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Should the Indian Markets fear Narendra Modi?

I have been referring to cooking gas, fertilizer and kerosene subsidies. I must confess that I am surprised by the way words are used by experts on this matter. When a benefit is given to farmers or to the poor, experts and government officers normally call it a subsidy. However, I find that if a benefit is given to industry or commerce, it is usually called an “incentive” or a “subvention”.

 

We must ask ourselves whether this difference in language also reflects a difference in our attitude? Why is it that subsidies going to the well-off are portrayed in a positive manner?

Let me give you an example. The total revenue loss from incentives to corporate tax payers was over Rs 62,000 crore. Dividends and long term capital gains on shares traded in stock exchanges are totally exempt from income tax even though it is not the poor who earn them. Since it is exempt, it is not even counted in the Rs62,000 crore. Double taxation avoidance treaties have in some cases resulted in double non-taxation. This also is not counted in the Rs62,000 crore.

Yet these are rarely referred to by those who seek reduction of subsidies. Perhaps these are seen as incentives for investment. I wonder whether, if the fertiliser subsidy is re-named as “incentive for agricultural production”, some experts will view it differently.

from Narendra Modi’s Speech at ET Global Business Summit

2 replies on “Should the Indian Markets fear Narendra Modi?”

Dividend is not taxfree, as before distributing the same to shareholders, company is paying additional tax on same.This i feel is best way as govt gets tax on total dividend distributed.

When common man gets ‘subsidy’, it is used invariably for consumption. When an industry or company gets ‘incentive’ or ‘subvention’, it is usually to encourage the industry or company to *produce* something. That’s a BIG difference. This usually happens in greenfield areas where India is behind technologically or infrastructurally. No incentives whatsoever are given to established industries like FMCG.
Fertilizer subsidy is no doubt not a decent sounding word, but it has stuck through for a long time, something like ‘Oil Pool Deficit’, which was actually a subsidy for Diesel/Petrol Users! It cannot be renamed now.

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