Budget 2018: When a pro-business dispensation starts taking some steps, we worry. Remember that in 1966 Indira was also right-of-centre and pro-business.
Budget 2018: When a pro-business dispensation starts taking some steps, we worry. Remember that in 1966 Indira was also right-of-centre and pro-business. The consequences of her ideological shift condemned our country to remain poor as our eastern neighbours took off. Consider a few items. Small companies get a tax break. This means that companies are confronted with a disincentive to be successful and grow big. Indira “reserved” the garments business for “small industries”. To this day, we are to develop a worldclass garment industry like China’s (incidentally China was way behind us in 1967) and now we are behind Vietnam and Bangladesh. This business of giving a tax break to “small” folks sounds good. The unintended consequences could mean a competitive disadvantage for winners and presumably we want winners.
Watch: Tax takeaways from Budget 2018 for the common man
Customs duties are up a few percentage points here and there —electronic items, CKDs etc. Seems benign and perhaps supportive of Make in India. But this is a slippery path. We did make in India —Ambassador cars, protected by bans on car imports and high duties on CKDs. Are we proud of the cars we made? The few duty increases may not matter. It is the direction that is worrisome. Indira too started in what seemed a relatively harmless way. By the time she had done her task, she had condemned multiple generations to poverty. A long-term capital gains levy on the dynamic nouveau riche who make stock market gains, again has that sound of reasonableness so characteristic of leftist BS. The worry is about the signal — is it bad to be a participant in dynamic wealth creation?
The worry is about the next step — is this the beginning of an attack on wealth-creators? Should they emigrate as their predecessors did in the seventies and eighties? Irrespective of the details of this Budget, one hopes that the powers that be realise that a pro-business, pro-growth, pro-wealth creation environment is tough to create and easy to lose. Indira may not be the best of role models.