As the Narendra Modi government prepares its initial budget offering, I offer herewith a compilation of some essentials the Budget has to contain. Individual recommendations will be discussed in detail over the next three weeks—for a discussion of how corporate tax rate should and must be reduced see FE, “No more band-aid tax policy”, goo.gl/ce4aB3. Incidentally, that article forgot to include, in the high 30 % effective tax rate paid by Indian corporates, the 2% tax via the misguided Corporate Social Responsibility levy.
The Budget vision document should clearly emphasise the following. First, that there is a structural change implied in the mandate of the people. The mandate does not involve a shift from tweedledum to tweedledee. The mandate is not what happens in George Orwell’s Animal Farm: “The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which”. In short, the Budget should be different from the Congress Budgets.
It is also nobody’s case, least of all mine, that Budget 2014/15 will suddenly make everything right; will magically make the economy grow, and provide jobs to the jobless, and toilets to those who don’t have them today. But the Budget will be misguided, and the voters’ wrath shall descend on it, if it does not contain a vision, and a roadmap, of what will be done in the next three years. The Budget must also outline the economic philosophy of this new government and how is it different than what the people have just recently, and overwhelmingly, rejected.
Some key policy concerns and initiatives expected in Budget 2014/15.
Retrospective taxes: The latest defence of the most retrogressive (Neanderthal?) policy ever initiated by the Indian government is that the GoI cannot reject, reverse, and remove this legislation because…the CAG will ask for explanation of the potential, litigation-dependent revenue loss! I am not a lawyer, but let me see if I get the argument right. Before the former finance minister, Pranab Mukherjee, introduced this legislation in his reverse path-breaking 2012 budget, there were no retrospective taxes. Indeed, the government had to introduce new laws in order to invoke this stupidity. The CAG is just an arm of the government that attempts to ensure that government expenditures and revenue collections are properly accounted for. It is just an auditing agency, definitely no more and may even be