As the country's Finance Minister, Palaniappan Chidamabaram, adorned in a nirma-white "Mayilkannu Veshti", walked with his briefcase through the corridors of the Parliament, the second biggest spectacle of world's largest democracy was in full display (the first of course were the elections). As the Nattukottai Chettiar with impeccable English "rose to present the budget for the year 2004-05", the nation watched with expectation, clinging to on to every word he spoke, noted every word that he emphasised and attributed meanings to his deliberate pauses.
The first half of the two-hour long speech was politically correct - 'of, for and by the farmer' spiel - which must have warmed the Marxists' hearts, seated adjacent to the treasury benches. As the DD camera fixed a three-button frame on PC, the over-his-shoulder view that one got was the cherubic pan-chewing rail mantri from Bihar. The image couldn't have been more perfect that this - a visual definition of the CMP, with a glum PC on the forefront and a beaming Lalu on the backdrop. A few days ago, the Rail Mantri had given away largesse amounting to thousands of crores of tax payer's money so that young, pan-masala chewing bihari boys could travel free on Rajdhani express to attend interviews of Sarkari Naukris in Dilli. While, I do not intend to rebuke the motive behind Lalu's freebie binge, retired railway officials tell me, that this budget has done nothing but to drain the railway's coffers even further. One retired Chairman of the Railway board, explained at great length, how he and a few of his colleagues spoke out of turn to impress on their political bosses to cut the flab of the staff. Forget downsizing, all they got were transfers or forced retirements with a suggestion that they try burning their own flab on the treadmill instead! These poor well-meaning chaps are cooling their heels in retirement, tapping their heads in disdain, watching every minister ruin the institution that they spent their lifetime building. "Sometimes, I wonder, how the Railways function....every day and night, trains go on ...despite the politician and the bureaucrat. It's a miracle really....there's only one thing which keeps it going. That's the commitment of the staff," one retired official noted.
Back to PC's budget. As Chidambaram spoke eloquently "mixing passion and reason" to convince the voters of rural India (and his homeground Sivaganga), poor Lalu found it difficult to keep up with his Harvard-educated colleague's angrezi. Also, blame it on the timing. One hour before lunch, with Rabri's home-made "Sattu Roti aur Dal" waiting, Lalu could do little but to doze off for a little while, fantasizing about his lunch or his lady or both. But when Chidambaram said, "backward state.....", Lalu sprung back to life, knowing fully well that PC was talking his language. He shook his head, smiled and thumped the benches hard, when the ispessal package for Bihar was announced. A staggering Rs 3500 crore! After getting his pound of makhan, Lalu stopped smiling and promptly went back to sleep.
PC went on, spoke at length on his plans to reduce revenue deficit and stick to his medium-term fiscal correction plan. After all that spiel, he went ahead to announce a series of freebies completely anti-thetical to fiscal prudence. To top it all, Chidamabaram said, with his classic tonality and cadence, that the Govt aims to bring down the fiscal deficit to "4.4% of GDP this year." How is going to do that? Where is going to get the funds from? asked the purist. As these questions arose, Chidambaram continued with measured staccato. The sting in budget 2004, was in the fag end of the speech. Two deadly blows - one to the meek, tax-paying, middle class and the second one to the shrewd, tax evading day trader of the stock market.
With the announcement of a 2% education cess across the board, Chidambaram ensured that every salaried employee took home less money and paid more for what he normally consumes. A majority of the middle class still does not know the impact of this cess. For a taxable income of let's say Rs 3 lakh per annum, if one were paying Rs 4000 per month as income tax, that would now go up approx to Rs 5000. What's worse that every product that you buy, the mfr is now passing off that 2 per cent onto you - so your monthly supermarket bill or that new car you wanted to buy or that air-conditioner that you wanted to gift your mother or that holiday that you'd planned with your wife are all now steeper! One might argue that the increase is only a marginal 2 per cent, the flip side is that this two percent is unlikely to meet the noble cause for which it is being levied. Using this cess, Chidambaram intends to fund the nationwide programme to educate the girl child and poor children across the country. Noble indeed, and yes if that means I'd have to pay a Rs 50 more to FoodWorld, so be it. But here's the ghastly truth: for every rupee that the Govt of India spends on a development project, 65 paise goes to fund the pot-bellied mantri, the babu and his peon. The rest, if any, goes to local district, taluk level party biggie who'd much rather use it to buy gajar ka halwa for his beti or fodder for Lalu's stable. It is this "leakage" of govt funds that I don't want to fund out of my pocket.
The second one is even harsher. Currently, every stock broker pays the following: brokerage fee, service tax and of course, income tax. (Yes, there are tax avoiders but avoidance is not illegal - it is cleverly circumventing the rule and does not amount to breaking the law). The finance minister has introduced a tax on every transaction through the market on the buyer. In short, every security (stocks, bonds, futures, options or any acceptable financial product) sold through the market attracts this 0.15% transaction tax. The buyer will pay this tax. So if a trader makes 50 transactions - 25 buys and 25 sells, he will pay this tax on half of his transactions irrespective of whether he books a profit of not. In return, the Govt has withdrawn the long term capital gains tax on stock transactions. The brokers are up in arms - crying hoarse that their livelihood is at stake. The long term impact of this new taxation is not yet clear. Pundits argue that the transaction tax will suck the liquidity out of the market and consequently it will make the BSE unattractive for FIIs for short-term exposures. While the benefit of Lalu's kin is detrimental to large section of the middle class, similarly, the benefit of a few invisible foreign investors is not worth worrying at the stake of the desi trader or the retail investor. The contours of Chidambaram's policy on areas such as service tax implications are rather vague and whether it affects the interests of the salaried small-investor remains to be seen.
While we accuse Lalu of being populist, Chidambaram's first budget of the UPA Govt seems no different. Taking care of the needs of rural India deserves appreciation - simple because over 60 per cent of our country depends on farming for their livelihood. However, if that is done at the cost of industry and services - which accts for 28% and 51% of the GDP respectively -Chidambaram is no better than Lalu.
Like Lalu's train, the nation's "gaadi chalthi rahegi". Because of or inspite of Chidambaram's budget.
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