Home arrow Archives arrow Economic Highlights arrow Economic Highlights 2013 arrow PM’s Rosy Picture: OFFICIAL FIGURES PAINT IT BLACK, By Shivaji Sarkar, 5 April, 2013
 
Home
News and Features
INFA Digest
Parliament Spotlight
Dossiers
Publications
Journalism Awards
Archives
RSS
 
 
 
 
 
 
PM’s Rosy Picture: OFFICIAL FIGURES PAINT IT BLACK, By Shivaji Sarkar, 5 April, 2013 Print E-mail

Economic Highlights

New Delhi, 5 April 2013

PM’s Rosy Picture

OFFICIAL FIGURES PAINT IT BLACK

By Shivaji Sarkar

 

It is bemusing, indeed. The country is sitting on a powder keg but Prime Minister Manmohan Singh ignoring the realities, paints a rosy picture before industry tycoons, who are struggling to maintain even the current pace.

 

Likewise, Congress Vice President Rahul Gandhi in a long-winding speech at the same Confederation Indian Industry meet calls for a revamp of the political system and closer government-big business relationship. Should it be seen as an indictment of the Government that his Party is part and parcel of? Does he expose the gap between the Party and the Government? Is he as unhappy as the Congress veteran Digvijay Singh, who has openly castigated the dual power centres in the UPA?

       

Addressing the Indian business tycoons, neither Singh nor Gandhi touched the issues bedevilling Asia's third-largest economy such as high inflation, decelerating investment, a ballooning current account deficit, a plummeting rupee and red-tapism that ties up infrastructure projects for years.

 

The Prime Minister says 8 per cent growth is possible. Many times during the past four years he has said so, earlier it used to be 9 per cent and above. Odd as it may sound, but each time he spoke, the growth plummeted. The official figure now is 5 per cent but if it is linked to over 30 per cent inflation during the past over three years, actual growth would not be over 3.5 per cent – almost the classical Hindu rate.

 

And, there is a major difference. At Hindu rate of growth, the situation was far less chaotic because agriculture was sustaining the larger part of the economy. Now it’s the reverse. The farm sector employing 58 per cent of the people-- over 70 crore-- is the most neglected. Taxes are being heaped on it and subsidies are being wiped out. It has become the most unsustainable of all professions and businesses. Futures’ trading has hit the farmer hard and consumers harder with food inflation at over 11 per cent.

 

The Hindu rate was also the result of high taxes almost up to 97 per cent. The liberalised economy was supposed to bring it down. Instead it has increased it. No not one tax technically can be categorised as high but a combination of these is killing the industry initiative, making production almost impossible and Government induced inflation is killing the economy.

 

Just take two simple instances. A family goes out for inexpensive dining at a small restaurant. Unfortunately all such ones or even dhabas nowadays are air-conditioned, which Finance Minister P Chidambaram has started taxing. They consume items worth say Rs 755. The restaurant adds service charge (for being air-conditioned) of 10 per cent at Rs 75.50; service tax of 4.94 per cent at Rs 41.06; VAT of 12.5 per cent at Rs 103.81; additional (unexplained) tax Rs 11.34 – i.e. a total of Rs 237 in taxes raising the bill to Rs 987. The tax component thus is almost a shocking 40 per cent. This is not an isolated incident. Many eating places have closed down for such atrocious taxes and high input costs. All other industries too are paying similar plethora of taxes and the Prime Minister is saying he is making their lives easier!

 

Here’s another instance. A person buys a railway ticket for Rs 695. He cancels it the next day, five days before commencement of the journey and Rs 195 is deducted. The example is not restricted to Railways. Similar charges are levied on electricity, gas bill and many other things. In fact, the railways have become so ingenious that rarely a waitlisted ticket booked even three months in advance gets confirmed, but if someone makes a cancellation he suffers a heavy penalty instantly.

 

Does the Prime Minister expect that such a “vision” of high taxation, ostensibly to support the luxury of his ministers and bureaucrats, would take the country on a growth path? He does not explain why he has to dole out Rs 30,000 crore to Air India, which was led to losses thanks to bureaucrats. Nor does he explain why they could go scot free.

 

Few industry leaders found either the speech of Singh or Gandhi visionary. They cannot. They are aware that Singh, who is supposed to have ushered in liberalisation in the economic process, is also responsible for taking it away from them. During the past 22 years, the industry has been saddled with scores of new norms, new taxes and procedures.

 

In 1991, it was hoped that licence-permit raj has ended. Now it has turned into a sophisticated affair. They do “not need licences”. Why? The number of clearances has increased ten-fold – green clearance from the forest department, hazards and so many more. It has not only increased the gestation, it also has heaped on them the burden of paying slush money. More the rules, merrier are those in officialdom.

 

Of course, in addition to this there is a price to be paid for some political masters. In some northern States, close to Delhi, where the only activity is in building industry, ask any builder why he sells his projects at a high price. He would simply explain thanks to a number of taxes and that he has to keep many officials at various development or autonomous authorities happy, apart from the outgoing or incumbent Chief Ministers.

 

This is almost recorded history in one case: an outgoing CM reportedly got Rs 3000 crore for passing an order and the new CM “cancelled” it immediately on assumption of office for “irregularities” only to clear it after a couple of months reportedly after he also got paid with a like amount. Finance Minister Chidambaram’s prescription of charging TDS on houses of over Rs 50 lakh has added further woes along with the high circle tax rates in the region.

 

Central tax officials too have become ingenious with serving notices on large industries. It may not have earned the Government much except litigation in most cases, but the officials know how to keep their bread buttered.

 

Vodafone was the most talked about such cases. It has led to a lot of litigation and has finally been acting as a dampener for new foreign direct investors. The FDI flows have come down from $41 billion in 2008 to $14 billion in 2012-13. Much of it is in the pipeline and hasn’t actually arrived. Even short term investment by FIIs has remained unchanged at around $1.1 billion during the past three years though there was a fall in 2011-12.

 

The current account deficit has reached $32.6 billion up from $12.18 billion in 2010. It has critically dwindled foreign exchange reserves sending the rupee on a tumble. It verges around Rs 54.5 to a dollar making energy –oil, coal and power – expensive.

 

Sadly, the Government has no solution except churning out rhetoric. The economy is in a cobweb. India’s confidence is shaking. There is no vision for moving ahead. Growth is turning out to be a mirage. The country cannot be enthused with speeches. It requires simplification of rules, thinner bureaucracy, low taxation and high activity. Is there anyone to ensure it? ---INFA

 

(Copyright, India News and Feature Alliance)

< Previous   Next >
 
   
     
 
 
  Mambo powered by Best-IT