Subsidies, incentives: India awaits action

Prime Minister Narendra Modi must be complimented for bringing to light and exposing the perverse thinking in the business community and among experts on the subject of subsidies. He chided them for the way they used words: pointing out that when subsidies are given to farmers and the poor, experts and officials usually call it “subsidies”, but if the benefit is given to industry, it is normally called an “incentive” or “subvention”.

He illustrated how the government had lost Rs 62,000 crores in revenues by foregoing taxes due to incentives for corporate taxpayers, and this didn’t take into account the loss of income-tax on dividends and long-term capital gains on shares traded on stock exchanges, and taxes lost due to double taxation treaties that in some cases led to double non-taxation!

This newspaper has highlighted this serious injustice in the way incentives and subsidies are interpreted, and the resulting losses to the exchequer in the last two to three Budgets. The PM should now even include minimum support prices in this. These experts have been saying MSP is inflationary, but without understanding agriculture.

For instance, when tur was selling at Rs 200 per kg, the MSP for tur was just Rs 4,600 per quintal, or Rs 46 per kg. The farmer was not getting Rs 200 for his tur, which was pocketed by traders. Given that Mr Modi favours inclusive growth, he should also look into another grave injustice regarding minimum wages. The Seventh Pay Commission suggested Rs 18,000 as the monthly minimum wage for government staff, that is Rs 600 per day; while farm labourers get a measly Rs 165 daily for toiling from sunrise to sunset.

And now, because farm labourers prefer to work on the MNREGS, the Modi government has cut allocations for the scheme. How can we ever have inclusive growth with this kind of discrimination between the organised and unorganised sectors? Mr Modi should talk directly to farmers who do dry farming if he really wants to help farmers. 

Otherwise, he will continue to be misled by bureaucrats and experts who will scuttle all his good schemes. That Mr Modi is in favour of generating jobs and creating opportunities that will uplift people from poverty is most commendable. But it is in the implementation that he has to depend on the bureaucracy and government employees, not to mention his ministers and chief ministers. They really need to work with more commitment and speed. Corruption, for instance, may have somewhat declined at the Centre, but it remains rampant in states like Maharashtra.