New Delhi: It will not tax you to vote the Bharatiya Janata Party (BJP) to power, but it could cost the treasury at least Rs50,000 crore. The BJP’s political manifesto, released after a gap of 11 years (the two in between were the agendas of governance of the BJP-led National Democratic Alliance), reads like an advance copy of the budget it would present if voted to power.
In the past five years, the United Progressive Alliance (UPA) government has pursued “tax and spend” policies. Former finance minister P. Chidambaram had a fetish for new taxes, whether fringe benefit tax, securities transaction tax or the just abolished banking cash transaction tax.
The BJP seems to believe in spending without taxing. By proposing to raise the tax-free limit to Rs3 lakh a year (higher for women and senior citizens), the BJP will move about half the current number, that is, 15 million assessees, out of the tax net, and lower the tax liability of other income tax payers. This move could mean a loss of Rs22,500 crore.
Popular agenda: (from left) Bharatiya Janata Party leaders Murli Manohar Joshi, Rajnath Singh, L.K. Advani and Jaswant Singh at the release of the party’s election manifesto in New Delhi on Friday. Ramesh Pathania / Mint
Revenue officials say a large taxpayer base aids collection, as the tax department can deduce possible incomes from expenditures and investments made. The people who pay taxes are also relatively better off than most other citizens and it is only fair that they pay for relief of the set that is down and out. The BJP says lower tax rates will improve compliance, but by exempting one set, it will have to raise rates for those that pay. The abolition of fringe benefit tax should cost Rs10,200 crore, which is the Budget estimate for this year.
Providing 35kg of rice and wheat per month to very poor families at Rs2 a kg might mean an outgo of Rs10,000 crore. Farm loans at 4%, will raise the subsidy from two percentage points to five, and swell the bill to Rs6,500 crore. A complete farm loan waiver may not cost much, as the UPA government has done much of the waiving at Rs66,000 crore.
Rank 1 pension for ex-servicemen is variously estimated to cost Rs1,500-5,000 crore.
One has not been able to put a number to subsidized education loans at 4% interest rate or exemption of soldiers and armed police from income tax.
The BJP is silent on the UPA’s flagship social sector innovation—the National Rural Employment Guarantee Scheme—though BJP spokesperson Prakash Javdekar had told social action groups recently that his party would extend entitlement beyond 100 labour days per family, to every individual. The Congress has written this promise into its manifesto and that is expected to double the bill on this score alone to Rs60,000 crore a year.
The BJP’s promises, if implemented, will blow a hole in government finances the size of 1% of the gross domestic product. Some might see it as expansion of the fiscal deficit; its supporters might call it yet another instalment of the fiscal stimulus.
However, since it is unlikely that the BJP will come to power on its own, it can always wriggle out, saying that these promises do not bind the ruling alliance.