India’s Recent Budget Tells the Unspoken Truth
The
national budget announced today, March 1, 2013, tells a lot about the nature of
India’s prosperity being experienced in recent years. It is not so much the
lower growth rate of 6% projected for next year that troubles ordinary people
most, but the skewed nature of that growth. Let us start with some hard
facts.
Only
3% of India’s population – 35 million – pays any income tax. All others do not
have sufficient income – Rs. 200,000 ($3,650) per annum -- to be “qualified”
for paying taxes. Of these eligible taxpayers who are considered “above water,”
1.5 million earn over Rs. 1 crore ($182,000) in annual income. They are the
0.125% of the population considered rich enough to pay the newly instituted 10%
surtax for incomes above that level. If these declared incomes are indeed
true, where is the often trumpeted prosperity?
The
government has introduced in the budget several new incentives for
infrastructure, textile and broadcasting companies. Companies like Larsen & Toubro, Bombay Rayon and Reliance Broadcast stand to gain from these special
favors, and the rest of us are expected to feel content with the trickle down
impact from their increasing profits.
To
offset any criticism for coming to the aid of large companies, the government
has suggested new investments and tax plans in the social arena – a government
supported bank for women only, financial assistance toward development of
educational applications to run on the “World’s cheapest Tablet PC,” and
marginal tax increases on the richest to “contribute” to the welfare of the
poor. These questionable investments favoring one group or company over all
others, and insignificant new taxes on the few super-rich, raise questions
about the government’s desire and willingness to bridge the gap between the
rich and the poor.
It
is a historical fact that in 1991, India was forced to abandon its
pre-occupation with socialism and embrace capitalism. But capitalism never
promised fairness; instead it offered the ingredients for business success.
Countries like India opened their doors to foreign companies that rushed in
mainly to take advantage of low cost labor. Many Indian companies joined forces
with them to exploit business opportunities in offering mostly services at very
low costs for foreign consumption. The prosperity that was brought about to a
few Indians employed in those industries spread to some more people, and now,
there are at least 3% of the nation’s population fit enough to pay taxes.
Whether
India’s aggregate growth rate improves from 6% to 10% as desired over the next
decade or not, the real question to ask is whether current policies will bring
about meaningful improvement in the lives of the remaining non-tax-paying
segment of the population. Will there be measures to assure decent minimum
wages and benefits, or will prosperity for the rich be harvested from the cheap
labor of the poor? Will there be a commitment to improving the capacity of the
poor, especially the young who will be tomorrow’s labor force.
A
nation cannot continue its indifference toward the poor by satisfying the
aspirations of the rich and the powerful. Foreign investors, especially those
of Indian origin, must ask themselves how they plan to operate in a country
where 97% of the people are not fit enough to pay taxes.
Comments
But who among us has the answers to these problems? Can our educated and intellectual masses pave a way out of this situation when our elected representatives seem not able to do much?