Where is the COVID money, honey?

CONTEXT: COVID induced lockdowns have impacted the overall Indian Economy and Government is the only player who has the capacity to catalyse the revival.

Steps to be taken:

• Reducing expenditure: Instead of token measures announced by the Government to reduce non-essential expenditure, substantial steps are required both at the centre and state level.

• Compressing Pay ratios: Government should narrow down the gap between ‘the median and highest-paid workers(pay ratio)’ both in private as well as government institutions.

• For, E.g. In 2019, the pay ratio for Hero Moto Corp was 1:752, 1:600 for Bajaj Auto and 1:502 for Infosys.
• The private sector witnessed pay cuts up to 25% from CEOs and government employees forgoing part of their salary.
• This will lead to a transfer of money from high worth CEOs (who are likely to save)  to employees who are more likely to use it for consumption.

• Reducing non-essential expenditure:  Centre should set an example by putting a hold on unviable projects such as statues and the Central Vistas in New Delhi.

• Excessive expenditure done on advertisements by the states such as Chhattisgarh should be checked and controlled.
• Increasing Expenditure: Government should increase MGNREGA’s budget, implement universal Public Distribution System (PDS), increasing pensions and an Urban Employment Scheme.
• Increasing sources of Revenue: The compulsion of maintaining fiscal deficit discourages borrowing. Therefore Government should amend tax structure to shore up revenues.

• Wealth Tax: According to IIFL Wealth Hurun India Rich List 2019, the average net worth of 952 richest Indians is more than INR 5,000 Crores.

•  Levying a one-time 4% wealth tax can yield up to 1% of GDP.

• Property Tax: India as raised 0.2% of GDP from property taxes as against an average of 0.6%  for developing countries and 2% for developed. 

• Using an automated taxing system for assessment and collection, can increase the property tax base and reduce default rates, thereby increasing revenues.

• Reducing Forgone Tax: Tax revenue forgone should be reduced since according to Government estimates INR 3 lakh crores was the tax revenue forgone in 2019-20, amounting to 14% of gross tax revenue. 
• Taxing Fairly: Super rich exploit the tax structure, and instead of paying the fair tax, they use the route of charity to give a fraction and increase their societal stature.

• Transparency: Government should be transparent to assure taxpayers that revenues will be used efficiently and productively, such as for relief measures, GST compensation to states and boosting the overall Economy.

Conclusion: Farmer bills are a step in the right direction, and the payoff will be high with Indian agriculture becoming globally competitive and benefits to farmers and consumer alike.