Opinion - Editorials

Packaging for better results

A KEY ISSUE in the execution of public policy that merits far greater attention than it does in India has to do with winning support for the less popular policies. What has been missing, to use an idiom common to the marketing of goods and services, is the packaging, in this case, of policy measures. Even the controversial ones will have to be made acceptable to a wider constituency. The just-concluded budget season has many valuable lessons here. The direct tax proposals announced in the budget speech — withdrawal of tax rebates and the retention of a surcharge — were expected to be unpopular and therefore had to be "sold" with special vigour. The Finance Minister's justification that those having higher taxable incomes do not require fiscal incentives to save is valid only up to a point. There is a sense of being discriminated against if monetary cut-offs — taxable incomes up to Rs. 5 lakhs, those earning above that and so on — form the basis for the higher tax incidence.

Personal taxation can never be popular anywhere. No matter how strongly the mounting fiscal deficit threatens the economic picture, few individuals see any justification to pay higher taxes when most of their contributions go towards unproductive expenditure. A deft packaging of the tax proposals ought to have involved more than a token commitment to reduce expenditure and to reform the tax administration. Also, the value of proper sequencing in the packaging of tough policy measures should not be forgotten. The Finance Minister's admittedly difficult task — he was forced to backtrack — would have been less onerous if other savings avenues exhibit a degree of vibrancy. The past few years have been a traumatic period for most savers and investors what with the near collapse of the non-banking segments and the lacklustre performance of the equity markets. As it is, the Government compounded the woes of the savings community by lowering the yields on the popular savings instruments.

Packaging, including a special attention to the sequencing, has always been vital for so sensitive a programme as disinvestment involving public sector enterprises. The message was always clear. Corporatise the unit, strengthen its commercial character, before putting it up for sale has been the advice of experts which unfortunately was not heeded in many cases. That move would enhance the market value of the unit. The benefits of packaging can be measured in pecuniary terms. Nowadays, with the emphasis shifting to privatisation there is an even stronger case to package the proposals better. That is because other key stakeholders — employees, minority shareholders and even the public at large will have to be shown that there is merit in the Government ceding control. One useful way is to highlight the benefits of competition that usually accompanies the Government's stake sale. The Indian telecom example is an outstanding case study: the recently opened up sector has seen rather dramatic falls in the tariff across all types of telephony. The telecom sector has also attracted large investments both domestic and foreign. Packaging of policy therefore involves extending its appeal over the widest possible segments of society. In the context of the interest rate policy, there has been a serious misgiving that the continuing preference for soft interest rates goes against the overwhelming majority — nearly 98 per cent — of those who deal with banks merely as depositors. For the benefits of a low interest economy to spread, many more than just the 2 per cent of banking customers should be persuaded to use the financial sector and become borrowers. The appeal here ought to be to a potential target group and not be limited to satisfying articulate sections.

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