Robbing Peter To Pay Paul

Robbing Peter To Pay Paul

One compelling reason for high prices of anything manufactured or processed in India is the tax component wrapped up in it at every stage from the raw materials onwards. It makes us singularly uncompetitive internationally, unless the exports are done on stripped- down and subsidised  basis.

The one exception is IT because, as many have pointed out, Government does not understand its ways well enough to cripple it. Besides, it is a ‘service’, a mind- based output, that got big before the taxation began. And it also benefits from the constantly weakening rupee, which is otherwise a barometer of a slowing and under-productive  economy.

This is, of course, in addition to the high prices of agricultural produce at retail level, which is at inflated double- digit percentages today, and hopefully in the nature of a temporary phenomenon.

Still, wastage, spoilage and transportation play a part in food prices, especially in the absence of much of a food- processing or packaging industry, or a cold chain, as do the vagaries of weather and crop yields. The percentages of spoilage and wastage are at a shocking between 30 and 50 per cent because of crude handling by rough and ready traders; and yet, the political will to modernise this vital sector, via multi-brand retailing, or any other route, has been largely absent. This, despite a third of the population below the poverty line, and 70% qualifying for food subsidies!

Elsewhere, half the price of a car for example, and half the price of a litre of petrol at the pump too is tax plus opaque/inefficient babu estimated expenses.  We are being told half- truths when the Government says prices must inevitably rise because of higher crude oil prices or even the fuel subsidy burden.

The Government, in fact, routinely collects money against one head and spends it, mostly without cost-effectiveness, on another. So petrol duties and notional expense charges may go to fund a welfare scheme. Punjab taxes may be spent in Mizoram. Mumbai, the business capital, and the source of much of the nation’s taxes, has always pointed this out for example. And many who live elsewhere, resent the amount of infrastructure spending done on the city-state of Delhi. The Government may not be arbitrary in all of this, but it is certainly non-transparent, and  the public has no say on how their taxes are spent.

And the Government itself is hugely expensive without a by- your- leave and quick at giving itself salary and perquisite hikes whenever it likes. It is gargantuan both in its size and operation, with dozens of cars, security men, officials and large houses at the disposal of every politician. It is, like the erstwhile USSR, in some danger of collapse under its own fiscal weight. Particularly, if the GDP is allowed to languish at around 4% per annum, instead of the necessary 8 to 9 per cent, while deficit financing and Government debt keeps spiraling upwards .

 Many observers from developed countries find the perquisites and processes of our Government much greater than what is permitted to them at home. And their numbers are very much smaller. We, by way of contrast, employ numerous people in permanent, pension paying jobs, and the numbers keep rising as State and Central ministries proliferate, along with other, satellite public –sector units (PSUs).

Most foreign diplomats like their experience of living on a lavish scale here, with India’s cheaper prices and undemanding ways, much better than in their own home countries. Also, India accords generous unilateral privileges to many of them, as has been illustrated by the recent reactions and reciprocal adjustments to the Khobragade Affair.

But for the aam aadmi, that every political entity is planning to benefit in this time of elections, the taxation and profligacy is getting to be a bit too much. Taxes, indirect at every step, plus direct ones, overlapping levies and so on, have grown onerous combined with inflation and high prices. And more new taxes are being continuously added and old ones are being further raised to new levels!

There is little evidence that the proceeds, always said to be in shortfall compared to targets and plans, are being spent efficiently by the State and Central Governments. Of course, this varies widely. The successful Sabarmati River clean up and beautification of the banks by way of promenades,  has reportedly cost a fraction of the endless crores poured into the Ganga clean- up over the years , the latter with near zero results.  

Many States are actually bankrupt and owe the Centre thousands of crores that will have to be written off. Almost everything run by the Government in the Centre or the States except for a clutch of monopolistic ‘navratnas’ and ‘mini-navratnas’ are functioning at a loss. How can this state of affairs be sustained indefinitely, with basic schooling, healthcare, security, nutrition, etc. all in a shambles, despite our high taxation?

Delhi’s AAP chief minister designate’s token refusals of government housing, cars, security and red beacons in Delhi is perhaps a move in the right direction. But it will take more than this kind of  populist playing to the gallery. Government accountability and efficiency, elimination of corruption and inordinate delay every step of the way must come. We need fiscal responsibility so that there is a balancing of budgets, some co-relationship between income and expenditure,  and decision- making that actually benefits the people, instead of various embedded vested interests.

There is also an urgent need for political parties to stop trying to fool the people with wild promises at election time, and turning their backs on them when elected. This might have worked with a largely illiterate rural audience in decades past, before satellite television, but not anymore. Today 40% of the electorate is urban. And very large numbers everywhere are young, aspirational people between the ages of 15 to 35.

To expect politicians out to win to avoid over-statement may be too much, so it needs to be borne in mind by the voter to not get swayed. Without voter discernment, the public cannot expect politicians to own up to any kind of accountability.

This is the real revolution of political maturity that the situation demands. But it is definitely a tall order in a country where the government, by and large, has become totally unresponsive.  The novice AAP may have unleashed a popular angst.

But now, it is for every political party, every bureaucrat and Government servant, to take its cue from this new reality, and change its ways towards a greater interactivity and responsiveness of governance.

 (1,097 words)

December 25^th, 2013

Gautam Mukherjee