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Arvind Kejriwal and his party need to pick holes in the budget

When everyone, from government clerks to street vendors, is speculating on Union Budget 2013/14, Kejriwal and his newly formed Aam Aadmi Party are keeping mum. The budget presents an opportunity for Kejriwal and his party to tear into the government.

twitter-logo Anand Adhikari        Last Updated: February 27, 2013  | 15:49 IST

Social activist turned politician Arvind Kejriwal wants to bring about a change in Indian politics by galvanising the frustrated middle class. The young political leader, who wears a Gandhi cap, was last spotted shouting slogans against the Sheila Dikshit-led Congress government in Delhi, accusing it of being hand in glove with private power distributors.

But strangely when everyone, from government clerks to street vendors, is speculating on Union Budget 2013/14, Kejriwal and his newly formed Aam Aadmi Party are keeping mum. "I don't think the budget will change the lives of people," was all he had to say in a recent interview to a newswire.

In reality, the budget has a significant impact on the lives of common people, particularly the huge salaried class, whose support Kejriwal hopes to enlist.

It therefore makes sense for the 44-year-old Kejriwal, who, in a way, became the voice of the common man, to widen his agenda from corruption and black money to reforms and other issues uppermost in the minds of this constituency.

The so-called aam aadmi who listens to him at Delhi's famous Jantar Mantar or the much larger Ramlila ground is eagerly awaiting a hike in the personal tax exemption limit from Rs 2 lakh. Former finance minister Pranab Mukherjee was a bit stingy when he raised the limit marginally from Rs 1.80 lakh to Rs 2 lakh last year.

While many political parties have protested soaring inflation, pointing at the rising prices of potatoes and onions, nobody is talking about how the double-digit inflation of the last three years has made the life of the common man difficult.

Take, for example, a salaried person who earns Rs 3 lakh a year and pays a tax of 10 per cent on his income. He also ends up paying tax indirectly by way of high inflation. In fact, inflation is itself a tax on the common man. He is actually paying for government inefficiency in tackling supply issues.

Kejriwal could expose or bring forth these issues to connect with people.

Under current taxation rules, a person has to pay 10 per cent tax on income from Rs 2 lakh to Rs 5 lakh; 20 per cent on income from Rs 5 lakh to Rs 10 lakh and 30 per cent on income beyond Rs 10 lakh.  

Being a former taxman, Kejriwal could play a part on the taxation front, if he is willing. But his silence will only erode his constituency.

Take the case of people who dream of owning a home. Today, the interest deduction available under tax laws is restricted to Rs 1,50,000 per annum, which is too low. Where can you buy a house for Rs 12 lakh with the interest outgo coming within Rs 1,50,000 per annum? You can't really, given the high interest rate environment and soaring property prices that prevail today. Many people over-leverage themselves to buy a decent house, paying over Rs 25 lakh. And there is not enough relief from interest payments under current income tax regulations.

Look at the exemption for medical reimbursements, which is limited to just Rs 15,000 per annum. This limit is ridiculous in current times, when healthcare costs have risen manifold. The corporatisation of hospitals has improved healthcare facilities, yet the common man has no recourse but to go to a government hospital because of the lower cost.

Last but not least is the investment options under the age-old Section 80C, which despite rising steadily in the past, are still very low at Rs 1 lakh. If the government wants to encourage long-term investment, especially in insurance, mutual funds and infrastructure bonds, this option offers an ideal route. In a scenario where the government's expenditure is ballooning and sources of revenue generation are not keeping pace, the hammer falls on the common man, who has to keep paying taxes while getting no significant relief or tax savings options. Issues such as corruption and black money resonate well, but a budget sets the tone for the aam aadmi, who dreams of a better life.

The budget also presents an opportunity for Kejriwal and his party to tear into the government. But they are not really doing that.

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