Surjit S Bhalla
Profile: Surjit Bhalla is the chairman and MD of Oxus Investments, a New Delhi-based economic research, asset management and emerging-markets advisory firm. He’s worked at the research and treasury departments of the World Bank, and also had stints with Goldman Sachs and Deutsche Bank.
India turns 66 this month. That it has transformed during this time is believed by most of its citizens. Consider that a majority of us were born after 1990, when India’s per capita GDP was $400 a year. Today, the figure is more than four times higher at over $1,600. Yet, most Indian policymakers behave as if, on an average, we are a very poor country and that nearly two-thirds of the total population needs attention in the form of transfers (doles) from the government. Most people, and almost all taxpayers, in India and across the world do not object to money spent in the uplift of the poor and in providing them with basic infrastructure and services. I have yet to meet anyone who protests the provision of roads, water, sanitation, education and health care to the poor.
Leaky, corrupt, ‘in the name of the poor’ subsidies are the problem and considered objectionable. They provide little income support to the poor and subtract from the subsidies that are desperately needed. This is particularly relevant in the sterile ‘growth versus redistribution’ debate that is currently raging in India. Prime Minister Manmohan Singh and Congress President Sonia Gandhi (the duo is hereafter referred to as Manmonia) along with their advisor, Nobel laureate Professor Amartya Sen, portray that India spends precious little on redistributing income. But the facts indicate otherwise.
There are at least two obvious reasons why India, like other countries, spends its fair share on redistribution. First, it has a very small income tax base, with the lowest taxpayer in the top 20 percent of the population. Thus the poor, the emerging middle class and half of the middle class do not pay any income taxes. Second, corporate taxes are paid by the wealthy. Therefore, a substantial proportion of money spent on redistribution is financed by the “rich” taxpayer.
Now, the poor and the taxpayer alike are concerned with the form taken by the subsidy or redistribution. Bad subsidies do not enhance productivity, good subsidies do. And the Congress-led UPA, both shades I and II, has been consistent in its advocacy of dole for the bottom half to two-thirds of the population.
Never in the history of India was two-thirds of the country considered poor—not even by the ‘garibi hatao’ queen Indira Gandhi. Indeed, there is no country in the world that sets its own poverty line to contain two-thirds of its population. The question, therefore, is: What prompts Manmonia to continue and substantially increase its dole expenditure over what had already prevailed before they arrived on the scene in 2004-05?
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(This story appears in the 23 August, 2013 issue of Forbes India. To visit our Archives, click here.)
Excellent Article. In India in most cases the subsidies hardly reach poor in full as it flows some of it is drained. Dr.A.Jagadeesh Nellore(AP),Indiaon Aug 21, 2013
Surprisingly, this wealthy man wants subsidies to provide fuel and fertiliser (two things destroying the world\'s resources and environment) not food which oddly enough poor people need to survive. This article quotes: Even the Congress does not argue that the first two do much to help the poor. Can you actually provide actual evidence rather than blanket statements which we are expected to accept as gospel truth. The world\'s richest are the greatest polluters of the land often leaders of companies which pay little tax but complain about the burden of taxes. It is the constant parasitic never-ending accumulation of wealth which often involves the exploitation and expense of the earth and poor people which is the problem. This man and his ideas are the problem.on Aug 20, 2013
Lovely article. This brings to front the very question of over dependence on Gvts. This very aspect of getting subsidized materials have taken the juice out of hard work. People are comfortable sitting at home and expecting gvt to bail out than putting their neck on line and start working. Sad state of Indian politics.on Aug 19, 2013
Great article. Such articles during these times will open people\'s mind and awareness about failing PDS and Manmonia. I was recently talking to the maid servant in my house. There are several times when she has been rejected of her rice quota on account of stock outs. There are several times when she is convinced to sell her quota to the PDS store keeper at a Re.1-2 higher. However, now shes says, she can afford and can get better rice from the market but can no more afford buying vegetables. Someone is definitely benefiting, if not down the line, certainly up the line and the subsidies instead of flowing down stream is flowing upstream all the way to Manmonia. Government instead of loosing money on PDS, instead invest that money in better infrastructure, roads, markets, cheap and continuous electricity to farmers, excess to mandis, it will help reduce the over all price of the agriculture produce and improve affordability and consumption. Something radically different needs to be done.... Regards, Rahul Dravidon Aug 19, 2013
Hi, Not to mention a good storage space for agriculture produce and also a very reliable supply chain management in our PDS. That is enough to keep control on them. Everything will be streamlined right from the farm to the consumer. Another matter is the egoistic mindset of our leaders. For them these kinds of suggestion will be just like pouring water on stone which will not have any affect on them. Thanks, Sandesh.on Aug 19, 2013
Sustainable agriculture is the way people have survived from the beginning not through the more modern destructive pesticides and fertilisers which now line the pockets of rich agricultural industrialists and do nothing but harm.Furthermore, the evidence is that there is already and always has been enough food in the world, the problem is distribution. Oddly, the suggestions by all the people in this forum are to cut off food. It seems reasonable to question these ideas to cut off food but you consider any questioning to be abuse? Perhaps this is because your views are unjustifiable if questioned and evidence is asked to be produced. It is no good adding a Dr to your opinions, provide proof not right wing declarations of what you think the poor need - please provide proof. Thankfully it is clear that your dead ideas are way past their sell-by-date similar to the destructive products you wish to continue imposing on the world and the poor.on Sep 28, 2013