling, which is not good for farmers, he said. Tonnes of grains were rotting in the warehouses of the Food Corporation of India, he pointed out.

This happens despite the fact that we can make silos to store grains without damage, he said underscoring the fact that this is being deliberately done to help vested interests.

Bhalla said doubling the income of farmers by 2022 remains a tough task without policy changes.

Policy makers should recognise that the world is changing. They should take into consideration the low inflation rate and the drastic growth of technology.

Budget to fuel tax evasion

Bhalla said the tax proposals in the Union Budget presented by finance minister Nirmala Sitharaman on July 5 would lead to more tax evasion.
He said it was the biggest irony and tragedy of the budget. Explaining this aspect, he said as per the budget, a person earning an annual income of above Rs 5 crore must pay above 40 per cent personal income tax.

But above 99 per cent of the companies in India will have to pay 25 per cent corporate tax now. This will definitely result into tax evasion.

He said the expectations on the budget were high since the BJP-led Narendra Modi government came back to power with a huge mandate.

Noting that the mandate gave the government a lot of opportunity for reforms, Bhalla said the budget was “very good on vision but not that good on satisfying expectations”.

Bhalla, a former member of the Prime Minister's Economic Advisory Council, decoded the 'good, bad and the ugly' of the budget in detail.

On the tax proposals in the 2019 budget, Bhalla said, “we need to increase tax compliance and decrease tax evasion. However, the budget has done the opposite”.

On the brighter side of the budget, he said the government's statement that India will be made a $5 trillion economy is very realistic.
Another important feature of the budget, he said, is the stress given to infrastructure development.

Reacting to a query from the audience post the speech, Bhalla said, “budgets cannot be non-political. We can disagree with some of the political contents of the budget and disagree with some.” He also said he was not in support of increasing import duty on gold.

A member of the advisory council of the 15th Finance Commission, Bhalla is also a senior India analyst at the New York-based Observatory Group, a macroeconomic policy advisory firm.

A doctorate holder from Princeton University, Bhalla has taught at the Delhi School of Economics.

After his stints as a researcher at the World Bank and as a consultant at Warburg Pincus, he worked at Deutsche Bank and Goldman Sachs. He has done several researches and authored a few books.

Bhalla had resigned from Prime Minister Narendra Modi's economic advisory council on December 1, 2019. Bhalla's resignation came close on the heels of the Reserve Bank of India's governor Urjit Patel quitting abruptly after months-long tussle over policies with the government. Modi formed the council late in 2017 to address issues of macroeconomic importance.