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Last year, the government undeservedly earned Rs10,50,000 crore —that’s nearly Rs9,000 for every Indian citizen — but didn’t know what to do with it. This doesn’t mean nobody knew about the moolah — good economists like Manmohan Singh and P Chidambaram couldn’t have missed it — but they preferred to sit on their hands and do nothing about it.

So where’s this treasure trove? Rs10.5 lakh crore is the value gained by listed government companies in the stock market, and the money is still there, waiting to be harvested. The 80 listed public sector companies grew their market worth from Rs8.82 lakh crore to Rs19.31 lakh crore during 2007. The chances are that this value could again increase by a similar amount in 2008, but it will rot unused because the Communists will not allow the government to sell public sector shares back to the public.

In this New Year essay, DNA would like to suggest three new (or rehashed) ideas that will not only make good use of the money, but also make for good politics and good economics.

Idea 1: It’s time to give all individual taxpayers a tax holiday — say, for three years. After that, the government could adopt a kind of flat tax, where, say, all taxpayers earning more than Rs10 lakh per annum could pay a flat tax of 20% on gross earnings. No deduction, no exceptions.

There are three reasons why this will work. One, the individual taxpayer — especially the salaried one, whose taxes are deducted at source — has always got a rotten deal. Companies earning hundreds of crores manage to avoid paying tax. But not the salaried taxpayer. It’s time for the government to say: “Thank you. We now plan to show our appreciation by giving you a three-year tax holiday. No income-tax for three years. We will accept any return you file.”

Two, the money lost will be largely recouped as corporate and other taxes. Money saved in tax is spent on goods and services, or share investment. Much of this will return to the government’s coffers as tax on corporate profits and share trading. A fifth of the money could come back this way.

Three, once income-tax is abolished, there will be no need to offer tax breaks.

In 2007-08, the government would have lost around Rs17,000-20,000 crore in offering tax breaks on things like higher deductions for senior citizens and women, and section 80C benefits. Once tax is gone, the exemptions will be gone too. Which means money saved for government. An added bonus: no tax means less money spent on maintaining hundreds of tax office, and less corruption.

In 2007-08, the budgeted income for the government from income-tax was Rs98,774 crore. If Rs40,000 crore comes back anyway as additional corporate taxes or savings from tax exemptions, we are talking of a deficit of less than Rs60,000 crore in the worst case scenario. It could be less, because money saved in the hands of the individual is better used than money gifted to the government. The deficit can be covered by sales of public sector shares, but it probably won’t be needed.

Idea 2: We need to create a universal food safety net. Hunger and poverty are India’s worst scandal. The key to creating a robust society is the banishment of hunger forever. India needs a universal food guarantee scheme, under which any citizen should be entitled to free food if he registers for it. Assuming even 300 million people register for it, at an average cost Rs10 a day per person, the total annual costs would be around Rs100,000 crore - just about a 10th of the market value gains last year. Not a difficult thing to fund, and something even Commies cannot object to.

Idea 3: The public sector must go back to the public. India’s public sector has been managed without a public spirit, thanks to rapacious politicians who try to milk it for private profit, and a deadening bureaucracy which makes it uncompetitive. The only way to remedy this is to shift ownership of public sector units back to the real public. Trusts could be formed to own the shares held by the government with three objectives in mind: providing management inputs to grow their market values, buying and selling shares from the market to increase portfolio value; and three, distributing the profits (or dividends) directly to people below the poverty line, once they are identified properly.

The above three ideas are not only bankable, but are also socially and politically the right things to do. Just in case anyone wonders where all the money is going to come from, here’s the clincher: in 2007, the market gains of Rs10.5 lakh crore came from just 80 listed companies. And we have not even talked about the biggest and the best public sector enterprises: the railways, the airlines, the various research and development establishments, the posts and telegraphs department, et al.

There’s more than enough value embedded in underused or unused government assets - including land - to bankroll tax holidays, anti-poverty schemes and cash payouts to the poor for 10 years or more. By then, we would be a half developed nation, and the handouts would have done their bit to take us there. 2008 is the time for bold thinking to lift India out of its centuries-old poverty. Doing it now is better than doing it later.