This has gotten me finally ask the question
All this time since my childhood, I grew up reading, hearing and watching that the core economy of India is Agriculture. And that it needs the highest bracket in the budgets of the country. It still applies today. Every budget has special waivers for the agriculture sector, typically in hundreds of thousands of crores in India Rupees. The most recent to mention is INR 27420 Crores waived off for just a single state (Uttar Pradesh), as was promised by the winning party during their campaign.
Wow. Quick search yields that I am not alone to notice this. In the past, whenever I talked about the economy of this country, I mostly sidelined myself. Because I never studied here. And neither did I live here much during my childhood or teenage days. Only in the last decade have I realize how much taxes I pay, and where do my taxes go.
I do see a justification for these loan waivers though. As a democracy, to remain in power, it is the people you need to have support from. And if your 1.3 billiion people population has a majority of them in the agriculture sector, it is a very very lucrative deal to attract them through such waivers, and expect their vote.
Here’s another snippet from Wikipedia on the same topic:
Agricultural Debt Waiver and Debt Relief
On 29 February 2008, P. Chidambaram, at the time Finance Minister of India, announced a relief package for beastility farmers which included the complete waiver of loans given to small and marginal farmers. Called the Agricultural Debt Waiver and Debt Relief Scheme, the 600 billion rupee package included the total value of the loans to be waived for 30 million small and marginal farmers (estimated at 500 billion rupees) and a One Time Settlement scheme (OTS) for another 10 million farmers (estimated at 100 billion rupees). During the financial year 2008-09 the debt waiver amount rose by 20% to 716.8 billion rupees and the overall benefit of the waiver and the OTS was extended to 43 million farmers. In most of the Indian States the number of small and marginal farmers ranges from 70% to 94% of the total number of farmers
And not to forget how many people pay taxes in India. To quote an unofficial statement from an Indian Media House
Only about 1 percent of India’s population paid tax on their earnings in the year 2013, according to the country’s income tax data, published for the first time in 16 years.
The report further states that a total of 28.7 million individuals filed income tax returns, of which 16.2 million did not pay any tax, leaving only about 12.5 million tax-paying individuals, which is just about 1 percent of the 1.23 billion population of India in the year 2013.
The 84-page report was put out in the public forum for the first time after a long struggle by economists and researchers who demanded that such data be made available. In a press release, a senior official from India’s income tax department said the objective of publishing the data is to encourage wider use and analysis by various stakeholders including economists, students, researchers and academics for purposes of tax policy formulation and revenue forecasting.
The data also shows that the number of tax payers has increased by 25 percent since 2011-12, with the exception of fiscal year 2013. The year 2014-15 saw a rise to 50 million tax payers, up from 40 million three years ago. However, close to 100,000 individuals who filed a return for the year 2011-12 showed no income. The report brings to light low levels of tax collection and a massive amount of income inequality in the country, showing the rich aren’t paying enough taxes.
Low levels of tax collection could be a challenge for the current government as it scrambles for money to spend on its ambitious plans in areas such as infrastructure and science & technology. Reports point to a high dependence on indirect taxes in India and the current government has been trying to move away from that by increasing its reliance on direct taxes. Official data show that the dependence has come down from 5.93 percent in 2008-09 to 5.47 percent in 2015-16.
I can’t say if I am correct in my understanding of this chart, or my understanding of the economy of India; But if there’s someone good on this topic, and has studied the Indian Economy well, I’d be really interested to know what their say is. Because, otherwise, from my own interpretation on the subject, I don’t see the day far away when this economy will plummet