Union finance Minister Pranab Mukherjee arrives at Parliament to present the budget 2012-13, in New Delhi. PTI Photo by Shahbaz Khan
Departing from the familiar references to Kautilya's Arthasastra, the finance minister, in his budget speech, quoted from the 'immortal' Shakespeare's Hamlet "I must be cruel only to be kind". The FM did not but Shakespeare continued: "Thus bad begins …" Indeed, it does with this budget.
This so-called aam admi government has presented a budget for the khas admi. Direct taxes have been reduced by Rs. 4,500 crore while indirect taxes have been hiked by Rs. 45,940 crore. Direct tax concessions benefit the rich while indirect taxes burden the working people.
The aam admi is subjected to a double whammy as indirect taxes hikes also contribute to the inflationary spiral directly.
Virtually turning a blind eye to the continuing global economic crisis, this budget has given significant concessions to international finance capital by reducing the security transactions tax as well as on external commercial borrowing by Indian corporates. This will only feed further speculation and make India more vulnerable.
These measures are being undertaken under the wrong assumption that the flow of foreign finances will bolster our situation.
The total fiscal deficit now stands at Rs. 5,21,980 crore or 5.9 per cent of GDP. The budget documents show that in the same year, the total tax revenue foregone (i.e., voluntarily not collected by the government) amounts to Rs. 5,29,432 crore.
This is nearly Rs. 8,000 crore more than the entire fiscal deficit. If these legitimate amounts were, instead, collected, then there would be no fiscal deficit at all.
Internationally, a 3 per cent fiscal deficit is considered healthy. This works out to over Rs. 2.5 lakh crore, given our current GDP.
If legitimate taxes were collected, instead of doling out concessions to India Inc and the rich, we could have generated huge additional employment. This would have been in the interests of the aam admi.
Yechury is a politburo member, Communist Party of India (Marxist)