(1888PressRelease)
January 13, 2007 - Where is India going? What is happening in the year 2007? Is it predictable? Or is it a grey zone? In fact, there is no grey zone at all. The picture appears to be clear. The very fact the Government is collecting taxes far beyond expectations as projected in the Budget almost a year ago is one signal that the year 2007 is likely to see the country move into the zoom zone and make unprecedented headway despite all the numerous problems India faces.
The taxes are buoyant indeed. The Finance Ministry is trying hard to ensure compliance. It is tightening almost all the screws. It is alert and watchful. It has just not told the income tax officers to get business and industry to share a part of the high profits and high net worth individuals to pay a part of their rising incomes to the treasury, but tried to reach out to the builders who are believed to be among the biggest tax avoiders or evaders and got them to pay some of their huge earnings as tax or face the music. The message has gone home and yielded results.
The chartered accountants are also being persuaded to file tax returns of their clients earlier than the last date and have advance tax deposited in good time—and a good 10 or 20 per cent more than the previous year. There is no more excuse to dilly-dally. As it happens, corporates and captains of industry are not dilly-dallying either. That is how the treasury has more money than it was hoping for, though it is not bursting at the seams. The simple reason for that is rising expectations, higher spending on health, education, some small reliefs for the dying, starving farmers. The Hindustan Times newspaper has revealed in an editorial on the plight of the people at large: 64 per cent of the Indians go to bed hungry night after night. That is the cause of malnutrition.
People die not only of freezing or blazing weather. Their misery is aggravated by sheer lack of food. It may be claimed that the government cannot feed, clothe, shelter, educate or take care of every one of the billion plus Indians. Nor can civil society do so despite the tall claims to civility: where is civility. Both civil society and government have to recognize that they are in governance or blessed with great wealth with the divine injunction from above to share with the poorest of the poor, or provide at least a few morsels, a few yards of clothing, a little hut, a small school for the miserable humanity whose number has been put down to 64 per cent by a publication which is the prime supporter of the rulers of the day.
To do a bit for the very poor, the Government has been sharing with us Indians or disclosing its intentions, or rather its tax plans that will be unveiled on February 28, that is roughly six weeks from now. What are these plans? There will be no new taxes, but the tax exemption limit may well be raised from about Rs.1,80,000 to Rs. 2 lakhs or even a little more to make it unnecessary for several millions to file tax returns. In view of the better compliance this year, there will be even greater stress on further compliance. The department is being increasingly computerized and more staff is being hired to ensure that many who evade tax fall in the net and can be tracked down. Of course, more taxmen means more corruption, more corrupt mouths to feed, but that is part of life, a fact of life, which the people of India have learnt to live with. The Government is bound to cut import and export duties, reduce excise duties to provide a level playing field to all entrepreneurs.
The government is also threatening to reduce tax exemptions, though the Prime Minister has promised that it will not be done this year, but from next year onwards. The Chinese have started withdrawing tax breaks from even special economic zones after ten years. That thought and practice has not escaped the government in India as well and after ten years even SEZs here in India may not be given a tax-free life. But one major proposal in the works is two per cent more of service tax and more trades coming under the umbrella. Even the value added tax or VAT may not escape the higher trajectory. Even the Central sales tax is proposed to be rationalized—upwards perhaps. Because the government does not always think downwards. It looks up to the skies and the sky is the limit.
The Government of India is indeed worried over inflation and has taken some steps like the banks’ cash reserve ratio or CRR and higher lending rates from the Reserve Bank to the nationalized banks but the inflationary pressures are so strong that inflation is officially close to 5.5 per cent, though on the ground it is much more. The dal roti, vegetable, spices, rents, clothing are all way up and there is no stopping manufacturers, wholesalers, distributors and retailers from jacking up prices of basic needs or for that matter of any thing.
With petroleum prices temporarily dipping, the government is hoping that it will go down below $50 a barrel in the next few weeks. As a Republic Day present, the prices of petrol and diesel may be further cut by a rupee or two per litre, thanks to the weak winter in large parts of the Occident.
The stock markets touched a new high of over 14,000 for the Bombay Sensex earlier this month, but has been dipping since. Perhaps it will be above 14,000 again or 14,500 around budget time and Nifty will be much above 4,000, but start dipping again in March for the speculators to book profits all the time. That is financial wisdom, financial expertise, that is playing the stock market casino. That is the name of the game.
