New Delhi. ‘Lokayat’ an affiliate of the Socialist Party (India), has released the following note on the budget presented by the Finance Minister Arun Jaitely for the year 2015-16. The Socialist Party shares the concerns and critique of the budget made by Neeraj Jain of ‘Lokayat’. Hence Pannalal Surana, Chairman Parliamentary Board and Spokesperson of the Socialist Party (India) released the same to the press and people.
Points on the Budget 2015-16
Part I:
The fraudulent fiscal deficit theory continues. As we
have discussed in our booklet, IS THE GOVERNMENT REALLY POOR, the theory that
“the government should reduce its fiscal deficit to promote growth”, is really
a fraudulent theory, designed to allow the government to transfer public money
to the corporate houses. Firstly, as Keynes had demonstrated long
ago, for a demand-constrained economy like India, fiscal deficit is good for
the economy. Even the developed countries like Japan facing recessionary conditions
have high fiscal deficits. But in India, the government is seeking to bring
down its fiscal deficit to near zero. Even assuming the fiscal deficit needs to
be reduced, the government can reduce it by increasing taxes on the rich, but
that it is not willing to do; the transfers to the rich, to the tune of lakhs
of crores of rupees, are justified in the name of promoting growth and so are
not called subsidies, but 'incentives'. The tax-to-gdp ratio of India is lower
than even the sub-Saharan African countries. And yet, the government has
further reduced the taxes on corporate houses in this budget.
On the other hand, the government spending on
the poor, aimed at providing them the bare means of subsistence and education
and health at affordable rates so that they can live like human beings and
develop their inherent potential, are being reduced to such low levels that
they are amongst the lowest in the world. They have been further reduced in
this budget, in the name of keeping the fiscal deficit under check.
So, here are some of the figures from this budget:
The Finance Minister seeks to contain fiscal deficit:
For 2014-15 – 4.1%
2015-16 – 3.9%
2016-17 – 3.5%
2017-18 – 3% (so target delayed by a year)
However,
While govt achieves fiscal deficit target for 2014-15 of
4.1%,
tax revenues target not achieved
l Jaitley's first
budget, 2014-15: gross tax revenue 10.6 per cent of the GDP;
l actual (revised
estimates) -- gross tax revenue 9.9 % of GDP.
Reasons for fall in Revenue in 2014-15: because revenue
foregone in tax exemptions – up from
Ø Rs. 5.5 lakh crores
in 2013-14
Ø to Rs. 5.89 lakh
crores in 2014-15!
New Budget, 2015-16:
i) In 2015-16 budget, FM announces further reduction in
taxes:
l New budget –
corporate tax rates further reduced from 30% to 25% - saying 30% uncompetitive!
(even though Jaitley admits – effective rate of taxation only 23%)
l Reduction of
corporate taxes – to provide tax-relief to corporate houses of Rs. 20,000
crores every year over next 4 years; Rs 80,000 crore in fourth year
l Budget abolishes
wealth tax (while increasing taxes on super rich - incomes in excess of Rs. 1
crore – by 2% more)
l GAAR implementation
deferred by more than 2 years – to 2017
l MAT also abolished.
ii) And on other hand, budget raises excise duties and
service taxes:
iii) Net result:
Ø Direct taxes fall
=> by Rs 8,315 crore, benefiting the rich
Ø Indirect taxes rise
=> by Rs 23,383 crore, increasing burden on the people
Ø Net impact of all
indirect and direct tax proposals – revenue gain of Rs 15,068 crore
iv) And so, on the whole Gross tax revenue no significant
increase, actually fall over 2014-15 (budgeted):
l 2015-16:
10.3% of GDP
l 2014-15
(budgeted): 10.6% of GDP
With tax revenues not rising (as proportion of GDP), and
fiscal deficit target set to fall, obviously – government expenditures set to
fall!
Note:
What
is GAAR – General Anti-Avoidance Rules:
Avoidance
is legal provision which allows investors to legally reduce their tax liability
GAAR
– empowers tax officials to deny avoidance, that is, tax benefits on
transactions or arrangements which do not have any commercial substance or
consideration other than achieving tax benefit
Whole
debate came about due to Vodafone case:
· Hutch-Essar
– an Indian company that had obtained telecom licenses in India to provide
cellular telephony in different circles in India
· 67%
of Hutch-Essar – controlled by CGP Investments – a company resident for tax
purposes in Cayman Islands; CGP in turn controlled by Hutchinson Hong Kong.
· Vodafone,
through a subsidiary, purchased CGP in 2007 for $11 billion (or Rs. 55000)
crores from Hutchinson – deal made overseas, so no taxes paid.
Indian
tax authorities: Since aim of transaction to acquire an Indian company, and CGP
had made a profit in selling shares of Hutch-Essar to Vodafone, so Vodafone as
buyer of shares liable to pay capital gains tax, of $2.5 billion, or Rs. 11,000
crore.
Vodafone
challenged this, saying deal outside India, and both companies – buyer and
seller – located outside India.
l Vodafone
– world's biggest revenue earning mobile telephony company, and second-largest
in terms of subscribers.
High
Court upholds Indian tax authorities, Supreme Court overrules, saying it cannot
be said the registration of CGP in Cayman Islands was for tax avoidance.
l This
strange – Cayman Islands world renowned tax haven, fifth-largest banking centre
in the world, with $1.5 trillion in banking liabilities.
Since
2012, Indian Finance Ministers seeking to implement GAAR – to check such
transactions – but furious opposition by FIIs – so keep deferring it.
Part II:
And so: Total plan expenditure, non-plan expenditure, and
total expenditure declines:
l Total plan
expenditure declines by Rs 107,066 crore, to Rs 467,934 crore
l Non-plan
expenditure also fell,
l 2014-15, Revised
estimates: Total exp declined over the budget estimates by Rs 113,734 crore;
l 2015-16: Jaitley
cuts plan exp by Rs 2,657 crore (over revised estimates for 2014-15)
BUT MEANWHILE:
FM Announces an increase in public investment on
infrastructure by Rs 70,000 crore
So, Axe has to fall on social sector spending:
Sharp falls in social sector spending: both in 2014-15
and new budget
Budget 2015: allocations on agriculture, rural
development, drinking water and sanitation, health, school education and women
and child welfare have been cut: by Rs 439,192.25 crore or Rs 4.3 lakh crore
1) Dept of agriculture: allocations reduced from Rs
19,800 cr in 2014-15 to Rs 17,000 cr
2) Ministry of panchayati raj: Heavy cuts –
from Rs 3,400 crore in 2014-15 to Rs 95 crore
3) Ministry of drinking water and sanitation, which
includes clean Indian campaign: Allocations halved, frorm Rs 12,000 crore to Rs
6,200 crore
4) Ministry of resources, river development and Ganga
rejuvenation, under Uma Bharti: allocation reduced by a third – will now get Rs
4,200 crore against Rs 6,000 earmarked last year; National Ganga Plan outlay
within this increased to Rs 2100 crore from Rs 1500 crore, implying other
rivers can continue decaying.
5) Scheduled Castes Sub-Plan (SCP) and Tribal Sub-Plan
Actual
2013-14 Budget
2014-15 Revised
2014-15 Budget
2015-16
Scheduled Castes Sub-Plan
(SCP) Rs 34,700
cr Rs 50,500
crore Rs
33,600 crore Rs
30,800 crore
Tribal
Sub-Plan Rs 22,000
cr Rs
32,400 cr Rs 20,500
crore Rs
20,000 crore
6) The women and child development ministry funds halved:
l 2014-15, budgeted:
Rs 21,100 crore
l 2014-15, actual
spent: Rs. 18,500 crore
l 2015-16: Rs 10,300
crore
Within this, ICDS – budget halved, from Rs 16000 crore to
Rs 8000 crore!
National Nutrition Mission, scheme to increase allocation
to anganwadi workers – all in limbo
7) Expenditure on schemes for the welfare of children:
Ø 2014-15, budgeted:
Rs 81,100 crore;
Ø 2014-15, actual
spent: Rs 70,000 crore
Ø 2015-16: Rs 58,000
crore =>Rs 12,000 crore less.
8) Education budget – several new IITs announced in July
last year – yet to take off, and yet another new IIT announced, new IIMs and
AIIMS also announced
Actual
2013-14 Budget
2014-15 Revised
2014-15 Budget 2015-16
Dept of School Edn
and
Literacy 46856 55115 46805 42219
Dept of Higher Edn 24465 27656 23700 26855
Total 71321 82771 70505 69074
· school education
budget cut– from Rs 55,100 crore to Rs 42,200 crore;
· higher education
budget cut – from Rs 27,600 crore to Rs 26,800 crore.
· In all, education
budget cut by nearly 17%
Education spending as percentage of GDP now down to just
3.3% of GDP.
9) Ministry of Health and family welfare outlay reduced
by Rs 5,900 crore.
Actual 2013-14 Budget 2014-15 Revised
2014-15 Budget 2015-16
Department of Health
and Family
Welfare 27145 35163 29042 29653
Department of Health
Research 874 1017 932 1018
Department of AIDS
Control 1473 1785 1300 1397
Total 29492 37965 31274 32068
10) Although Jaitley tried to present a human face by
announcing a slew of low-cost pension and insurance schemes, including the Atal
Pension Yojana and the Universal Social Security scheme, the impact of these
schemes cannot be assessed for want of details.
