Economic Highlights

New Delhi, 30 January 2010

Budget Request

AID INDIVIDUALS, NOT CORPORATE

By Shivaji Sarkar

Finance Minister Pranab Mukherjee is passing through one of the most difficult phases of his life as he prepares to give the final touches to his budget papers. The government is short of revenue, borrowings are rising and the corporate is breathing down his neck to get more stimulus packages despite high profits. Mukherjee has to balance all this with the poor individual taxpayer, whose contribution to the national kitty is sharply falling.

Skyrocketing prices are adding to the minister’s woes. The Petroleum Ministry is demanding Rs 12,000 crore to offset the supposed losses its companies have suffered. Else they want to raise the prices to add to his discomfiture.

The market is baying for the Finance Minister’s blood. It wants the individual consumer to turn to the market. The consumer is hanging between the devil and the deep sea – high prices and low purchasing power. This apart, he is saddled with a high personal income tax liability and is not organized like the Federation of Indian Chambers of Commerce (FICCI) to demand a relief. . 

Unfortunately, Mukherjee has not considered the individual taxpayer, who is squeezed from all sides worthy of a concession. Rising prices means he has to pay more in terms of indirect taxes, whether it is VAT or excise duty. Higher the prices he pays for commodities more he is forced to pay the tax. Sadly, the taxpayer is not appreciated for this contribution. It is not even acknowledged. This apart, he is not given any relief on his tax burden and is expected to go to the market to help it look up!

Often the minister is led by bureaucrats, who just at the year-end come up with a list of celebrities such as Sachin Tendulkar, who supposedly have evaded some tax. The State does not provide any welfare scheme to any taxpayer. Those welfare schemes supposedly provided can hardly be availed. Over 5 lakh people have lost their jobs during the past one year. Many more are losing employment. A larger number of them have their wages frozen by their corporate employers. Many have not got their own Provident Fund contribution deposited with the Employees Provident Fund (EPF) authorities. Though this can invite penalties, including jail, nothing has happened

The government has powers to swoop down on the defaulting employers. But it has chosen not to do so in the hope to “create congenial business atmosphere”. Additionally, business is not creating the jobs, which it is capable of doing. The business houses are in a mode to exploit the country. Instead of helping the government in tiding over the situation, they are out to extract more to enrich their own kitty. They could say that they are paying more taxes “despite the slowdown”.

Indeed, they are definitely doing it. But they are doing much more on the sly. They are producing speculative figures on growth pattern to scare the government to give them more of stimulus. The FICCI has come out with projections stating that the growth could slip below 7 per cent. The International Monetary Fund had put the projections at 7.7 per cent and the government had stated it to be 7.75 per cent.

The statement of FICCI may or may not be correct. That is not the issue. The timing it has chosen needs to be marked along with the fine prints that it has added. The official growth figures would be coming in about 20 days. The key point is not the innocent projection. What is to be noted is FICCI’s suggestion that a sudden withdrawal of stimulus measures announced through 2008 and 2009 to counter the economic downturn, would adversely affect growth prospects. The idea has come almost as a tactic to pressurize the government to continue what it would like to reduce, if not scrap it altogether.

In short, it appears that the FICCI wants to corner more for the corporate from the public kitty without agreeing to part anything for building the nation. It wants the tax concessions to continue ignoring the overall improvement in corporate performance, profit figures and reduced expenditure particularly on payment to employees.

It is surprising then that it has not said a word on personal income tax. The falling accruals –over 13 per cent - on this count have not caused any concern to FICCI. Instead, it should have shaken it. Undoubtedly, corporate performance is sustained on growth of individuals. If by depriving the individuals – the employees - a section of the business has made profit, it needs to ask how it would sustain it if the employee lacks the capacity to go to the market and purchase what the corporate produces.

The Global Economic Prospects 2010 (GEP) prepared by the World Bank has predicted that the economic recovery that is now underway will slow later this year. Financial markets remain troubled and private sector demand lags amid high unemployment. It also predicts more borrowings by developing countries.

The GEP warns that while the worst of the financial crisis may be over, global recovery is fragile. Predictions are that the fallout from the crisis will change the landscape for finance and growth over the next decade. Unfortunately, FICCI was aware of this latest report but chose to ignore the key factor of high unemployment. The moot question is: Is it the sole responsibility of the government to create jobs and that of the corporate to rake in profits-- even snatching what is not its due from the exchequer?

Clearly, it is a difficult task for the government to extend concessions. But it must not ignore the individual citizen, who contributes and suffers the most. Sadly, the government works under pressure from corporate lobbies and conveniently forgets the citizen, who elects it so that it could safeguard his interest.

On no count the government is being seen protecting the interests of its citizens. It is time it comes out with a generous tax policy – cut individual direct tax at the highest level to 20 per cent – to empower the people to lead the country on the path of growth. Too many benefits to the corporate would not help the nation. The government has given it enough of carrots. It is now the turn of the individual citizen to have it.---INFA

(Copyright, India News and Feature Alliance)