I have been off the air for a while. Assorted reasons drove my idle state — I can safely say that paucity of time and not a lack of noteworthy content would rank high among them. Our national mood has, in fact, stretched the arc of the pendulum in this hiatus. A cricket World Cup victory transported India to a euphoric seventh heaven even as a sustained corruption soap opera on national news tested the other extremity.
Amidst this topsy-turvy madness, a widely anticipated Union Budget went by without unduly troubling history. Two months on, I found it uncommonly difficult to recall its details last Tuesday (finding much relief in the fact that my conversation partner, usually a highly aware sample of our species, struggled similarly). The catalyst for our discussion was a BS blog that argued for a tax-stimulated Welfare State in India. To my mind, the post was most instructive — both the merit in its core logic (an established part of neoclassical economics) and the vitriolic reactions (including some regrettably personal ones) it drew.
It is not difficult to understand the clamour for lower taxes. Individuals always want to maximise take-home from gross income (economics = limited-means-unlimited-needs etc). India's historical stress on thrift imparts to this global truth an additional fervour. This intensity is likely rooted in political subjugation and consequent economic travails of the last few centuries. It may run even deeper — the relentless onslaught on our land by variously hued invaders rendering a psyche eschewing 'worldly' pursuit in favour of a productivity focus. In any case, our sociocultural abhorrence of resource waste is singular (consider a humble beverage PET bottle's multi-stage journey in an average Hindustani household to gauge our resource consciousness). Parting with hard-earned income to an ill-performing State is, thus, a tough sell.
On the other hand, if the governance deficit — GOI's 'trust factor' must be at all-time low currently, explaining the cynicism that greeted the post — were to be bridged, then taxes would likely not be branded undesirable waste. Therefore, the idea of taxes-for-welfare merits exploration beyond academic interest. Europe's State-run healthcare framework i(as different from the private sector US model), for instance, would be worthy of deeper analysis and potential emulation.
Two other reactions to the post need unpeeling. First, it is an overly simplistic position to tom-tom tiny city-state successes against the practical realities of India's size and complexity. Next, we put at risk the lessons of GFC 2008 if we continue to pretend that free markets and private initiative are a panacea to all the world's problems. The anti-government intervention refrain in the comments, therefore, was mostly an outcome of the corruption-inflation-misrule that the current Raisina Hill dispensation has come to symbolise.
It behoves us to ask whether the resources to pay for welfare can be mobilized without tax rate hikes. An obvious opportunity is coverage — going by filed returns, an abysmal 3% of Indians pay taxes (vs the US's 45%, say). This has been a tough nut to crack historically. Technology (particularly UID and bolt-ons), however, may provide a way out in the not-so-distant future. Stronger sponsorship must be built for these efforts, including better articulation of benefits and timelines. Saddling the taxpaying salaried minority with more levies ought to be the last resort in this sense (you could say that my stance is partially inspired by a month-end routine of agonizing over the payslip!).
In summary, the post provoked some interesting (even if open-ended) chains of thought. At the very least, its advocacy of a Welfare State underscored a key policy shibboleth — inclusive growth. The question is whether those at the helm think economics beyond competitive populism (commitments in the ongoing state elections, for instance); and how they win back that precious commodity called public confidence — the key to driving larger participation in nation-building. Woh subah kabhi to aayegi...
Amidst this topsy-turvy madness, a widely anticipated Union Budget went by without unduly troubling history. Two months on, I found it uncommonly difficult to recall its details last Tuesday (finding much relief in the fact that my conversation partner, usually a highly aware sample of our species, struggled similarly). The catalyst for our discussion was a BS blog that argued for a tax-stimulated Welfare State in India. To my mind, the post was most instructive — both the merit in its core logic (an established part of neoclassical economics) and the vitriolic reactions (including some regrettably personal ones) it drew.
It is not difficult to understand the clamour for lower taxes. Individuals always want to maximise take-home from gross income (economics = limited-means-unlimited-needs etc). India's historical stress on thrift imparts to this global truth an additional fervour. This intensity is likely rooted in political subjugation and consequent economic travails of the last few centuries. It may run even deeper — the relentless onslaught on our land by variously hued invaders rendering a psyche eschewing 'worldly' pursuit in favour of a productivity focus. In any case, our sociocultural abhorrence of resource waste is singular (consider a humble beverage PET bottle's multi-stage journey in an average Hindustani household to gauge our resource consciousness). Parting with hard-earned income to an ill-performing State is, thus, a tough sell.
On the other hand, if the governance deficit — GOI's 'trust factor' must be at all-time low currently, explaining the cynicism that greeted the post — were to be bridged, then taxes would likely not be branded undesirable waste. Therefore, the idea of taxes-for-welfare merits exploration beyond academic interest. Europe's State-run healthcare framework i(as different from the private sector US model), for instance, would be worthy of deeper analysis and potential emulation.
Two other reactions to the post need unpeeling. First, it is an overly simplistic position to tom-tom tiny city-state successes against the practical realities of India's size and complexity. Next, we put at risk the lessons of GFC 2008 if we continue to pretend that free markets and private initiative are a panacea to all the world's problems. The anti-government intervention refrain in the comments, therefore, was mostly an outcome of the corruption-inflation-misrule that the current Raisina Hill dispensation has come to symbolise.
It behoves us to ask whether the resources to pay for welfare can be mobilized without tax rate hikes. An obvious opportunity is coverage — going by filed returns, an abysmal 3% of Indians pay taxes (vs the US's 45%, say). This has been a tough nut to crack historically. Technology (particularly UID and bolt-ons), however, may provide a way out in the not-so-distant future. Stronger sponsorship must be built for these efforts, including better articulation of benefits and timelines. Saddling the taxpaying salaried minority with more levies ought to be the last resort in this sense (you could say that my stance is partially inspired by a month-end routine of agonizing over the payslip!).
In summary, the post provoked some interesting (even if open-ended) chains of thought. At the very least, its advocacy of a Welfare State underscored a key policy shibboleth — inclusive growth. The question is whether those at the helm think economics beyond competitive populism (commitments in the ongoing state elections, for instance); and how they win back that precious commodity called public confidence — the key to driving larger participation in nation-building. Woh subah kabhi to aayegi...
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