The problemsThe major problems facing the economy are as follows:1. There is a steep fall in the collection of direct and indirect taxes. Even the "Karvivad Samadhan Scheme" has not made any major impact on the revenue from direct and indirect taxes.2. The figure of deficit finance is astoundingly huge and a cause for concern. The revenue deficit is estimated to be Rs 36,408 crore and fiscal deficit Rs 73,434 crore for April-December 1998.

Therefore, as a percentage of gross domestic product (GDP) it will be in excess of the estimated 5.6 per cent made last year and not within the limits suggested by the International Monetary Fund (IMF).3. Inflation is hoveringaround five to six per cent though there may be a temporary fall in the figure.4. The burden of subsidy for food, fertilisers and oil has increased so much that the central government has attempted to roll back the subsidies to reduce the expenditure on the same during the remaining period of the year, but not without opposition from its allies as well as opponents.5. Likewise, the burden of interest payment on loans has increased considerably so as to exceed the original provisions of around Rs 75,000 crore in the last year's budget, which constituted a very large percentage of about 40 per cent of the total expenditure.6.

The balance of trade position is affected by the fall in the rate of increase of exports anticipated earlier, though, on account of the fall in oil prices the Import Bill has reduced substantially partly making up for the difficulty in this respect.7. The capital market has remained in a very subdued state during the year so that there is a very steep fall in new capital issues by thecorporates.8. The recession in trade and industry has affected several industries like steel, automobiles, etc., pushing up unemployment. The impact of free import in several lines of products has seriously affected many units in the country, which can not compete with imported products.The solutionsThese are the important parameters constituting the economic scenario on the eve of the Budget. A question arises as to what can be done by the finance minister broadly in respect of different aspects of the economic policy.

1. Tax collection can be increased by disposing off pending appeals at the tribunal, high court and Supreme Court levels. The huge amount of more than Rs 30,000 crore estimated to be blocked in litigation could not be significantly brought down by schemes like KVSS which had several limitations.

2) Administrative expenditure included in the non-plan expenditure estimated in the last Budget at Rs 1,96,105 crore has to be curtailed drastically by reducing expenditure on foreign and domestictrips of minister and bureaucrats, jumbo sized cabinets in various states with a plethora of visible and invisible perquisites and top heavy administration in several departments, etc. It will require considerable courage and determination to curtail this kind of wasteful expenditure.

3) The expenditure of state governments on both plan and non-plan expenditure also should be brought down by a reduction in the allocation to states which run their governments inefficiently.

4) The impact of the above steps would reduce deficit finance to a significant extent and lead to a fall in inflation, which is the single most important factor affecting the economy.

5. Subsidies on food, fertiliser, oil etc., have to be reduced in spite of uninformed criticism by opposition parties as well as coalition allies who must be educated in the realities of the situation.

6) The interest burden on loans taken internally and overseas has to be checked if not curtailed by reducing public borrowings and by an activeprogramme of disinvestment in public sector undertakings which has fallen far below the Budget estimate of Rs 5,000 crore. The government has waited too long during the current year before kicking off the programme of disinvestment. The opposition to this from the working class and other groups should be overcome by explaining the advantages to them or brushing aside the opposition.

7) The balance of trade can be improved favourably by a radical policy of encouraging exports by giving incentives in the direct taxes provisions, as well as in the export policy. "Export or perish" should be the slogan implemented seriously by cutting down all procedural delays and denial of the incentives by interpreting laws unfavourably. Though controls on imports have been done away with pursuant to a liberal economic policy, the imports of non-essential goods must be prohibited to preserve the foreign exchange reserve. A liberal export-import policy may be theoretically ideal but not at the cost of reduction in theforeign exchange reserves.

8) The capital markets can be given a boost by directly attacking the causes of recession, by building up confidence in foreign companies, FIs and NRIs and by pursuing a consistent and stable trade and monetary policy without tinkering with it from time to time.

9) Though it may sound impossible, the aim should be to plan for a surplus budget by drastically reducing non-plan expenditure and if necessary, also the low priority plan expenditure. Similarly, a beginning has to be made by levying income tax on agricultural income at high levels, so as to leave out the majority of the poor and middle class farmers. This may affect the fortunes in election but the right policy can be pursued by orienting the electorate about the dangers of economic crisis and the progress which can be made by following a bold and pragmatic policy.

10) The biggest factor affecting our economic progress is the very rapid growth in population, which is not causing even a ripple in the government.

Hence top priority should be given to check the growth of population by providing harsh disincentives to persons with large families and having a programme of family planning with large budget.The author is chairman, taxation committee of the Bombay Chartered Accountants' Society