One hopes finance minister Arun Jaitley’s optimism over passing the insurance bill, coal bill and goods and services tax is not misplaced. The proposed insurance bill that seeks to hike FDI from 26 per cent to 49 per cent was moved by the Manmohan Singh government, so there is no real reason why it shouldn’t be passed.
But politics is the big elephant in the room, and Congress spokesmen have been voicing reservations on the bill as it was the BJP that had scuttled passage of the bill earlier. They are also miffed about the coal ordinance being promulgated without consulting the Opposition. Also, it is BJP states that mainly held up implementation of the Good and Services Tax. So if these bills are to be passed Mr Jaitley will have to be more accommodating of the Opposition’s objections, given the past behaviour of his own party. If the Opposition wants more safeguards and protection for Indian investors, this should be given serious thought. After all, foreign insurance companies are no angels, nor are they coming to India for charity.
As Mr Modi has said, reforms should be politically agnostic. For this, he and Mr Jaitley must show more statesmanship in accommodating the concerns of the main Opposition party, particularly given they had not been generous enough to allow it the Leader of the Opposition tag.
The salaried classes, meanwhile, have got some good news: the finance minister made it clear he has no plans to increase the tax burden on them. It is hoped he may even raise the tax exemption cap to say '6-10 lakh if the middle class is to really benefit as part of the basic consumption process. It is imperative for the minister not to depend too much on indirect taxes. These are regressive. In the indirect tax regime, India’s richest man Mukesh Ambani pays the same sales tax on a soap as a poor man. Relatively speaking, the burden of indirect taxes is more on the poor than the rich. Of course, indirect taxes can’t be avoided altogether, but the FM shouldn’t depend on it.
There are many ways Mr Jaitley can increase revenues. Indian corporates, for instance, pay just 22 per cent in corporate tax, against the average 33 per cent globally. He can introduce inheritance tax. He needs to widen the tax base, especially as he is fully aware where black money is being generated. Rich women come with cash-filled briefcases to buy luxury items. If these sellers know how to get money from the rich, surely Mr Jaitley knows better. The time for talking is over. It’s time for action.
