Budget 2015: Bonanza for the Rich, Bitter Austerity Pill for Others

Whichever way one looks at the first full-fledged budget of the Modi government, three features would stand out in bold relief. The budget has certainly handed out a big bonanza to the corporate sector – may not be as big a bonanza as would make the share market jump in joy, but a substantial bonanza nevertheless. That there are sharp cuts in social spending is another fact that stares everybody in the face. MNREGA may have escaped the kind of cut many had apprehended, but the axe has fallen heavily on every other item. But if the budget has added to the disappointment of one section of the people, it is the section which had voted in a big way for the BJP in the last Lok Sabha elections – the burgeoning Indian middle class. It is the middle class that along with the poor and the deprived will bear the burden of the 2015-16 budget – the 1.5% hike in service tax will pinch the middle class in every step of life.

Let us take a closer look at all these three defining features of the budget. In one fell swoop, the government has done away with wealth tax. The government knows that in a country with such sharp inequality as India, the abolition of the wealth tax cannot be defended as a matter of principle. So we are told the wealth tax is not cost effective, the cost of collecting the tax is higher than the amount of tax collected. In other words, the rich in India have mastered million ways not only to amass massive wealth but also to keep it safe from the taxman. If the government admits to this basic failure of ‘governance’ and wants to use it as a pretext for abolishing the very tax levied on wealth, how on earth does it expect us to take its threats against black money seriously? The 2% surcharge announced on income of above Rs one crore will also suffer on the same count.

The government has of course not stopped with just the abolition of wealth tax. It has also handed out a Rs 200,000 crore tax bonanza over the next four years by promising to lower the corporate tax from 30% to 25%. And this when according to the government’s own calculation, the current tax rate of 30% actually works out to an effective tax rate of only 23%! The exemptions dished out to the corporate houses – in tax as well as customs and excise duties – continue to be staggering, during the first year of Modi government (2014-15), they just increased from Rs 5,500 billion in the last year of the UPA government (2013-14) to Rs 5,890 billion. And with no MAT (minimum alternate tax), inheritance tax or wealth tax, an exemption-laced lowered corporate tax is all that the corporate sector will have to face in the coming years. Add to this the proposed changes in the land acquisition law and labour laws, the disinvestment offerings and the government readiness to bear all risk in PPPs, the size of the corporate cake could not really be any bigger!

Contrast this bonanza to the treatment meted out to the consumers – the service tax has now been raised to a whopping 14% and like every other indirect tax, this too affects the people regardless of their income, making it blatantly disproportionate and regressive. During the Delhi elections, Modi talked of his ‘luck’ that his tenure so far has seen global oil prices crash from $110 per barrel in June 2014 to just about half, $57 per barrel. Far from transferring the benefits to the people, the government has resorted to a steady hike in excise duties on petrol and diesel and now in freight rates in this year’s rail budget, mopping up billions of rupees of extra revenue, and if yet government figures show stagnation on the revenue front, it only shows highlights the dire need to increase taxes on the rich, do away with the sundry exemptions and improve the actual collection of taxes. But the government has chosen the opposite way and the result is an unprecedented squeeze in public spending and that too in the most sensitive social sectors concerning the most deprived sections of the population.

Compared to last year’s budget, total plan expenditure is estimated to decline by a massive Rs 1.1 lakh crore, an unprecedented squeeze of about 20%. The decision to wind up the Planning Commission and replace it with the strange sounding ‘NITI Aayog’ was clearly not just a wordplay, the Modi raj has actually embarked on the dangerous journey of cutting back even whatever little money the government it spends on basic services and people’s welfare. From Sarva Siksha Abhiyan to higher education, mid-day meal to National Health Mission, SC/ST sub plan to women and children welfare, the axe has fallen on virtually every single social expenditure item. Even the allocation for sanitation and drinking water has been reduced, leaving one to wonder if like ‘kala dhan wapsi’ (repatriation of black money), ‘swachchhata’ would also turn out to be just another ‘jumla’ or ’empty rhetoric’ for the BJP. And contrary to the BJP propaganda of ‘cooperative federalism’, the states do not get any extra resources to make up for the cuts in central expenditure.

Arun Jaitley has advised the middle class to take its own care. What he has not said in so many words is that his government has abandoned the poor. Tax cuts for the rich, spending cuts for the poor and greater cost burden on the working people and middle classes – these are the classic features of a dreadful economic regime that is known as ‘austerity’ to the whole world. Yes, instead of the promised glimpses of ‘achchhe din’, Arun Jaitley’s budget has delivered the first few pills of austerity to the overwhelming majority of Indian people. In the economic realm, the truth of ‘minimum government, maximum governance’ has started ringing as ‘minimum responsibility of the government, maximum burden on the people’. The time has come for all sections of the people to rise in unison against this disastrous economic direction.

Reduction in Social Sectors in Budgetary Allocations (BE) of 2014-15 and 2015-16 (BE)

Departments 2014-15 (BE) Rs. Cr. 2015-16 (BE) Rs. Cr. Change
Agriculture (including Agri Research) 28,795 23,323.85 -19%
Drinking Water and sanitation 15,263.15 6,238.87 -59%
Health and family Welfare 34,874.86 29,358.87 -15%
AIDS Control 1,749 1,357 -22%
Housing and Urban Poverty Alleviation 5,558.6 5,169.47 -7%
Rural Development 79,999.8 71,593.08 -10%
Women and Child Development 20,900.82 10,084.40 -51%
(In particular ICDS) 18,321 8,471 -53%
School Education 54,8444.18 41,934.50 -23%
Higher Education 27,565.20 26,760.26 -8%

 

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