As a prudent economic practice in the aftermath of demonetisation, union finance minister Arun Jaitley should concentrate on slashing indirect taxes, keeping the direct tax structure and slabs intact in his forthcoming budget proposals for the financial year 2017-18, his predecessor P Chidambaram advised on Saturday.
“Had I been the union finance minister currently, I would have concentrated on reduction in indirect tax rates like service tax, excise duty and customs duty, among others. At the same time, I would have kept the direct tax structure and slabs untouched for the time being,” Chidambaram said while participating in an interactive session at the Kolkata Literary Meet here on Saturday.
The former finance minister said that change in the direct tax structure and slabs would have benefitted only a small number of people in the country. “However, slashing of the indirect tax structure would benefit crores of people who have already suffered a lot because of the demonetisation,” he added.
Chidambaram also took a swipe at Jaitley saying that had he been the finance minister he would have resigned on November 8, 2016 immediately after the Prime Minister, Nareandra Modi made the late- evening announcement banning the old high-value currency.
“The practice is that on crucial issues on banking and currencies it is Reserve Bank of India (RBI), which should make recommendations and the union government should act as per the recommendations of the apex bank. But in case of demonetization what happened was exactly the opposite of the common practice, where the RBI acted as per the recommendations of the union government,” Chidambaram said.
{{/usCountry}}“The practice is that on crucial issues on banking and currencies it is Reserve Bank of India (RBI), which should make recommendations and the union government should act as per the recommendations of the apex bank. But in case of demonetization what happened was exactly the opposite of the common practice, where the RBI acted as per the recommendations of the union government,” Chidambaram said.
{{/usCountry}}He said that through demonetisation the Prime Minister has been able to create a class divide in the Indian society. “The Prime Minister hopes to gain political mileage through this creation of class divide. However, with days passing by without any immediate respite being visible, such class divide will slowly fade out,” the former finance minister said.
Chidambaram acknowledged that while the cash crisis might have eased to an extent in the major cities and to an extent in poll-bound Uttar Pradesh, most of the northeastern states and rural areas of Odisha, Bihar and even Tamil Nadu are still suffering from cash shortage.