The fiscal and monetary policies for FY 2011/12 made public in the third week of July have shown an appallingly anti-free market and anti-private sector tilt. The much touted about three-pillar concept that puts the government, cooperatives and the private sector at par is in itself an unfeasible proposition.

 

In a free-market economy, it is unfair on the part of the government to seek its share of the role in the market. At best, the government can be a facilitator. That means its role should be limited in introducing appropriate legislations, maintaining law and order and keeping surveillance to ensure a fair play in the market competition. That is in fact not a role of the government but its duty to be undertaken even to justify its very existence. An anti-free market argument suggest that the role of the government is essential at least to build large-scale infrastructures and to conduct economic diplomacy. But, squarely, it is the private sector tax that finances these activities, and the government is just a manager of it. If the private sector is exempted of all taxes in exchange of their contribution in building infrastructures too, one may not at all need the role of the government.

 

 

Moreover, the proposed budget (fiscal policy) plans to spend more as general expenditure (just to maintain the government) than what it plans to collect as taxes. Economic diplomacy has remained a rusted sword, unused ever since the debate began regarding its importance. For all these reasons, government's self-claimed role as one of the three pillars is thus a clumsy hyperbole.


There has been an extensive debate on recognising the cooperatives as an equal and parallel pillar. Apparently, the appropriate recognition it deserves is a sub-pillar under the private sector head. By all logic, effectively, there should be single pillar-economy led, invested, managed and operated by the private sector.

But this policy has treated the private sector just contrary to this. The government has in fact done more harm by using its discretionary power to siphon away substantial amount of budget from development programmes to appease the Maoists. In this sense, the government role is becoming increasingly dangerous for the general people.


In comparison to the fiscal policy (budget), monetary policy has taken more balanced approach. For example, despite the announcement in the budget that saving and credit cooperatives would now on be supervised by the central bank, the monetary policy has chosen to remain silent on it.

 As the fact of the matter, both fiscal and monetary policies have come as mere rituals. The present day problems of the economy perhaps are beyond the jurisdiction and capacity of the realms of these policies. Therefore, to reviewing the economy from the present slump the leadership should first address the challenges of non-monetary and non-fiscal nature, but have direct bearings to the economic growth and prosperity of the country.