Second, Delhi’s Kejriwal government has fully demonstrated that sound financial management can support welfare spending, which was previously unthinkable. For example, it provides free electricity (up to 200 units) and subsidized electricity (50% up to 400 units) to a large population without resorting to higher tariffs. Before him, the increase in electricity taxes was almost an annual affair. It also provides waterless (up to 20 KL) for everyone. Yet its fiscal resources have not diminished. Many states and political parties now follow his model (Rajasthan announced 50 units for free for those consuming 100 units in the latest budget) or promise to do so.
Third, the Center’s gross tax has grown at an annual average of 10.7% between FY15 and FY22 (RE) – despite pandemic disturbances. GST, which is part of the gross tax, had an annual average of 12.3% growth during FY19-FY21. This indicates a robust growth in tax collection. By expanding the tax base and rationalizing it (based on the principle of solvency), India can raise more resources.
There is another aspect to it.
Here is an opportunity to look at the whole social security system in India which is nothing to be proud of. A large majority of workers (89% are informal) have no social security. Even the best quality jobs outside the government – regular pay / paid employment (22.9% of all jobs) – do not guarantee social security. The latest PLFS for 2019-20 (annually) states that 67.3% of such jobs did not have written contracts, 52.3% were not entitled to paid leave and 54.2% were not entitled to any social security benefit.
The new Social Security Code 2020 promises social security for all, including informal workers, but it is neither operational nor provides a plan or funding mechanism. It just promises social security schemes in the future. It was adopted in a hurry in the midst of the pandemic shutdown without public or parliamentary debates. Forget social security, the new wage code enacted in 2019 remains on paper, and the national minimum wage remained at INR 176 for years.
Often, debates about social security and welfare are hampered in India due to lack of clarity about the role of government in it. Governments are increasingly seen as facilitators of private companies and the free market, which are then assumed to take care of the development needs of all people. In India’s constitutional democratic framework, people elect their governments (center and state) once every five years to take care of their needs and welfare. Free enterprise and a free market are some of the tools to achieve this, not the entire raison d’être of governments.