His conclusion: “It’s Corporate India that needs austerity. The fiscal deficit can be wiped out simply by withdrawing the tax concessions to industry. Instead, the need is to invest more in human assets. The sooner we learn this, the quicker will we be able to avoid a Greek tragedy”.
Sharma comments that though in India, the term austerity is not commonly used, successive finance Ministers, policy makers, mainline economists and TV anchors harp on reducing the worrying levels of fiscal deficit, the gap between government earnings and expenditures and reducing social spending:
“Every time a panel discussion opens on any aspect of the country’s economy, the ire of the panelists is on the wasteful subsidies – the burgeoning food subsidy, fertilizer subsidy, LPG subsidies – and a horde of other subsidies like cheaper train fares, and public sector investments in public health, education, agriculture etc. The task therefore is two-pronged. First, to drastically cut down the so-called wasteful subsidies. Secondly, to reduce the outlays for various social sectors that directly impacts the majority population”.
Sharma continues: “The primary thrust of economic reforms is to cut down on social spending and shift the resources to corporate welfare. It is generally assumed that more financial support for corporates will lead to increased industrial output, increase in manufacturing, and growth in exports eventually leading to more job creation . . .
“Since 2004-05, Corporate India has been given tax concessions to the tune of Rs 42-lakh-crore. In addition, State governments have been providing more tax rebates every year. For instance, Punjab has in the past 4 years given tax concessions to the tune of Rs 900-crore to the industry. Regardless of such massive doles to the industry, the thrust of fiscal consolidation remains on cutting social sector spending”.
The editor notes that his thinking is applicable to other countries, having just received news of the £93bn subsidies and tax breaks to business in Britain, reported by the Guardian’s senior economics commentator, Aditya Chakrabortty in:’The £93bn handshake.
The UK Guardian analysis reveals that hidden subsidies, direct grants and tax breaks to big business amount to £3,500 a year given by each UK household.
As Sharma says, this flawed economic thinking is based on the discredited concept of ‘trickle down’. He adds that Greece has shown that neither the concept of ‘trickle down’ nor the stringent austerity measures have helped.
We repeat Sharma’s words: “It’s Corporate India that needs austerity. Fiscal deficit can be wiped out simply by withdrawing the tax concessions to the industry. Instead, the need is to invest more in human assets. The sooner we learn this, the quicker will we be able to avoid a Greek tragedy”. #