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That weird time of year is here again when India (or, more accurately, financially literate India) waits with bated breath to see which rabbits the magician in the ministry of finance (or illusion?) will pull out of his torn, tattered and battered hat. What will he do to tax rates? Whom will he hit or hurt? Will he kill the rich (and kill savings and investment as well) à la le crétin Hollande? To whom will he be malign or benign? Which industries and services will he grace with his favour? Which ones will he tax into oblivion? Will his Budget understand that economic entities actually exist for purposes other than paying tax?
What populist sops will he hand out? Which ones will he rein in? Or will his Budget accept that the Indian electorate has raced ahead of its elected representatives who, when they act in the interests of those they represent, do so more by accident than design? Indians now much prefer jobs, opportunities, income and growth to vote-buying sops that barely get to them. Will the FM use this Budget to continue on the path of slashing all price subsidies to eliminate them within five years (as he must)? Will he redeploy funds thus released to enhance more carefully-targeted income subsidies to the poorest, using Aadhaar to minimise leakage (of funds intended for the poor, which flow to the political and bureaucratic class instead) as Surjit Bhalla has so powerfully argued in this newspaper, with compelling evidence.
Will he spend time after the Budget educating the Left (who seem to occupy not another planet, but a different galaxy, where sense is inverted by populist socialist rhetoric into incomprehensible nonsense), and those illiterate in economics, who argue so shrilly that removing price subsidies is “anti-poor and anti-people”? Precisely the opposite is true! Price subsidies indirectly hurt the poor as well as the Indian economy (through deficits that fuel borrowing and inflation). Targeted income subsidies have the opposite effect.
The self-appointed protectors of the poor (who have made it clear in election after election that they don’t want their protection) should understand that instinctively, if they knew how market economies functioned (and accepted that non-market economies don’t function at all) instead of marinating in their confused Utopian longing for illusion. It is mind-bending that the most erudite, interesting, and civilised people in the Indian political space can be so irrevocably committed to