Union Budget: The darker side

Many publications have talked about the good side of the Budget that was unfolded before the parliament and the country on 28 February 2006. 

<> But there are other mistakes or oversights that the FM continues to overlook.  For instance, even though the FM has widened the scope of service tax, and has made it applicable to many more services, he continues to exempt the legal profession from the purview of this tax.  This is despite the fact that it is one of the largest services in India.  And it is notwithstanding the fact that lawyers continue to be among the most affluent people in this country.  One wonders why the FM has chosen to be so magnanimous to lawyers and not the common salaried classes! <> 

Then there is the sheer absence of direction, or even vision.  For instance, the FM has reduced the levies on small passenger cars.  If it were to provide a fillip to industrial production, it could be a good thing.  But shouldn’t the FM have simultaneously provided incentives for investments in roadways as well?  Or shouldn’t the FM have offered incentives to states that encourage public-private ownership of roadways and developing businesses on either side of highways to help finance the same, and reduce the levy of toll taxes?  That would have been financially welcome, and could actually have spurred industrial and economic growth.  Instead you will now have more cars on a horribly congested and inadequate road system.  And instead of benefiting sectors that appeal to the lower middle classes (motorcycles and scooters) or the trucking sector which helps bring in vegetables and other necessities, the FM has catered to just one segment of the mobile population.  <> 

But there is a pernicious side to the budget that few have spoken about.  For maybe the first time in India’s history, an attempt has been made to introduce taxes based on the religious character of institutions.  The introduction of Acts in the parliament that favour specific religions — one instance is the Hindu Undivided Family (HUF) which provides a financial benefit only to the Hindus — was bad enough.  But to introduce more financial incentives to the religious is not a wise thing. <> 

The FM has proposed that all anonymous donations to charitable trusts will henceforth be taxed (which is not a bad idea at all).  But he has also stated that any trust or charitable body that invests in education and health, and is only partly religious in its activities, will also be subject to tax.  The only bodies exempted from tax will be those who are wholly religious, and who use these funds for health and education. <> 

In doing so, the FM has actually provided a fiscal incentive for only wholly religious trusts taking up education and health.  The need for funds in education is urgent and critical.  Only 3% of India’s population comprises graduates, of which almost 30% is not even capable of writing a few sentences correctly in any language.  The quality of education in schools is pathetic.  No country can aspire to become a global leader with such demographics.  Given this backdrop, surely there is a need to exempt from tax all investments in education? Yet you have taxes on all training other than in-house training, and even on scholarships.  More significantly, when the entire world has been witness to the dangers of allowing religion and education to get mixed up, we have a budget that actually encourages wholly religious bodies to take up activities relating to education and health.  <> 

Don’t be surprised if you have more bodies like the VHP or fundamentalist Islamists funding their own cocktail of religion and education.  And — what makes this sadder — is that the proposal has come from a government that claims that it does not encourage fundamentalism!