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As a statement of financial intent, the full budget presented by the government post-election would probably get a solid 8 or maybe even slightly more out of 10. With focus on employment, rural & business growth, incentives for startups and overall continued focus on capital expenditure, the document scores well. However, when it comes to having its ear to the ground, the budget is a ZERO. For a government that has come off an election where it lost ground amongst the middle & upper classes – whether through disenchantment or apathy – to slap a budget that does nothing for them is exactly that: a slap, tightly across their ambitions. And this is coming from a staunch supporter of this dispensation, not from today but pre-2014 (and much before).
As we see middle class memes explode on social media, one can clearly see the missed point – tax has gone down, as it has been gradually over the past few years; the impact of GST is substantively lower than the erstwhile VAT regime where inter-state taxes, and other indirect taxes such as excise & octroi forced price structures to be elevated; and so on. We even see unchallenged untruths that businesspeople are paying vastly lower taxes on the same “income” playing out without the realization of the simple differentiation between revenue & profits. As someone who fascinatingly sees Freakonomics (Levitt & Dubner, 2005) playing out in everyday life, the government’s response to an almost lost election seems to be completely contrarian to the smoke signals out there. And here is how:
India has less than 2% of its population paying income tax, and individual income tax collections are higher than corporate tax. Everyone does pay GST, but for the 2% that is paying king’s ransom on its hard-earned money held captive by an unthinking Finance Minister, that only adds to be burden. And to top that, for a class that has painstakingly built and nurtured assets over the long term from savings barely squeezed out post the tax burden, to see a higher tax incidence on capital gains adds to the blow further. Despite all of this, this is a class which has been ready to bear tax for the sake of development with barely a murmur and has staunchly supported the BJP. Yet, the disillusionment has bubbled, almost violently, up to the surface in wake of the budget because the government seems to be unthinking of its most loyal supporters. A post-poll survey indicated that while the Congress did gain votes amongst the poorer sections of society, BJP held pretty much steady – meaning that freebies did resonate amongst the voters, and so yes, welfare needs to remain a key objective of the government. However, amongst the middle & upper classes, BJP lost substantial vote share, as did the Congress amongst upper classes, because of its anti-wealth stance coupled with freebies, but in the middle classes, the Congress had a substantial gain almost completely at the cost of the BJP. But the question is whether this was only because of taxes? And the answer is a big fat NO.
The answer is in the complete lack of big bang and REAL reform that the tax-paying middle class has been waiting for, now almost interminably. One of the best examples is in the new criminal laws – which can be described as window dressing at best. While they certainly codify modern techniques and approaches, none of the draconian measures that are misused daily by police and unscrupulous elements to torment the public at large have been addressed. Even the long standing – and laid down in detail by the law commission – reform in bail laws has been completely eschewed, despite the government having committed to do so as a part of overall reform. And that can be extrapolated to pretty much everything that this government is doing – no meaningful reform, just incremental changes and that too at a snail’s pace. We see no ease of doing business, no ease of living and continuation – maybe even enhancement - of bureaucratic terrorism. This is what then manifests itself into terrible infrastructure, casual acceptance of corruption in every aspect of life, horrible traffic conditions that kill nearly 500 people each day and take away precious personal and productive time, and the lording of bureaucrats – lowly to top – over the lives of people. Even the good things that the government has done in areas such as expressways, railways, aviation & telecom – are mired in bureaucracy and abject delays. The government seems to miss the fact that we are country of highly educated citizens with global access and awareness. We see the quality of life that countries with our levels of taxation offer to their citizens. And no, you cannot hide behind the “India so poor, world so rich” argument because that does not apply to apathy to reform and towards rooting out bureaucratic corruption (read: terrorism).
So, in short here is the bottomline: as said at the beginning, from a fiscal perspective, this budget is good, maybe even great. However, from a signaling perspective, it is unequivocally abysmal. A government that has had a massive mandate for 10 years, and chose to go for incremental reforms which are yet to show any real improvement in the quality of life of the citizens of this country. And therefore, if this government wants to win the next election, there better be (real) big bang reforms coming in massive doses, else its goodbye. Believe me, if I end up not supporting this dispensation come next election, it means that the fence sitters as well as the casual and issue-based supporters have already abandoned ship long back. Unfortunately, since I see no other active choice, at this moment, my mind is made up on NOTA if this government continues its inexplicable self-induced slumber.
Postscript: Two massive (and I am being equal parts sarcastic & serious) reforms to beging with would be a: to fire the ivory-castle resident arrogant-in-your-face Finance Minister, and b: reach out to professionals who can handle voter communication and policy making at world-class levels rather than relying on old hands who are out of touch with the real world and focused on jingoism almost vocationally. Modiji may just want to see the levels of disillusionment and disappointment the WhatsApp groups of even his ever-reliant ‘bhakts’ are filled with today.
