Modi: Why’s benefit to rich an ‘incentive’, for poor ‘subsidy’
Modi: Why’s benefit to rich an ‘incentive’, for poor ‘subsidy’
Setting the reform agenda before the Budget, Prime Minister Narendra Modi said on Friday that the polices of his government are popular, “but none are populist”.
“The benefits of improved governance and reduced corruption are lasting and profound. If our policies are studied closely, you will find that many are popular, but none are populist. Every one of the changes we have made is in the direction of good governance and rationality,” said the Prime Minister.
Mr Modi said the government will not eliminate all subsidies but will rationalise and target them to the needy. He said unnecessary controls and distortions will be eliminated and promised efficiency in allocation of resources as well as creation of opportunities for citizens to progress.
The PM said he was surprised to see that when a benefit is given to farmers or to the poor, experts and government officers normally call it a subsidy. “However, I find that if a benefit is given to industry or commerce, it is usually called an ‘incentive’ or a ‘subvention’. We must ask ourselves whether this difference in language also reflects a difference in our attitude,” said Mr Modi. “Why is it that subsidies going to the well-off are portrayed in a positive manner The total revenue loss from incentives to corporate tax-payers was over Rs 62,000 crore.
Dividends and long-term capital gains on shares traded in stock exchanges are totally exempt from income-tax even though it is not the poor who earn them,” the PM pointed out. He said that since it is exempt, it is not even counted in the Rs 62,000 crore. He noted that double taxation avoidance treaties have in some cases resulted in double non-taxation.
“This also is not counted in the Rs 62,000 crore. Yet these are rarely referred to by those who seek reduction of subsidies. Perhaps these are seen as incentives for investment. I wonder whether, if the fertiliser subsidy is re-named as “incentive for agricultural production’, some experts will view it differently,” said Mr Modi.
The PM said he was not arguing that all subsidies were good. “My point is that there cannot be any ideological position on such matters. We have to be pragmatic. We have to eliminate bad subsidies, whether or not they are called subsidies. But some subsidies may be necessary to protect the poor and the needy and give them a fair chance to succeed. Hence my aim is not to eliminate subsidies, but to rationalise and target them,” said Mr Modi. He added that universal access to banking through the Jan Dhan Yojna has enabled plugging of huge leakages in subsidies. Subsidies on cooking gas (LPG) are now directly transferred to bank accounts of users, thereby eliminating multiple and bogus connections. “This enables genuine beneficiaries to get what they deserve while eliminating those who are not eligible. This has substantially reduced the subsidy,” he said. A similar experiment is being now started for kerosene.
The PM said that true reforms are those which result in transformation in the lives of citizens. He said the government should create new opportunities for citizens to progress and also give them a choice of opportunities. He said entrepreneurship is one of India’s traditional strengths. “It was sad to see it neglected in the last few years. ‘Business’ and ‘profits’ had become bad words. We have changed that. We need to value enterprise and hard work, not wealth. Our programmes, ranging from Mudra to Start Up India and Stand-Up India, provide opportunity to the hard-working and to the enterprising.”
Mr Modi said the global economy is going through a period of uncertainty and in a connected world the actions of one country affect another. While there is economic stagnation in many parts of the world, India has been the fastest-growing large economy during the last four quarters. It contributed 7.4 per cent of global GDP in purchasing power terms. It contributed 12.5 per cent to global growth, 68 per cent higher than its share.
