Budget reax: India doesn't need a tax-and-spend Government

As the Finance Minister presents his Budget each year, we hear praises for the money he provides to this segment or that. We wait in anticipation, like a child waiting to see the gifts that Santa Claus will bring.

There is a fundamentally wrong assumption here – that the money of the citizen belongs to the government. And, the citizen should only be too thankful for getting some of his or her hard-earned money back. We have become so used to this logic that even for a disappointing Budget like the one presented this year on February 29, we end up praising the government for the little money it returns to us. In the worst case, we are modest in our criticism, hoping for better gifts next time and not wanting to annoy Santa.

Hello! Let’s wake up. It was our money to begin with!

Let us look at two facts:

• The best way to reduce poverty is to create sustainable jobs with good wages. The healthy growth in India’s economy, the 11 million net new jobs created per year, and reduction in poverty are due to the hard work of the private sector, and not because of government spending.
• The Government is inefficient, bureaucratic and corrupt in spending money, let alone in creating sustainable jobs. And I think a vast majority of Indians would agree. Studies show that often only 15 paisa of every rupee spent by the Government benefits the intended recipient. Even the Finance Minister says the Government machinery is tried, tested and failed in bringing results.

With a steep growth in economy and tax collection, we should keep state expenditure flat and return the money of India’s citizens back to them.

But, how?

By reducing personal and corporate taxes. By eliminating complex and unnecessary taxes like FBT. By giving private sector incentives to raise India’s human capital through education and skills improvement, with a focus on inclusive growth.

With the exception of reduction in personal income tax rates, there is nothing material in this Budget that will help boost India’s economy in the long term. Instead, what we see is an unprecedented increase in government spending and a shocking 88 pc increase in tax collection over three years – from Rs 3.7 lakh crores in 2005-06 to a projected Rs 6.9 lakh crores in 2008-09. This money will mostly line the pockets of an inefficient and corrupt system.

If you are working hard and earning more money, what would you say if your neighbor says, “You are doing well, so I deserve some of that money”. “Ridiculous!” is what you would say.

Yet, we tolerate a government attitude that if the private sector is doing well, it is okay for the Government to collect more of its money. That there is no need to reduce corporate tax percentage to compensate for the growth.

If a company’s board is patient, it will remove a CEO with a poor record in less than two years. However, it is sad that a government system with a poor record of 60 years justifies spending more of its citizens’ money. We hear about better monitoring this time around. Do you really believe this claim?

India badly needs investment in education and skills development. But only money that will be spent wisely. If given the chance, I know the leaders of India’s corporate sector will bring impressive results by educating the tens of millions of Indians. By not only pulling them out of poverty but by making them tax-paying citizens! Now that would be a Budget worth cheering about.

(Dr. Anil Gupta is the COO of Aditi Technologies.)