advertisement
Video Editor: Vivek Gupta
Video Producer: Sonal Gupta
Cameraperson: Shivkumar Maurya
Finally. Finally! The Modi government has acknowledged the futility of trying to pump prime India’s GDP by ever-escalating government expenditure, which increased by an astonishing double-digit CAGR (compounded annual growth rate) over six years of impotent growth. Remember, Indian governments drive only 10 percent of our economy – worse, they do so inefficiently and bluntly.
Finally, the Modi government has acknowledged that the budget presented on 5 July 2019 was a failed, vapid policy document.
Finally, it has realised that India’s private enterprise is the most potent engine of economic growth, accounting for over 90 percent of GDP.
And finally, after six excruciating years, it has shed its “I am the government and I can fix everything” stance and adopted the mantra of “I will free your animal spirits by empowering, trusting and enriching you.”
Finally!
The fiscal giveaway is an awe-inspiring 0.6 percent+ of GDP. Absolutely, it’s a generous Rs 1.45 lakh crore of additional cash created on corporate balance sheets. Optically, it’s a humongous 10 percentage points’ hack of the corporate tax rate by one swing of the axe (reminiscent of P Chidambaram’s audacious move in the “dream budget” of 1997/98 – ouch!).
Yes, I am delighted. But no, I am not ecstatic. Why? Here are three reasons:
Well, here’s how Rs 1.45 lakh crore would have given a bigger booster. Imagine if the government, instead of giving more cash to companies, had cut the following taxes, which would have enriched ordinary folk, directly and immediately:
While we could not figure out what the revenue loss would be if these three taxes were cut, my bet is that the loss would be in the vicinity of Rs 1.50 lakh crore, give or take a few thousand crores, which is quite immaterial when you are mounting change on this scale.
What’s more, I can bet my last penny that the consumption/investment impact of these three tax cuts, putting cash directly in the hands of ordinary people, would be a multiple of what will eventually be achieved by the current cut in corporate taxes.
Any takers for this wager, especially on Raisina Hill (office of the Ministry of Finance)?
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)