Two new books reveal stark weaknesses of the Indian state in serving India’s poorer citizens. The first,Locking Down the Poor: The Pandemic and India’s Moral Centreby Harsh Mander, records the plight of millions who lost incomes and shelter, and food and medical care too, in a harsh lockdown to create a sanitised cordon for better-off Indians during the pandemic. “Every system is perfectly designed to produce the results it is presently producing”, said Donella Meadows, a doyen of systems thinking. The second,Despite the State: Why India Lets Its People Down and How They Copeby M. Rajshekhar, is an incisive examination of the systems of the Indian state before the lockdown. These books explain how the weakness of the Indian state to care for its poorer citizens is not a failure of the present National Democratic Alliance government only, nor of the previous United Progressive Alliance government. The weakness is systemic.
The pillars needed
Strong states, according to political and social historians, are founded on three pillars. They are built with support from the people; they have a strong administrative machinery to provide stability and deliver public services, and they have the managerial ability to shape and implement change.
Strong support of the people is essential. Mere election by a majority is not sufficient. Historically, as Francis Fukuyama points out inThe Origins of Political Order, builders of strong states have bound people around a shared identity: ethnic, racial, or religious; Aryan, Han Chinese, Japanese, Muslim, Catholic Christian. The peoples’ identity is not formed by legal constitutions. Strong leaders who unite people around their shared identity are even given liberty by the people to change constitutional structures because they trust their leaders do it for the sake of citizens. Thus, dictators emerge loved by the people.
Confirming this thesis, Michael Cook points out, inAncient Religions, Modern Politics, that builders of the Indian state have a difficult problem. It is hard to unite Indians around a shared ethnic or religious identity because, in addition to the diversity among India’s races and religions, there are entrenched caste divisions even within the Hindu religion of the majority. If Indians must be united to support a strong state, it must be around a modern, inclusive idea of India, as the Constitution imagined. The present ruling dispensation, while trying to force a majoritarian identity, is dividing Indians and weakening the state.
Indian bureaucracy’s role
Fukuyama and other historians have highlighted the role that professional civil services have played in the formation of strong states, in Han China, the Ottoman empire, France, and Japan. India inherited the ‘iron frame’ of civil services from Britain. It was designed to provide stability and compliance with rules: it was not equipped to shape change, the third requirement of a good developmental state. Therefore, there are demands for its reform. Even the Prime Minister has complained that bureaucrats seem not to care for the country’s progress as much as entrepreneurs do.
Simultaneous management of both change and stability is necessary for the evolution of good states and societies. Unmanaged change can cause chaos, while too little change entrenches the established system. This was the essence of the ‘great debate’ in the 18th century between Edmund Burke, the leader of the conservative movement in Britain, and Thomas Paine, a thought leader of the French and American revolutions. It was also the ‘birth of Right and Left’ in politics, according to Yuval Levin in his eponymous book,The Great Debate.
The great debate, about stability versus change for good governance, evolved into new arguments in the 20th century: capitalism versus socialism; and markets versus governments. By the end of the century, capitalism and markets were positioned in the public imagination as the prime movers of economic growth, and socialists and governments as retarders of progress. Capitalists took on the mantle of ‘wealth creators’, relegating governments to the role of ‘redistributors’. A popular slogan that wealth must be created before it can be redistributed leads to the conclusion that there should be less government when countries are poor, and more freedom for large, private, wealth creators. Moreover, with the logic that governments are stodgy, even public services such as health and education are handed over to private enterprises.
The logic of economics is not the same as the logic of society. Mancur Olson, author ofPower and Prosperity: Outgrowing Communist and Capitalist Dictatorships, says that privatisation of government fits with ‘efforts of economists to extend their model of rational, utility-maximizing behavior into the political realm and to see politics as nothing more than an extension of economics’. The ideology of private is good and public is bad requires that public servants should think like private sector managers — committed to growing the pie — and not think like socialists concerned about the condition of the people who are waiting for wealth to trickle down to them. To assist them, consultants from the private sector are brought inside government to help the state run more like a business corporation.
Where the focus should be
Private corporations are not states designed for citizens. CEOs are not elected by employees, and they have the authority to hire and fire workers. Whereas leaders (even unelected ones) of states cannot lay off citizens to trim populations to fit the size of economies. The state must perform primarily for its poorest citizens for economic growth to be equitable and sustainable, and not for investors in corporations. Leaders of states must ensure that all citizens have opportunities to work and earn. They must also ensure that all citizens, even those who cannot afford it, have good health and education.
The ideology of private rather than public has moral consequences. The purposes of a private enterprise and the state are different. Private sector managers move from one competitor to another, like professional mercenaries, serving the interests of owners of corporations wherever in the world they may be. Whereas public servants, whose mission is to build their nations and states, are expected to devote their lives to the care of citizens in their own countries.
GDP cannot be the scorecard
The pandemic has revealed the chronic inability of the Indian state to take care of its poorest citizens. The scorecard for the nation cannot be its GDP. Economic justice, environmental sustainability, and improvement of the dignity of all citizens must be measured too, and these must improve much faster. The present ‘top up the top’ model of India’s economic growth, with hopes of trickle down, is not delivering these.
India must build a strong and good state. This requires: political leaders who can unite all Indians into one India, whatever their religion, race, or caste; cadres of good public managers to build and run services for all citizens equitably; and business leaders who are not just wealth creators for themselves (distributing some of it in philanthropy), but creators of opportunities, very soon, for millions of Indians to earn and create wealth for themselves too.
Political leaders, administrators, and business leaders must work together, with a shared vision, to build an Indian state that is good for all citizens, especially the poorest. Time is running out.
Arun Maira is a former Member, Planning Commission
After reeling under the onslaught of the COVID-19 pandemic for over a year, the world is now waiting for some respite. “How is the pandemic going to end?” is the question on everyone’s mind. But the end to the pandemic will not be instantaneous, like an absolute full stop to the replication of the virus. In fact, there may not be an end to the virus at all. The virus is evolving to cohabit with humans, and this can include a range of possibilities, from the virus becoming less lethal, more infectious to it becoming virulent. Nonetheless, the SARS-CoV-2 virus is likely to remain alive and around.
There has been a reduction in the incidence, severity, and mortality related to COVID-19 locally in some countries, including India, which meets the definition of what is termed as “control”, by Walter R. Dowdle, a former deputy director of the Centers for Disease Control and Prevention (CDC).
However, while the world is trying to come to terms with cohabiting with the virus, a recent article published inThe Lancetand some well-intentioned experts are pushing the envelope by advocating an “elimination strategy”, otherwise known as the zero-COVID-19 strategy, wherein replication of the virus is reduced to a bare minimum and no new cases occur in a defined geographical area. The strategy has three elements — rapid reduction in the number of infections to zero, creation of virus-free green zones, and prompt outbreak management when new cases occur occasionally.
Rich countries have found a shortcut for the elimination strategy — to vaccinate every citizen in the country. The plan is well-suited for geographically isolated countries that can afford strict border control measures, such as New Zealand. Even there, the goal of zero COVID-19 cases is elusive since the virus continues to be in circulation in other countries.Firstly, the risk of infection from elsewhere, and thus outbreaks, would always be imminent. Secondly, there has to be universal coverage of vaccines with consistent upgrades, as the pace of vaccine development may not match the new variants’ emergence. Thirdly, a zero-COVID-19 strategy will worsen global health inequities by creating green zones of free travel among richer countries, thus alienating poorer nations.
Experience with other diseases
A quick look at the gains in eliminating other diseases does not offer an optimistic scope for COVID-19. Even though elimination programmes for measles and neonatal tetanus have been ongoing for more than 20 years now, the goals have not been completely realised. Polio, eradicated from southeast Asia, is still endemic in Afghanistan and Pakistan.
Maternal and neonatal tetanus, which has an 80% to 100% case fatality rate, caused deaths of nearly 25,000 newborns in 2018. Despite the global efforts to vaccinate children over the last few decades, these preventable diseases still remain major public health challenges in the developing world.
So far, there is no empirical evidence to suggest how eliminating the SARS-CoV-2 virus is feasible in the near term. Nearly 90% of 100 immunologists surveyed by the science journalNaturethink that the virus will become endemic, i.e., some regions will see a constant presence of COVID-19. The level of endemicity depends on how the world reduces inequities of all kinds, including access to vaccines, and how well public health measures, such as containment, are followed.
We need pragmatic measures for the realistic goal of saving lives. This calls for ensuring that disease control measures are implemented globally and ramping up vaccine coverage for vulnerable people. In addition to meticulous review at the country and regional level, vaccine coverage for the vulnerable population across the globe is an immediate necessity. The world needs to increase the current pace of vaccination 4.3 times by vaccinating 6.4 million persons per day, compared to the current rate of 1.46 million per day, to cover just 30% of the vulnerable population with a single dose in a year.If there is a clear resolve, this is feasible. This needs to be enabled by mapping the elderly and persons with comorbidities on a priority basis and vaccinating them.
So long as disease control is neglected in even a few parts of the world, every other part is at risk of importing infections due to free travel. Without these necessary life-saving measures in every country, the developed world, too, is not immune. Instead of isolated strategies for a few countries, what is needed is a global leadership and resources to vaccinate the vulnerable population and strengthen epidemiological and genomic surveillance for COVID-19.
The COVID-19 pandemic has exposed the flaws in our preparedness and inefficient public health systems that lead to disproportionately high morbidity and mortality among the poor and the vulnerable. The pandemic has also reversed the gains made in programmes like tuberculosis control, caused economic hardships, worsened inequalities, and pushed the poor towards the brink of catastrophe. We cannot let our focused efforts against COVID-19 ruin the progress made in other disease control programmes and our commitment to Sustainable Development Goals (SDGs). It is also essential to resume pursuing the agenda of Universal Health Coverage (UHC).
A recalibrated strategy
Global elimination of COVID-19 in the immediate term is a tricky goal — the zero-COVID-19 strategy comes with zero evidence of feasibility, seeks luxury that few countries can afford, does not reflect field realities, and, if adopted, may result in diverting most of our attention, funds, and time. Excessive focus on one virus in select countries will only worsen the poor global preparedness to fight other pandemics in future or tackle the devastating burden of non-communicable diseases.
For global health, every idea must be assessed based on its merit while ensuring that there is maximisation of benefits for people across the world. At this stage of the pandemic, the goal of elimination will divert focus and steer the world in a different direction altogether. A pragmatic goal of controlling COVID-19, not elimination, combined with a renewed emphasis on UHC can restore and rejuvenate an ailing healthcare system and bolster our progress towards realistic goals.
Giridhara R. Babu is Professor and head, Lifecourse Epidemiology, at the Indian Institute of Public Health, PHFI, Bengaluru.
Health care has taken centre stage due to an unfortunate novel coronavirus pandemic that has devastated lives and livelihoods across the globe. Although India has performed relatively better in its COVID-19 management, even compared to countries with highly developed health systems, the impact of the outbreak on society and the economy is undeniable. Against this backdrop, the Union Budget 2021–22 was an eagerly awaited one and the announcements for the health sector, in particular, have been widely discussed.
Context of packages
It is important to view the Budget in the context of the various Aatmanirbhar Bharat Abhiyaan packages announced by the Government of India, which also include several short-term and longer-term measures to strengthen the health sector. Production-Linked Incentive schemes have been announced to boost domestic manufacture of pharmaceuticals and medical devices. Mission COVID Suraksha has also been launched to promote the development and testing of indigenous vaccine candidates. At least 92 countries have approached India for a COVID-19 vaccine, thus bolstering the country’s credentials as the vaccine hub of the world. Further, to ensure food and nutrition security for the poor and the vulnerable during the COVID-19 crisis, the Government of India launched the Pradhan Mantri Garib Kalyan Package for providing free foodgrains to 800 million beneficiaries. To facilitate access to subsidised grains across the country, the ‘One Nation One Ration Card’ scheme has been enabled in 32 States/Union Territories covering 690 million beneficiaries.
With respect to the “padding” of the health Budget, with allocations for water, sanitation, nutrition and clean air, as pointed out by some commentators, it is important to appreciate that the presentation of a combined ‘health and well-being’ budget, which sets the tone for greater integration of these areas, is in fact a welcome step. The National Health Policy (NHP), 2017, highlights the close links between health, water and sanitation. This year’s Economic Survey too recognises that improvements in access to bare necessities such as water, sanitation and housing are strongly correlated with progress in health indicators.
Good water, vaccine coverage
The substantive allocation for the newly launched Jal Jeevan Mission (Urban) is especially commendable as access to adequate, good quality water supply has major positive externalities for the health sector. A report released by the Johns Hopkins Bloomberg School of Public Health in 2019 suggested that nearly one out of every 100 Indian children does not live to celebrate their fifth birthday on account of either diarrhoea or pneumonia. Suboptimal access to clean water and sanitation is directly linked to diseases such as diarrhoea, polio and malaria. Moreover, water contaminated with heavy metals such as arsenic increases the risk of developing heart ailments and cancer.
Another important public health-related announcement in Budget 2021 was the government’s decision to expand the coverage of the pneumococcal vaccine across the country. Pneumococcal pneumonia is a major killer of children under the age of five years. Once universalised, this indigenously developed vaccine could save up to 50,000 lives annually. The Finance Minister has also made a special allocation of Rs. 35,000 crore for the COVID-19 vaccine in 2021–22, which could be increased if required. India has already delivered over eight million doses of the vaccine to health-care and frontline workers thus far — the fastest vaccination drive in the world.
The priority accorded to capital expenditure through the launch of the Pradhan Mantri – Atmanirbhar Swasth Bharat Yojana (PMANSBY), is also a much-need step. Capital expenditure has, historically, constituted only a small percentage of the overall health Budget, with the majority of funds going towards salaries and administrative costs. Further, PMANSBY lays emphasis on the health system being strengthened at all levels, including establishing integrated public health laboratories and institutes of virology. This is crucial as experts have repeatedly highlighted the need for enhancing disease surveillance and diagnostic capabilities to be better prepared for disease outbreaks. Additionally, the emphasis on expansion of health and wellness centres under PMANSBY, together with a Rs. 13,192 crore Finance Commission grant for strengthening the primary health system through local government bodies, is also noteworthy.
Another point of discussion in relation to the health Budget is the stagnant allocation for the Pradhan Mantri Jan Arogya Yojana (PM-JAY), a flagship scheme launched by the government in late 2018 as part of the Ayushman Bharat initiative. Despite being a relatively new scheme, the Economic Survey estimates a 20% decline in the infant mortality rate between 2015–16 and 2019–20 in States that adopted PM-JAY, compared to a 12% decline in States that did not. It is important, therefore, to persist with this highly ambitious scheme and accelerate its roll-out as the absorptive and governance capacity of States improve.
A less talked about aspect of the health Budget is the nearly 40% hike for the Ministry of Ayurveda, Yoga & Naturopathy, Unani, Siddha and Homoeopathy (AYUSH). The pandemic has catalysed a behavioural shift in favour of preventive care, holistic health and wellness. There is considerable potential for promoting ayurveda and yoga as well as integrative health-care approaches in the post-COVID-19 scenario, especially for stress reduction and the management of chronic diseases.
States must act too
Undoubtedly the budgetary allocation for health needs to be ramped up over time. We also have to ensure adequate funds for critical and closely-linked sectors such as nutrition, water and sanitation. The onus of increasing health spending, however, does not lie with the Centre alone but also with the States also. In fact, as elucidated in the National Health Accounts 2017, 66% of spending on health care in India is done by States. It is imperative, therefore, that States increase expenditure on health to at least 8% of their budget by 2022 as recommended by the National Health Policy (NHP), 2017 and the Fifteenth Finance Commission.
The health sector has found a prominent place in the government’s agenda over the last few years, with the implementation of a series of well-thought-out and carefully sequenced reforms. While much remains to be done, the Union Budget 2021–22 has laid a strong foundation to increase the resilience of the sector in the post-COVID-19 era and achieving Universal Health Coverage by 2030 as part of the Sustainable Development Goals agenda.
Rajiv Kumar is Vice Chairman, NITI Aayog and Urvashi Prasad is Public Policy Specialist, NITI Aayog. The views expressed are personal
The question whether the rich are more satisfied with their lives is often taken for granted, even though surveys, like the Gallup World Poll, show that the relationship between subjective well-being and income is often weak, except in low-income countries in Africa and South Asia. Researcher Daniel Kahneman and his collaborators, for example, report that the correlation between household income and reported life satisfaction or happiness with life typically ranges from 0.15 to 0.30. There are a few plausible reasons. First, growth in income mostly has a transitory effect on individuals’ reported life satisfaction, as they adapt to material goods. Second, relative income, rather than the level of income, affects well-being — earning more or less than others looms larger than how much one earns. Third, though average life satisfaction in countries tends to rise with GDP per capita at low levels of income, there is little increase in life satisfaction once GDP per capita exceeds $10,000 (in purchasing power parity). This article studies the relationships between subjective well-being, which is narrowly defined to focus on economic well-being in India, and variants of income, based on the only panel survey in India Human Development Survey (IHDS).
Why do we need a new measure of well-being when there is already a widely used, objective welfare measure based on per capita income? There are several reasons. The first stems from the distinction between decision utility and experienced utility. In the standard approach to measure well-being, ordinal preferences are inferred from the observations of decisions made supposedly by rational (utility maximising) agents. The object derived is decision utility. In contrast, recent advances in psychology, sociology, behavioural economics and happiness economics suggest that decision utility is unlikely to illuminate the utility associated with different experiences — hence the emphasis on measures that focus more directly on experienced utility, notably using subjective well-being (SWB) responses.
We draw upon the two rounds of the IHDS for 2005 and 2012. An important feature of IHDS is that it collected data on SWB. The question asked was: compared to seven years ago, would you say your household is economically doing the same, better or worse today? So, the focus of this SWB is narrow. But as it is based on self-reports, it connotes a broader view that is influenced by several factors other than income, assets, and employment, like age, health, caste, etc.
There is a positive relationship between SWB and per capita expenditure (a proxy for per capita income, which is frequently underestimated and underreported): the higher the expenditure in 2005, the greater was the SWB in 2012. The priority of expenditure, in time, rules out reverse causation from high SWB to high expenditure, i.e., higher well-being could also be associated with better performance resulting in higher expenditure. High expenditure is associated with a decent standard of living, good schooling of children, and financial security. As India’s comparable GDP per capita in 2003 (PPP) was $2,270, well below the threshold of $10,000, it is consistent with extant evidence.
Aspirations and achievements
In order to capture the gap between aspirations and achievements, we have analysed the relationship between SWB and ratio of per capita expenditure of a household to the highest per capita expenditure in the primary sampling unit. Although this is a crude approximation to relative deprivation, we get a negative relationship between SWB and this ratio. In other words, the larger the gap, the greater is the sense of resentment and frustration, and the lower is the SWB.
The larger the proportionate increase in per capita expenditure between 2005 and 2012, the greater is the SWB. To illustrate this, we construct three terciles of expenditure in 2005: the first representing extremely poor, the second the middle class, and the third the rich. If the proportionate increase in per capita expenditure is highest among the extremely poor and lowest among the rich, the higher will be the SWB of the extremely poor. This is indeed the case.
This provides important policy insights. One is that in a lower-middle-income country like India, growth of expenditure or income is significant. However, the widening of the gap between aspirations and achievements or between the highest expenditure/income of a reference group and actual expenditure/income of a household reflects resentment, frustration and loss of subjective well-being. So, taxing the rich and enabling the extremely poor to benefit more from economic opportunities can enhance well-being. In conclusion, objective welfare and subjective well-being measures together are far more useful than either on its own.
Veena S. Kulkarni teaches Sociology at Arkansas State University and is a co-author for this article. Raghav Gaiha is Research Affiliate, Population Studies Centre, University of Pennsylvania; Vani S. Kulkarni teaches Sociology at University of Pennsylvania
Indian leaders have committed to supporting the rights of minority Tamils in Sri Lanka to “live with equity, equality, justice, peace and dignity”. In pledges to the United Nations, the Indian government has also vowed to uphold global human rights.
These commitments have become crucial. The human rights situation in Sri Lanka has worsened since Gotabaya Rajapaksa became President in 2019. At its next session starting February 22, the UN Human Rights Council(UNHRC)will face a crucial test in taking action for protecting vulnerable Sri Lankans and upholding international law. India, as a council member, will have a key role.
Rajapaksa was the defence secretary in the government led by his brother Mahinda from 2005 to 2015, a period marked by particularly egregious human rights abuses. Critics of the government were murdered, tortured, and forcibly made to disappear. Tens of thousands of civilians were killed in the civil war which ended in 2009 between government forces and the separatist Liberation Tigers of Tamil Eelam (LTTE), with both sides responsible for numerous war crimes. In the final months of the war, the armed forces indiscriminately shelled civilians and summarily executed suspected LTTE fighters.
When Mahinda Rajapaksa lost the 2015 presidential election, there was hope for change. There was greater freedom of expression. The repressive and heavily militarised situation in Tamil-majority areas began to improve. The new government supported a consensus resolution at the Human Rights Council that offered victims of abuses and their families truth, justice, and reconciliation.
But now, fear has returned. Tamil communities in the north and the east fear increasing abuses. Since last year, singing the national anthem in Tamil has been dropped from Independence Day celebrations.The religious rights of minorities are under attack, including interference with Hindu temples.
In January, the authorities bulldozed a memorial at Jaffna university that commemorated Tamil civilian victims of the civil war. People who participated in a protest march in February are now facing criminal investigation.
The Rajapaksa government, in 2020,renounced its commitments under the 2015 Human Rights Council resolution and is threatening victims’ families and activists who supported it. A presidential commission set up to investigate supposed “political victimisation” of officials by the previous government has recommended the exoneration of those implicated in cases of abuse. Numerous people who were involved in war crimes have been appointed to senior roles.
Loss of accountability
The Rajapaksa government has shown outright disdain for accountability. In September last year, Sri Lanka told the Human Rights Council that allegations against senior military officers are “unacceptable” and without “substantive evidence”.
Last March, Rajapaksa pardoned former army sergeant Sunil Ratnayake, who killed eight Tamil civilians, including children. In October, the government amended the Constitution to remove constraints on political interference in Sri Lanka’s courts.
Since 2012, the Human Rights Council has sought to work with Sri Lanka to promote reconciliation and accountability, efforts that India has backed. Sri Lanka is now rejecting that endeavour, instead proposing a new domestic commission that UN experts have dismissed as lacking credibility or independence.
The UNHRC should recognise the government’s actions for what they are — an effort to impede justice. A new resolution is urgently needed to protect vulnerable minority communities in Sri Lanka, by upholding the principle of accountability for the worst crimes. India should join other member states in supporting a resolution to reduce the growing risk of future atrocities.
The author is South Asia director at Human Rights Watch
India’s Road Safety Month, launched on January 18 as an extended form of the annual Road Safety Week for greater impact, has concluded with a bus accident in Madhya Pradesh that has claimed 51 lives. The victims, including many young people reportedly travelling to Satna and Rewa to take a government recruitment examination, were trapped within the bus as it plunged into a swollen canal. One of many ghastly mishaps that have occurred after the COVID-19 lockdown, it lends grist to the view that the country, with the world’s worst record on road safety, cannot get its act together any time soon. India has, according to the just-released World Bank-commissioned report, Traffic Crash Injuries and Disabilities, 1% of the world’s vehicles but 11% of all road accident deaths; the Union Transport Ministry put the number of dead in 2019 at 1,51,113, and injured at 4,51,361. Those who suffer the most are from low income households, especially in rural areas, and women bear the long-term financial and psychological impact of the losses more. Such a cringeworthy performance, affecting the fundamental right to life of the average citizen, should have led to intensive measures and a determined campaign to end the carnage, but the Centre and the States are evidently prepared to take only incremental steps. In the wake of this bus mishap, the immediate response has been to order a magisterial inquiry, which is no substitute for a technical investigation conducted by safety experts.
Union Transport Minister Nitin Gadkari has actively campaigned for road safety, and the Motor Vehicles (Amendment) Act of 2019 has provisions that aim to bring about change. But most States have been lukewarm towards hard steps to bring order to the roads, viewing zero tolerance rule enforcement through the lens of populism. This is reflected in the spate of accidents on India’s highways, which witnessed 61% of deaths from just 5% of all accidents, as per 2019 data. The Centre must now set a timeline to operationalise the National Road Safety Board, for which draft rules were circulated in December last year, to lay down engineering standards and complaints procedures that will help citizens hold States to account. Transport departments continue to take an indulgent view of rule violations. Political parties and others fix illegal flag poles and spears on car bonnets and metal contraptions to SUV bumpers, which are deadly in an accident. Even with high political will — and there is no evidence this is present in all the States — ending the “silent pandemic” of accidents will need education, civil society cooperation and professional policing. Meeting the SDGs on transport and reduced road deaths and injuries will need actions that go beyond pious declarations.
Finance Minister Nirmala Sitharaman has stressed that Budget 2021-22 raises resources to push the economy without increased taxation. However, one change to the income tax law proposed in the Finance Bill, 2021, has triggered anxieties for the salaried class: withdrawing tax exemption on interest income accrued into Provident Fund accounts arising out of employee contributions exceeding Rs. 2.5 lakh ‘in a previous year in that fund,’ on or after April 1, 2021. The rationale — some employees are contributing huge amounts into their PF accounts and getting tax-free incomes. Subsequently, the Revenue Department has pointed out the tax will only affect a small group of ‘high net-worth individuals’ (HNIs); the 100 largest employees’ PF (EPF) accounts had a combined balance of over Rs. 2,000 crore. It can be no one’s case that a social security scheme for formal sector workers should become an investment haven for the well-heeled corporate top brass. However, the threshold proposed to exclude the so-called HNIs appears low, as it would end up partially taxing PF income for even those putting away Rs. 21,000 a month towards their retirement — hardly a typical HNI given it may take the saver decades to attain a one crore rupee PF balance. The threshold also does not tie in with the Rs. 7.5 lakh limit set in last year’s Budget for employers’ contributions into the EPF, National Pension System (NPS) or other superannuation funds (rules for which are yet to be notified).
This is not the first time this government had tried to tax PF savings, citing its abuse by the rich. In the 2016-17 Budget, it proposed to tax 60% of EPF balances at the time of withdrawal, but backtracked after a backlash. Now, it has covered even government employees’ contributions into the GPF, but left NPS investments over Rs. 2.5 lakh a year untouched. Tax treatment inequity between India’s limited retirement savings instruments aside, employees and employers have some serious doubts on the implementation. The words ‘in a previous year’, for one, suggest this will be a type of retro-active tax — taxing future income even on past years’ contributions of over Rs. 2.5 lakh. It is also not clear when and how the tax is to be paid — at retirement or each year that the PF rate is announced. The CBDT chief has said employees should include such income in their annual tax returns, which may work for GPF members whose interest rate is announced every quarter, but not for EPF accounts as interest rates are declared late and credited even later. Finally, this may not be smart timing for a government looking to lean on huge borrowings to dent large inflows into EPF — most of its corpus is captively deployed in government bonds. While the goal of targeting HNIs using the PF savings to avoid taxation is laudable, the Centre should consider recalibrating the arithmetic and operational details of this tax.
Mr. Sivaji Ganesan, film actor who is on an election tour of the southern districts on behalf of the Democratic Front candidates told THE HINDU to-day [February 17] that three attempts were made on his life during his 2,000 miles tour in the past three days. “I am not afraid about my life In fact I have already suggested that in case I am killed, my body should be taken to the very taluks, villages and towns that I have toured,” he said. His only worry was the safety of persons accompanying him and the thousands who gather to see and hear him. Mr. Ganesan said that police reluctance to provide adequate protection to him and his party was obvious. “When mere office-bearers of the ruling party tour the districts, they are accompanied by the Collector and lorry-loads of police, and I do not see any reason why I should not be given police escort, especially when several untoward incidents have taken place during the tour,” he said. Replying to Mr. M.G. Ramachandran’s reported statement that except the failure of electricity, no untoward incident took place at Tuticorin where he (Mr. Ganesan) had spoken, Mr. Ganesan wanted to know when “M.G.R. became an official of the Home Ministry, to enjoy the privilege of seeking information from top police officials and issue statements on it”. Explaining the Tuticorin incident of Monday, Mr. Ganesan said that though he had reached the meeting place at 6 p.m. (behind schedule), the large crowd which was anxiously waiting for him, took him in a procession, though it was not in the programme.