Budget 2015 misses the important questions:
Budget of India for 2015 passed by Parliament of India with usual rhetoric and careful negligence to important aspects. Opposition which was in power till yesterday is as bereft of constructive criticism as it was out of ideas when in power.
Finance Minister called the economy as recovering economy in his budget 2015 speech. That sums up. Like recovering patient, the economy is in hospital and can not do much for others. Therefore it has to be nursed before it can do anything for others. So what the finance minister did? Raise the tax rate for all citizens and reduce the corporate taxes. His logic is that corporations are needed to invest and to revive economy.
Thus except for small matters, this budget is a status quo.
Economic problem of India:
The worst problem for economy is the Government Expenses and Interest payout on borrowings. 98% of revenue goes into these two heads. Obviously the right direction would be to reduce Govt expenditure. Wouldn’t it?
Colonial culture and lavishness:
India is a museum not only of British empirical laws but also of the lavish bureaucracy. The British era opulant living of the kind shown in Downton Abbey is relived everyday by Bureaucracy, ministers, judges and whoever is who in Government. Large number of Footmen called peons and orderly occupy the corridors of powers waiting to serve the masters while bleeding the economy.
In the recent years a new orgnisation came up to show the redundancy of such lavishness. Delhi has its own Metro Rail and DMRC as it’s orgnisation is called, is the first Government company without peons, drivers or back office clerks. It’s efficiency is exemplary and it demonstrates the need for change. Will it be done? Will change happen?
To make this happen the Government have to move silently and no announcement can be expected. For announcements are met with political bigotry and it will be made an issue of reducing employment. Let’s hope that new Government has this problem in focus.
Nehru’s Stockholm syndrome:
Jawahar Lal Nehru was the first Prime Minister of India. He must be the only protégée who turned the teachings of his mentor Gandhi upside down. But that is a different matter. Nehru was in love with British lifestyle. Had it been convenient he may have found a way to have peerage established in India. Any how he liked the lavishness and saw nothing wrong in continuing with it. It was more like Stockholm syndrome that he fell for the empirical lifestyle. In his life time he lived in Trimurti Bhawan which is a huge Mansion. The point is neither him nor any of his successors thought it fit to change the opulent office-style and lifestyle of Government Officials anything away from opulent colonial legacy.
Price of lavishness paid by citizens:
In India rate of Income tax for a person earning above 10 lakhs (a lakh is hundred thousand) is 30%. It is less below that in two different slabs. Every commodity is subject to excise duty or indirect tax upto 30%. Sales Tax is again upto 6%. And a service tax of 16% on almost every transaction e.g. Mobile recharge, insurance premium, rent payment and what not. The last one has been revised from 12.9% to 16% in this budget. In addition to above levies of Union Government there are taxes by state government and local government.
For every 100 rupee earned and spent honestly about 70 goes in taxes. At one time it was 90. Such rates of taxation are called confiscatory but courts have never interfered with rates of taxation. So what the citizen do?
Citizens get the Government they deserve and Government get the taxpayer it deserves
Under such heavy taxation citizen have made evasion a kind of art form. Salaried class in Government Service has difficulties but they find more means of income to supplement taxation by corrupt means.
Before elections the Prime Minister shared dais with people advocating radical reforms including abolition of personal income tax. Such tax regime has failed. 90% of expences on income tax recovery yield 10 percent of tax. It was argued that in those speeches that personal income tax must be abolished. The question is will somebody admit it now and do something about it or look into it?
These are few questions. Another is rising NPA or non performing assets of Government owned and controlled Banks. It is not that common man is defaulter. It is the huge commercial loans which are into default. Why economy is bled through these loans so that every alternate decade, Government has to infuse capital to avoid collapse as banking apple cart if rattled, the economy as a whole would be mal de mer with it’s ripple effect.
Another aspect is the difference between deposit rates and lending rates. Difference of 9% may give Banks undue and unfair advantage over other sectors. No where in the world, Banks earn this much. Something must be done to reduce this gap and make banking sector more efficient. Most of the Banking sector is owned and controlled by Government. If it can not run it efficiently, it should get out of it. If not form all the banks, it must divest most of the banks. However we have no clue about this aspect as well.
Budget 2015 is that nutritional diet which is neither tasty nor has any medicinal property. Hope the Finance Minister may learn more about his job by next year.