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Journalism of Courage
Finance Minister Pranab Mukherjees Budgets,otherwise broadly reformist,have been fairly criticised for being stuffed with sector-specific exemptions and subsidies. Sector-specific measures of this sort have two major problematic consequences: they do not aid in the rationalisation and simplification of the tax code that is an essential first step in increasing voluntary compliance; and they are active inducements to rent-seeking of the worst sort,leading big business and industry confederations to conclude that profits will accrue from sitting patiently with begging bowls in the finance ministers ante-room rather than in searching for innovation,allowing markets to function,and cutting their own costs.
Both those faults are magnified when the finance minister does what he did on Thursday: announce modifications in the Finance Bill that are obviously in response to intense lobbying by individual sectors and,disturbingly,their associated ministries. After all,if an industry is struggling,the best way to handle it is industry-specific rule changes,not fiscal tinkering through a favourable word in the Union Budget. Doing it this way discourages the only real way to energise struggling sectors and prepare them for greater openness greater reform. And conceding industry demands weeks after the Budget was introduced is a fairly transparent message that petitioning the government works. Nor are the individual changes necessarily justified.
