Editorial 1 : Less Taxing
Introduction: In a few weeks from now, Finance Minister Nirmala Sitharaman will unveil the Union budget for 2024-25. The budget will be seen by many quarters of economy, as many things have happened since the interim budget presented earlier this year.
Addressing the slack in private investment will be top priority
- The budget, the first of the newly sworn in government, will be presented against the backdrop of a continuing slump in household consumption and subdued private sector investments.
- In what could be an acknowledgement of the extent of this demand slump and the need for policy intervention, officials in the government are reportedly exploring the possibility of rationalising the tax structure, tinkering specifically with the tax rates for lower income segments.
- There is an expectation that such a proposal would help boost household consumption, thereby pushing private capex in consumer-focused sectors, providing a fillip to economic activity.
- But, alongside such measures, there is also a need for a more comprehensive review of the tax systems in the country.
The examination of existing tax regime will be desirable
Capital Gain Tax
- Examining the existing capital gains tax regime would be one imperative to address the drop in the private investment.
- Considering that currently the tax rates and the holding periods vary across asset classes, bringing about some alignment could be explored.
Goods and Services Tax
- There is the issue of GST rate rationalisation which, unlike changes in particular income tax slabs, affects a wider segment of the population.
- In its 45th meeting, the GST Council had decided to form a Group of Ministers to look into this issue.
- One possible option could be to merge some tax slabs.
- There is also the matter of bringing items such as petroleum products within the ambit of GST.
- However, any movement on these would require getting the state governments on board.
- The central government must negotiate with states, ease their anxieties, and push through the necessary measures — the next meeting of the GST Council is scheduled for June 22, only a few weeks before the presentation of the Union budget.
Government’s effort to ease the compliance regarding taxing
- Over the years, the government has taken various steps to increase the tax base, reduce the tax burden, and ease compliance.
- On the direct tax side, the number of taxpayers (individuals, companies etc) has gone up from 5.26 crore in assessment year 2013-14 to 9.37 crore in assessment year 2022-23, with individual taxpayers increasing from 4.95 crore to 8.9 crore over the same period.
- On the indirect tax side, there were 1.4 crore active GST taxpayers as on June 30, 2023.
- In comparison, in June 2018, registrations had stood at 1.12 crore.
- In 2019, the government had lowered the corporate tax rate to 22 per cent, and in the budget 2020-21, it had introduced a new and simplified income tax regime for individuals who forgo deductions and exemptions.
- More recently, in the interim budget 2024-25, the finance minister had proposed to withdraw “petty, non-verified, non-reconciled or disputed direct tax demands” up to specified limits, benefiting around one crore tax payers.
Conclusion: the government's efforts to increase the tax base, reduce the tax burden, and ease compliance have shown progress, as evidenced by the significant rise in the number of taxpayers and active GST registrations. These initiatives reflect a commitment to creating a more efficient and equitable tax system, and it is imperative for the new government to continue building on these positive steps to foster sustained economic growth.
Editorial 2 : Bharat’s way in the world
Introduction: After Prime Minister Narendra Modi’s meetings with the beleaguered “steering committee of the free world” at the G7 outreach summit at Apulia on the Adriatic coast of Italy, it is clear that a fractured and fragile world needs India and its leadership, almost desperately so — much of the West seems to have run out of steam and ideas.
Trepidation and Expectation in the East
- International Concerns: The "enlightened world," including the Holy See, views the East with both trepidation and expectation amidst a precarious international system.
- China's Threat: Xi Jinping’s China is seen as a significant threat to Western values, interests, and lifestyles.
- Hope in India: India is viewed with hope, seen as a potential global friend, family, guru, and protector (a vishwa mitra, a vishwa bandhu, a vishwa guru and even as a vishwa rakshak).
India's Potential for Global Leadership
- Heightened Expectations: Questions arise about whether India can meet these high expectations and build the capacity for new leadership.
- How can India address these expectations: Only if India learns to act with a combination of alacrity, audacity, and the flexibility required to deal with an uncertain world and rapidly changing circumstances.
- Drawing from Ancient Wisdom: India must leverage its vast reservoir of ancient knowledge to navigate an uncertain world.
Acting with Alacrity and Flexibility
- Required Strengths: India needs to act with urgency, boldness, and flexibility to become a global mediator, regional manager, and mobilizer against China.
- Valuing Indigenous Wisdom: Emphasis on utilizing the wisdom within India’s sacred geographies.
Case Study: Gaza Initiative
- Diplomatic Effort: In March, India’s National Security Advisor, Ajit Doval, proposed a ceasefire during Ramadan to Israeli Prime Minister Netanyahu.
- Outcome: Netanyahu was not dismissive and surprisingly well disposed, and the proposal almost translated into reality. Though the proposal initially seemed promising, it ultimately failed due to trust deficits among stakeholders.
India's Diplomatic Interventions
- India has engaged in several significant diplomatic efforts, including:
- Strengthening ties with key leaders of Saudi Arabia and UAE.
- Facilitating a ceasefire along the Line of Control.
- Attempting to organize a meeting between Putin and Zelensky.
- India's strategic autonomy and innovative ideas have gained traction on the global stage.
Modi 3.0's Role
- The success of these initiatives hinges on Modi 3.0’s ability to tap into non-Western ideas and homegrown talent.
- The traditional bureaucracy and certain think tanks are inadequate for generating new ideas.
- Reaching out to homegrown talent and scholars with their deep knowledge of shrutis and smritis, and other ancient Indian texts should be on top of Modi 3.0’s agenda.
Importance of Regional Stability
- Great powers historically secure stability and influence in their immediate neighbourhoods.
- From the Roman Empire to the United States, from the Mauryan Empire to the Vijayanagara and Chola kingdoms, peace in the neighbourhood has been a critical component of their rise to prominence.
- India's rise requires addressing challenges and opportunities in its immediate neighbourhood, especially with Pakistan.
The China Challenge
- The rise of China presents a significant challenge to the international system.
- India must enhance its domestic capabilities and mobilize regional and international partners to address the security concerns posed by China.
- In addition, India must establish itself as a “mobiliser” — proactively mobilising regional and international partners to address China’s challenge across geographies and addressing, in particular, security concerns.
Conclusion: In a precarious international system, the self-declared ‘enlightened world’, is looking East with trepidation and expectation. Xi Jinping’s China poses the greatest threat to values, Western way of living — but in India, there is hope for the future.