A recent Forbes estimation of world billionaires has listed out 49 of them in India and two among them at International level. It was unimaginable at least two decades back while the GDP does not cross 2 Lakh Crore.
Today the post liberalization India has produced dramatically one less than fifty billionaires since the barriers has been broken on 1991. The unprecedented growth of up to 10% per annum ignited mass wealth with few corporate chieftains who amass huge wealth as few note with the forfeit of government revenue in the form direct and indirect taxes.
Before the mid-1990‘s and earlier 2000 the corporate tax was at peak nearly 35-40% and there was vociferous hue and cry from the industrialists lobby that hampers development of industries. Currently it is well with in 30% and while adjusted with the growth rate and potential future growth-gives big revenue to their coffers.
In 2005 Financial Express wrote that “A comparison of the corporate tax rates may not be indicative of India’s competitiveness from a tax perspective. A number of incentives and exemptions are woven into the Indian tax system that results in a significantly lower effective tax rate. Clearly, India Inc. does pay lower taxes than its counterparts in some of the developed economies”...
It also was evident at that time itself Indian corporate started to ‘shop’ for foreign firms in particular Mittal and Tata bought Arcelor and Corus subsequently.
It also to be noted that as mentioned in the article …”Presently, the statutory corporate tax rate for domestic companies is 36.6% — corporate tax rate of 35%, plus a surcharge of 2.5%, plus the education cess of 2%. In 1996-97, the rate stood at 43%. The present rate is a result of successive reductions in the tax rates over the past decade and is in line with the global trend of rationalization of tax rates to make the structure objective and to encourage compliance by tax payers.”
As reported in the Business Line, Corporate India urged the Finance Minister, Mr P. Chidambaram, to moderate its direct tax burden, promising that industry would respond with even more robust performance if corporate tax rate were cut in Budget 2008-09. Fiscal incentives have also been sought to encourage India Inc to expand its footprints abroad.
Although the captains of industry were unanimous in their submission that the tax outgo for corporate should be lowered, they however came up with different suggestions on how the burden should be minimized. In April-December 2007, the Centre’s corporate tax collections registered a 39.84 per cent increase to Rs 1, 27, 683 Cr. As well in the 2009-10 revised estimate it was mentioned as Rs 255076 Cr compared with in three years there is nearly 28,000 Cr increase in the tax collections.
Therefore India’s case for lower corporate tax won’t give much anticipated benefits to the corporate. In contrast it will create a less tax collections for the exchequer.
As it is the case the corporate baron’s personal wealth also shoots-up as it is evident from the 49 billionaire club.
On the other hand the $ 1 per day estimation for measuring Indian poverty says that an average every body (age group 18-60 minus unemployed) should earn almost Rs 2000 per month. Is there any possibility for earning the same in rural areas of India?
A World Bank’s recent estimate says: similarly, estimates for India also indicate a continuing decline in poverty. The revised estimates suggest that the percentage of people living below $1.25 a day in 2005 (which, based on India’s PPP rate, works out to Rs 21.6 a day in urban areas and Rs 14.3 in rural areas in 2005 ) decreased from 60% in 1981 to 42% in 2005. Even at a dollar a day ( Rs 17.2 in urban areas and Rs 11.4 in rural areas in 2005 ) poverty declined from 42% to 24% over the same period.
Both the dollar a day and $1.25 measures indicate that India has made steady progress against poverty since the 1980s, with the poverty rate declining at a little under one percentage point per year. This means that the number of very poor people who lived below a dollar a day in 2005 has come down from 296 million in 1981 to 267 million in 2005.
However, the number of poor people living under $1.25 a day has increased from 421 million in 1981 to 456 million in 2005. This indicates that there are a large number of people living just above this line of deprivation (a dollar a day) and their numbers are not falling.
To achieve a higher rate of poverty reduction, India will need to address the inequalities in opportunities that impede poor people from participating in the growth process.
Therefore, with accumulating digital divide there are chances to happen as was in ‘Dantwade’ as the anger of the disillusioned public goes against the system that very one which has to be changed radically.