Commentary/Mani Shankar Aiyar

Too many things wrong with the Budget

This is a lopsided Budget. The changes are all on the revenue side. On the expenditure side, the status quo has been maintained.

This is an iniquitous Budget. The benefits have been bestowed on the rich. The burden is on the poor: the lower your income, the smaller the benefit you get.

This is an unfocussed Budget. It relieves taxpayers and the corporate sector. It provides for the conversion of their illegitimate assets into white money. But it does nothing to tackle the real constraints of growth.

This is an uncaring Budget. It exposes the poor to the risk of inflationary pressures. Yet, it carries no assurance that price rises, especially of essential commodities, will be contained within acceptable limits.

This is an un-Indian Budget. It aims at replicating models tried out in other countries without taking into account the essential difference between us and them: that the Asian tigers are either oil surplus or authoritarian or both.

This Budget is not a continuation of Manmohan Singh's policies. It is just a caricature. For, Manmohan Singh kept the poor firmly at the centre of fiscal and financial policy. This Budget substitutes the well-off for the worse-off.

And here are the reasons why:

With regard to raising revenue, a veritable revolution has been unleashed. Personal income and corporate taxes have been slashed. And income from dividends excluded from the taxman's net. Never before in India's fiscal history has tax relief been offered on this scale.

Curiously, however, the finance minister has deliberately refrained from estimating the loss in revenue on account of this. This is unprecedented. It is estimated that the relief to the taxpayer is around Rs 50 billion. This means that, on an average, every taxpayer would save about Rs 4,500 an year. Of course, the richer he is, the larger will be the amount saved.

At the lowest end of the income tax-paying scale, the chhota babu in a government office will save no more than Rs 50 a year. Enough, as Sumer Kaul points out in The Hindustan Times, for him to buy himself two extra postal envelopes a month. The savings of the fabulously rich, on the other hand, will run to Rs 5 million each. And more.

Moreover, the exemption from direct taxes for income from dividends means that the more you earn, the more you will be taxed. The larger the proportion of your unearned income, the less is the tax! If you are fortunate enough to have inherited a fortune in shares, and sensible enough to do no work whatsoever, the Budget promises you that not khota paisa will be taken from you. Chidambaram is the first finance minister in 50 years to define 'equity', as a share-holding -- and not justice!

The finance minister has also announced a Voluntary Disclosure Scheme. Since all money thus converted from black to white will be taxed on the same rate, this means that a petty halwai who was unethical about, say, a few thousand rupees a year, will have to shell out a premium on conversion at par with what multimillionaires -- who acquired the status by stashing away millions in Swiss banks -- pay.

One estimate puts the annual amount stashed away in the United States alone at over U S $ 11 billion. Thus, Chidambaram's Voluntary Disclosure Scheme guarantees one thing : the more crooked you are, and the more crooked you have been, the greater is the benefit you get!

The beneficiaries of this skewed largesse are the taxpayers of India -- some 1.2 per cent of the population. For 98.8 per cent of our people, the changes in tax rates will not make an iota of difference. For them, the Budget matters, if it matters at all, in terms of what it provides for them materially.

Unmentioned in the finance minister's speech, but tucked away in the unreadable mass of figures that were distributed with it, is the ugly confession that the United Front government spent Rs 100 billion less on development than what Chidambaram promised in his previous budget. This is what he technically calls as the shortfall in central plan outlay between BE 1996-97 and RE 1996-97. All this money is stolen from the poor.

In the Budget, the pattern of expenditure envisaged is virtually the same as in the past. The share of the social sectors remains the same; so does that of grants for human resource development. Poverty eradication, education and health have not shown any progress

Unheard-of goodies have been doled out to the well-off. But there is no parallel revolution in expenditure. The well-off will become better-off and the better-off, the best-off. But on every index of relevance to the 98.8 per cent of our population, the country will stagnate.

That is what makes it such a lopsided Budget.

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