Rebooting economy: Jaitley should put more money into middle-class pockets, boost farm income
While tweaking income tax rates would address a long-standing grievance of the salaried class, it is the agrarian crisis that has been allowed to fester for long
Bringing petroleum products under the Goods and Services tax (GST) net would have a tonic effect---it will send right signals besides putting more money into consumers’ pockets. But it won’t be easy as opposition ruled states in the GST Council will put up a stiff resistance for the fear of tremendous loss of revenue. The Modi government at the Centre should therefore do those things quickly without being at the mercy of the opposition for cooperation. Direct taxes are Centre’s remit.
The present income tax slab rates are steep, made steeper still by the Finance Act, 2017. Earlier, we had three rates---10 percent, 20 percent and 30 percent. Now, we still have just three---5 percent, 20 percent and 30 percent---but the steepness of rates has got accentuated while the need was to make them gradual. In Malaysia rates progress in multiples of 2.5 percent. This is as it should be. Steep rates are cruel as it mercilessly extracts a huge tax on incremental income above the earlier slab, enticing people to look for subterfuges to remain within the ‘affordable’ slabs.
Jaitley should forthwith right this skew. From Rs 5 lakh to Rs 10 lakh, the current rate is 20 percent which is a quantum jump from 5 percent applicable on the first slab of 5 percent on income between Rs 2.5 lakh and Rs 5 lakh. This would result in a huge relief to the middle class especially the salaried segment which has been chafing at the successive finance ministers’ indifference towards it. 20 percent should be the rate for income between Rs 10 lakh and Rs 20 lakh and the maximum marginal rate of 30 percent should kick in only when one’s income crosses the Rs 20 lakh mark. This would result in more money in middle class pockets.
The surcharge of 10 percent applicable for those who earn between Rs 50 lakh and Rs 1 crore and 15 percent on income beyond Rs 1 crore is largely symbolic given the fact that the number of such assessees are in thousands in a country of 125 crore people. Let the symbolism continue but substantial changes must be made in favor of the middle class.
While tweaking income tax rates would address a long-standing grievance of the salaried class, it is the agrarian crisis that has been allowed to fester for long and hence needs to be addressed seriously without delay. That agriculture is a state subject should not be the alibi for inaction. First VAT and then its comprehensive version GST was ushered in overcoming states’ opposition. A similar gargantuan, roofs and branches reforms would be required on the farming front.
Our farm yields are abysmally low thanks to fragmented land holdings and unimaginative cropping patterns. And we are allowing this problem to fester for the fear of rocking the boat. What is the use of comprehensive and more liberal crop insurance when crop itself is not in bountiful in terms of yield? The Modi government should call upon the BJP ruled states to blaze the trail---lead by example for others to emulate by clearing the decks for corporate farming. Producers’ cooperative a la Amul on the milk front, can be a more appealing alternative to corporate farming but it is a long haul. Corporate farming can take off quickly. We already have satisfied farmers who have entered into long-term contracts with McDonald's and Pepsi. But corporate farming goes beyond long-term supply contracts.
Corporates buying up rural lands should be a strict no-no. What must be done is consolidation of land holdings though 30-year lease agreement. The farmers would not only get lease rentals from the corporate farmers but also employment resulting in double income that has the potential in realising a dream envisioned and nurtured by Prime Minister Modi---doubling of farm income by 2022. A spin off of corporate farming would be mushrooming growth of food processing industries alongside farms resulting in optimum utilization of farm products besides generating rural employment on a large scale.
He said that there was an excellent warmth between the leaders during the summit and they all had productive & meaningful discussions that were marked by a cooperative & constructive agenda and a very positive approach to the discussions
When the prime minister says he’s making an announcement, Indians start expecting the unexpected. It all started with the sudden announcement to ban Rs 500 and Rs 1000 notes on 8 November 2016