FEBRUARY 14, 2015

By Mukund Abhyankar

I feel many of our tax incentives are capital centric (instead of job centric) and many subsidies are consumption centric (instead of growth centric) with the result that most of these fail to address social objectives of public exchequer.

Capitalism needs to be graduated to Inclusive Capitalism if this form of economic model is to remain acceptable to masses and if the country is to be saved from going back from liberalisation and falling prey to dangers of pseudo socialism.

It is in this context that all worthy programs of new Government like "Make in India" should be supported by Job centric tax incentives so that trickle down effects of economic growth achieved through such programs will reach masses and therefore will have participation of broad spectrum of society.

Labour intensive industries that create more employment opportunities should get preferential treatment in tax liabilities because it is these industries which reduce burden of the Government in providing jobs to unemployed. Subsidy schemes like NREGA can be gainfully replaced by tax incentives to private sector participating in labour intensive manufacturing or infrastructure development.

Income tax deduction of some absolute amount should be given per person employed through out the year in the business of tax payer. Graded deduction slabs can be provided according to education standards of person employed in the business. Since this deduction will be allowed on number of persons employed in the organisation it will have quid pro quo with the employment opportunities generated by that business. This will also avoid need for huge capital for creating employment because of absence of any connection in this incentive formula towards capital invested or wage cost incurred for providing such employment.

Such a deduction in conjunction with labour reforms will also curb the practice of contract labour prevalent in the industry which will go a long way in creation of competitive and secure organisedlabour in the country.

SSI and other labour intensive industries such as Textile etc. will greatly benefit from such an incentive.

Providing employment is no business for government and whenever it is attempted by the Government it more or less results in charity rather than creating any public good. Employment generation should be best left to private entrepreneurship who operate in market environment that rewards efficiency and competency and, therefore, normally makes positive contribution to economic growth.

It is high time that we recognise and reward gainful employment (as evidenced by business profits earned by entrepreneurs) provided by the employers to members of society so that Government will be finally relieved of unnecessary burdens of pseudo socialism.