Mr Chidambaram, can the nation’s poor have more on their plates please?
I have known you for over 30 years now. As a lawyer, you have brilliantly fought both good and lost cases and causes; as a politician-economist, you’ve been a forceful advocate of opening economic boundaries. I have been witness to your journey that started as a minister of state for internal security in the Rajiv Gandhi government and through all later governments, barring the NDA. Even when circumstances forced you to change parties, your faith in the economic ideology you initially embraced sustained. For the first time since Independence, we now have political parties of varying hues resorting to good economics even if meant bad politics at times. It is this glitter of economic reforms which makes for the cohabitation of confrontationist politics with consensual economics.
The past three decades have seen Indians becoming the most respectable economic identities globally. We may be having more poor people than the whole of Africa but we also have more billionaires than Britain. Every year at Davos, more Indians arrive in their private jets than people of most other countries. Scores of Indian companies have become multinational corporations. Where we once had to settle for either an Ambassador or a Premier, now we have the option of buying any car, any model. Last year’s list of $1 billion-plus High Net Worth Individuals (HNIs) has 68 Indians, third only behind the US and China.
This wealth, and the level of luxury it gives them, could not have come but for the fiscal policies of successive governments whose policies helped them expand their businesses and become globally competitive. Two decades of economic liberalisation has drastically changed the perception about India. Earlier, we were known as a rich nation inhabited by poor people. India is now a poor country in which few rich people live and who enjoy disproportionately higher control over capital market and natural wealth and resources. In the past two decades, India was perhaps the only developing economy in which more than 50 per cent of the GDP came from services sector. Share of both the manufacturing and agriculture sectors is shrinking.
On the eve of your last regular budget, it would not be an exaggeration to say that the expectations from you are so high , anyone else in your place would have run scared. It is your last regular budget before the next Lok Sabha elections. So far, the prime minister kept hoping that the positive effects of economic reforms would trickle down. They haven’t. And it’s easy to see why. The top is stone-hearted and is loathe to let some of the wealth roll down to the deserving. Worse, subsidies for the poor are being gradually withdrawn to make way for increased incentives for the rich. Both the prime minister and you have been talking about pruning subsidies on everything which the lower and middle class consumes. At the same time, the UPA government has been quite liberal with funding social schemes which dole out thousands of crores to the poor but not productive jobs. Fiscal policies have encouraged conspicuous consumption by the super-rich who jet around on private crafts, buy villas in exotic locales, hold birthdays and weddings in Venice, Paris and London while the lower middle classes struggle to buy even single-bedroom flats in any city. While public authorities have abdicated their responsibility to provide affordable housing for the poor and the middle class, avaricious builders have been given liberal loans at low interest rates to construct condominiums for the rich.
The ordinary people can only hope that you will at least keep them somewhere in the back of your mind when you formulate your budget policies. They want quality education and healthcare, potable water and sanitation. You may argue that these are state subjects, but let us face it, it is the Central tax structure that determines how investors choose to put their monies. It has not gone unnoticed that while average price of middle segment cars haven’t risen for the past five years, fuel prices have gone up by almost 60 per cent during the same period. They are not able to understand why an ordinary investor who makes few thousand rupees on the stock market pays the same percentage of tax as a person who makes millions as dividend from his own company. A middle class family has to now pay service charge on almost all services, from a train ticket to getting the house repaired.
Your frustration with shrinking sources of additional resources mobilisation is quite understandable. The states aren’t willing to expand their tax net because they rightly or wrongly feel that the Centre has usurped most of their powers. Some of them, however, have a point. Rising income of the Centre is being spent on schemes which the states feel are meant to get more votes. The states expect that they should get a better share of the Central funds. Even your ministerial colleagues are mounting pressure on you to be liberal in allocating money.
I am aware that your job is such that you are constantly walking on the razor’s edge. Now the time has come for you to make a choice. Don’t forget that your own party admitted that it were the pro-rich economic policies that were responsible for its defeat during 1996. You have to prove that even good politics can deliver better economic results. You have to reduce the cost of governance, tax conspicuous consumption, and create more employment opportunities. The last three decades have seen successive government initiating policies that turned millionaires into billionaires. You have a chance now to convert the poor into middle class and the middle class into rich. And unlike the rich and mighty, they are not fair-weather friends. Give them something, they will reciprocate.
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