India has declared war on pollution, with Finance Minister Arun Jaitley imposing levy of up to 4% on new passenger vehicles as part of his annual Union Budget.
While presenting the Narendra Modi government’s annual budget in the Parliament on February 29, Jaitley announced that India would introduce a new tax on car sales mainly to fight high levels of air pollution and congestion. The Indian finance minister admitted that the South Asian nation has become home to many of the most polluted cities in the world. In the capital city of New Delhi, levels of harmful particles have exceeded European and US safe limits by 15-20 times.
The scenario prompted Jaitley to impose a sales levy of up to 4% on new passenger vehicles. He told the Parliament that the government’s move would encourage investors to buy stocks of some biggest Indian automobile companies, like Maruti Suzuki India Limited and Tata Motors. Jaitley further lowered prices of hybrid electric vehicles as a measure to protect the environment.
Medical experts and environmentalists have welcomed the government’s move, as they believe that the finance minister’s announcement is a victory for campaigners and a defeat for the powerful automobile industry. “There are some things that are politically palatable now that were not before. Jaitley has seen there is political space and public support. Once Indians owning cars was seen as a sign of economic success. Now, this sort of tax is seen as Indians being responsible,” said Samir Saran, a senior member of Delhi-based think-tank Observer Research Foundation. For her part, Anumita Roychoudhry of the Centre for Science and Environment in Delhi stressed: “This is an important step forward. The finance minister has finally integrated polluter pays principle with fiscal policy to slap a pollution levy on all cars, which are more than double on diesel cars and four times more on SUVs compared to petrol cars. This is needed to address the fuel tax distortion in the market that favours polluting technologies and fuels like diesel.”
However, majority of the Indian people are disappointed with the annual budget. Although the Modi government tried its best to balance economic growth and equality with a shift to asset creation, it failed to meet demands for tax sops from the middle class salaried people. From the budget, it is very much evident that Indian economists and policymakers are unsure about which way the winds are blowing. Although neighbouring China experiences its lowest growth in a quarter of century, India has set a growth rate of 7.6% in 2016 and 7-7.75% in the coming years.
The finance minister tried hard to portray a bright picture of the Indian economy in order to defend his move to increase the service tax from 14.5% to 15%. Despite admitting that a cold draft of economic uncertainty is sweeping across the world, Jaitley claimed that the performance of the Indian economy is quite good. As far as the BRICS (an association of five major emerging national economies – Brazil, Russia, India, China and South Africa) nations are concerned, they (too) have caught a chill even after firing up the global growth. And Jaitley said that India is an exception. With China losing its glow after nearly three decades of red-hot expansion, India burns brightest among the large economies, claimed the minister.
With the markets dimming, banks slipping into an area of darkness, exports melting and consumer demand flickering, India needs oxygen in the form of bold reforms and visionary policies to keep the flame alive. The minister is confident that his budget will achieve the objective of spreading warmth and light, as he chosen the path of macro and fiscal prudence over that of growth promotion.
However, the majority of Indian people have a different view. They are of the opinion that India’s candle is also in danger of being snuffed out because of the government’s visionless budget. The government has put Indian people under tremendous pressure by increasing the service tax. With this, the government signalled its intent not to walk the talk on sensitive issue. As the government has realised that it performance will ultimately be judged by its ability to address India’s agrarian crisis and the state of its social infrastructure, it has completely ignored the urban development. It is also interesting that the budget allocated INR 385,000,000,000 for Mahatma Gandhi National Rural Employment Gurantee Act (MGNREGA), despite Modi’s criticism of the scheme.
At the end of the day, everything will finally depend on the government’s intention to resolve the problems faced by the Indian middle class people. Otherwise, the candle will be snuffed out.