Mainstream, VOL LIV No 29 New Delhi July 9, 2016
Some Thoughts on GST : A Victory of the Powerful Crony Lobbies
Saturday 9 July 2016, by
Even without a detailed study of the nitty-gritty and minutiae of the proposed legislation on the goods and services tax (GST), prima facie it can be maintained that there is a lot in its design and implications to endear it to the neo-liberal enthusiasts. Hence little wonder they go on to parade it as a major tax ‘reform’ in India, a tax reform which covers practically all the goods and services in every nook and corner of the country. It seems once this tax is legislated at the Union level and endorsed by the requisite number of State Assemblies, the Indian fiscal system would be marked by a qualitative change. Actually even a cursory understanding of GST in terms of the overall context of Indian political economy in general and its fiscal system in particular along with the essential concept and supposed and much-advertised rationale of GST are, to my mind, enough to give rise to a number of apprehensions. More specifically, it is so when the fiscal policy in general and taxation measures in particular are viewed, howsoever fleetingly, from the standpoint of really inclusive development of India (not as a cosmetic exercise of democratic deceit indulged in by the rich, powerful and famous in the country as a widespread practice).
It may be noted that it amounts to some concession or adjustment to the ground realities that necessitated among the neo-liberals a concern for inclusive development, of course following the lead provided by the World Bank. It is projected as a far-reaching add-on corrective to the prevailing GDP-centric highly disequalising and disem-powering phenomenon of neo-liberal growth. This kind of growthmanship, particularly owing to the prevailing neo-liberal ideological and narrow social commitments, seems presently to take precedence over everything else—as can be seen from the competitive pursuit of the so-called neo-liberal reforms by the two major political groupings contending for political power in India. The latter is an exercise to do the same but with a different public face and in order to break the power-monopoly of a single group of political classes, though both the groupings are operating with some loose but deeply embedded intertwining with the top business classes and entities under our prevailing system of crony economic and political oligopolies!
Let it be clearly understood that the Indian fiscal system as it stands today surely demands a major overhaul. It neither serves the state in terms of adding to its autonomous power and capability to enable it to do what it professes (may be a part of the lingering agenda of growth-facilitation and democratic allurements offered to the potential voters), which is a typical feature of most market mechanism and private corporate power-driven open economies in the present era to supplement their single-track push for corporate-profit inflation under the cover of various populist measures. As practical and logical interconnected parts of the model, it can be seen that the ostensible pro-poor thrust is based on the imperative of both democratic vote-mobilisation and cheap labour requirements of the system empowering corporate businesses. These postures and practices also address the concerns of the MNCs as the most critical major centres of economic, financial and technological power and the military capabilities of the topmost hegemonic nation- states and their geo-political and business satellites supporting the Indian neo-liberal reforms.
The prevailing fiscal mechanism, as it has evolved over the last almost seven decades, fails the state to enable it to command a reasonably autonomous financial and operational space for openly and unambiguously following what it upholds as its agenda in terms of both its stated as well as the real objectives of state policy and governance. Even with huge resource-mopping by privatisation of the existing PSUs as also the downsizing of the investible resources required in order to fill the vacuum created by the withdrawal of public investment from key areas of the economy and the consequent lowered demand for investible funds by the state, the state remains under severe fiscal crunch and has ‘voluntarily’ to go in for statutorily ordained fiscal discipline. As a result, we have a fiscally constrained state able to satisfy neither the big players entrusted with the agency role nor the people at large who are promised a better place under the sun. This is because the big guns always want the state on their side wholly and without practically operative reservations under the cloak of pursuit of high, increasing and sustained growth rates of the GDP, of course by means of ever larger bottom-line of their balance-sheets.
Such a growth process is supposed to result from the rising rate of investments by the local and foreign capital, effectively funded directly or indirectly by the transfer of resources from the general public (that is, without the big money having to curtail its fast-growing consumerist pursuits of wallowing in super-luxuries and accumulation of precious valuables). Actually it is the growth resulting from transfer of people’s resources, financial and real both (such as land, mineral resources, sources of water, forest resources with scant concern for global warming), which are effectively controlled and used up by the corporate giants by means of the overgrown and narrowly controlled financial sector entities. One can appreciate the reasons for the all-out push for GST (notwithstanding its much-touted revenue-neutrality in terms of the overall draft on social resources) by both the government and businesses expecting a two per cent point increase in the GDP (as though we have in the past not come across such episodes of a two per cent point or even greater push-up in the annual rate of growth with everything remaining a repeat story of similar jerky and disempowering outcomes) by factoring in the above outlined overall context.
Remember, the rising growth rate is propagated as the panacea for the country’s bright and just future, as though in a highly skewed society everyone is taken on board by the growth process and that too in a fair and just manner on both sides of the inputs and outputs. Can one say this expectation is realisable if not in a relevant short-run may be in the long-run? Do the highly adored growthmanship stalwarts ever stop for a moment to wonder whether in the long run the young aspirants in their millions can get fair and just livelihood-earning opportunities (encashing the demographic dividend the country has been waiting for a long time) even during their remaining working lives (something which has eluded an overwhelming majority so far after nearly seven decades of by and large rising growth of the GDP)? Or is it the long run of the Keynesian variety in which we are all dead! Recall how the official statistics have stopped counting the total backlog of people without adequate and regular access to means of using their capabilities for accessing their entitlement of earning an honest, adequate and assured livelihood!
Why we mention this issue is because the state— as the provider of social and public goods and services, as a growth and development agency, promoter, regulator and planner and a just and fair democratic arbiter among various divergent and conflicting claims and counter-claims—has to make use of its powers, particularly the fiscal authority, to turn development into a real develop-ment of all and that too by at least controlling the spiral of worsening disparities and by increasing decent employment opportunities to cope up with the annual sizeable additions to the army of employable young persons. This major role is inconceivable without a strong, and not necessarily large, presence of the state in the economy with a decisive voice over the use, pattern and beneficiaries of the social resources, at least as a mediator to protect and promote the right to life and development with dignity of the historically socially adversely included majority of citizens presently sidelined owing to excessive fixation with the whims and fancies and material and financial interests of the resource-use-miser and relative capabilities of the rich, privileged minority of citizens at the top echelons. Recall how the annual memoranda for the fiscal policy changes by the big, organised capital to the fiscal authorities get translated in as short a time as possible into actual Budget proposals and fiscal laws, while the rest of the have-nots are left high and dry, except for the rephrased old populist promises.
Let us cut short the overall qualitative, socio-economic context and come to hard fiscal facts. India, as it finds itself in the early decades of the twentyfirst century, is facing a massive deficit of pressing and overdue social-public tasks requiring an active state to ensure adequate and qualitatively appropriate public and quasi-public goods and services to create conditions in which the majority of people can develop their productive and social capabilities and contribute to the common task of producing the wherewithal for a good and quality life for everyone in a framework that reflects our values as enshrined in our Constitution. Obviously such a nuanced characterisation of the challenges facing Indian development was sorely missing from the beginning as it was placed under the supposedly all-encompassing shadow of a low and stagnant per capita income without an attempt to forefront the specific, broad categories of goods and services and their production system relevant for the majority of the people who are sidelined. Our fiscal crisis, both in terms of such qualitative neglects of epic dimensions as also in the form of inadequate command over financial resources, was given a one-dimensional characteri-sation. It is in this context that the GST proposal is making rounds as something that can do the trick of extending the fiscal net far and wide where most or all other means have so far fallen short. This is how one finds the presently much-advertised, well-known parts of the neo-liberal agenda, that seem to have been designed to make good what has so far been less than successful. Or is it in the nature of these reforms that they are never complete and a new element always presents itself as the old one is carried through?
Let us face some facts on the fiscal front. We have one of the lowest tax-GDP ratios (hovering around 10 per cent as far as the Union Budget goes). Thus every single task that is to be performed by public expenditure, directly and immediately benefiting the general public to equip them with both civic amenities (in villages and small towns and for getting rid of the stigma of slums prior to the extravagant spread of super-luxurious amenities in a few pockets of the deluxe localities with enormously expensive houses and villas) and access to productivity-enhancing facilities and capabilities, has been an object of criminal neglect and blamed on the inability of the tax system to reach a vast majority. Apparently the big gap that separates the privileged few from the majority of people without access to means of assured and adequate livelihood as a pre-condition for bringing them into the tax net simply escaped the neo-liberal mindset and values.
See the data collected about civic and production-enhancing infrastructure facilities in our villages brought out by the Socio-Economic Caste Census (SECC) 2011 and you would shed a few genuine tears at the outcomes produced by perverse means of collection and allocations of our scarce fiscal resources. Similar is the case of the production capabilities-enhancing public goods and services, including even public health, elementary and secondary education in good quality schools giving better facilities to those who have been the victims of centuries of accumulated neglect and exclusion, let alone paved intra-village streets with sanitation, lighting facilities and security of lives, limb and human dignity against the pervasive social authori-tarianism based on caste, gender, access to public goods and equal protection of law rather than fancy showy projects. Even what is supposed to serve the general adversely included masses, such as building private toilets, has been prioritised without first ensuring water supply or even a structure with a roof that can be treated as a house except by default, let alone a critical minimum income entitlement. On the contrary, huge sums are spent and planned to be spent driven by the international demonstration effect on prestigious, latest technology-based showy facilities whose location and pricing simply rule out the majority of people from their use, let alone benefiting from them, even in terms of construction labour or as maintenance staff. The short point is that in the budgetary allocations of public expenditure there is no trace of the principle of progressive dispensation which requires relatively higher priority, a democratically ordained priority for the needs and requirements of the relatively worse-off common citizens to enable them to catch-up and join the mainstream of social-economic and political life of the community.
What such a pro-people, democratic restruc-turing of the fiscal policies calls for is a quantum jump in the overall size of the Union Budget, a rise in the tax-GDP ratio on par with most of the developing Third World and other countries offering a secure and better life to those at the lowest rungs of their respective social pyramids, collecting from the corporates a share of the total fiscal operations commensurate with their share in the generation of the GDP (which is roughly about 25 per cent of the GDP presently) and a comprehensive social security for the unorganised segments of the economy, to mention a few imperatives. These cannot be accomplished by relying on indirect taxes as the main and bigger source of public revenue and letting the rich and super-rich, especially the corporate sector entities, go practically scot-free, in an overall sense in particular, taking note of both the bounties and spurs offered to them as also underpriced and disproportionately heavily funded public and quasi-public goods and services excessively catering to the needs of the modern, organised corporate and metropolitan services and facilities and access to the natural and heritage resources.
Yes, such things may make India look like an isolated island compared to the rich West and even some of the Third World states which followed and follow in the footsteps of a mimetic, exogenously determined pattern of socio-economic and scientific changes. Real nationalism, people’s nationalism, requires giving highest priority to the weak and vulnerable in the country—in the millions of our villages and slums—as these are the people who constitute the India of today and tomorrow and are the real solid bases of national power, pride and purpose.
Compared to some such imperatives, the GST simply appears as a means of doing more of the same which has become our bane. It fails to improve our tax-GDP ratio, particularly its bias against indirect taxes and against the common man and woman. Treating the grossly unequal as equal in terms of tax liabilities, whether on goods and/or services, is among the worst ways of perpetuating inequalities. It becomes still more deplorable when the unequal position/ location/ capabilities and potential for social good of the producers or service-providers is simply treated as irrelevant when it comes to collecting taxes from the goods and services produced/ provided by them. Actually it seems the words, concepts and concerns for matters related to equality among citizens have been simply obliterated from the mindset of the neo-liberal policy-establishment, struggling to enforce a common general tax on all ignoring their differentiation in every relevant sense. The GST, as conceptualised presently, reminds one of the famous Hindi saying or dohaa, popular about indiscriminate regimes,
“Andher nagari, chaupat raja, take ser bhaaji, take ser khaajaa.”
Like in any large and modern society, we have in India vast and glaring disparities not only in the level of consumption, but more sharply and significantly in the commodities composition or the pattern of consumption, organisation of production, the hierarchy of needs, preferences and access to resources underlying them and the ease and regularity of the assured and affordable availability of the articles of consumption, without greatly fluctuating prices. These are matters which get buried under the heavy weight of a uniform all-India pattern of commodity taxation as the hall-mark of GST. We require a pattern of commodity taxation which differentiates between the rich man’s goods and services and the poor person’s goods and services, positive health and welfare-promoting pattern of saatvik consumption as also one that penalises the dependence on demerit goods and services, say, for example, between bus fares and taxi fares or taxi fares in super-deluxe luxury cars and the run-of-the-mill ordinary taxis or air travel and super-luxurious train services and so on as such examples can be easily multiplied.
Such a people-sensitive, justice and fair play- centric pattern and system of commodity and indirect taxation (with overall lower weight than the direct taxes on the rich and powerful with heavy use of public goods, facilities and prime spaces) must of necessity cover the entire spectrum of our vastly differentiated multiple disparities-ridden patterns of social existence and relation-ships in every single sphere of life. The outcomes thus produced should be a blow in the direction of greater equality rather than accentuation of the existing pernicious disparities. It is not growth as such but an appropriate growth responding to our infirmities and weaknesses whch can become our panacea. The political and public support-sanction and legitimisation-based business and public life entities and classes must be held accountable for their decisions on such sets of rarely expounded criteria, criteria which spare the many and soak the few privileged sections. Such a simple but unexceptionable test of pro-gressivity of public decision-making is absolutely missing from the GST proposals.
It is clear that ignoring all such social and economic desiderata a mechanical unthinking or rather one-sided thinking-based unjust and costly system of GST is sought to be imposed on the general public, torn between various unjust differentiations and discriminations, as parts of the overall endemic adverse inclusion. This condition of social existence of the people is prevalent in economic, political, social, cultural spheres. What makes it worse is that even in terms of the laws as they operate at the ground level, whether in the legislatures or law courts or in police stations (which are effectively run by those who are laws unto themselves), the voices and interests of the common citizens seem to vanish into thin air. The entire top-down GST debate has been so debased and so orchestrated as to single out and highlight the issues from the partisan angle of the all-powerful corporate-political classes and their unholy alliance by means of and through the network of white-collar crimes forming the difficult-to-shake base of what is portrayed as India’s black political economy. Any familiarity with the long-drawn debate and preparations for this one-stroke debasement of the state system has not drawn a real exposure and opposition from any quarter traditionally believed to represent the voice of the weak. Shockingly, many such worthies have been parts of the establishment pushing for and devising the GST, forgetting their conventional lament about the lop-sided powers and responsibilities of the State governments in the Indian brand of federalism, let alone the interests of the country’s working poor.
Some seriously spurious arguments and claims on behalf of the GST lobbies make strange reading. We are a highly differentiated, non-functionally and unjustly diverse society and economy. Over two hundred years of commodi-tisation processes in most walks of life have not led us to a well-integrated economy, let alone society and nation. So many attempts at national planning and its so-called progressive core or actually afterthoughts have borne little positive pay-off owing to the perverse impact of GDP-centricity as the hegemonic panacea of all our ills, including the actual life-distortions caused by the fiscal policies and spending pattern. We are in most senses a divided and poorly integrated economy. We have a vast informal-unorganised sector whose primary feature is its spontaneous diversity and variety—a virtual jugad economy and life-style. It remains the main part of the economy, with over 90 per cent share of the work force, it accounts for half of the GDP.
All said and done, no device tried so far has been claimed to have succeeded in producing a well-integrated Indian economy, even if one ignores the neo-liberal bias of the highly skewed nature of the economy and its inherently disequalisation-enforcing growth. But lo and behold, the all-India uniform pattern of GST’s indirect tax regime, as enunciated and visualised under the conceived GST system, is expected to lead to an integrated economy! A one-pattern of indirect tax regime producing an integrated national economy with its all-India uniform pattern! It seems to be a classic case of wild social imagination, possibly on par with poetic licence. Our absolutist empires in the past often had uniform tax systems and the kind of economies they produced is a well-known story.
The fact is that the neo-liberal modes of thought have so pervaded our establishment and so sadly missing are the voices of the poor and marginalised from the policy-fora that it appears to be a matter of a little waiting for the competing rivals agreeing on the GST and then the stock markets would surely go into a celebration mode (sky-high share prices, irres-pective of corporate economic performance owing to the successful fiscal policy-coup) as the GST is enacted into law and collections from the masses start. Actually the corporate sector itself has been in the forefront of the vociferous supporters of GST, and surely it is not in a mode of self-goal. The moment the GST begins, the companies would make their accountants become busy with creative accounting to claim huge sums back from the public exchequer as credits for what they have paid by way of GST at earlier stages of the transaction/value chains. Of course, the State governments would not be too unhappy as they would get compensation from the Central Government for the putative loss of revenue, a gain without the unpleasant decision to impose taxes.
So as the stories end in our folklore, once the GST legislation is in place, everybody lives happily thereafter, that is as happily as they have been living for ages! The present-day players of the competitive neo-liberal reforms-game would parade the GST introduction—perhaps in full- page advertisements—as yet another feather in their cap for successful introduction of major reforms facilitating profitable businesses with remarkable ease!!
A noted economist, the author is a Professor of Economic Development and Decentralised Planning holding the Malcolm S. Adiseshiah Chair at the Institute of Social Sciences, New Delhi.