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Budget, loans, silent taxes, rising prices, squeezed pockets-Who Gains?

Saturday March 24, 2012 05:45:09 PM, Rakesh Manchanda

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Medieval India folk tales remind us about the impact of the good governance process called tax collection. King's soldiers should be as silent as a bee collecting honey from the flower and should not disturb and hurt the public was the ancient India Governance message.


Today the silent impact of indirect taxes, high prices and micro finance loans together leads farmers and consumers towards suicides. Nation has to carry forward the choice less baggage of lakhs of farmers suicide. It is a matter of common sense that due to unpredictable market it is difficult for a farmer rather in comparison to a city entrepreneur to pay back his loan without market support for his capacity.


Recently, TV channels displayed a city labour's hand chopped off as he was unable to pay a loan of Rs.300/- to the local lender. In ancient days, a loan seeker used to avail the opportunity of advance money called loan by producing more wealth in a period of time and then used to return the loan safely. Today government takes loan from the Public savings- with a business sense to utilise this money in making more money, more production, more jobs faster then the interest amount.


It is a well accepted norm to talk of fiscal deficit as the gap between the income and future expenses of the nation. The fiscal deficit as pointed by few MPs in this year budget has been shown at about Rs. 5,22,000 crore while the tax revenues waved off or gifted as concession by the government stands around a whopping Rs.5,30,000 crore. It appears even the Government is forced to take loan without daring to say no to the Corporate concessions gifted as incentives. Figures shown there could have been a loan free surplus of Rs.800 crore if taxes were to be collected honestly.

Strangely ignoring the familiar Indian references to Kautilya's Arthashastra, the finance minister, in his budget speech, quoted from the Shakespeare's Hamlet."I must be cruel only to be kind"-This Shakespeare quote from ancient European culture is perhaps picked up by FM to motivate the majority in India. To prepare middle class and poor for more sacrifices. Market survival is simple. One shinning-other suffering. It can never deliver the win-win for all. When someone is spending, someone else is gaining. In modern India with indirect `hidden` taxes we find a new way to guide India's economy tax collection. Since majority have a hand to mouth income the possibility to use direct income tax to squeeze them does not arise. Indirect taxes carefully packed in each and every industrial and agriculture produce helps the law makers to hide behind the retailer and producer of goods and services.


 Direct Tax collection is unpopular as four crore privileged tax payers in 120 crore largest democracy are expected to use concessions to generate more production and improve the GNP. Here the trick is that corporate rich are interested to give a false bubble growth by not investing in real production but by pumping money in share bazaar ensuring jobless growth. Government continues to give concessions to direct taxes and justify favouring the rich at the cost of the poor. 69 billionaires have an asset value equivalent to one-third of our GDP, while out of the rest of the 121 crore Indians, over 80 crore struggle to survive on less than Rs.22 a day.

In the past Tax system was simple. Direct taxes at the rate of around 6% in shape of crop was collected and deposited in the temple ware houses. Indirect taxes hidden in the cost of goods as seen today in the industrial/agriculture output was missing. If the tax payers in ancient times resisted they were expected to stop the King`s horse a part of revenue generation politics packed with religious label ritual called Ashva Megha Yaga. If the rain gods were kind enough then the recovery of the tax was cent percent. In a Governance system which survives on city-slum, town-village and Bharat-India divide let us see the impact of Budget-2012-13.

Majority fails to understand the difference of ten times in the direct-indirect taxes direction and recovery. While direct tax collection is pegged at Rs 4,500 crore, indirect taxes would raise Rs 45,940 crores in the current year budget. You need not be a student of Economics to see that indirect taxes are a huge burden on the people, while the low direct tax rates were a relief for the rich. Common Man calculates the risk in survival with his decreasing hard work value vis-à-vis his standard of living. In India when the price rises every month it hurts 99% as the money in the pocket as earnings do not match and remain freezed. With no sale of goods in the market, no wage security, no job security and no social security the market recession stands teasing.

Terms like fiscal deficit and subsidy used by policy makers to calibrate and audit the budget do not make sense to majority people who are engaged day and night to earn a better standard of living. The helpless government is trying to hide the dirty poverty picture. Its false claims of decreasing poverty by lowering the Below Poverty Line limit is shameful. What the policy makers forget is that the financial crisis can only be saved by raising the standard of living. Better purchasing power of the people as market crisis `savers` is the only way out.

Policies in past were made as complimentary to environment and ecology. No feudal king in the past had ever dared to sell forest, ordinary well/stream water or river water including our holy Ganga. Silence of ancient tax collection is compared with the Sun silently converting the water to vapour but the rain clouds with thunder and rain supporting greenery must show that the money taken as tax is put back to the public welfare in the cycle controlled by Rich-poor divide with the participation of the people.


Today the discussion is how and why to reduce the fertilizer and diesel subsidy. Much energy is invested to redefine the BPL India to save the Politicians from the shame. The government considers concessions for the rich as an incentive for growth while subsidies for the poor is seen as being negative for growth as it hardly reaches the needs and the system of distribution has many leakages. The petroleum pricing policy is also skewed. The government calculates the prices of petroleum products on the basis of international prices of crude oil. But the fact is imported crude is refined in India and pricing should be based on domestic component inputs.

Why Pranab Da choose to include Hamlet reference in his Budget Presentation ?A tempest in every home: Pranab plays it safe by putting more emphasis on Euro Crisis and more salary cuts and pensions in Europe. In subsequent media interviews the FM was quick to score by saying we are still better then Europe Crisis. Hamlet the prince of Denmark The Tempest ... In his first soliloquy, Hamlet explains that he does not like his mother marrying the next King of Denmark so quickly within a month. It is unfortunate that the helpless Finance Minister is committed like in marriage to protect the interests of few rich corporate and shift the blame to compulsory collaborations of the government with allies.


Opposition and the Left was bitter in the Budget critique by demanding, ”Why rob the poor to pay more to rich.”


14 Lakh of industrial and agriculture workers and TUs which went on strike gave the FM their suggestions which were not mentioned in the Budget lay out. Budget fails to see that fall in wages of workers both organised and unorganized engaged in production investments which means less purchasing power in the pockets of millions.

PM says the finance minister had to bite the bullet, but it seems he has bought the used empty bullets and is unable to learn from the Euro crisis.



This article was written on 22, March, 2012 and is published by Governance Now on 23, March, 2012. The author blogs on




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