Is Freebies For Corporates, But Not For Poor?

Recently, RBI had released the state wise information by explaining about the financial indicators of the States vis-a-vis Freebies to GSDP for the current financial year 2022-23 as per the budget estimations and it had identified that, the States which offering maximum ratio of Freebies to GSDP are facing the huge revenue deficit, fiscal deficit and primary deficit with uncontrolled debts. Most particularly, Punjab and Andhra Pradesh has been spending for highest Freebies to GSDP as 2.7% and 2.1% respectively. Further, both these states have been spending for Freebies to Revenue Receipts as 17.8% and 14.1% respectively and on the other hand, both these States have been spending for Freebies to Own Tax sources Revenue as 45.40% and 30.30% respectively. Frankly, RBI had analysed the financial indicators of the Punjab and Andhra Pradesh and both the states have identified as the huge Debt to GSDP ratio for 53.30% and 32.50% respectively.

Actually, Financial state of affairs implications of the Andhra Pradesh also similar to that of Punjab since the accounting adjustments between february and march 2022 pertaining to overstating revenue and understating the debts and diversion of revenue to corporations to raise loan against to the violation of Article 293(3) and 293(4) are all needed to make adjustments to take fair accounts for consideration of analysis where RBI had considered the accounts as submitted by the Andhra Pradesh Government after these adjustments. In addition to this, Andhra Pradesh State Government Guarantees to GSDP had registered at 9.1% for the financial year 2020-21 , it is highest in the country.

Though there is a serious financial constraint around Freebies and Welfare programs of the Governments, still there is an argument for continuing it for the smooth living standards of the eligible poor BPL families, otherwise, Social disparities will be continued, Here the debate shall be carried objectively rather than Vote Bank Politics by allegations and counter allegations to divert the truth. Unfortunately, Political opponents like Kejriwal, Kapil Sibal, and some left-background intellectuals who favors Freebies have been given counter argument for trying to show case with the incomparable examples, such as, Why the Corporate Taxes reduce to 22% and Why it is at 15% for new Companies? Why the Bank Loans Write off for Corporates ? and How the Corporates maximising their wealth? And so on. These arguments are just useful to provoke the people against to the PM Narendra Modi led Union Government though the facts are distinct. Hence, it is time to project the facts to protect the interest of the Nation for safeguarding future generations. It is clear that Welfare measures are mandatory to the BPL families, but those measures should be productive schemes like NREGA with effective systems in the quality of work and payment thereof as per the guidelines.

Is the Corporate Taxes reduced from 30% to 22% only and 15% for new companies formed on or after 1st October 2019 making fresh investment in manufacturing considered as Freebies as alleged by some individuals?, answer is No, as In September 2019, the Union Government had given option for the companies to switchover to a lower basic rate of 22 per cent from 30 per cent while foregoing all exemptions, after considering cess and surcharge that effective rate will be 25.17% for the Companied Turnover up to 400 Crores only. However, Companies which do not opt for the concessional tax regime and avail the tax exemption/incentive shall continue to pay tax at the pre-amended rate, that is 30%. Further, in order to provide relief to companies which continue to avail exemptions/incentives, the rate of Minimum Alternate Tax has been reduced from existing 18.5% to 15%. Further, any new domestic company incorporated on or after 1st October 2019 with afresh investment in manufacturing sector, an option to pay income-tax at 15% and this benefit is available to firms which do not avail any exemption/incentive and commences their production on or prior to 31st March, 2023. The effective tax rate for these companies shall be 17.01% inclusive of surcharge & cess and such companies shall not be required to pay Minimum Alternate Tax.

As per the assessment, This led to a 16 per cent decline in corporate tax collections in 2019-20 for Rs 5.57 lakh crore and the decline was about Rs 1 lakh crore in this new regime of Corporate Taxation. But corporate tax collections at Rs 7.23 lakh crore in fiscal 2021-22 were 58% higher than in the previous financial year. The corporate tax collection in 2021-22 were higher by over 9% when compared to collections of Pre-COVID 2018-19. This shows that the simplified tax regime with low rates and no exemptions has proved as successful measure of the Union Government. As per the data, Corporate Tax share is 53 per cent of all direct tax collection, while 47 per cent came from personal income tax and Securities Transaction Tax together. In this circumstances with the above facts How can be treated by someone about the option for a New tax regime and concessions for newly formed Companies as Freebies provoke the people the preoccupied negative minded individuals and they should give an answer for sharp raise in Corporate Tax collections after 2019-20 and Collection on income of companies surged by 34 percent in the first four months of the current financial year 2022-23, it indicates that a simplified tax regime with low rates is yielding positive results and pumping resources instead of cost to the Union Government.

In addition to above, there is a misconception spreading around the Banks and Financial Institutions Loan Write Off as Loan Waiver by the Rahul Gandhi, Kejriwal and few left oriented individuals though the fact is distinct. As per rules, any provision made by a bank for bad debts on NPAs as per Banking regulation Act and the rules and regulations pertaining to thereof, such provision shall be Write off after the specific period of those provisions In Balance sheets of respective banks technically, that doesn’t mean as those accounts have been settled. But Advanced amount to the borrower continues as Receivable from the customer as Advances in their books and Balance sheet and all legal and other statutory proceedings against to these Bad debts continue though such Bad debts have Written off. Apart from this, Note the point that Write off the Bad debts provisioning as write off is not the Loan waiver. Settlement of loan outstandings mutually by the Banker and Borrower is distinct to that of the write off of Bad debts provisioning. SBI or any other Bank can do only Write off of bad debts for provision as per classification on its advances, but not the Waiver for the liability of the borrower.

If we observe The provision coverage ratio of the Public Sector Banks, a measure of health that captures amounts set aside to cover bad loans, has improved to 86.9% at the end of March 2022 from 46% at the end of March 2015. The state-run banks have recovered ₹5.17 lakh crore in non-performing assets (NPAs) and ₹1.24 lakh crore in written-off accounts since FY15 and filed suits against 98.5% of wilful defaulters, data available with the government showed. It requires fair argument on Freebies and Welfare schemes rather than quoting the wrong examples like Bank Loan Write off as Waiver to provocate the general public where the facts are different from that of the propaganda against Bank Loan Write off as Waiver when there has been recovered ₹1.24 lakh crore in written-off accounts since FY15 and Who speaks about Bank Loan Write off as Waiver shall be answered that How the ₹1.24 lakh crore in written-off accounts recovered for last 7 years?

Apart from the above, there has been discussion about the Wealth Maximisation of Corporates in India. How can Government restrain any entity on their expansions where similar environment is available for all ? Whether Corporates born in the last 8 years alone or they have grown steadily for past 20 to 75 years in the 75 years of independent Nation. How old are TATA, Birla, Ambani and other big groups in our country. On the one hand, We applause the success of Amazon, Micro Soft, Google, Apple, Samsung etc., but not our own brands. We can’t neither support nor against for particularly company, they grow as per their risk in taking and no body above the law of our land on their irregular practices. But, it is not good to undermine our own Corporates for the sake of political gains. Because, Government and People are permanent, but not the parties in power as the same Corporate entities continue irrespective of the party in the Government.

In this context, all Welfare Schemes and Subsidies can’t equate to Freebies in general. It is mandatory for the Governments to serve the BPL families under National Food Security Act with food grains, supply of Safety Drinking Water, Subsidy of Housing for the poor, Health Services, Education for children and Employment opportunities keeping in view improve their living standards and making them productive for the Nation, these are all necessaries for better living conditions for poor and downtrodden people in the country. Let We observe the Narendra Modi-led Union Government has implemented the Gareeb Kalyan Yojana for 80 Crore BPL families in the country during the pandemic and still food grains under this program are continuing since the impact of the Lock down leads endanger to the lives of the people, it is not considered as freebies and similarly, Atmanirbhar Bharath Package shall not be considered as freebies as it all need of the hour to safeguard the Nation from the uncertainties of the pandemic.

Executive of the State Governance shall assess on their own in the implementation of Welfare measures and they should openy educate the people on this issue, neither Supreme Court Nor Election Commission has power to give any statutory direction and only political parties shall have self directives by using their application of mind about the future generations. But the issues raised pertaining to the freebies impact on the finance by the Supreme court up on the PIL is very important where the Tax payers urging that their sacrifices shall not be poured in to the drain rather than for the productive development of the Nation.

My view is Supreme Court urges all the Governments and political parties for the consideration of stringent guidelines on using debt fund for the the freebies and welfare of any government in the normal conditions. It is imperative to set up a mechanism like Central Debt Regulatory Authority ( CDRA ) like Electricity Regulatory Authority to control the debts with in the stipulated FRBM limits of the Governments and usage of debts for future revenue generating Productive measures and finance of welfare measures shall be revenue of the Governments without impacting the Debt services of the respective Governments rather than using freebies for electoral attraction.