It is Budget season and there is the usual chatter in the well-heeled circles of Mumbai and Delhi about the possibility of “draconian” measures such as a long-term capital gains tax on shares, an inheritance tax or a wealth tax. Ironic, as this comes at a time when an Oxfam report has just told us that the richest 1 per cent of Indians accounted for 73 per cent of the total gain in national wealth last year. Yet, the rich want more. And they cannot bear the thought of the government claiming an extra portion of their fortunes, however tiny.
Ordinary hard-working, salaried folk part with over a third of their annual income, in the highest tax bracket. Income from bank fixed deposits, where most of Indian savings lie, is taxed at the same rate. But when you make a killing in the stock market, as most investors have over the last few years, you pay nothing, long-term capital gains tax being zero. Apparently, this is to encourage financialisation of savings. In a country where the poor go hungry, is this conscionable? Yet, the government cannot bring itself to take this step as it may break the breathtaking flight of the Sensex, which conveys to the world India’s great economic success. Inequality is just a leftist lament, the things which matter are GDP growth and the Sensex, correct?
The Oxfam report says we now have 101 billionaires. We should be proud of them. Thirty-seven per cent of these billionaires are inheritors of family wealth. For years, there has been background noise on an inheritance tax but the government has not had the guts to implement it. Meanwhile, most inheritors have protected their acquired wealth through the creation of trusts in a way that even an inheritance tax may not be able to reach. The Maharajas may have disappeared from the scene but economic feudalism lives on, and thrives.
Oxfam says that the wealth of the richest 1 per cent of Indians grew by Rs 21 lakh crore last year, roughly the size of India’s annual budget. Would it not be fair to tap a very small portion of this obscene number, as wealth tax? Just a drop of this enormous bounty for Indians who are less fortunate? Unimaginable. The finance minister has already soothed the anxieties of billionaires by promising that there won’t be any such tax.
After four years of falling short, the BJP knows that it cannot go back to the larger, non-urban electorate with economic delivery as its election plank. For this section, ‘achhe din’ still remains a mirage and any mention of it may actually rile sentiments. We saw glimpses of it during the recent Gujarat elections. Much more prudent, then, to fall back on good old Hindutva to win votes in the crucial Hindi heartland. The choice of Yogi Adityanath as the chief of India’s most populous state is the biggest proof of Modi’s conviction that Hindutva trumps economics any day, in the villages of north India.
Not just individuals, corporate India wants its share too. Lobbyists of CII and FICCI are working overtime to ensure that the rate of corporate tax is slashed in the budget, in line with an earlier commitment. Apparently, this is necessary to unleash “animal spirits” in our best companies, and of course to further fuel the Sensex. All lofty objectives. In essence, the portion of our country which has the most — wealthy citizens and profitable corporations — should get the biggest benefits from economic policy, that is the pitch.
It is logical to be baffled. At a time when economic growth has slowed, unemployment and inequality have jumped and the government is struggling to find budgetary resources, surely the onus must fall on the haves to help out the have nots? Equally, for a government preparing for a national election, one would have thought its priorities would be directed at the larger population — the ones who did not see their wealth balloon last year. Yes, but there is a flaw in that line of reasoning. The premise that economics is the key determinant for a voting choice across all sections of society is seen as a bogus one by the government.
Economics matters, for urban India. The BJP understands the economic pulse of the urban Indian voter better than any other party. A sharp fall in the Sensex can spoil the mood. Any claim on the growing wealth of the rich can affect the feel good factor. This cannot be disturbed. Modi hails from Gujarat, he understands it.
But what about rural India? Our farmers, small businessmen, wage labourers, the jobless? For them, there is the opium of the masses — religion. After four years of falling short, the BJP knows that it cannot go back to the larger, non-urban electorate with economic delivery as its election plank. For this section, achhe din still remains a mirage and any mention of it may actually rile sentiments. We saw glimpses of it during the recent Gujarat elections. Much more prudent, then, to fall back on good old Hindutva to win votes in the crucial Hindi heartland. The choice of Yogi Adityanath as the chief of India’s most populous state is the biggest proof of Modi’s conviction that Hindutva trumps economics any day, in the villages of north India.
This is why, while there may be some overtures to farmers and the rural population, analysts should not fear a hugely populist budget from Arun Jaitley. Some additional outlays here and there but nothing game-changing. And stock investors should breathe easy, nothing will be done to rock their boat. Villagers and farmers, on the other hand, should not expect any great turnaround in their fortunes. Rather, they should expect more instigation to emerge more patriotic and more Hindu, and cement their “rightful” domination of this great nation. What is money, after all, compared to these far loftier ideals?
Next year there will be another survey to show how the gap between the rich and poor has grown even wider. Yet, nothing will be done about it. Because our prime minister has cracked the winning formula. Horses for courses: More wealth for the rich, Hindutva for the poor.