A Budget rooted in another era

The Finance Minister, Mr Pranab Mukherjee's latest Budget has been described by some commentators as a “throwback to the 1980s.” It is, but not just because it has gone back to an older school of revenue raising and focused on indirect taxes, or because it is loaded with the kind of complicated details on inclusions and exemptions which made yesteryear Budgets such a happy hunting ground for lobbyists and tax specialists alike.

It's a throwback, not for the number of new things taxed, but the kind of things taxed. The Budget, by treating things like air-conditioned travel in the Railways' less than world-class coaches (where the ‘toilet' is a hole in the floor) as some form of sinful luxury which is enjoyed by the ‘rich' who therefore ought to be taxed, reflects a mindset one had hoped had been consigned to the pages of history.

Old mindset

As a nation, we are a prickly lot, with an acute sense of self esteem. We constantly tell ourselves that we belong at the ‘top table' of world economies — a phrase, in fact, which was actually used by the Finance Minister in his Budget speech this year — and get peeved and upset when anybody does not accord us the ‘respect' we deserve.

But do we really believe this is so? Do we behave as proudly emergent nation revelling in its new-found economic might? Do we consider ourselves as a developing nation on the way to developed status, or do we only make noises about it but prefer the security blanket of underdevelopment?

Going by what we do and not what we say, it appears to be the latter. Apart from scoring the odd point with our erstwhile colonial masters by spurning their aid, we don't actually behave like a country which is confident of its economic achievements.

That's why this Budget is a throwback to an older, pre-reform India, an India we were told — and we believed those who told us — that we had left behind. An India where it was an offence to want, a sin to aspire and a crime to consume.

Such ‘offences' against the ‘national interest' were duly punished with punitive taxes. From automobiles to televisions to computers to air-conditioners, anything which didn't fit the notional Gandhian idea of swarajya and khadi which was notionally pursued by our political masters — witness the khadi dutifully displayed by crorepati netas — was then controlled through a mix of production permits and tax disincentives.

It's not as if attempts haven't been made in the past to change this kind of mindset. Rajiv Gandhi perhaps was the first. Perhaps because he was not a career politician, asked simple questions uncoloured by the compulsions of electoral politics. Why couldn't people have colour television? Why couldn't India make a modern car? Why shouldn't individuals or businesses have computers if they needed it? Why shouldn't our villages have telephones?

Middle-class growth story

And because he was the Prime Minister, because he had the largest majority in the history of Parliament and, most importantly, because he was a Gandhi, he managed to get solutions. So, white goods happened, Internet access was opened up, a Sam Pitroda was hired to develop a cheap rural telephone exchange...and suddenly, an aspirational, want-driven middle class which was willing to work to fund its dreams, was created. The same middle class which put the ‘I' in BRICS and which is still, to a great extent, the engine powering the India growth story.

Poor Rajiv Gandhi could not live to see his dream turn to reality. But what of those who followed him? Clearly, there was no fundamental change of mind or heart, because it took an economic crisis which drove the country to the verge of bankruptcy to force the political class to acknowledge the economic realities facing the country and to do something about. Later, even during the golden years of sustained growth and booming stock markets and a ‘virtuous cycle' of consumption, there was never any conviction. So we had excise duty on cars being cut — but anything bigger than a Maruti 800 was a ‘luxury' and taxed accordingly. Taxation slabs were ‘rationalised' — but cesses and surcharges remained. So what if the poor prefer cheap, durable polyester — we are a khadi nation, and branded apparel a privilege of the rich!

One can endlessly list the self-serving hypocrisies of the ruling political-bureaucratic class. The point is, will we, as consumers, tax payers and voters — ever get around to forcing them to face up to it?

Inconvenient truths

Going by recent experience, that appears doubtful. A Railway minister who proposes a small fare increase to generate the much-needed money to pay for even more sorely needed modernisation and safety measures is promptly sacked, amidst much shedding of crocodile tears for the aam aadmi — the common man — by the political class. Never mind that Railway workers, Railway fans, and even the aam aadmi Railway user, said they were quite happy to pay more for a better and safer journey!

But, then, such inconvenient truths have always been conveniently ignored. Most ordinary taxpayers will tell you that they are quite happy to pay more taxes — provided they get better governance. The first part of the statement is heard, and promptly acted upon, while the second part is quietly ignored.

Time and again, the Indian consumer has responded by going the extra mile, even when given a few paltry inches. A reduction in duties which brought car prices this side of ridiculous was enough to create a domestic automobile industry which last year manufactured more cars than the US!

A trifling tax break on housing finance unleashed a real estate boom which is transforming the face of urban India. Simply opening the gates a little bit in telecom was enough to put a mobile into the hands of half a billion Indians.

This is not to say that the issues which our rulers say they are focusing on are not real or unimportant. We have oceans of poverty amidst plenty, hunger and malnutrition amidst overconsumption, islands of illiteracy amidst a sea of computer engineers.

But the solution does not lie in pumping more and more funds into a leaky, inefficient and corruption-ridden system of income transfer from the so-called haves to the have-nots, while squeezing the genuine aspirations for a better life of ordinary Indians.

Want the world to make room for you at the top table? Start by thinking that your own people deserve a place there!

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