Rich feed off subsidies worth over Rs. 1 lakh crore: Economic Survey

[prasad1]

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“Commodities that are primarily consumed by the rich have a low tax rate”


India’s rich feed off subsidies worth over Rs. 1 lakh crore a year that are meant for the poor, according to the Economic Survey. And this figure only considers the subsidies on six commodities, two public utilities — the Railways and electricity — and one small savings scheme, the Public Provident Fund.
“There are a fair amount of government interventions that help the relatively better-off in society. In many cases, this takes the form of explicit subsidisation, which is surprisingly substantial in magnitude,” the Survey said in a provocatively titled chapter ‘Bounties for the Well-off.’
The Survey classified the population on the basis of consumption data collected by National Sample Surveys. “Poor refer to the bottom 30 per cent of the population and the rich the top 70 per cent,” it said in a footnote. This categorises a sizeable portion of the non-poor as ‘rich’.

“These numbers are striking and have one policy implication: any tax incentives that are given, for example, for savings, benefit not the middle class, not the upper middle class but the super-rich who represent the top 1-2 per cent,” the Survey added.
Chief Economic Adviser Arvind Subramanian, the Survey’s lead author, argued that most commodities primarily consumed by the rich have a very low tax rate, in effect subsidising them at the cost of the poor. For example, the rich consume 98 per cent of the gold in the country, and yet gold is taxed at only 1-1.6 per cent (the Centre and the States combined).
The rich avail of an 88 per cent subsidy on kerosene, amounting to Rs. 5,501 crore and 86 per cent subsidy on LPG, amounting to Rs. 40,151 crore.

The rich consume 98 per cent of the gold in the country, and yet gold is taxed at only 1-1.6 per cent, says the Economic Survey.
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[krish44]

After 1991, we have ushered in a high cost economy which has lead to more than 50% of population dependent on some subsidy or other.

Agriculture is subsidised with free wate and power, fertilser subsidy and MSP for output . Again they are distributed thru PDS at low rates leading to a dual price

structure, PDS rate and open market rate. Many try to get Ration cards for the poor category.As long as we float on a false economy on artificially decided prices , I do

not consider it wrong to avail benefits .

It is not possible for the retired and other middle class to live on pensions [Poor social security for all] without subsidies on power, water, gas, subsidised rail fares,

Govt owned low cost hotels, for that matter air travel on budget airlines for long distances.It is a fact of life.

My feeling is we opened out too fast leading to this distorted living that we are partially dependant on the state for decent living. Politicians would like this too as we

become dependant on them for hand outs.

When the difference in salaries between the highest and lowest employee is 9 or 10 times , there are bound o be distortions. In nehrus india it was 1 to 5.

Now private sector employees pay 20-25 lakhs per year to bright IIT or MBA graduates. I collected a starting salary of Rs 700 odd when I was fresh from IIT some 45

years back with a PG degree.Comparing these high wage structure with daily income of labourers , how distoted is compensation structure.

No sense in lamenting that middle class is getting the subsidies.

Govt created this model by opening out the economy.They are reaping what what they have sown.

Industry is sensible. They get capital out of PSB banks and not return them. This is 100% subsidy.lol

 

[yesmohan]

First of all, let................ the Govt. / policy makers/ rulers............................spell out in clear unequivocal terms......

who are all eligible and not eligible for subsidies and ensure that the subsidies are all going only to eligible persons.

Let the rulers fix some economic criteria,in this connection, for availing subsidy.

Shall they do it ?
All ruling parties are only playing politics !!

 

[vgane]

Why should the rich be allowed to take the subsidies..But the definition of rich is nebulous...Anyone with a gross taxable income of over Rs 5 lac are in top 1.6% & they are big time investors in PPF and other 80C instruments..But it is not a big income...Engineering graduates get that in their second or third year....I opine that a rich person is one whose family earns over Rs 10 lacs per annum...There has to be rationale behind it...

 

[asadu]

Sir, A family of 3 or 4 members earning a combined total income of 10 lakhs or above a year can not be clubbed into rich category. Just see if any member of that so called rich family can get a home loan ? or reap its benefits of deduction u/s 24b or 80c. Either give them their due or go for voluntary giving up. We can not even label a person getting 10 lakhs as rich as after deductions and various components, what he / she gets in hand may be 50/60 k per month with which he has to plan his her future course. In today's uncertain economic conditions and insecurity of jobs, the govt. must come out with clear cut guidelines for cutting off subsidies in a intelligent manner.

 

[CHANDRU1849]

If the combined wealth of a family is more than Rs.10 lakh, which is accruing due to multiple earnings and the members are staying together, such family needs to be classified as a rich family.

 

[auh]

A simple point to consider - if one were to look at the cost indexation chart for India, it is 519 in 2006-07 vs 1081 in 2015-16. Almost double.

When it is accepted that the "presented" cost has doubled, the limits for taxable income should also be increased. Imo, exemption limit of taxable income of a single individual should be kept INR 20 lakhs for any financial year. I believe that this itself could perhaps reduce some of the black money transactions in the market. Plus, the reduction in tax burden could offset the reduction in subsidies, if any, done by the govt.

And we could think of introducing luxury tax on sale of certain classes of vehicles for personal use.

Also, CG tax should be waived off on selected infrastucture securities, if held for a period of 15 years or more.