The BJP manifesto-an important indicator of how the party intends to govern differently from the ruling Congress?was released on Friday. The most interesting and convincing proposals are on tax?except the bizarre promise to exempt all armed forces personnel from paying income tax, which is against all principles of equity and efficiency. The plan to raise the exemption limit in general, and to grant tax-free status to pensions for people over 60 are sensible moves and will boost consumption in a time of downturn. The proposition to abolish the fringe benefit tax is unexceptionable. The proposal to make interest on deposits tax-free for those without business income seeks to avoid such a concession largely benefiting corporates. But the distinction may introduce another complicated clause in tax rules and exempting income-from-interest from tax is bad in principle . Apart from tax, the BJP has reiterated its commitment to spend on infrastructure, particularly roads. It?s hard to argue against these on a point of principle. The proposal to build homes for poorer sections of society and to provide loans at cheaper rates can?t be faulted. Except, remember, that the government has no direct control over interest rates and should not have, either. Labour reform is another area where the BJP has made the right noises: compulsory secret ballot for union elections is a positive suggestion.
The manifesto, however, disappoints on a number of fronts. There is only a passing one-line reference to economic reforms. There is a deafening silence on disinvestment?something the BJP had pursued during its time in government?something that the Congress has hinted at in its manifesto. There is no mention of reforms in the financial sector, particularly banking, insurance and pensions. And the manifesto is also silent on how a BJP government would manage the fiscal deficit. There is plenty of populism, competing with the Congress?agricultural loan waivers, cheap farm loans and subsidised rice and wheat for BPL families. The plan to prevent any FDI in retail is clearly pandering to the vote bank of the unorganised retail sector, but is a signal against reform nonetheless. The BJP has, in recent days, been raising the issue of money of Indian origin lying in tax havens abroad and how its intends to bring this money back to India. While this goal may seem reasonable in the context of the G-20 declaration on tax havens, it is completely unclear how the BJP intends to actually go about accomplishing this goal.
