The Government of India’s social sector expenditures are among the lowest in the world. The government claims that India is one of the world’s fastest growing economies. Even if there is some exaggeration in this, can’t the government raise its social sector expenditures to the level of countries at a similar level of development?
The Government of India’s social sector expenditures are among the lowest in the world.[1] The consequence of these “woefully” low social sector expenditures is that India’s welfare services are in a dismal state:
- Government spending on education in India is among the lowest in the world — and declining. Consequently, our public education system is in shambles. There is a severe shortage of teachers. A single teacher is teaching two or three different classes at the same time in a single room in a majority of the primary schools in the country! The government has shut down more than 80,000 schools in the last few years. Total school enrolment (in both public and private schools) has fallen, probably for the first time since independence.
- The situation of higher education is worse. Because of decline in government funding, majority of our colleges are in derelict state, privatisation of higher education is accelerating, fees is going through the roof, and so higher education is going beyond the reach of students from poor families.
- India’s public health spending is also among the lowest in the world (India is ranked 179 out of 189 countries), because of which our country is facing a ‘health emergency’. India is the disease capital of the world. Lakhs of people die of treatable diseases every year because of lack of affordable and good quality public health services.
- India is facing a ‘hunger and malnutrition emergency’. Yet, the government has slashed its budgetary spending on food subsidy by more than 60% over the last few years. Instead of providing foodgrains to the poor at subsidised rates, it is more interested in providing foodgrains to companies at subsidised rates for producing biofuels to power swanky cars carrying the rich on expressways, also built at subsidised rates.
- Our ruling regime is totally insensitive towards the 5 crore children in the country who are malnourished, and the more than two crore pregnant women and lactating mothers, majority of whom are suffering from anaemia. It has slashed the budget for the most important programme meant to provide supplementary nutrition to pregnant and lactating mothers and children below 6 years of age. A majority of pregnant women are even being denied the paltry financial assistance promised to them under the National Food Security Act (NFSA), to partially compensate them for wage-loss so that women can take adequate rest before and after delivery.
- There are nearly 15 crore people in India above the age of 60. Most of them have worked for low wages in the informal sector during their younger days, and so do not have any savings on which they can live a life of dignity in their old age. The least the government can do is give them a decent pension in their old age. But the Modi Government’s allocations for pension schemes for the elderly are scandalously low.
The government claims that India is one of the world’s fastest growing economies, and that we are on the way to joining the ranks of the developed countries. Even if there is some exaggeration in these claims, the government can at least raise its social sector expenditures to the level of countries at a similar level of development. A RBI report admits: “In terms of GDP, the social sector expenditure, primarily constituting health and education in India continues to remain woefully below peers.” [2]
Why is the government not willing to increase its social sector expenditures — despite the country facing an ‘unemployment, poverty and hunger emergency’?
The ostensible reason is low government revenues. We have pointed out in an earlier article that the total general government revenues of India (Centre and States combined) are very low — they are less than half of the developed countries, and are also way below that of Emerging Market Economies. The blame for this lies entirely with the Centre. That is because the Centre collects the bulk of the revenues in the country; the States do not have many sources of revenue. As we have discussed in a previous article of this budget series, of the total revenues of the Centre and States (including Centre’s borrowings), the Centre collects around 70%, and the States the remaining 30% [3].
Why are Government Revenues Low in India?
The reason for low revenues of the Central Government is — the Modi Government has been doling out enormous amounts of ‘subsidies’ to the big corporate houses and the rich. The total amount of these concessions is mind-boggling. They are to the tune of several lakh crore rupees every year!
Obviously then, the Centre is not going to have money to spend on social welfare schemes.
In a deft use of language, while the breathtaking ‘subsidies’ given to the rich are euphemistically called ‘incentives’ and justified as being necessary for ‘growth’, the social sector expenditures — whose purpose is to provide the bare means of sustenance to the poor at affordable rates — are condemned as ‘subsidies’, as being wasteful, inefficient, benefiting the middle classes rather than the poor, promoting parasitism, and so on.
Here is a snapshot of some of the subsidies being given to the rich:
1. Tax Cuts
The Modi Government has sharply reduced the corporate tax rates. In September 2019, the Finance Minister (FM) sharply reduced the base corporate tax rate from 30% to 22%, and for new manufacturing companies from 25% to 15%. While making the announcement, the FM also admitted that this would lead to a loss in direct tax income of Rs 1.45 lakh crore every year.[4]
The steep cut in corporate tax rates has made India among the countries with the lowest corporate tax rate in the world. France has a corporate tax of 31% to 33.3%; Germany also has a similar net corporate tax rate; corporate taxes in the USA and Canada are around 30%, while in Brazil this is at 34%. Even our neighbour Bangladesh has a 35% corporate tax rate.[5]
India has no wealth tax. India had a low wealth tax earlier, but FM Arun Jaitley scrapped even this low wealth tax in 2015. India also has almost zero property tax. In contrast, as we can see from Chart 1, 15 out of 18 countries in the chart earned between 1 and 4 percent of GDP from property taxes.
Chart 1: Property Tax as % of GDP for Various Countries [6]
2. Tax Exemptions
Apart from low corporate tax and almost zero property tax rates, the Modi Government has also been giving tax exemptions to the rich to the tune of several lakh crore rupees every year.
Since 2006–07, the Union Budget papers have included a statement on the ‘Revenue Foregone under the Central Tax System’. This statement is included in the annexure attached to the Receipt Budget. This statement gives the revenue loss to the Centre on account of tax concessions given in the past year. These tax write-offs are in corporate tax, income tax, customs duties and excise duties.
After the Modi Government came to power in 2014, in 2015–16, it changed the name of this statement to ‘Statement of Revenue Impact of Tax Incentives under the Central Tax System’. So, instead of calling it a tax loss, it is now being called a ‘tax incentive’ — in line with the ideology of the ruling regime. The Union Budget papers for the years 2015–16 and 2016–17 show that the projected and actual tax exemptions given to the country’s uber rich by the Modi–Jaitley government in 2014-15 were Rs 5.49 lakh crore and Rs 5.01 lakh crore respectively, and projected tax exemptions in 2015–16 were Rs 5.51 lakh crore (See Table 1). [In these figures, we have excluded the tax revenue foregone due to concessions given in personal income tax, since this write-off benefits a wider group of people.]
In the 2017–18 budget document, the Modi Government changed the methodology of calculating excise duty and customs duty tax concessions. The methodology for calculating corporate tax concessions was not changed, they increased for 2016–17. But excise duty concessions and customs duty concessions came down so sharply that revenue foregone in 2015-16 came down by more than half, from the projected Rs 5.51 lakh crore to actual Rs 2.25 lakh crore. The projected revenue forgone in 2016–17 also sharply declined to Rs 2.38 lakh crore (see Table 1)! We have estimated the tax concessions given to the rich in 2016–17 by the older methodology, and shown that the projected tax concessions to the rich remain at the same high level as in 2014–15 and 2015–16 and total Rs 5.50 lakh crore! [7]
Table 1: Revenue Forgone by Centre Due to Tax Exemptions (Rs lakh crore)[8]
| 2014–15 P | 2014–15 A | 2015–16 P | 2015–16 A | 2016–17 P * | 2016-17 P † | |
| Corporate taxes | 62,399 | 65,067 | 68,711 | 76,858 | 83,492 | 83,492 |
| Income taxes | 40,435 | 53,526 | 59,928 | 61,800 | 80,034 | 80,034 |
| Excise Duty | 184,764 | 196,789 | 224,940 | 69,259 | 77,978 | 199,838 |
| Custom Duty | 301,688 | 238,967 | 257,549 | 79,183 | 76,844 | 266,803 |
| Total | 589,286 | 554,349 | 611,128 | 287,100 | 318,348 | 630,167 |
| Total (excl Income Taxes) | 548,851 | 500,823 | 551,200 | 225,300 | 238,314 | 550,133 |
P: Projected; A: Actual; * New methodology; † Old methodology (our calculation)
In the 2018–19 budget document, the government discontinued the estimation of excise duty tax concessions, because of the introduction of GST. The official data on total tax concessions given to the rich further came down.
Clearly, the Modi Government has been indulging in all kinds of manipulations to play down the tax concessions being given to the super-rich.[9]
In a paper published in 2020, economists Reetika Khera and Anmol Somanchi of IIM Ahmedabad have estimated government revenue foregone, that is, government tax exemptions to the super-rich, based on the older methodology, for the years up to 2019–20. They conclude that the crash in the government estimate of revenue foregone completely disappears if the calculations are redone based on the older methodology, and have been stable at between Rs 5–6 lakh crore during the 6-year period 2014–15 to 2019–20.[10]
Considering the overall pro-corporate pro-rich attitude of the Modi Government, we can safely assume that the revenue foregone for years 2020–21 to 2023–24 must be at the same level as the earlier years. Taking the average annual tax exemptions to the super-rich to be Rs 5.5 lakh crore, the total tax concessions to the corporate houses and the richie-rich during the past decade (2014–15 to 2023–24) work out to Rs 55 lakh crore.[11]
This is a mind-boggling sum — it is more than the Union Budget for this year (Rs 48 lakh crore)!
3. Loan Write-Offs
- In 2018, Prime Minister Narendra Modi claimed that his National Democratic Alliance had not granted even a single loan to parties who later defaulted on repayments. Taking a jibe at the Congress, he said, “Every penny of loans given at the behest of ‘naamdaars’ [dynasts] will be recovered.” He further stated: “A majority of bank funds during the previous regime were reserved only for rich who were close to a particular family.[12]
- In an interview given in 2016 to Times Now news channel, Modi said that he would give a taste of the law to wilful loan defaulters who, having defaulted on huge corporate loans, escape to foreign countries. “The public is sure that if anyone can do this, it is Narendra Modi,” he said. “And I would certainly do it.” [13]
Let us measure these claims of our Prime Minister with ground realities of the past ten years.
Chart 2: Public Sector Banks: Loan Write-Offs, Recovery and Waivers, 2014–15 to 2023–24 (Rs crore) [14]
During the past ten years of the Modi Government (that is, 2014–15 to 2023–24), public sector banks have written-off loans totalling Rs 11.57 lakh crore. Of this, the banks have recovered Rs 1.97 lakh crore, that is, just 17% of the total loan write-offs (see Chart 2).[15] Data provided by the RBI shows that almost 85–90% of the loans written off by the banks are never recovered.[16] Therefore, we can assume that the remaining amount is never going to be recovered, implying that complete loan waivers total Rs 9.60 lakh crore over these 10 years. These are official loan waivers, admitted by the government in Parliament. This figure does not include the interest accruing on these loans; including that, the loss could be as much as four times this amount.[17] That is a staggering sum.
Recently, PM Narendra Modi claimed that while the previous UPA government had destroyed the banking sector with “scams”, his government has restored its good financial health.[18] For once, PM Modi is right. The financial health of the banks has indeed improved. The magic wand used by his government for this banking ‘miracle’ is ‘loan write-offs’.
Even after all these write-offs / waivers, the total non-performing assets (a euphemism for bad loans) of public sector banks were Rs 3.36 lakh crore as of June 2024.[19] Considering the nature of the ruling regime, we can safely assume that the great majority of these are also going to be eventually waived.
But this is just the visible part of the total loan waivers given to the country’s super-rich. Additionally, public sector banks have restructured loans of the ‘high and mighty’ — a roundabout way of writing off loans. This too must be of the order of several lakh crore rupees (the actual amount is not known).[20]
What is the total amount of loans that the Modi Government has written off (including write-offs under the guise of restructuring) over the 10-year period 2014–24? At the minimum, excluding interest, it should be of the order of Rs 20–25 lakh crore.[21] Including interest, it could be 2–3–4 times this amount. That’s mindblowing.
The beneficiaries of these breathtaking amounts of loan waivers and restructurings are mainly the big corporate houses.[22] Defending these loan waivers, Arvind Subramanian, when he was the Chief economic adviser to the Modi Government, had stated that writing-off of bad loans of the corporate sector makes economic sense. “This is how capitalism works,” he said. But the Modi Government has not been willing to waive farm loans. Arun Jaitley, then Finance Minister in the Modi Government, had made it very clear: “…states which want to go in for farm loan waivers will have to generate funds from their own resources. Beyond that, Centre has nothing more to say.”[23] If waiving bad loans for the corporate sector is necessary for economic growth, this logic should hold good for farm loan waivers too. Well, Arvind Subramanian made a small but important mistake in his statement. This is not how capitalism works; rather, this is how monopoly capitalism or corporatism works. Small scale agriculture, small scale industry, small traders – all are being gradually bulldozed, so that they can be taken over by big corporate houses. So, farm loans cannot be waived, but corporate loans can.
Bailing out wilful defaulters
In an even more astounding development, the RBI has issued a circular (on 8 June 2023) allowing banks to go in for a compromise settlement of loans of wilful defaulters and companies involved in fraud.[24] These are defined as:
- a wilful defaulter is a borrower who refuses to repay loans despite having the capacity to pay up;
- a fraudster is one who intentionally cheats the bank with false documents/information and misappropriates the money.
Both are criminal offences.
The total amount owed by these crooks to banks total several lakh crore rupees. Here are some estimates:
- According to a report in Business Standard, based on data from TransUnion CIBIL, since March 2019, the total outstanding dues from wilful defaulters in India have surged by a staggering Rs 100 crore per day. As of June 2023, the total amount owed by wilful defaulters had crossed the Rs 3 lakh crore mark. Public sector banks bore the bulk of these losses, accounting for a substantial 77.5% of the total amount owed by wilful defaulters.[25]
- In December 2023, the Minister of State in the Finance Ministry informed Parliament that as of 31 March 2023, 2,623 wilful defaulters owed Rs 1,96,049 crore to scheduled commercial banks.[26]
- According to the Finance Ministry, just the top 50 wilful defaulters owed Rs 87,000 crore; their names include Mehul Choksi, Rishi Agarwal and others.[27]
Now, the RBI has allowed “compromise settlements” or “technical write-offs” with these wilful defaulters or fraudsters. This is absolutely shocking. It not only rewards unscrupulous borrowers but also encourages honest borrowers to default. The Modi Government is ruining the integrity of our entire public sector banking system.
It means that crooks like Jatin Mehta (a close relative of Adani), Vijay Mallaya, Meher Chokshi, Nirav Modi and others, who have fled abroad after looting the banking system, can now return, pay a small amount to the banks and have their slates wiped clean. The RBI circular even allows them to start borrowing again 12 months after executing the compromise settlement![28]
The newest game in town
Another technique being used by the Modi Government to transfer public wealth to the coffers of the corporate sector is pressurising public sector banks through the National Company Law Tribunal (NCLT) to give ‘haircuts’. NCLT is a quasi-judicial body under the administrative control of the Union Ministry of Corporate Affairs that has been tasked with the responsibility of resolving large distressed assets, a euphemism for bailing out indebted corporates. ‘Haircuts’ are defined as losses incurred by creditor banks while resolving bad debts or stressed assets of companies. The most common method being adopted for this is that the NCLT orders banks to allow the sale of these stressed assets (that is, companies that have become bankrupt due to high debts) to another company at a fraction of their value. According to news reports, banks are taking ‘haircuts (meaning incurring losses) of as much as 70 to 90 percent of the original value of these assets in these deals! For example:
- banks took a 60% haircut in the sale of stressed steelmaker Electrosteel to Vedanta;
- NCLT permitted Reliance to take over Alok Industries for Rs 5,000 crore. Banks took a 83% haircut on this sale — they had outstanding receivables from the company of about Rs 30,000 crore! [29]
Even more mind-boggling is the debt resolution deal of Reliance Communications Infrastructure Limited (RCIL), a wholly owned subsidiary of Anil Ambani owned Reliance Communications Limited (RCOM). RCIL owed Rs 49,668 crore to banks and financial institutions. In December 2023, NCLT gave its approval to a resolution plan for this loan, wherein it ordered the settlement of this loan for just Rs 455.9 crore. Banks and financial companies thus took a 99% haircut on this loan! [30]
Even Harsh Goenka, Chairman, RPG Enterprises has been constrained to observe: “Promoters slash away on the side, take the company to cleaners, get an 80% to 90% haircut from Bankers/ NCLT. That’s the new game in town”. [31]
Note that these haircuts being taken by public sector banks are over and above the loan write-offs / loan waivers discussed above.[32]
4. Transfer of National Resources & Assets to Private Sector
The Modi Government has handed over control of the country’s mineral wealth and resources to private corporations in return for negligible royalty payments; transferred ownership of profitable public sector corporations to foreign and Indian private business houses at throwaway prices; handed over control of infrastructure including airports, ports, telecom network, etc. to its corporate friends at hugely discounted prices; given direct subsidies (that is, cash transfers) to private corporations as ‘incentive’ for investing in infrastructural projects in the name of ‘public–private–partnership’; and so on. These transfers of public wealth to private coffers have resulted in enormous losses to the public exchequer — of the order of several lakh crore rupees every year!
In end-2018, the Modi Government decided to privatise six airports, at Ahmedabad, Jaipur, Thiruvananthapuram, Lucknow, Mangalore and Guwahati. Within just 3 months, it handed over all the six airports to the Adani group, in violation of its own rules that no single bidder would be given more than 2 airports, and that bidders must have prior experience in developing or operating airports (which the Adani group did not have). The whole privatisation process was manipulated to keep away other airport players from bidding for these airports, and conditions were imposed that enabled Modi’s bosom friend to grab all the 6 airports put up for privatisation at a fraction of the actual value of the assets privatised.[33]
During the pandemic, the Modi Government auctioned 19 coal mines at such low rates that it cost several states several thousand crore rupees in potential revenue.[34]
Another huge scam is the sale of Air India to the Tatas. In 2021, the Modi Government announced the sale of Air India, its low cost airline Air India Express, and Air India’s holding in AISATS, the ground handling company in which Air India was an equal partner along with Singapore Airlines, to the Tatas for Rs 2,700 crore. Tatas also took over Rs 15,300 crore of the total debt of Air India of Rs 61,562 crore. The remaining debt of Rs 46,252 crore was taken over by the Modi Government. (In Union Budget 2022, the Centre allocated Rs 51,917 crore towards clearing Air India’s dues.)
By paying a total of Rs 18,000 crore, Tatas acquired control over the 141-aircraft fleet (including 49 wide-body long-haul jets) operated by Air India and AI Express. Tatas also acquired, in one stroke, control of 4,400 domestic and 1,800 international landing and parking slots at Indian airports, as well as 900 slots at airports overseas.[35] The total value of these assets thus acquired by the Tatas should be at least a few lakh crore rupees.
Following the completion of the deal, Tatas managed to get a loan of Rs 23,000 crore from a consortium of public sector banks at an interest rate of 4.25%, to finance the Air India deal as well as for working capital.[36] In March 2023, newspapers reported that Tata-owned Air India had borrowed another Rs 14,000 crore from the State Bank of India and Bank of Baroda — it was a mix of fresh loan and refinancing of existing debt. Subsequently, on 29 February 2024, the Economic Times reported: “Tata group-owned Air India has refinanced short-term loans with the State Bank of India and Bank of Baroda for a three-year loan at an attractive rate, thanks to the conglomerate’s strong credit profile. The new Rs 19,000 crore loan will be used to finance the carrier’s working capital needs and upgrade its aircraft fleet.”[37]
A new loan to replace the previous loan; another new loan the next year to replace the previous loan … It shouldn’t be surprising if ultimately, public sector banks end up waiving half or more of the Air India debt taken over by the Tatas (15,300/2 = Rs 7,650 crore). This effectively means that the Centre has handed over Air India and AI Express to the Tatas for free, and in addition has poured in a minimum of [51,917 + 7650 – 2,700 =] Rs 56,867 crore of public money to consummate the deal. Also, it is very much possible that in the coming years, a part of the new loan given to Tatas as working capital will also be waived, in the name of providing an ‘incentive’ to Tatas to develop Air India into a ‘world class airline’.
This is the case with each and every public sector corporation being privatised by the Modi Government — each of these public assets has been sold at heavily discounted prices to foreign and Indian private corporations. So, when the government claims that it earned Rs 46,000 crore in disinvestment income in 2022–23 (Actuals, as mentioned in Union Budget 2024–25), and Rs 30,000 in 2023–24 (Revised Estimates), it actually means that these deals would have caused a (notional) loss to the public exchequer of the order of Rs 5–7 lakh crore, or maybe even more.
It is not just public sector corporations and infrastructure, huge parcels of land within cities are also being handed over to private corporations at rock-bottom rates in the name of redevelopment. One of the biggest such scams is the project to redevelop Dharavi, one of the world’s largest slums located in Mumbai. It is being executed by Dharavi Redevelopment Project Private Limited (DRP), in which the Adani group has an 80% share (the remaining is with the State government — to give the project an official veneer). While Dharavi is spread over 640 acres (of which the project area is around 429 acres), DRP is seeking several land parcels across Mumbai in the name of rehabilitating the residents of Dharavi. According to one news report, the total land parcels sought could go up to 1,250 acres. News reports say that already, the state government has given approval for the transfer of 21 acres of land at the state-owned Kurla Dairy, 45 acres of land that belongs to the railways, two land parcels in Mulund with a total area of 64 acres, 283.4 acres of salt-pan land in Kanjurmarg, Bhandup and Wadala, and 17 acres of land in the Bandra Kurla Complex to the DRP. The Adani Group has also set its sights on acquiring 820 acres of land in Deonar. The value of such a huge chunk of land in one of the country’s most lucrative real estate areas could go up to several thousand crore rupees. It is being called the ‘world’s biggest land scam’.[38]
The Modi Government has also launched a scheme to ‘lease’ out Rs 6 lakh crore worth of physical assets, like railway lines and stations, telecom systems, power transmission lines, oil & gas pipelines, roads, bridges, ports, etc. to private entities, over four years (FY22 to FY25). The actual value of these assets, so painstakingly built over the years, is obviously going to be many times this amount. These so-called ‘leases’ will run for up to 40 years. This is actually sell-off disguised as lease! According to media reports, the private entities taking over these assets are gigantic funds, based in developed countries, who seek to invest their billions globally for quick and juicy returns. So, they will not be interested in maintaining or improving the health of the assets being leased out to them by the ‘nationalist’ government ruling Delhi, but will seek to maximise their returns in the shortest possible time.[39] According to the Niti Aayog, the government has earned Rs 1.14 lakh crore through asset monetisation during FY22 and FY23.[40] Another notional loss of a few lakh crore rupees!
5. Favouring a Few Corporate Houses at Expense of Others
Such is the favouritism being shown by the Modi Government to its corporate ‘friends’ that it is even helping them acquire businesses run by their peers, by getting central agencies to carry out raids on them. To give a few examples:
- After taking over all the six airports privatised by the Modi Government in 2019, the Adani group then sought to take over Mumbai airport too, India’s second busiest airport. The GVK Group, the operator of the Mumbai airport that also had the rights to build a new airport at Navi (New) Mumbai, vigorously resisted the Adani group’s attempts. In July 2020, the ED launched an investigation into the activities of the GVK Group, alleging that it had been involved in financial irregularities amounting to over Rs 800 crore. Residences of several high-ranking GVK Group executives, including Chairman GVK Reddy, were also searched. The CBI also moved in, and registered a case of criminal conspiracy and fraud against the Group and its chairman. Within a month, in August 2020, the GVK Group announced that it had “agreed to cooperate” with the Adani Group in its airport business and sell its stake in Mumbai airport, as well as the new airport project in New Mumbai. Soon after, the ED and CBI investigations against the GVK Group mysteriously disappeared.[41]
- Adani Ports is India’s biggest port operator. It today has 13 ports in India, most of them acquired after Narendra Modi became PM in 2014. The story of how during Modi’s 10 years in power the Adani Group has become India’s largest private port operator is shrouded in mystery. For instance, Krishnapatnam and Gangavaram, the two largest private ports in South India located in Andhra Pradesh, were taken over by the Adani Group in 2020 and 2021 respectively. Though the inside story of how the Adani Group managed to buy out these ports from their previous owners is not much known, news reports indicate that pressure mounted by the Jagan Reddy Government that was in power in Andhra during those years played a significant role. Those days, Jagan Reddy’s YSR Congress was closely aligned to the Modi Government.[42] Similarly, the public sector Jawaharlal Nehru Port Trust (JNPT), India’s largest container port, was keen to take over the Dighi port in Maharashtra, but both the Ministry of Shipping and Ministry of Finance did not support its bid and it had to back out and the Adani Group took it over.[43]
- Adani became the second biggest cement manufacturer in India almost overnight in September 2022, after acquiring Ambuja Cements and ACC from Holcim India, the Indian subsidiary of the Swiss conglomerate Holcim. In December 2020, the anti-trust regulator Competition Commission of India (CCI) had raided Holcim India’s business premises, including those of Ambuja Cements and ACC. During that month itself, the CBI too raided ACC and Ambuja Cements. Following this, in April 2022, it was reported that Holcim was considering selling its Indian businesses. In September 2022, Holcim sold Ambuja Cements and ACC to the Adani Group, even though the bids of JSW (Jindal Steel Works) Group and Ultratech Cements were higher. Then in April 2023, it was reported that India’s third-largest cement producer, Shree Cements, was seeking to acquire a smaller cement firm, Sanghi Industries. On 21 June, the Income Tax Department conducted search-and-seizure raids at five locations in the country where Shree Cements had offices and manufacturing plants. On 19 July, Shree Cements abruptly withdrew from the race to acquire Sanghi Industries. On 3 August 2023, the Adani company Ambuja Cements took over Sanghi Industries.[44]
6. Refusal to Act against Black Money
During the 2014 Lok Sabha election campaign, Modi projected himself as a crusader against corruption. He famously declaimed: “Na khaoonga, na khaane doonga” (Neither will I take bribes, nor will I let others take bribes). He made a promise that reached every village in the country, that if voted to power, he would bring back the black money stashed away in tax havens abroad by the corrupt, and deposit Rs 15 lakh in the account of every citizen.
After winning the elections, Prime Minister Modi made a complete U-turn on the issue. In fact, soon after coming to power, the Modi Government went to the extent of refusing to divulge the names of foreign account holders in the Supreme Court. Commenting on the application moved by the Attorney General on behalf of the government in the Supreme Court, senior advocate Ram Jethmalani, who was the petitioner in the case, stated, “The government has made an application which should have been filed by the criminals. I am amazed.”[45]
The Modi Government claimed in the Supreme Court that it cannot disclose names of all Indians holding foreign bank accounts as double taxation avoidance treaties with those countries barred such information from being made public.[46] Be that as it may, this does not prevent the government from taking action against illegal foreign account holders. There have been several leaks of names of Indians who have stashed away black money in illegal bank accounts in tax havens abroad. These include the ‘Swiss Leaks’ of February 2015, when names of 1,195 Indians with accounts in HSBC’s Geneva branch were revealed by the Indian Express; and the ‘Panama Papers scandal’ of 2016 wherein names of 500 Indians with links to offshore firms were made public. These names include prominent Indian businessmen, diamond traders, politicians and film stars. Then in October 2021, the Indian Express reported yet another leak of offshore financial records of wealthy individuals and businesses in what has come to be known as the ‘Pandora Papers scam’. This list contains the names of more than 300 Indians.[47] However, the Modi Government has so far not prosecuted any of these individuals.
Instead, it has diluted the anti-corruption legislations in the country. It delayed operationalising the Lokpal Act for five years despite it having been notified in the gazette in January 2014, and appointed a Lokpal only in 2019, after being admonished by the Supreme Court. But the Lokpal has been made toothless — the Modi Government has diluted key provisions of the Lokpal Act, and taken steps to see that the Lokpal does not effectively discharge its duties. One of the last pieces of legislation passed by the Manmohan Singh government before it relinquished power was the Whistle Blowers Protection Act (WPA), which received the President’s assent on May 9, 2014. This Act provides a mechanism for protecting the identity of whistleblowers — a term given to people who expose corruption — so that more people could come forward and expose illegal acts and corruption in public offices. A decade after its passage by Parliament, the Modi Government has not operationalised it. So many people have been killed in the last few years for exposing corruption and wrongdoing in the government; had the law been operationalised, the lives of many of them could have been saved. The Modi Government amended the Prevention of Corruption Act, 1988 in 2018 — the changes not only dilute the act, they also make it difficult to prosecute corrupt public officials in court. The RTI Act, also introduced by the Manmohan Singh government, had been a potent tool to curb corruption and brought about greater transparency in the way public offices work. The Modi Government has diluted the provisions of this Act too.[48]
The government’s unwillingness to act against those who have illegally stashed huge sums of money abroad, its refusal to take firm steps to curb illicit flows of black money, has resulted in huge loss in tax revenues to the government.
Direct taxes are collected by the Centre. The direct taxes as a percentage of GDP have hovered at around 5.5–6% of GDP. In 2023–24, total direct taxes collected by the Centre were Rs 18.2 lakh crore. Prof. Arun Kumar, one of India’s best known experts on black economy, estimates that had the government taken steps to check black money, the direct tax to GDP ratio would have conservatively risen to 12% of GDP [49] — implying an additional revenue of Rs 18 lakh crore! That’s huge!
7. Electoral Bonds: The Biggest Scam Since Independence
In 2017, the Modi Government rammed the Electoral Bonds (EBs) scheme through Parliament. It used its brute majority to force the Lok Sabha to pass the scheme as a money bill, to avoid discussion in the Rajya Sabha where it did not have the necessary numbers. The government claimed that the scheme would bring in transparency into the system of political funding, by ensuring that only white money flows to political parties, as the donors will have to donate through proper banking channels. The most important features of the EBs scheme were:
- Electoral bonds will ensure anonymity — the names of the donors and recepients will not be revealed. The transactions between the political parties and EB donors will remain completely hidden from the general public.
- Till 2017, the law was that corporate donors must be profit-making entities for three years before giving the donation, and they could donate at the most 7.5% of their average profit of the past 3 years to political parties. The government removed this restriction.
- The government amended the FCRA to make it possible for foreign companies with subsidiaries in India to donate to political parties.
These features clearly give the lie to BJP’s claims about the scheme. In the name of transparency, EBs actually made the system of political funding opaque. The removal of the restriction on how much companies could donate to political parties meant that loss making businesses and even businesses that did not exist could now donate infinite amounts to political parties! Also, it has now become known that while the opposition political parties knew the identities of the donors who had donated to them, they did not know anything about donations received by other parties; on the other hand, the BJP was in the know about everything — which party was receiving how much and from which company. This enabled the BJP to intimidate corporates and individuals donating to opposition parties. By removing funding limits for corporate donors and by opening a backdoor for the funding of Indian elections by foreign interests and lobbyists, and by making the whole funding opaque, the scheme legitimised high-level corruption on an unprecedented scale.[50]
And yet such a nakedly unscrupulous scheme remained on the statute books for six long years, even though Common Cause and Association for Democratic Rights (ADR) had jointly challenged the constitutionality of the Electoral Bonds scheme in a PIL in 2017 itself, even before it became law.
The Supreme Court finally struck down the EBs scheme on 15 February 2024. A five-judge Constitution Bench of the Court deemed the scheme “unconstitutional” on the grounds that it violated the right of the people to be informed about who is donating how much to political parties; that it could lead to quid pro quo arrangements between corporates and governments headed by these political parties; and that it distorts the level playing field by giving a massive advantage to parties in power. It also forced the State Bank of India to disclose the full details of the scheme to the Election Commission of India (ECI), which uploaded the entire data on its website — who purchased the electoral bonds and donated them to which party.
The data reveals that a total of Rs 16,492 crore was received by political parties through EBs, of which the BJP received Rs 8,251.8 crore, just over half the value.[51] If we match which corporate donor had given how much to each political party, the data shows that much of the donations were indeed given as quid pro quo arrangements — as the Supreme Court had prophesied. An analysis of the EBs data by ADR shows that at least 33 groups of companies got 172 major contracts and project approvals from the Modi Government, of a total value of Rs 3.7 lakh crore, in exchange for Rs 1,751 crore in electoral bond donations to the BJP.[52] Not only that, in return for these kickbacks, the BJP also —
- allowed companies to get away with money laundering;
- allowed companies to cut corners in executing projects that even led to accidents and deaths;
- changed environment laws and procedures to allow companies to get away with environmental destruction;
- amended the Mines and Minerals (Development & Regulation) Act to allow private mining companies to make windfall profits;
- amended the Electricity Act and Telecom Act to benefit private corporations;
- twisted procedures and ignored protective laws for tribals making it easier to hand over precious mineral blocks cheaply to private miners.
Even more horrifying than all these criminalities is that the BJP allowed drug companies to get away with making sub-standard drugs, in return for kickbacks of a few hundred crore rupees![53]
Consequence of Transfers to Rich
i) Low Direct Tax income
This then is the real reason for the Government of India’s low direct tax revenues. The reason is not just low corporate tax rates; the Modi Government is also giving mind-boggling tax waivers to the country’s uber rich. Therefore, India’s tax-to-GDP ratio is less than half of the developed countries and also compares poorly with that of comparable developing countries.
ii) Low General Government Total Revenues
The main responsibility for raising budgetary revenues of the general government (that is, Centre and State governments combined) lies with the Central government. As we have repeatedly mentioned earlier, the Centre has much greater flexibility in raising revenues; that is why, of the total revenues of all kinds collected by the Centre and States, the Centre collects roughly 70%, and the States’ own revenue is 30%.
However, because of the breathtaking tax concessions / transfers of public wealth / subsidies being given to big corporate houses, especially the handful of corporates particularly close to the Modi Government, the total revenue of the Central government is low. Consequently, the total government revenue of India (that is, revenue of Centre and States combined) as a percentage of GDP is among the lowest in the world.
References
1. See our article: Neeraj Jain, “Analysing Budget 2024–25 from a People’s Perspective, Part 7: Reduction in Social Sector Expenditure; Violation of Federalism”, 7 October 2024, https://countercurrents.org.
2. RBI Bulletin, p. 98, April 2018, https://rbidocs.rbi.org.in.
3. See our article: Neeraj Jain, “Analysing Budget 2024–25 from a People’s Perspective, Part 7: Reduction in Social Sector Expenditure; Violation of Federalism”, 7 October 2024, https://countercurrents.org.
4. “Corporate Tax Cut to Cost Govt Rs 1.45 Lakh Crore”, 20 September 2019, https://www.businesstoday.in.
5. “What Is Corporate Tax? India’s Corporate Tax Comparison with Other Countries”, 20 September 2019, https://www.newsx.com.
6. Rohit Azad and Indranil Chowdhury, “Making a Case for the Old Pension Scheme”, 18 October 2022, https://www.thehindu.com.
7. Neeraj Jain, “Pandering to Dictates of Global Finance”, Janata Weekly, 19 February 2017, http://www.janataweekly.org.
8. All data except 2016-17 P† are from budget documents, various years. Data for 2016-17 P† are our calculation, as explained in Ibid.
9. Mysteriously, the Receipt Budget papers for the financial years 2020–21 and 2021–22 both give data for revenue forgone on account of corporate tax and customs duties for the same years — 2018–19 (Actual) and 2019–20 (projected impact). And yet, the data for projected and actual revenue loss in the two statements are different. Subsequent Receipt Budget papers for 2022–23, 2023–24 and 2024–25 now give data for actual revenue forgone for 2019–20, 2020–21 and 2021–22 respectively. So, while normally actual data is available after 2 years, in the case of revenue forgone, actual data is now available only after 3 years. The government now began fudging data for revenue forgone in corporate taxes too — after increasing from Rs 65,067 crore in 2014–15 to Rs 1.08 lakh crore in 2018–19, it has reduced in subsequent years.
10. See Figure 1a, Fixing A+B in: Reetika Khera and Anmol Somanchi, “A Comparable Series of Tax Revenue Foregone”, May 2020, https://web.iima.ac.in.
11. This is a very conservative estimate. Actual tax concessions must be much more than this. Even the official ‘Statement of Revenue Impact of Tax Incentives’ admits that corporate tax concessions have gone up from Rs 65,067 crore in 2014-15 to Rs 96,892 crore in 2021-22. That works out to an average annual increase of 5.85% (CAGR).
12. “Modi Slams ‘Dynasts’ for Bad Loans, Says Banks Lent on Orders of ‘a Family’”, 1 September 2018, https://www.business-standard.com; “PM Blames Congress for Bad-Loan Mess, Says Every Penny Will be Recovered”, 2 September 2018, https://timesofindia.indiatimes.com.
13. “I Will Give Wilful Defaulters a Taste of the Law, Says PM Modi”, 27 June 2016, https://www.hindustantimes.com.
14. “Rs 10.4 Lakh Crore NPAs, 9 Years: Which Banks Wrote Off, Recovered How Much?” 1 March 2024, https://www.newslaundry.com; Data for 2023–24 taken from: Sharad Raghavan, “Loan Write-Offs Fall 27% in 5 Years, Public Sector Banks Outperform Private Peers in Recoveries”, 8 August 2024, https://theprint.in. Same data also given in: Write Offs by Scheduled Commercial Banks, Rajya Sabha Unstarred Question No. 884, Answered on Tuesday, Ministry of Finance, July 30 2024, https://sansad.in.
15. When a bank recognises that a loan is no longer collectable, it writes off the loan, but it does not mean the loan account is closed. The bank continues to try to recover the loan amount. On the other hand, a loan waive-off is a complete cancellation of a loan account, the borrower no longer needs to repay any part of the loan.
16. Vivek Kaul, “Bad loans Are First Written-Off, Then Waived” 30 July 2023, https://www.deccanherald.com; Ashish Kajla, “Banks Paying Heavily for Corporate Loan Waivers: RTI”, 30 July 2020, https://www.cenfa.org.
17. Sucheta Dalal, “Loan Write Offs Is the ‘Biggest Scandal of the Century’”, 9 May 2016, https://www.moneylife.in.
18. “Public Sector Banks Earlier Known for Huge Losses, NPAs; Now for Record Profits: PM Modi”, 22 July 2023, https://www.thehindu.com.
19. “Indian Banks’ Net NPAs drop to Rs 1 Lakh Crore as of June 2024”, 26 September 2024, https://bfsi.economictimes.indiatimes.com.
20. For more on this, see our booklet, “Is the Government Really Poor?” Lokayat publication, Pune, 2018, http://lokayat.org.in. For the official definition of loan restructuring, see: “Loan Restructuring 2.0 – Meaning, Eligibility & How To Apply?”, Tata Capital, 14 February 2024, https://www.tatacapital.com.
21. We are not exaggerating. At a time when the total NPAs of public sector banks were Rs 7.3 lakh crore and they had written off around Rs 1.14 lakh crore during the past 3 years, Dr. K.C. Chakrabarty, a former deputy governor of the RBI and a veteran public sector banker, in an interview to First Post stated that the total problematic loans of the banking sector was of the order of Rs 20 lakh crore: “I’ll put the figure around Rs 20 lakh crore. It is not correct to say that NPAs are only Rs 6 or 7 lakh crore. One should include all troubled loans including reported bad loans, restructured assets, written off loans and bad loans that are not yet recognised.” Source: Dinesh Unnikrishnan, “Exclusive: Actual Bad Loans About Rs 20 Trn; Govt, RBI Clueless, Says ex-RBI Deputy K C Chakrabarty”, 27 February 2017, https://www.firstpost.com.
22. “SBI Tops Corporate Loan Waiver List”, 11 October 2019, https://www.dailypioneer.com; Rohit Prasad & Gaurav Gupta,“Data Check: Loan Defaults by Corporates have Cost the State Much More than Farm Loan Waivers”, 18 February 2019, https://scroll.in; Ashish Kajla, “Banks Paying Heavily for Corporate Loan Waivers: RTI”, 30 July 2020, https://www.cenfa.org. More recently, the Minister of State in the Finance Ministry admitted in a reply given in Parliament that loans to large industries and services comprised the majority of loan write-offs by public sector banks during the five-year period 2019–20 to 2023–24: Write Offs by Scheduled Commercial Banks, Annexure 3, Rajya Sabha Unstarred Question No. 884, Answered on Tuesday, Ministry of Finance, July 30 2024, https://sansad.in.
23. Devinder Sharma, “Farm Loan Waiver vs Corporate Loan Largesse”, 4 April 2017, https://www.hindustantimes.com; Devinder Sharma, “Set Up a Farmers’ Income Commission”, 25 June 2017, https://www.theweek.in.
24. “RBI Supports Frauds and Wilful Defaulters – 3 Articles” (Articles by Thomas Franco; ‘The Wire’ staff; and E.A.S. Sarma), 25 June 2023, https://janataweekly.org.
25. “Dues Skyrocketing by Rs 100 Cr Per Day Since 2019 in Indian Banks vs Wilful Defaulters Battle”, 27 October 2023, https://www.nationalheraldindia.com.
26. “2,623 Wilful Defaulters Owe Rs 1.96 Trillion to Indian Banks: Bhagwat Karad”, 5 December 2023, https://www.business-standard.com.
27. “Top 50 Wilful Defaulters, Including Mehul Choksi’s Gitanjali Gems, Owe Rs 87,295 Crore to Banks: Finance Ministry”, 2 August 2023, https://www.businesstoday.in.
28. “RBI Supports Frauds and Wilful Defaulters – 3 Articles”, op. cit.
29. “Vedanta Wins Bid to Acquire Electrosteel Steels”, 1 April 2018, https://indianexpress.com; “Reliance–JM Financial ARC’s Rs 5,000-Crore Plan for Alok Industries Gets NCLT’s Blessings”, 6 December 2021, https://www.thehindubusinessline.com; “NPAs + Write Offs + Wilfull Defaulters: Report Card 2014–24”, January 2024, https://www.fanindia.net.
30. “NCLT Mumbai Approves Resolution Plan for Reliance Communications Infrastructure Ltd.: A Significant Verdict”, https://2acompany.co.in; Thomas Franco, “It Is Time for a Full-Scale Overhaul of the Insolvency and Bankruptcy Code”, 9 January 2024, https://www.thehindu.com.
31. Thomas Franco, ibid.
32. “NPAs + Write Offs + Wilfull Defaulters: Report Card 2014–24”, op. cit.
33. Ravi Nair, “How Modi Bypassed Norms to Try and Enable Adani’s Entry into Airport Business”, 27 March 2019, https://www.newsclick.in; “Adani Paid Rs 74.5 cr for Mangaluru Airport Assets Valued at Rs 363 cr, Says AAI Union”, 7 October 2021, https://www.thenewsminute.com; “Finance Ministry and Niti Aayog had Raised Red Flags Before Adani’s Clean Sweep of Six Airports”, 15 January 2021, https://indianexpress.com; “Modi Government Flouted Rules, Favoured Gautam Adani to Lease Out Six Airports to His Firm”, 15 October 2020, https://www.nationalheraldindia.com.
34. Shreegireesh Jalihal & Tapasya, “Coal Auctions: Modi Govt’s Policy Push to Private Miners Will Cost Chhattisgarh Rs 900 Crore a Year”, 16 August 2021, https://www.newslaundry.com.
35. Ravi Sharma, “Air India: Sold for a Song”, Frontline, 19 November 2021, https://frontline.thehindu.com; V. Sridhar, “Air India: Family Silver Sold for a Song”, 15 October 2021, https://www.newsclick.in.
36. “Tata Plans to Borrow Rs 15,000 Crore for Air India’s Working Capital”, 29 October 2022, https://www.business-standard.com; “Tatas Pick SBI, Two Other Banks to Finance Air India’s Old Debt”, 29 January 2022, https://economictimes.indiatimes.com.
37. “Air India Raises Rs 14,000 cr Loan from SBI, BoB”, 30 March 2023,”, https://www.livemint.com; “Air India Refinances Loans with SBI and BoB at Near G-Sec Yields”, 29 February 2024, https://economictimes.indiatimes.com.
38. Amey Tirodkar, “The Great Mumbai Robbery: How Prime Land Is Being Sold to Vested Interests on the Cheap”, 18 September 2024, https://frontline.thehindu.com; Navin Kumar, “Maharashtra Diary: ‘We Will Not Give Up Our Dharavi’”, 31 August 2024, https://www.nationalheraldindia.com; Saurabha Kulshreshtha, “Why Does Adani Group Need 1,250 Acres for Redevelopment Project: Dharavi Residents”, 15 June 2024, https://www.hindustantimes.com.
39. Subodh Varma, “Who is Taking Over National Assets in India?” 17 April 2022, https://www.newsclick.in.
40. “Assets Worth Rs 26,000 Crore Monetised in FY23: NITI Aayog”, 23 February 2023, https://economictimes.indiatimes.com.
41. Ayush Joshi & Paranjoy Guha Thakurta, “Are Law-Enforcement Agencies Assisting Adani Group Takeovers?”, 22 September 2023, https://www.adaniwatch.org; “GVK, That Is Facing Cases from CBI and ED, Agrees to Cooperate with Adani Group”, 31 August 2020, https://www.thenewsminute.com.
42. Ayush Joshi & Paranjoy Guha Thakurta, ibid.; M. Rajshekhar, “A Deep Dive into Adani Group’s Acquisitions”, Janata Weekly, 3 September 2023, https://janataweekly.org.
43. “Congress Asks 3 Questions on Adani’s Monopoly in Ports, Airports”, 13 February 2023, https://www.moneylife.in; Dighi Port: JNPT Unable to Give Bank Guarantee”, 29 April 2019, http://timesofindia.indiatimes.com.
44. Ayush Joshi & Paranjoy Guha Thakurta, op. cit.
45. Dhananjay Mahapatra, “Now, Modi Govt Too Refuses to Name Foreign Bank Account Holders”, 18 October 2014, http://timesofindia.indiatimes.com.
46. Ibid.; “Black Money Case: Modi Govt Too Refuses to Disclose Names of Account Holders”, 17 October 2014, https://www.domain-b.com.
47. Ashish Mehta, “Surgical Strike? This was Aspirin for Cancer”, 9 November 2016, http://www.governancenow.com; Ritu Sarin, “Exclusive: HSBC Indian List Just Doubled to 1195 Names. Balance: Rs 25420 Cr”, 9 February 2015, http://indianexpress.com; “Panama Papers: From Amitabh Bachchan to Adani’s Brother, Names of 500 Indians Leaked”, 4 April 2016, http://www.business-standard.com; “Exclusive: Panamagate India”, 8 April 2016, http://www.theindianeye.net; “Over 300 Indian Names in New Data Leak That Sheds Light on Offshore Dealings: Report”, 3 October 2021, https://thewire.in.
48. Paranjoy Guha Thakurta, “Long on Rhetoric, Short on Practice: Modi Government Battling Corruption”, 2 May 2024, https://frontline.thehindu.com. Saurav Das, “Corruption Allegations Felled The UPA, But Modi’s Bribery-Fighting Lokpal Has Little To Do”, 22 January 2022, https://article-14.com; “It’s Courage, Not Crime: Whistleblowers Strengthen Democracy But Face Dangers. Give Them Strong Legal Protection”, 17 May 2024, https://timesofindia.indiatimes.com; Sevanti Ninan, “Defanging RTI, Step by Step”, 21 August 2019, https://www.theindiaforum.in; M. Sridhar Acharyulu, “How the ‘Strict’ Data Act Is Diluting RTI”, 8 Sep 2023, https://www.downtoearth.org.in. See also our booklet: “Demonetisation: Yet Another Fraud on the People”, Lokayat publication, January 2017, lokayat.org.in.
49. Arun Kumar, “The Hollowness of the Modi Government’s Tall Claims and Self-Praise on Economy”, 18 August 2023, https://thewire.in.
50. Prasenjit Bose, “Decoding Electoral Bonds Data”, 19 March 2024, https://www.thehindu.com; Supriya Sharma & Project Electoral Bond, “Electoral bonds: What We Know So Far, What We Will Know Soon – and What We May Never Know”, 18 March 2024, https://scroll.in. Also see this video which explains these issues very well: “Electoral Bonds | The Biggest Scam in History of India? | Explained by Dhruv Rathee”, https://www.youtube.com. Even the Election Commission had opposed the scheme, arguing that electoral bonds, contrary to government claims, wreck transparency in political funding: Krishnadas Rajagopal, “Electoral Bonds Hit Transparency in Political Funding, Says Election Commission”, 27 March 2019, https://www.thehindu.com; Akshat Jain, “‘Credibility, Transparency’ — Why RBI & Election Commission had Opposed Electoral Bonds Scheme in 2017”, 16 February, 2024, https://theprint.in.
51. “How Much Money Did the BJP Really Get From Electoral Bonds?” 18 March 2024, https://thewire.in; Snigdhendu Bhattacharya, “Bonding with the Bonds”, 21 March 2024, https://www.outlookindia.com. See also: “Updated Data on Electoral Bonds – January 2024”, 15 February 2024, ADR, https://adrindia.org.
52. “41 Companies Facing Probe by Central Agencies Gave Rs 2,471 Crore to BJP Through Electoral Bonds: Petitioners”, 23 March 2023, https://www.dailyexcelsior.com.
53. For more details on all these issues, see our article: Neeraj Jain, “The Electoral Bond Scam: The Biggest Scam Since Independence”, 9 May 2024, https://countercurrents.org.
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Neeraj Jain is a social–political activist with an activist group called Lokayat in Pune, and is also the Associate Editor of ‘Janata Weekly’, a weekly print magazine and blog published from Mumbai. He is the author of several books, including ‘Globalisation or Recolonisation?’, ‘Nuclear Energy: Technology from Hell’, and ‘Education Under Globalisation: Burial of the Constitutional Dream’.
