India’s election budget [Archives:2008/1153/Community]
By: Rajendra K. Aneja
[email protected]
India's 2008-2009 budget has just commenced and is designed to woo its 1.1 billion people in next May's elections.
Income tax ceilings have increased 50 percent to benefit citizens, while their daily living conditions – i.e., traveling in tattered, overcrowded buses and trains – continue to be deplorable.
Additionally, $15 billion in farm loans are to be waived and duties have been marginally reduced in sectors such as automobiles, pharmaceuticals and paper in the hopes that these benefits will trickle down to citizens; however, rising oil prices and inflation will marginalize these minor gains.
Corporate taxes haven't been increased to keep companies in a buoyant mood. India's investment and savings as a portion of its GDP are an impressive 35.9 percent and 34.8 percent respectively and this is laudable. Even deficit financing is below 3 percent.
Sure, the finance minister has increased some outlays sensibly, with defense budgets up 10 percent. Increased allocations for rural infrastructure development, i.e., irrigation, roads, power, telecommunications, etc., as well as social uplift allocations regarding guaranteed employment, education, health, etc., are worth singing about if their execution is effective. However, short-term capital gains have been taxed – a premature measure that will depress the markets.
India's twin curses are corruption and execution, with an estimated 75 percent of budgeted funds evaporating as they traverse down the execution pipeline. The result is that projects are delayed 10 to 15 years. If even half of the plans and projects envisaged in the budget were implemented on time, India would be rich!
India cannot be complacent because the global recession will visit it too. It is utter balderdash to think that India's economy is robust enough to withstand an international meltdown, as growth could fall from 9-10 percent to 7-8 percent.
The ruling party's election gifts will cost the exchequer $15 billion, while next May's public workers pay raise involving 10 million employees who run the government machine could add to the invoice.
An agricultural slow-down with a minimal 2.6 percent increase in agricultural production and a 15 to 25 percent escalation in food prices could generate violence and vandalism; thus, a nation that prides itself on self-sufficiency regarding food grains could face a shortage.
The number of Indians living below the poverty line has decreased from 50 percent in 1972 to approximately 25 percent now, which means more Indians are eating more food. India's educated middle class is counting their calories and eating better quality foods.
However, the nation of 1.1 billion is adding 15 million people every year. With wheat prices already having increased 100 percent, it's time to grow more wheat, rice, potatoes and onions.
Cash registers are ringing as tax revenues grow 20 percent annually due to collection streamlining; however, abysmal poverty levels abound in India – from wretchedly maintained airports and rail stations to unhygienic public hospitals. India's roads also are a national disgrace.
Indians may be brilliant global managers and institution builders, but they are utter failures at home in managing state institutions, which fester with nepotism and corruption.
India's problems can't be solved by well meaning budgets; thus, although our budget treatises read well and all the books balance, the vast majority of Indians will continue wallowing in centuries of sludge and slush.
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[archive-e:1153-v:18-y:2008-d:2008-05-08-p:community]
