March 26, 2012

Speech in Rajya Sabha on ‘The Budget (General) 2012-13’

SHRI PIYUSH GOYAL (MAHARASHTRA): Thank you very much, Mr.Vice-Chairman, Sir, for giving me this opportunity to present the views on the Budget presented by the Hon. Finance Minister. At the outset, I am disappointed man, Sir. We have an illustrious Finance Minister, very experienced. The first Budget he presented was in 1981 when he became the Finance Minister for the first time, and, since then, we have always looked up to him as a beacon of light to take this economy out of the morass that it finds itself in. Unfortunately, that is not to be. Despair is spreading, Sir, all over India. Corporate India does not believe that this Government understands what are the evils afflicting the economy. The middle class is completely shocked and shamed by all the scams that we see with continuous frequency emerging one after the other. Sir, the poor aam aadmi, about whom other Members talked about so passionately from the Treasury Benches, doesn’t trust the administration of the welfare schemes, tom-tomed by this Government, which, though may be launched in the name of one particular family over the years, but which are hijacked by administrative failures and corruption of very large magnitude, as evidenced by statements of their own senior leader as far back as 20 years ago or may be 25 years ago when he said, ‘85 per cent of Government’s expenditure is frittered away in corruption and maladministration.’

Sir, this Government needs to address bigger issues of good governance. They need to address the big issue of de-bureaucratization rather than just focus on tinkering with FDI retail because, unfortunately, for this Government, reform is equal to FDI and they go no further. I think it is time the Government realizes that there is far more things to reform in our country. People want Government to get out of their lives.

SHRI PIYUSH GOYAL (contd.): People want Government not to interfere, not to tax every aspect of their lives, not to have a license quota raj for everything that they engage in. They are looking for freedom from high taxes. They are looking for freedom from bureaucratic controls over their lives.

Sir, I just wish to touch upon one or two points, since I am on the point of reforms, before I go further. This Government has often alleged that it is the Opposition that is responsible for the paralysis in policy reforms that this country is urgently asking for. I would like to contest that, Sir.  We talk of the GST. The Government talks of reforms in the indirect tax structure by the introduction of GST. But what have they done? They have an Empowered Committee of Finance Ministers working for the last four years. In the last four years, the Government has not been able to bring even the Chief Ministers of their own States on the same page as the Central Government in terms of implementing the GST.

On this account, Sir, let me raise a few points about the GST. We do not dispute the advantages of having a Central tax which eliminates a lot of duplication in the system. It eliminates the cascading effect of taxes. It eliminates the export of taxes. Probably, getting a GST in place would also give the States a share in the service tax collected, which by the way, Sir, was a promise made by this Government when service tax was first introduced in India, that the revenue would be shared with the States. But, till date, we have not seen that revenue being shared. However, despite all of these advantages, why are we frittering away the benefits of GST? We are frittering it away because the Government has still not been able to come to modalities of how to implement that tax. They still do not have a common form, which can be filed by an assessee, finalized by the GST committee. The Central Government wants to usurp all the powers. The States are not willing to let go their powers. As of now, about two lakh assessees report to the Central Government in excise whereas 50-60 lakh assesses are under the jurisdiction of the States. So, now a new formula has come, which I don’t think the people outside, who claim that they want GST, are aware. This formula is that the General Sales Tax would comprise two sections – one, a Central GST and the other, a State GST. I don’t understand what would be the benefit of such a GST that they are proposing. And then, there is no clarity at all on how the assessments would take place, where the returns have to be filed, how the money has to be paid, who the dealer would report to, and so on. And, I am given to understand that every dealer will have two assessments, one, from a Central authority and another from a State authority. And then, they don’t have a dispute resolution mechanism in place. As yet, we don’t know how a dispute under the Empowered Committee will be resolved, because the Centre wants a veto power, while implementing GST or dispute resolution, which, obviously, the States are not willing to give.

Sir, they have not yet even determined the rate at which GST would be taxed. Still, there is a talk of two rates but we don’t know what those two rates are going to be. We don’t know what the floor rate will be. We don’t know what the band would be in which the GST would be implemented in various States. We don’t know how the money is going to be forwarded to the States in terms of compensation. The Central Government is still not compensating States for the loss of the CST, which was reduced from four per cent to two per cent, with the promise and sovereign assurance that they would be compensated for the loss. To date, except for the first two years, from the third year onwards, a very small compensation has been made. This year, there is no plan for compensation, and the logic being given is that ‘when we announced VAT or CST reduction, we had said that we would compensate for two or three years’. But Sir, they had also said that GST would be implemented in three years. They have not completed one part of the bargain. They have not implemented GST, but they have stopped compensating the States. How do they expect States to trust such a Government? And, obviously, there is resistance because the fiscal autonomy of the States is under threat under such a GST regime that is proposed by this Government.

Therefore, Sir, the GST is not a burden on my head. It is a burden on the Centre’s head, to resolve these issues, sit down with the people concerned and the concerned States and find solutions.

SHRI PIYUSH GOYAL (CONTD.): Sir, we have a great law called the ‘Direct Tax Code’ which has been proposed by this Government. I am a part of the Standing Committee and we have recently put forth our recommendations and Report. Sir, the recommendations have come out after detailed examination of the DTC. But the Government chose to take (ive parts of the DTC, for example, the General Anti-Avoidance Rules, and implement them in the Budget itself in the original form rather than considering the recommendations of the Standing Committee. Sir, these are draconian provisions. In the normal course, we would welcome them since they are a tool to fight black money. But, Sir, we all know, and I think, many people in this House must have experienced their constituents complaining about the misuse of the tax laws in our country. People come with a gun on their head and say, ‘Look, you deposit additional tax before 31st March, otherwise I will penalize you; I will trouble you because we have to meet our fiscal targets set by the Finance Ministry.’ Sir, assessees are also told, ‘You deposit money before 31st March and we will refund it to you in April. But if you do’t deposit it and if I do’t meet my targets, then I may not get a good posting, then I may not get a good CR and I may be penalized.’ Is that how tax administration in our country works? In that situation, with a provision like GAAR, what will happen to the assessee? They will be under continuous pressure with no safeguards brought into the law. I would urge the Hon. Finance Minister to please consider the recommendations of the Standing Committee before finalizing the Budget provisions and bring those recommendations into the GAAR provisions, as they have been proposed.


Sir, the disinvestment process has been a big casualty of this Government. The NDA Government had initiated a process of strategic sales through auction in a most transparent manner. I do’t know how some Members of the Treasury Benches had called it ‘sweet-heart deal’. I do’t understand how can an auction, where the whole world was invited to participate, be a ‘sweet-heart deal’. But ever since this Government has come, no loss-making PSU has been disinvested; no loss-making PSU has been turned around and there is no improvement in efficiency of these PSUs. All that we have seen is the sporadic sale of some shares of PSUs which have not even met the disinvestment targets of the last three years. What is the solution? I would urge the hon. Finance Minister to look at that big pool of assets in the Government’s hands. Today, just the listed PSUs have a market cap of Rs.14 lakh crore. The rest of the PSUs, with all the assets put together would not be less than another Rs.20 lakh crore. So, he has an asset base of approximately Rs.30 lakh crore. It is already on record that Government can disinvest up to 51 per cent. Why do’t you take that forward faster? Why do’t you take the process forward to raise revenue from alternate mechanism, as the hon. Leader of the Opposition said, through auction or transparent method? The assets of the country can be better utilized or exploited in the hands of the private sector, can be utilized through Public-Private Partnerships. I would urge the Government to look at disinvestment in a more holistic fashion and take this process forward.

Sir, one other suggestion that I want to make is that the Government should move to the accrual system of accounting. It will take care of the earlier problem that I mentioned of tax officials troubling the assessees during the end of the year just to meet fiscal targets. It is high time the Government also started accounting for its assets, expenses and incomes on an accrual basis, which is an internationally accepted, correct method to account for Government revenues.

Sir, my dear friend, hon. Shri Mani Shankar Aiyar, very (ively chose one statistic and, unfortunately for him, he chose a statistic on which this Government, or unfortunately India as a whole, has been a complete disaster.

SHRI PIYUSH GOYAL (CONTD): He chose a statistic of debtto-GDP ratio in order to highlight how India is a great story with 63 per cent debt-to-GDP ratio, and a completely amusing and amazing statistic of China having 155 per cent debt-to-GDP ratio. I wonder from where he got those statistics. I would urge the hon. Finance Minister to please apprise his esteemed colleague on what the real facts are. But, in any case, I will highlight the real facts. The fact of life is that whereas India had a debt-to-GDP ratio of
66.2 per cent in 2011, China had a debt-to-GDP ratio of only 16.5 per cent in 2011. Sir, since you are busy, I will repeat. India is at 66.2 per cent. China is at 16.5 per cent. I wish the Treasury Benches had some more economically-savvy people to give, at least, the correct facts on the Table. Then, unfortunately, he chose a country like China which, on almost every parameter, has beaten India, whether you look at per capita income, whether you look at GDP growth, whether you look at Forex reserves, whether you look at FDI, and I can continue to name so many more fields. China has beaten India hollow and we have to put our act in order, we have to start acting fast. If the dream to make India a super power has to be achieved, I would urge the Finance Minister to please take these large deficits, that he is proposing in his Budget, more seriously and not fritter away the resources of this country on large subsidies, which have been wasted and not implemented properly.

In the same light, Sir, regarding the foreign exchange reserves, what is the current account situation in this country today? Last year, the current account deficit was over 3.4 or 3.5 per cent. Sir, even in 1947-48, when the country gained independence, the current account deficit was not such an alarming figure. It was, probably, less than 2.5 per cent. And, look at the foreign exchange reserves. Mr. Mani Shankar Aiyar went about harping on NDA Government’s performance. So, I did a little calculation. When the NDA Government came to power in 1998, they had Forex reserves of $29 billion. When they demitted office in March, 2004, the Forex reserves were $113 billion. It shows a growth of 289 per cent over a period of six years, an increase of about 48 per cent every year. This Government came to power in 2004 with a reserve of $113 billion. Today, as on 16th March, 2012, the Forex reserves are $294.821 billion, that is, a growth of about 161 per cent in the last eight years of mismanagement of the economy. That shows growth of only 20 per cent a year in our Forex reserves. I have gone through the Economic Survey. On every page, I can do a statistical analysis to show how the economy was far better handled by the NDA Government, vis-a-vis, the UPA Government. Take the case of inflation. I beg to correct myself. The first Budget, that Pranabda presented, was for the year 1982-83. I stand corrected. Sir, in the fifth para, page 1 of that Budget Speech of 1982-83, hon. Finance Minister had said, “The fight against inflation has been a high priority of the Government. Any slackening of effort on this front would have undermined the very basis of our development. Inflation hurts all sections of the community. But, it hurts the weaker and poorer sections the most. Inflation also hurts the development process, as investment costs get distorted and financing becomes an increasingly severe problem.” So, we were assured that this would be the mantra of the hon. Finance Minister when he presented the last two Budgets that I have seen.

SHRI PIYUSH GOYAL (CONTD.): Unfortunately, Sir, on the front of inflation, this Government has failed miserably. If you see the statistics, when the NDA Government came to power in 1998, they were handed over a headline inflation, which during 1991-96, again, the Congress’ previous regime, had reached 9.3 per cent per annum. It was the NDA, which, through sheer fiscal prudence, brought it down to 4.9 per cent per annum. From 9.3 per cent per annum in six, seven years that we were in power, it was brought down to 4.9 per cent per annum.

We almost reduced the WPI inflation to half. Unfortunately for this country, the UPA came back to power. In the last seven years, upto 2011, the headline inflation was at an average of 6.2 percent, again, inched up year on year. Of course, the last year has been even worse. We have seen double-digit inflation all through the year, except in the last two months, but that also was more because of the base level effect. If the base is higher in the previous year, it shows that the inflation has come down. Similarly, coming to food inflation, Sir, during the NDA regime, food inflation was at an average of 3.5 per cent but in the seven years of this Government, it has been in double-digits at an average of 10 per cent, and, if you take only the last five years, it is 12 per cent per annum. So, in terms of statistics, we can keep going on till the cows come home, and, there will be enough statistics to show as to how this Government has mismanaged the economy.

Sir, I come to one figure which Mr. Mani Shankar Aiyar spoke about, and, I was again very amused to see how (ively statistics can be used for distorting the correct picture. From the Finance Minister’s Budget, he spoke about the interest outgo versus revenue receipts. So, I sat down, took out a calculator and gathered the old information. Look at what I have found, Sir. This Government was in office till 1996. They left behind an interest to revenue receipts ratio of 47 per cent, and, when the NDA came to power in 1998, we were handed over an interest to revenue receipts ratio of 49 per cent. So, it was 47 per cent during the original Congress rule, and, 49 per cent when the NDA came to power. Again, by the time, we left office in 2004, with sheer fiscal prudence; we had brought it down to 41 per cent in the Budget Estimates of 2004-05, which were actually achieved. And, as my Hon. Leader also mentioned, it was not like the present Government which gives figures which are never to be achieved. Our figures used to be achieved. We brought it down to 41 percent, which is a reduction of 16 per cent. But, there again, in the last six, seven years of UPA rule, as per the 2011-12 revised estimates, they have been able to bring it down to 36 per cent, and, a fall from 41 per cent to 36 per cent amounts to only 12 percent reduction. So, despite having a much better fiscal position than what we had, they have not been able to reduce it as much as we had reduced the ratio. I wish Mr. Mani Shankar Aiyar would check his statistics better, maybe, he can consult somebody like me, I will help him to run through statistics and give more factual statistics rather than giving distorted figures, which do not mean anything. The most amusing thing, I repeat, is the China’s 155 per cent Debtto-GDP ratio. That is the best of them all, Sir.

One very interesting figure came to my notice when I was going through the Budget in detail. Sir, since they like to blame the NDA Government for everything, I thought I will highlight some of the achievements of the NDA, which are far more important than the so-called blames. Sir, when the NDA Government left office in 2004, as per the actual figures for 2003-04 in the last year when we were in power, our non-Plan expenditure on the revenue side was Rs. 2,83,000 crore, and, on capital account, it was Rs. 65,000 crore, whereas in the current Budget of 2012-13, they have increased the revenue account to Rs. 8,65,000 crore, and, capital account to Rs. 1,04,000 crore.

SHRI PIYUSH GOYAL (CONTD.): So, Sir, in the seven years that they have been here, or eight years now, they are increasing the Revenue Account by 200 per cent whereas the Capital Account expenditure is increasing only by 50 per cent. And the same goes with the Plan expenditure. The Revenue Account expenditure from 2004 to 2012 has increased from Rs. 78,000 crores to Rs. 4,20,000 crores, which is an increase of 450 per cent on the Revenue Account, and on the Capital Account, the increase has been from Rs. 43,000 crore to Rs. 100,000 crore, which is only 150 per cent. What does that show you? It shows you clearly a Government which is focused on vote bank politics. They are throwing away the money of this nation, creating large fiscal deficits only on the Revenue Account, costing the nation and the future generations of this country huge problems as we go into the future, and that, by no stretch of imagination, is prudent fiscal management. I think, a good Government would have spent more money on creating assets of this country, spending on the Capital Account rather than wasting money on the Revenue Account. And, further, I just want to highlight one small thing. The hon. Finance Minister had projected GDP to grow by 14 per cent in the last year’s Budget and again 14 per cent in this year’s Budget. Now, he did achieve 14 percent in the last year’s Budget, but not by genuine growth. The nominal growth is 14 per cent and the real growth, as he himself has acknowledged, is 6.9 per cent, which I personally contest because that figure is based on the first three quarters and the last quarter is worse than the previous one. I think, 6.9 per cent will be left at about 6.5 per cent by the time we get the actual figures.

Having said that, we still achieved GDP growth of 14 per cent. So, how did you do that? The rest was inflation. Now, in the current year, we are told that it will again be 14 per cent. I am just calculating that if the real growth in GDP is going to be 7.6 per cent this year, at 14 per cent nominal growth, that means, it is already budgeting for 7 per cent inflation. Whatever may be the final figures, today we are already budgeting 7 per cent inflation in this. Final figures, I suspect, would again be double digit inflation with the pressure of large indirect taxes and the lower growth would be compensated by inflation. Yes, you will again have 14 per cent nominal growth in GDP but through means of inflation.

THE VICE-CHAIRMAN (PROF. P.J. KURIEN): Mr. Goyal, your party has ten speakers. So, please try to conclude it now.

SHRI PIYUSH GOYAL: Yes, Sir. In terms of subsidies, the Hon. Finance Minister has under-provided so grossly that I am amazed that even a common reader – Sir, I gave a speech in March last year on last year’s Budget and I raised exactly the same point – of the Budget could glance at it and tell you subsidies were underprovided, revenues were over-provided. It does not need rocket science to understand that, Sir. But again, this year it is the same ploy – show low subsidy, show higher revenue growth, fool the public because after all, public does not bother about the Revised Estimates of the last year. So, you tell them The future is rosy, forget the past. In 2013, when we come back to debate again, and I hope my party gives me a chance to speak then, we will again see a picture, an actual picture, when you will have all these figures going wrong and nothing to write home about.

THE VICE-CHAIRMAN (PROF. P.J. KURIEN): I think, you can conclude now. You are searching for points.

SHRI PIYUSH GOYAL: No, no, I have got so many of them all over the place.

THE VICE-CHAIRMAN: A number of speakers are there from your Party.

SHRI PIYUSH GOYAL: Sir, Service Tax is one area I want to highlight to the hon. Finance Minister when I talk about this Budget being less than honest in its figures, and I hope I will get some answers. I have sought protection from the Chair on many an occasion. This is my seventh or eighth intervention in the House in the last one and a half year, but to date I have got no response to any of the points I have raised. But then that is another story. I hope the Parliamentary procedures bring in some mechanism that we get a response to our comments. Sir, they have shown Service Tax to grow from Rs. 95,000 crore to about Rs. 1, 24,000 crore, an increase of only Rs. 29,000 crore.

SHRI PIYUSH GOYAL (CONTD.): The projection being made is not a very big burden on the aam aadmi. Sir, I contest that figure. And I will tell you why.

Sir, the Hon. Finance Minister is on record saying that there will be a GDP growth of 14 per cent, and we all know that services are growing faster. It compensates for the lower agricultural and manufacturing growth. Last year, service tax grew from Rs.71,000 to Rs.95,000 crore. This is 34 per cent growth without any increase in rates. This year and last year also, the GDP was slated to grow at 14 per cent. So, by that same logic, this year also, in the normal course, without increasing the tax rate and without increasing the scope of services to be taxed, there should be a 35 per cent growth in service tax. However, to be more conservative, I have taken 30 percent as the normal growth. Hence it will be Rs.95,000 crore + Rs.28,000 crore, which is 30 percent, as the normal growth in  service tax.

Now, they have also expanded the scope of service tax, everything on earth except 17 items. I have assumed that this will add another 25 percent. So, another Rs.32,000 crore can be added by the expanded scope. The total becomes Rs.1,55,000 crore. Then there is a 20 per cent rate increase, from 10-12 percent, which is another Rs.31,000 crore. So, the effective tax, service tax alone, I suspect, Sir, could be Rs.1,86,000 crore and by the time the year ends, you will see an additional burden on the common man. As my hon. Leader said, the Prime Minister is on record in 1991 to state that indirect taxes are an inefficient way of taxing the people; it is a burden on the common man; and it should not be resorted to. But what we are seeing is a burden of Rs.91,000 crore on the common man which in addition to a customs increase of Rs.33,000 crore and an excise increase of Rs.44,000 crore is a phenomenal burden on the common man.

THE VICE-CHAIRMAN (PROF. P.J. KURIEN): Please conclude. 

SHRI PIYUSH GOYAL: Just one more thing. They are talking of excise increase of 30 per cent in the current year. Out of that, 20 percent is due to the rate increase. They are saying that only 10 percent will be the real growth of excise collected. They are already acknowledging that production and manufacturing in India are dead. There is no hope for domestic Indian manufacturers. But on the customs side, without any increase in rate, there is an increase of 22 per cent. Are we going to see an increasing, an overarching dependence on imports in the years to come causing the Indian economy to be shattered and the foreign economies to gain at our expense from the large domestic market in India? 

THE VICE-CHAIRMAN (PROF. P.J. KURIEN): Goyal ji, please conclude.

SHRI PIYUSH GOYAL: However, Sir, as we can see, today, we are in a situation where the Indian Government has to take proactive steps to ameliorate the problems of the poor, effectively give them relief from the high dose of taxation, do something for good healthcare, and provide them quality education. I was amazed to see Shri Mani Shankar Aiyar quoting statistics that a ninth standard boy cannot read a second standard textbook. I don’t know whether he was speaking from our benches or from their benches. I think it is an insult to the Government of the day if that is the status of their highly tom tomed Sarva Shiksha Abhiyan. If the NRHM loot is going to continue in this country, when is healthcare really going to reach the common man? What is there in this Budget for tourism? What is there in this Budget for infrastructure? And all that they can do is retrospective amendments in laws due to which SEZ story has been killed, foreign investment will be killed, and we will have a situation where India will, once again, go back to the old days of backwardness and lose the momentum that we have achieved in the last few years. Thank you very much, Sir.


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