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The Rediff Budget Special/K R Malkani

'High incomes wherever and in whatever sectors should be taxed'

BUDGET 2000

The finance minister had said that it will be a harsh Budget. I do not find it harsh at all. This is a normal good Budget. And the main reason for this is that the nation's economy is in good shape.

We have an almost six per cent GDP. Inflation rate is down to 2 to 3 per cent. Foreign exchange is up to more than $ 30 billion and the fiscal deficit that used to be 9.2 per cent of the GDP in 90-91, is today down to 5.6 per cent.

Income tax assesees who used to number barely ten million only two years back are today 20 million in number. This is a very satisfactory situation.

I am glad to note that special rural development is going to be launched in the name of prime minister. There is going to be more water, power, schools and hospitals for the poor in the countryside.

I particularly note with satisfaction that the poorest people can have a life insurance of Rs 20,000 on payment of just Rs 10.

The tax structure has been changed. We used to have three slabs of excise tax. 8, 16, 24 per cent. Now we are going to have just one --16 per cent. This doubling of excise duty could hurt some sections.

Also tax on dividends paid by corporates to shareholders is going to be doubled. This could hurt some companies. The custom duty is going to be reduced by 5 per cent. This could mean more imports and that could hurt Indian industry.

I have already mentioned the highlights. These are: the PM's rural development scheme, the insurance cover for the poorest. I also find that the government wants to press ahead with divestment. I do not feel very comfortable with that. PSUs should be privatised only when absolutely necessary, only if they are basket cases and even in that case we should make it a condition that the new private proprietors will not sell it to foreign companies. This could lead to, in the words of former president R Venkataraman, "new colonialism".

There is a problem with the fiscal deficit. I wish the fiscal deficit which has come down from 9 per cent 10 years ago to 5 per cent now went down even further. However, this is possible only if there is a greater discipline in state and Central expenditure. However, that is not easy because in a democratic country, you cannot retrench people easily.

We could augment our revenues in a number of ways. For example, 30 per cent of power is stolen in the country. This must be curbed and theft of power should be treated as an offence.

Also, there is also a big leakage in our export rate. There is heavy under-invoicing of exports and over-invoicing of imports. According to an American university estimate, India is losing at least $ 6 billion on this score every year.

A third good source of raising revenue could be curbing tax evasion. According to experts, our GDP is at least 60 per cent more than what our statistics show.

The NRIs are our brothers. There is no question of us dumping them. Many of us are for giving them dual citizenship. However, I wish the NRIs invested much more in India than they actually do. I understand that 70 per cent of foreign investment in China comes from overseas Chinese. Similar foreign investment from NRIs in India would be 17 per cent.

It is true that in certain items, the prices will rise. However, for certain other items, the excise duty will come down from 24 per cent to 16 per cent.

There have been no hosannas from my side. I have congratulated Sinha for the positive things he has done. And I have not hesitated to find fault with some of the economic policies of the government, particularly divestment of government stake in the Navratna companies like IPCL and GAIL.

High incomes wherever and in whatever sectors of society should be taxed. If some farmers are real big and making good money, they should pay the tax like everybody else. It is significant that the Budget has for the time introduced income tax on the produce of farm houses.

I will not be surprised that in a year or two the regular agricultural income will also be taxed. In this connection, I would also like to say that it is not very rational to exempt all SC people from income tax. There are highly educated SC/ST people in the North- east and elsewhere. There is no reason why they should not be taxed like the salaried classes.

Generations are a continuing process. Reforms also are a continuing process. The end of one generation reforms constitute the beginning of the next generation of reforms.

There are some minor concessions although the income tax exemption limit is only 50,000 a year, when considered with the various other concessions it comes to about Rs 100,000 a year. However, even that is not good enough. I hope that in another year or two, the exemption level will be raised significantly.

K R Malkani is a senior BJP leader.

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