Hike direct benefit transfer, don‘t cut income tax: Pronab Sen

Budget 2017 will be unveiled in two weeks time and former chief statistician of India Pronab Sen’s top suggestion to Finance Minister Arun Jaitley would be to infuse cash in the economy by increasing direct benefit transfers (DBT).

“The number 1 priority right now is to inject as much demand in the economy as possible and this can be done the quickest through a direct benefits transfer,” Pronab Sen told News18.

Sen is an economist and the former Chief Statistician of India, who was in charge of compiling the country’s economic data.

Sen’s reasoning is that private consumer demand has declined because of demonetisation and the quickest way to revive it would be to inject cash into the economy directly so that people start spending it. A DBT is the electronic transfer of cash, in lieu of subsidy, directly into people’s bank accounts to reduce corruption and leakage and increase targeted delivery.

The government in FY 2016-17 has already transferred around Rs 47,450 crore in DBT to people’s accounts, most notably as LPG subsidy, education scholarships and rural development schemes. With a greater push towards electronic transactions, this would be an ideal way to increase demand in the economy and make use of digital infrastructure.

Sen’s other suggestion to the government was to not reduce personal income tax. There is a strong buzz in policy circles that the government is looking at cutting income tax rates to give the salaried class relief. Sen thinks that apart from reducing its own revenue, the class that pays income tax hasn’t been affected much by Demonetization and therefore can afford to pay.

Sen’s final suggestion to Arun Jaitley is to concentrate on small and quick turn-around infrastructure projects rather than big ticket items. An example of the former is rural roads and low cost housing. “Forget about the economic corridors and big infrastructure items for the time being because the need of the hour is to get the economy going,” Sen told News18.