The GST and Freebie Tangle

Without getting into the politics, or even the ethics of the move, India Tracker takes a look at the latest available data on actual money spent by the government on various welfare schemes in the country

 

 

 

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The imposition of 5% GST on items of daily use like packaged atta, milk, curd, lassi, tetra pack juice and many others has to a firestorm of controversy. Opposition parties have disrupted proceedings of the monsoon session of the Parliament to protest against this move. According to them, the government is imposing draconian levels of taxes on lower middle class and middle class Indians even as it favours a section of “crony capitalists”. The government, on the other hand argues that  the decision to impose 5% GST on these items was taken by consensus during the meeting of theGST council held on June, 28. The government further argues that the GST council members also belong to opposition ruled parties and they had not opposed the move at all when this unanimous decision was taken. The opposition insists that the government has acted in bad faith and should not have imposed GST when ordinary Indians are already hit by rising inflation. The government, on the other hand, justifies the move saying funds are required for the various welfare schemes that help
the poor in India.

Without getting into the politics, or even the ethics of the move, India Tracker takes a look at the latest available data on actual money spent by the government on various welfare schemes in the country. The accompanying chart provides an incomplete list of schemes and the amount spent on them in the financial year 2021-22. Remember, there are about 150 welfare schemes and India Tracker has collected data on just seven major schemes. The least amount of money was spent on the free medical insurance scheme (Rs 3,199 crore), the Ujjwala LPG scheme (Rs 4,000 crore) and the PM Awas Yojana (Rs 8,000 crores). Close to Rs 100,000 crore was spent on NREGA that promises work for 100 days to any rural Indian who wants it. Apart from getting direct cash transfers of Rs 65,000 crores, farmers also got Rs 162,132 crores in fertiliser subsidies. The most expensive scheme was the free food scheme for 800 million Indians on which the government spent close to Rs 300,000 crores. If one adds up all the expenditure on all schemes, the government is spending a massive sum on what are called sometimes as “freebies”

Now since the government doesn’t have any money of its own, it has to look at other sources. It cannot afford to print money as inflation is already quite high. Borrowing money is a risky proposition when fiscal deficits are already over targets. The last recourse is to keep taxing helpless citizens at every opportunity available. That is perhaps what has happened during the unanimous decision taken by the state governments and the centre to impose GST on items of daily use. But that is hardly any consolation for the ordinary Indian already hit by 7% retail inflation and double digit food inflation.