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BW Businessworld

Aspiration Lost

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It is difficult to praise or criticise the budget any more. So much of the critical decision making is outside the purview of the Finance ministry that the minister himself feels helpless. 
 
Much of the problems of Indian economy remain because of rising demand for non-grain food, high interest rates, poor implementation of infrastructure projects and faulty delivery of social services like health and education.
 
Apart from allocating funds, the Finance Minister can do little. Hundreds of projects are held up because clearances are missing or they are caught in disputes. Speeding them up alone can create a stimulus for the economy. 
 
Subsidy remains a drag on the government funds. But while the government is tinkering with ways to reduce subsidy without increasing burden of tax payers, a critical element is lost. 
 
Finance Minister P Chidambaram has not spoken enough about widening the tax base in Budget 2013. At about 32 million, the tax base remains too narrow for a country with 1.2 billion people. If more people pay tax, the burden on each can be reduced. Taxing new categories while lowering taxes for those in the net could have earned him a lot of credit. 
 
The last few years have shown a worrying trend on fall in growth in number of tax assessees. The tax deficit seems to be growing faster than the tax base. 
 
About 90 per cent of the tax payers remain in the bottom slab of the income tax rates. So increasing taxes on high income group can earn the government only limited benefit.
 
Perhaps the simplest of simplistic solutions is to focus on job creation. The economic survey did emphasise on it. But the budget does not underline it emphatically enough. 
 
When jobs increase and salaries rise, people don't mind the relative burden of higher direct and indirect tax as long as they have enough to spend on their aspirations. 
 
This budget disappoints by not reviving the enthusiasm of the consuming classes. With fewer consumers in the market, industrial activity and therefore tax revenue may not see the expected spike. The policies also do not do more to increase the population of the consuming classes.
 
Despite all social schemes, the poor feel good only when they can afford something they could not earlier. Work guarantees that freeze their mobility may keep them satisfied but not happy enough to vote for their benefactor. 
 
(Pranjal Sharma is a senior business writer. He can be contacted at [email protected])