Feb 4, 2016

Yes, Mr Prime Minister. Incentives too are subsidies.

Yes, Mr Prime Minister. You are absolutely right. It is all a game of words. When the poor are given financial support it is called subsidies, a word which has now been demonized. But when the rich are doled out massive freebies like land at a throwaway price, natural resources being made available on a platter, tax exemptions, tax holidays, and the list is endless; it is called incentive for growth.

This clever manipulation of economic thought through a deliberate choice of words – and parroting it to a level that it becomes a part of the popular discourse – in reality is what has actually led to worsening inequality. The choice of right vocabulary to cover up massive subsidise to the rich and the influential, often doled out at an obscene level, is perhaps at the very foundation of the global economic crisis.

The tragedy is that none of the mainline economists have ever questioned this. They knew it but they kept quiet.

When Prime Minister asked: “If the fertilizer subsidy were to be re-named ‘incentive for agricultural production’, I wonder if some experts might view it differently,” he actually hit the nail on the head. This is exactly what I have saying for long. How come an outlay of Rs 1.25 lakh crore for the food security programme, which is expected to feed 67 per cent of India’s population, is decried by economists as a wasteful subsidy but Rs 42-lakh-crore tax concessions (listed as Revenue Foregone in the budget documents) to India Inc since 2004-05 is considered to be an incentive for growth? You would have noticed. Every time I raised this question on various TV panels I was just ignored.

I still remember. In one of the pre-budget meetings with the Finance Minister Arun Jaitley I had specifically made a suggestion to withdraw tax concessions (at that time it stood at Rs 5.24 lakh crore for just one year) which I explained were nothing but a terrible drain on nation’s finances, a mainline economist had gone to the extent of actually asking the Finance Minister Arun Jaitley to strike off the ‘revenue foregone’ category from budget documents so that these massive doles remain hidden from public glare. 

Consider this. The LPG subsidy was decried as a wasteful subsidy. Much of it of course goes to affluent section, which should be withdrawn. I remember an economist wrote that every year the country was spending Rs 48-crore for subsidizing LPG cylinders, an amount good enough to wipe out poverty from India for one year. He wanted the entire subsidy to be scrapped. When I responded by saying that if Rs 48-crore subsidy could wipe out poverty for one year, Rs 42-lakh crore subsidy by way of tax exemptions could have removed poverty for 84 years, and surely would have made poverty history, I was told that tax exemptions to corporate India were an ‘incentive for growth’.

These massive tax exemptions, enough to meet the entire budget expenditure for three years, however failed to deliver. India is witnessing jobless growth, employment generation is dismal, industrial growth has remained sluggish, manufacturing has gone into negative, and the exports have failed to pick up. The question that I have been asking and which still remains unanswered is that if the incentives have failed to make any visible impact, then where has all that money gone? But the Niti Ayog never questioned this. Nor did the Chief Economic Advisor ever point it out.

The silence is deafening.

I like it when Narendra Modi says: “Double taxation treaties have in some cases resulted in double non-taxation.” These are also not counted in the tax exemptions that are fished out every year. In other words, the country is suffering a double loss. On the one hand there is a revenue loss from these tax exemptions, and on the other, as the Prime Minister says, “dividends and long-term capital gains on shares traded in stock exchanges are totally exempt from income tax even though it is not the poor who earn them. Since it is exempt, it is not even counted in the tax exemptions.”

He is absolutely right. The country continues to suffer a double blow.

The language game does not end here. If you and I default on a bank loan, we are called defaulters. The bank can seize the car against which the loan is taken or mortgage the property or even use wrong arm tactics to extract the amount. But when the rich and the corporate default a bank, it is called Non-Performing Assets (NPAs). First, the common man on the street does not understand that how cleverly a difference in language hides a bigger crime. Secondly, the banks never seize the physical assets of these companies but instead go for restructuring the bad debts.

Non-Performing Assets of banks have reached a critical level. But watch any TV debate; NPAs rarely feature in prime time discussions. We are time and again reminded of the Rs 74,000-crore loan waiver that was given to farmers in 2008-09 but I have never seen the mainline media (including the business channels) ever question the restructuring of bad loans. The reason is obvious. The rich want to protect their subsidies, and the best way is to dress them in a vocabulary that the masses cannot differentiate. Thank you, Mr Prime Minister. You have stepped in where mainline economists and the mainline media fears to tread.

PM Modi bats for subsidies and rightly so. ABPLive.in 

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