Revenue. The where-its-at, as the Americans like to call it, of the next budget is going to be the revenue side. On all the other fronts, we can’t expect rabbits pulled out of hats. But it is the all-too critical revenue generation steps that much is going to boil down to. The budget, whose outlay is rumoured to be around rupees 3.5 trillion, is said to contain mechanisms to expand the tax base. It had better. The government’s limited fiscal space is probably the biggest problem the economy is facing at the moment. Lack of money, the cheeky quip, is the root of all evil.
The IMF program, on which much of the government’s spending is dependent, insists on major tax reform. That is easier said than done. Changing the tax structure is not an executive decision but a legislative one. It has to be passed by the parliament. And that, given the current composition of our national assembly, is a flaming hoop. Getting a consensus on passing a budget similar to last year’s is going to be tough enough as it is, pushing the envelope and trying to implement a value added tax like the RGST is going to be next to impossible. When big money backs political parties and the latter use the woefully ill-informed mass media as propaganda tools, progressive steps like reforming the GST – which will go a long way in documenting the economy for our revenue services – can be presented as draconian, anti-people measures. On the propaganda front, this could be countered with some serious headway on going about taxing agricultural income.
Since ‘tis the season to be thrifty, perhaps our subsidies could be thought through as well. Targeted subsidies – as opposed to the one-size-fits-all variety that benefit the rich and poor alike – could be implemented, specially in the agricultural goods markets.
It all boils down to whether the government can muster up enough support in the lower house to take unpopular steps.
