Inclusive budget option for Modi govt

June 14, 2014 07:54 pm | Updated December 04, 2021 11:24 pm IST - CHENNAI

As the Narendra Modi-led BJP Government is getting set to present its maiden budget next month, expectations are, understandably, running high. One the one hand, every constituency will be hoping the Modi Government to shower some concessions or the other on it.

On the other, every economist will be wishing the BJP Government to plug the gaping hole in its cash box. The task is, however, easier said than done.

There a quite a number of challenges staring at the new government right now. How to put the economy on to an acceleration mode? How to do it without inviting price spiral?

An influential section has been pleading for putting more money into the pockets of common men. Some have countered this saying that this will further fuel inflation, which has already seen a huge hole in their pockets.

Not surprisingly, the reported move to raise the income tax limit to Rs.5 lakh from the current Rs.2 lakh has elicited extreme reactions. Casting aside the merits and demerits of such a move, it can be safely argued that inflation has indeed hurt every Indian who earns the money hard way. Inflation-caused erosion in their income needs to be compensated.

It is indeed a fair argument. But how could the government compensate the revenue loss if it lowers income tax rates?

Complex politics

Given the complexity of the Indian politics, many segments are still functioning outside the organised economic system for assorted reasons. Perhaps, this is the reason why certain well-meaning policy actions of the Reserve Bank of India aren’t exactly been able to see the desired, rather intended, effect on the economy.

Often times, top officials of the RBI have suggested the need to move away from cash and into cashless system. The reason is not lost on discerning students of economics.

As the fiscal and monetary managers are battling to bring everybody into the organised stream, the best course open in the interim is to use indirect means to bring them on board. Precisely this in view, many have suggested lowering the tax and widening the base.

Best option

The exclusion of certain segments from the organised stream due to extreme politicisation of caste, creed and community in the Indian context has to be dealt with innovatively by the economy managers. The best tool available for the fiscal managers is to use the indirect tax as an ingenious way to bring even those who skirt the system on board.

Indirect tax by definition is regressive. How to remove this tag from it, and make indirect tax a secular one? It calls for a “least taxation’’ system.

Will the Modi Government take the bull by its horns? That is the moot question, though.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.