73% of the wealth generated in India in 2017 went to the richest 1%, while the poorest half of the population saw only a 1% increase in their wealth
Photo: iStock Economic inequality in India impacts every aspect of our everyday lives, despite the country being a welfare state. As we celebrate 75 years of Independence, the poor citizens of India continue to face increased fiscal burden in the form of inflation and higher taxes, with fewer benefits.
No taxation without representation — this slogan played a crucial role in the freedom movements of India and the United States. The statement indicates the relationship between the state, citizens and taxation.
Read more: What does it take to tax the rich?
“In a tax state, taxes were no longer raised merely for the purposes for which the prince had asked them, but also for others,” said economist JA Schumpeter. Indeed, the legitimacy of taxation is derived from the welfare done by the government.
The Constitution of India envisaged the state’s role as a welfare one. For that, the government is empowered to administer taxes and their transfer. However, in the year of Azadi ka Amrit Mahotsav, ‘transfers’ are being painted as revadi (freebies) and the lives of poor citizens are being burdened by regressive “taxes”.
Inflation acts as a hidden tax on poor and middle-class citizens. For instance, at the time of the introduction of the central scheme Pradhan Mantri Kisan Samman Nidhi or PM-KISAN, which gave Rs 6,000 cash benefit to farmers, diesel cost Rs 65 per litre.
Diesel recently crossed the Rs 90 mark. Thus, fuel inflation devours the cash benefit of this scheme. However, inflation often invites public debate. Many other such charges are hardly discussed.
The roadways are meant to be available free of cost, being public goods. However, thanks to privatisation and PPP models, such services now demand a fee. Travelling from Jammu to Kanyakumari via car (3,450 kilometres), one has to cross 59 toll plazas and pay Rs 5,000 as toll taxes.
In the financial year 2021-2022, the government mopped up Rs 35,000 crore as toll tax. The same is projected to reach Rs 1.34 lakh cr by 2025.
Secondly, the diversion of funds originally meant for the roadways to other sectors is an implicit fiscal burden. In 2000, the government enacted the Central Road Fund Act (CRF), under which fuel cess was used to fund the construction and maintenance of roads.
In 2018, CRF was amended into the Central Road and Infrastructure Fund (CRIF). This allowed water and sanitation schemes, communication, social infrastructure, etc, to be funded from this fund. But the utilisation of CRIF funds for the year 2021-22 ranged from Jal Jeevan Mission to Swacch Bharat Scheme.
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In other words, road cess that was intended to fund the construction of roads is diverted to other projects, while citizens are charged heavy tolls for the roads. The people’s suffering, however, is unlikely to cease anytime soon.
The government aims to generate Rs 1.6 lakh cr by monetisation of public highways, which will further increase the toll burden on citizens.
In the 2020-21 Budget speech, the finance minister announced a public-private partnership (PPP)-based smart cities, railways, and warehouses, amongst others.
PPP-based infrastructure, user charges and cess — the financiers of “new India” — have established a parallel framework to raise revenue and are likely to impose a fiscal burden on citizens.
When citizens pay municipal tax, the municipality is supposed to ensure cleanliness and sanitation facilities. But the Ahmedabad Municipal Corporation (AMC) introduced a “User Charge” of Rs 365 per household to make the city clean, which is 15% of the municipal tax amount.
Discriminatory practices of the administration also impose fiscal costs on the poor and middle classes of society. Administration allows cars to be parked on the road with impunity, but if two-wheelers are parked on the road, they get towed.
Read more: Wealth, inequality and children’s right to survival in India
Such practices pushed bike owners to park their vehicles in pay-and-park spaces, while car owners have the luxury of parking on the road without paying anything.
Oxfam observed in its 2021 report that 73 per cent of the wealth generated in India in 2017 went to the richest one per cent, while 670 million Indians, who comprise the poorest half of the population saw only a one per cent increase in their wealth.
While lacking in nuance, these broad statistics are a reflection of the result of years of unequal treatment meted out to different classes of citizens by the government, as has been explained above.
It is said when people take ownership and responsibility of public spaces, people become citizens. But, free urban public spaces like parks, sports complexes, etc, are shrinking rapidly.
Prime Minister Modi recently inaugurated a foot-over bridge, Atal Bridge, built on the Sabarmati river in Ahmedabad. AMC charged a fee of Rs 30 for the 30-minute walk.
The citizens of the Republic of India have to pay a fee to attend the Republic Day parade. It ought to be remembered that monetisation of public spaces portends to weaken the state-citizen relationship.
The nomenclature of government language itself reflects this discriminatory approach. When governments provide fiscal help to the poor, it is called revadi, but the same offered to the rich is lucratively termed “incentive”.
Posters for subsidised food to the poor are ubiquitous across India, but no public posters are screaming about the Rs 1.97 lakh crore “incentive” given to the corporate sector under 13 production linked incentive schemes.
In the name of transparency, the government uploads the personal details of each Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) worker on its website; but the same government does not disclose the names of willful bank defaulters to uphold those ideals of privacy.
Economic inequality impacts our life every day. Richard Wilkinson and Kate Pickett in their study show that issues like drug addiction, obesity, mental illness, rising crimes, etc, are directly linked to economic inequality.
It is not just a coincidence that the economically less unequal societies of Nordic countries rank top in various indices like democracy, human development and press freedom.
Nevertheless, there is no dearth of solutions available to us. Scholars like Thomas Piketty and institutions like Oxfam have suggested numerous ways to make societies economically equal. What lacks is the intent.
Read more: Unequal India:101 billionaires thrive; 364 million poor struggle to survive
Members of Parliament — our policymakers are elected by, but do not truly represent — the voters. While 80 crore Indians cannot afford even two meals a day, more than 80 per cent of the Lok Sabha members are crorepatis.
When we celebrate the Azadi Ka Amrit Mahotsav, the need of the hour is to imbibe the idea of one of the founding fathers of the nation, Mahatma Gandhi, to make India economically equal and prosperous: “Economic equality is the master key to non-violent independence.”
Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth
This article is written as part of Smitu Kothari fellowship by non-profit Centre for Financial Accountability
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