The Rs.10 lakh crore Golden Parachute for the Rich: The Essence of MODInomics…

The Modi government just fails to hide its commitment to uplift the rich. And this is not the first time it has done so with elan. Nor will it be the last. India’s flashy billionaires have enjoyed this patronage and are got used to it long time back. A look at the Budget 2016 will more than reveal this. And Chetan Bhagat and a bunch of mainstream media, you may call it a pro poor budget, but the reality is far from it. This Budget by no stretch of imagination is pro-poor or pro-farmer and not even a socialist budget. Instead, this is a continuation of the same polices with the force of a sledge hammer.  

Image Courtesy: pixabay.com

Let me try to refresh your memory a bit. In 2015-16, the government lost potential tax revenue worth a staggering Rs 6.11 lakh crore due to various exemptions, concessions, rebates, etc, given to sections of taxpayers (Read businesses…) This is an increase of Rs 56,779 crore over the previous fiscal. Couple it with the over Rs. 4, 00, 000 crore, (75 per cent of the total NPA with the banking sector) stuck as bad loans with businesses. The whooping Rs 10 lakh odd crore is the price we are paying to help these poster boys of India Inc to continue to party in style.

If one breaks down the concessions enjoyed by the businesses, the corporate world has on an average received almost Rs. 70 crore every hour (or little over Rs. 1,600crore every day) in write-offs on direct corporate income tax, excise and customs. During the eleven year period from 2005-06, when the government started to make public this estimate, a whopping amount of Rs.48 lakh crore was doled out to corporate sector in the form of tax concessions. It could taken the entire Indian children to schools, provided world class healthcare to all Indians, build roads to ensure connectivity, moreover provided food for the needy at the subsidized rates.

Finance minister Arun Jaitley’s chief lieutenant in revenue collection, Hasmukh Adhia, the revenue secretary, had last week said that what the government was losing in direct and indirect tax exemptions is curtailing the space to reduce income tax rate for taxpayers – indeed a startling revelation by the top most bureaucrat in the finance ministry.

Interestingly, the effective tax rate for corporate bodies in 2014-15 was just 24.67% compared to the statutory rate of 32.45%. Some of the biggest companies were paying taxes at rates even lower than the average, taking advantages of various loopholes. Even these exemptions are lopsided. Significantly, the effective rate is the highest for smaller companies that have a turnover of up to Rs 1 crore and lowest for those having turnover of more than Rs 500 crore. Smaller companies faced a rate of 29.37%, closer to the statutory rate, while their larger counterparts enjoyed a rate as low as 22.88% Statutory rate of income tax for companies having a turnover of Rs 10 crore is 33.84%, while for those with turnover of up to Rs 10 crore it comes to 32.44%. If there is rationalisation of tax exemptions, then the tax-to-GDP ratio will also go up considerably from the current ratio of 10.

Compare this to the following facts as well. Special Component Plan (SCP) for the Scheduled Caste and Tribal Sub Plan (TSP) for the Scheduled Tribe are components of Union budget, which are in effect since 1979-80 with provision for the welfare and development. As per norms, 16.6% for SCP and 8.6% for TSP (over the Plan Budget amount) are to be allocated in the budget.

But the finance minister's allocations for SCP & TSP are 7.06% and 4.36% respectively of the Plan Budget of Rs. 5,50,010 crore. Against the total amount of Rs.1,38,603 to be allocated for SCP & TSP, the actual amount allocated is Rs. 62, 838 crore. The deficit works out to Rs. 75,765 crore and has been increased by Rs. 11,149 crore over the Revised Budget Estimate for 2015-16. Virtually this amount ofRs. 75,765 crore is a shameless loot.

Let us have a look at the precarious allocations made against the very essential services like nutrition, healthcare and education which has a large bearing over the vast majority of our population. Former finance minister P. Chidambaram, pointed out some of these. He said – ‘the total allocation for agriculture and farmers welfare shows an impressive jump from Rs.15,829 crore in 2015-16 (Revised Estimate) to Rs.35,984 crore. How did the government pull the rabbit out of the hat? By shifting allocation for interest subsidy for short term credit from Department of financial services to Department of Agriculture, Cooperation and farmers welfare. Minus this shift the allocation details are as follows: 

2014-15 - Rs.19,255 crore

2015-16(RE) - Rs. 15,809 crore

2016-17(RE) - Rs.20,984 crore

The allocation that was cut in 2015-16 was restored to 2014-15 level. 

As a sub-note, let me also add this fact, since it has come into power the Modi government has given environmental clearances to 943 projects with a total investment to the tune of Rs 6.72 lakh crore and also let us keep in mind the fact these projects, almost entirely will be financed by the banks using public money. While, every penny has been squeezed out of the poor, the ‘Suited Booted’ continue to get dole outs.

Disclaimer: The views expressed here are the author's personal views, and do not necessarily represent the views of Newsclick.