Budget 2023–24: What Is in it for the People? 

Part 3: The Modi Government’s Approach to Budgetary Revenues

Neeraj Jain

Before we examine the budgetary outlay for 2023, it would be useful to look at the overall approach of the Modi Government towards budgetary revenues and budgetary spending. That would give us pointers towards examining this year’s budget — to see if anything has changed.

The Modi Budgets 2014 to 2022

The Modi Government has been running the economy solely for the profiteering of the biggest corporate houses like the Ambanis and Adanis. It has transferred enormous amounts of public funds and natural wealth to the big corporations and the super-rich. Here is a snapshot of some of these transfers.

i) Tax cuts

The Modi Government has sharply reduced the corporate tax rates. In September 2019, the FM sharply reduced the base corporate tax rate to 22% from 30%, and to 15% from 25% for new manufacturing companies. While making the announcement, the FM also admitted that this would lead to a loss in direct tax income of nearly Rs 1.5 lakh crore every year.

The steep cut in corporate taxes has made India among the countries with the lowest corporate tax rates in the world. France has a corporate tax of 31% to 33.33%; Germany also a similar net corporate tax rate; corporate taxes in the USA and Canada are around 30%, while in Brazil this is at 34%. Even our neighbour Bangladesh has a 35% corporate tax rate.[1]

Apart from low tax rates, India has almost zero property tax and no wealth tax. India had a low wealth tax, but FM Arun Jaitley scrapped even this low wealth tax in 2015. During the UPA regime, India’s property tax, even though low, rose between 2005 to 2012, but has fallen precipitously since.[2] 

Chart 1: Property Tax as % of GDP for Various Countries

ii) Tax Exemptions

A much bigger scam than the lowering of corporate tax rates is that the Modi Government has been giving tax exemptions to the rich — in corporate taxes, income taxes and excise duties — to the tune of several lakh crore rupees every year. An analysis of Union Budget documents reveals that these exemptions total at least Rs 50 lakh crore over the period 2014–23. That’s a mind-boggling sum![3]

iii) Loan write-offs

During the first eight years of the Modi Government (that is, 2014–15 to 2021–22), public sector banks have written-off loans of at least Rs 12.32 lakh crore.[4] These are official loan write-offs, admitted by the government in Parliament. Note that this figure does not include the interest accruing on these loans; including that, the loss could be as much as four times this amount.[5]

But this is just the visible part of the total loan waivers given to the country’s super-rich. Additionally, public sector banks have restructured loans of the ‘high and mighty’ — a roundabout way of writing off loans. This too must be of the order of several lakh crore rupees (the actual amount is not known).[6]

Even after all these write-offs, the total non-performing assets (a euphemism for bad loans) of public sector banks were Rs 5.41 lakh crore as of March 2022.[7] Considering the nature of the ruling regime, we can safely assume that the great majority of these are also going to be written off very soon.

The beneficiaries of majority of these loan waivers and restructurings are mainly the big corporate houses.[8]

What is the total amount of loans to big corporate houses that the Modi Government has written off (including write-offs under the guise of restructuring), ever since it came to power in 2014? It is difficult to say. At the minimum, excluding interest, it is of the order of Rs 25–30 lakh crore. Including interest, it could be thrice or four times this amount!

iv) Transfer of national resources & assets to private sector

The Modi Government has handed over control of the country’s mineral wealth and resources to private corporations in return for negligible royalty payments, transferred ownership of profitable public sector corporations to foreign and Indian private business houses at throwaway prices, given direct subsidies to private corporations in the name of ‘public–private–partnership’ for infrastructural projects, and so on. These transfers of public wealth to private coffers have resulted in enormous losses to the public exchequer — of the order of several lakh crore rupees every year!

To give an example, during the pandemic, the Modi Government auctioned 19 coal mines at such low rates that it cost several states thousands of crores of rupees in potential revenue.[9]

Even more scandalous is the sale of Air India to the Tatas. In 2021, the Modi Government announced the sale of Air India, its low cost airline Air India Express, and Air India’s holding in AISATS, the ground handling company in which Air India is an equal partner along with Singapore Airlines to the Tatas for Rs 2,700 crore. Tatas also took over Rs 15,300 crore of the total debt of Air India amounting to Rs 61,562 crore — according to news reports, Tatas plan to enter into negotiations with the banks for restructuring this debt, and it is likely that a portion of this would be written off by the banks. The remaining debt of Rs 46,252 crore was taken over by the government. (In the Union Budget 2022, the Centre allocated Rs 51,917 crore towards clearing Air India’s dues.)

In return for this, Tatas acquired control over the 141-aircraft fleet (including 49 wide-body long-haul jets) operated by Air India and AI Express. Tatas also acquired, in one stroke, control of 4,400 domestic and 1,800 international landing and parking slots at Indian airports, as well as 900 slots at airports overseas.[10] The total assets thus acquired by the Tatas are worth a few lakh crore rupees.

Following the completion of the deal, Tatas also managed to get a loan of Rs 23,000 crore from a consortium of public sector banks at an interest rate of 4.25%, to finance the Air India deal as well as for working capital.[11] And just as we were finalising this booklet, news reports said that Tatas are borrowing another Rs 18,000 crore to refinance the existing debt of Air India.[12] This only means that the restructuring / waiver of the Rs 15,300 crore debt of Air India taken over by the Tatas has begun.

It is possible that a part of the loans being provided by banks to Air India as working capital will also be waived.

Assuming that the public sector banks eventually waive half of the Air India debt taken over by the Tatas (15,300/2 = Rs 7,650 crore), this effectively means that the Centre has handed over Air India and AI Express to the Tatas for free, and in addition has also put in [51,917 + 7650 – 2,700 =] Rs 56,867 crore of public money to consummate the deal.

This is the case with each and every public sector unit being privatised by the Modi Government — each of these public assets has been sold at heavily discounted prices to foreign and Indian private corporations. So, when the Government claims that it has earned Rs 50,000 crore in disinvestment income in 2022–23 (as mentioned in this year’s Union Budget), it actually means that the (notional) loss to the public exchequer would have been of the order of 5–10 lakh crore rupees, or maybe even more.

The Modi Government has also launched a scheme to ‘lease’ out Rs 6 lakh crore worth of physical assets, like railway lines and stations, telecom systems, power transmission lines, oil and gas pipelines, roads, bridges, ports etc., to private entities, over four years (2022–25). The actual value of these assets, so painstakingly built over the years, is obviously going to be many times more than this amount. These so-called ‘leases’ will run for up to 40 years. This is actually sell-off disguised as lease! According to media reports, the private entities taking over these assets are gigantic funds, based in developed countries, who seek to invest their billions globally for quick and juicy returns. So, they will not be interested in maintaining or improving the health of the assets being leased out to them by the ‘nationalist’ government ruling Delhi, but will seek to maximise their return in the shortest possible time.[13]

In this year’s budget, the government says that it has earned Rs 10,000 crore through monetisation of assets. The actual value of the assets transferred to private entities would be of the order of Rs 1–2 lakh crore. 

Consequence of Transfers to Rich

1. Rising Indirect Taxes

There are two types of taxes, direct taxes and indirect taxes. Direct taxes are levied on incomes, such as wages, profits, property, etc., and so fall directly on the rich; while indirect taxes are imposed on goods and impersonal services, and so fall on all, both rich and poor. An equitable system of taxation taxes individuals and corporations according to their ability to pay, which in practice means that in such a system, the government collects its tax revenue more from direct taxes than indirect taxes. The developed countries collect the bulk of their tax revenues from the rich, that is, through direct taxes. According to the Economic Survey 2017–18 of the Government of India, direct taxes account on average for about 70% of total taxes in Europe. According to another dataset by two economists (Rohit Azad & Indranil Chowdhury, who teach Economics at JNU and PGDAV College, Delhi University, respectively), the ratio of direct taxes to total tax revenue is 76.6% for USA, 67% for Japan, 61.8% for South Korea, 57.1% for Germany, 59.6% for UK, 74.5% for Australia, and 72.7% for Canada.[14]

In India, to make up for the shortfall in revenues due to the huge concessions in direct taxes to the uber rich, the Modi Government has hugely increased indirect taxes:

• It has imposed GST on even essential commodities of daily consumption, like pre-packed and labelled wheat, rice, pulses and other foodgrains, several milk products like curd and paneer, fish and meat, several stationery items like pencil sharpeners and ink, and so on. 
• It has hiked excise duty (including cesses) on petrol and diesel; this is the most important reason for the steep hike in price of petrol and diesel over the past 9 years – price of petrol has gone up from Rs 80 per litre in 2014 to more than Rs 100 per litre today, while diesel has gone up from Rs 62 per litre to more than Rs 92 over this period (See Table 12).

Table 12: Excise Duty on Petrol and Diesel, 2014 to 2023 (Rs / litre)[15]

	May 2014	May 2020	February 2023
Excise Duty on Petrol	9.48	32.98	19.98
Excise Duty on Diesel	3.56	31.83	15.8

The total income from GST since the government introduced it in 2017 till 2022–23 (RE) totals a massive Rs 31.25 lakh crore. And the total income of the Modi Government from taxes and duties on crude oil and petroleum products over the period 2014–15 to April–September 2022–23 totals another huge Rs 24.78 lakh crore.[16] The total income from these two indirect taxes totals a whopping Rs 56 lakh crore. 

Because of this massive income from indirect taxes, in India, for every Rs 100 collected by the government (Centre + States combined) as tax revenue, between Rs 32 to 34 comes from direct taxes, and the rest, Rs 66+, from indirect taxes.[17]

The burden of paying the indirect taxes falls disproportionately on the poor, both individually as well as collectively. At the individual level, a poor person pays a larger portion of his/her income as indirect taxes as compared to the rich. And collectively too, the bulk of the indirect taxes collected by the government come from the poor. The 2023 Oxfam report on growing inequality in India estimates that the bottom 50% of the population pays six times more on indirect taxes as a percentage of income compared to the top 10%. And of the total GST collected from food and non-food items, 64.3% comes from the bottom 50%, one-third from middle 40% and a meagre 3–4% come from the top 10%.[18]

It is this huge rise in indirect taxes that is responsible for the huge rise in inflation over the past few years.

2. Low Government Tax Revenues

In every capitalist country in the world, including the developed capitalist countries, while their governments essentially run the economy for the profiteering of the rich, they also collect significant amount of taxes from them and spend it on providing education, healthcare and other welfare services for their people. The average tax revenues of the governments of the developed countries (the 38 countries of the OECD) as a percentage of their GDP (this is called the tax-to-GDP ratio) was 34.1% in 2021.[19] The tax-to-GDP ratio for India’s Emerging Market peers like Brazil, Argentina and South Africa was 31.6%, 29.4% and 25.2% respectively (all figures for 2020). [20]

Despite the huge increase in indirect taxes, the direct tax concessions and exemptions to the rich are so massive that on the whole, India’s tax-to-GDP ratio is less than half of the developed countries, and at least 10 percentage points below the other Emerging Market Economies. India’s tax-to-GDP ratio (taking into consideration all taxes of the Centre and states) has been fluctuating between 16 and 17% over the period 2014–15 to 2021–22 (it touched 18% in 2021–22).[21] Since the Gross Tax Revenue of the Centre, which constitutes around 60% of the total tax revenues of the Centre+States combined, has actually declined as a percentage of GDP for 2022–23, so we can definitely say that this ratio must be around 17% for this year too.

3. Low Government Total Revenues 

Apart from the massive tax concessions, the Modi Government has also transferring huge amounts of public funds into the coffers of the rich, through means like loan write-offs, subsidies given in the name of PPPs, ‘strategic disinvestment’ in public sector corporations, transfer of mineral wealth to private corporations for negligible royalty payments, and so on. Because of all these concessions and subsidies, the total revenues of the Government of India are very low, because of which the government’s budgetary spending is also low. (Here, total revenues of Government of India means the Central government revenues and revenues of State governments combined. However, in actuality, it is the Centre that is responsible for the total low revenues of the Centre and States combined, and not the States, because of the total revenues of all kinds collected by the Centre and States, including borrowings, the Centre collects roughly 70%, and the States’ own revenue is 30%.[22] Furthermore, while the Centre has great flexibility in raising resources if it wishes to do so, the States have few independent sources of revenue and limited access to emergency borrowings.)

India’s total government revenue as percentage of GDP is among the lowest in the world. In 2021: it was as high as 47.2% for the 19 Euro area countries, going up to 50% and above for countries like Austria, Belgium, Denmark, Finland, France and Norway; it was 26.9% for South Africa, 33.5% for Argentina, 35.4% for Brazil, and 36.7% for Russia. Even for the Middle Income and Emerging Market Economies of Europe, it averaged 35%. But total revenue of the Government of India (Centre + States combined) is much lower — just 20.2% of GDP.[23] This means that it wouldn’t be an outlandish endeavour for the Government of India to strive to increase its revenues by 50% —even after that, its revenues would still be less than that of its Emerging Market Peers! That if the Government of India so desires, it can do it, we discuss this in a subsequent article in this series.

References

1. “What Is Corporate Tax? India’s Corporate Tax Comparison with Other Countries”, 20 September 2019, https://www.newsx.com.

2. Rohit Azad and Indranil Chowdhury, “Making a Case for the Old Pension Scheme”, 18 October 2022, https://www.thehindu.com.

3. Our estimate. Budget documents reveal that in 2014–15 and 2015–16, the Modi Government gave tax exemptions to the country’s uber rich totalling Rs 11 lakh crore. For 2016–17, the government changed its methodology of making this calculation to show a much lowered figure — we have calculated that actual tax concession was the same as the previous year, Rs 5.5 lakh crore. (For more on this, see our article: Neeraj Jain, “Pandering to Dictates of Global Finance”, Janata Weekly, 19 February 2017.) In the subsequent years, the government stopped making a full estimate of these tax concessions. However, in a paper published in 2020, economists Reetika Khera and Anmol Somanchi of IIM Ahmedabad, have estimated government revenue foregone, that is, government tax exemptions to the super-rich, based on the older methodology, for the years upto 2019–20. They conclude that the crash in the government estimate of revenue foregone completely disappears if the calculations are redone based on the older methodology, and in fact exceed Rs 6 lakh crore for 2018–19 and 2019–20. (See Figure 1a, Fixing A+B in Reetika Khera and Anmol Somanchi, “A Comparable Series of Tax Revenue Foregone”, May 2020, https://web.iima.ac.in.) Even if we take the tax exemptions / concessions given by the Modi Government to be Rs 5.5 lakh crore every year, then, total tax concessions for the 9-year period 2014–15 to 2022–23 = 5.5 x 9 = ~ Rs 50 lakh crore.

4. Vivek Kaul, “Banks have Written Off Bad Loans Worth Rs 10.8 Lakh Crore in Last Eight Years”, 23 July 2021, https://www.newslaundry.com; “Banks Write Off Loans Worth Rs 10 Lakh Crore in Last 5 Years”, 2 August 2022, https://bfsi.economictimes.indiatimes.com.

5. Sucheta Dalal, “Loan Write Offs Is the ‘Biggest Scandal of the Century’”, 9 May 2016, https://www.moneylife.in.

6. For more on this, see our booklet, “Is the Government Really Poor?”, Lokayat publication, Pune, 2018, http://lokayat.org.in.

7. “Top 50 Wilful Defaulters Owe ₹92,570 Crore To Banks, Mehul Choksi Tops List”, 21 December 2022, https://www.ndtv.com.

8. “SBI Tops Corporate Loan Waiver List”, 11 October 2019, https://www.dailypioneer.com; Rohit Prasad & Gaurav Gupta,“Data Check: Loan Defaults by Corporates have Cost the State Much More than Farm Loan Waivers”, 18 February 2019, https://scroll.in; Ashish Kajla, “Banks Paying Heavily for Corporate Loan Waivers: RTI”, 30 July 2020, https://www.cenfa.org.

9. Shreegireesh Jalihal & Tapasya, “Coal Auctions: Modi Govt’s Policy Push to Private Miners Will Cost Chhattisgarh Rs 900 Crore a Year”, 16 August 2021, https://www.newslaundry.com.

10. Ravi Sharma, “Air India: Sold for a Song”, Frontline, 19 November 2021, https://frontline.thehindu.com; V. Sridhar, “Air India: Family Silver Sold for a Song”, 15 October 2021, https://www.newsclick.in.

11. “Tata Plans to Borrow Rs 15,000 Crore for Air India’s Working Capital”, 29 October 2022, https://www.business-standard.com; “Tatas Pick SBI, Two Other Banks to Finance Air India’s Old Debt”, 29 January 2022, https://economictimes.indiatimes.com.

12. “Air India to Borrow Rs 18,000 Crore from SBI, BoB: Report”, 7 February 2023, https://www.businesstoday.in.

13. Subodh Varma, “Who is Taking Over National Assets in India?” 17 April 2022, https://www.newsclick.in.

14.  Rohit Azad and Indranil Chowdhury, op. cit.

15. “Petrol, Diesel Fuel Price Calculator with Full Tax Breakup”, https://www.mycarhelpline.com; “Excise Duty on Petrol was Rs 9.48/ltr, Diesel Rs 3.56 in 2014: Minister”, 1 August 2022, https://www.business-standard.com.

16. “Contribution to Central and State Exchequer”, Petroleum Planning and Analysis Cell, https://ppac.gov.in.

17. Our calculation. This calculation is for the period 2014–15 to 2021–22. Data for total tax revenues of States is not available for 2022–23. We have taken the data for tax revenues of States from the RBI publication, Handbook of Statistics on Indian States (2021–22), https://m.rbi.org.in. For 2020–21 and 2021–22, the data for States is Revised Estimates and Budget Estimates respectively. All other figures are Actuals.

18. “Survival of the Richest: The India Story”, Oxfam Report, 15 January 2023, https://www.oxfamindia.org.

19. “Brochure: Revenue Statistics 2022”, OECD, https://www.oecd.org.

20. “Revenue Statistics LAC: Key Findings for Brazil”, OECD, https://www.oecd.org; “Tax Revenues: Tax-to-GDP ratio – Key Findings for South Africa”, OECD, https://www.oecd.org.

21. Our calculation. Data for total tax revenues of States is not available for 2022–23. We have taken the data for tax revenues of States from the RBI publication: Handbook of Statistics on Indian States (2021–22), op. cit. Data on tax revenues, for India and other countries, is also borne out by another set of data published in The Hindu: Rohit Azad and Indranil Chowdhury, op. cit.

22. Our calculation. For states own revenue, we have taken data from the RBI publication, Handbook of Statistics on Indian States (2021–22), op. cit.

23. “Methodological and Statistical Appendix. IMF Fiscal Monitor”, October 2022, https://www.imf.org.