It is refreshing to hear the statement of the Finance Minister that the government cares for the poor and respects wealth creators.
This is contrary to the routine narrative, where the government projects itself as pro-poor and anti-rich. Opposition parties often blame the ruling dispensation for being one with corporates to loot the common man.
Society needs different segments for efficient functioning — politicians to rule the country, farmers to produce foodgrains, workers to manufacture goods, teachers for dissemination of knowledge and skill, defence forces to protect the borders, and business entities to produce and create wealth for the country.
When the services of workers, farmers and government employees are recognised, why should the narrative with regard to the business community be one of animosity?
When an individual or group of individuals want to start a small business within their limited means, a proprietorship concern or partnership firm is formed. But when huge capital outlay is required, they float a company and solicit equity share capital from the public.
Why should a business entity be anathema merely because it has a corporate structure?
Alternative structure?
If the corporate model is bad, what is the alternative structure for the production of various goods and services?
Corporates have done yeoman service to the people and it would be naive to blindly oppose them. Most products that we use in our daily life are produced under the corporate structure. Also, most service industries like banking, insurance, railways, and transportation fall under it.
Though the country’s workforce is largely employed in the farm sector (around 42 per cent), the employment potential of corporates cannot be ignored; the sector employs millions of people. Politicians who are against corporates must explain some alternative arrangement for the employment of these people.
Economic benefit
According to data released by CBDT (Central Board of Direct Taxes), the actual gross corporate tax revenue mop-up stood at ₹6.78 lakh crore in 2019-20. That our political parties are exempted from income tax is a different story.
Listed companies comprise a mere 0.62 per cent of the overall taxpayer base, but they contributed 35.29 per cent of the GST revenues.
Most of the revenues under GST have been generated by businesses with an annual turnover of above ₹5 crore.
These businesses comprising a taxpayer base of 7 per cent contributed 80.7 per cent to overall GST revenue. And all of them follow the corporate model.
In 2017, while addressing the 40th annual shareholders meeting, the Chairman of Reliance Industries, Mukesh Ambani, claimed that the company had doubled shareholders’ money every 2.5 years for the last 40 years.
There are millions of small shareholders in this company either directly or through mutual funds and other domestic institutions. When companies are listed, it gives a number of small investors the chance to become shareholders and benefit from it.
Our mindset must change and should accept corporates as an essential business structure. Those running the corporate sector are not from some other planet — they are our own countrymen. By incentivising them, the country will stand to gain a lot economically.
State policy
When Nani Palkhiala was asked why India is poor, he explained as follows: “Not by chance but choice, not by default but design, by embracing poverty as state policy and with a socialism that did not transfer wealth from the rich to the poor, but from the honest rich to the dishonest rich.”
Any action of the government that is considered pro-rich need not be anti-poor. If implemented properly, the benefits of pro-rich initiatives will percolate to the poor as well.
The writer is a retired banker