Looking at the ever-increasing size of the Union Budget, doubling every three years, Finance Ministers are hard pressed to generate resources to meet the Central Government’s ballooning expenditure. Competitive populism dictates that more and more money is spent on handouts and freebies every year, and except for some token gestures like doing away with senior citizen concession on train travel, nothing much is done to curb expenditure. All parties, both at the Centre and in States, pay lip service to elimination of subsidies and freebies, but promptly forget their promises once elections are announced.

A situation has emerged where one political party’s welfare expenditure is another party’s freebie, and viceversa. The Central Government, whenever it needs extra funds, often takes short cuts like increasing GST rates or playing around with Central Excise levies on petroleum products. This is child’s play for the Government, since the Centre now controls all significant levers of taxation; Direct Taxes through Income-tax, and almost all Indirect Taxes through GST. State Governments follow the Centre’s lead, wherever they can.

Such ill-thought measures affect citizens adversely, because incidence of tax i.e., the particular segment of the population that has to pay the tax, is rarely one of the considerations. Even otherwise, Indirect taxes hit the poor more; according to the latest Oxfam report “Survival of the Richest: The India Story,” a little less than two-thirds (64.3 per cent) of the total GST is paid by the bottom 50 per cent of the population, one-third of the GST is collected from the middle 40 per cent, and only 3-4 per cent from the richest 10 per cent of the country.

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Another toxic method is to resort to deficit financing. According to the Fiscal Responsibility and Budget Management (FRBM) Act 2003, fiscal deficit was to go down to 3 per cent of GDP by 31 March 2008, and reduce annually by 0.3 per cent thereafter, yet the fiscal deficit on 31 March 2024 is estimated at 5.8 per cent ~ far in excess of what was originally envisaged. Also, according to FRBM, Central Government Debt should not exceed 40 per cent of GDP by 2024-25, but according to Budget........

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