FM may play populist tune

NEW DELHI: In what appears to be a tussle between Kelkar''s economics and the BJP''s politics, the scale seems to be tilting in favour of the latter.
The party has managed to extract an assurance from finance minister Jaswant Singh that recommendations of the Rajnath Singh review committee — set up by the ruling party to align the Kelkar recommendations with political exigencies — would be taken into consideration while finalising budgetary proposals.
Anxious to keep its middle class support base intact, especially in a year when several states go to polls, the BJP wants the ministry to ensure that Mr Kelkar''s suggestions don''t turn out to be a recipe for political disaster.
Because while the middle class is numerically small from the electoral perspective, it often carries an influence which far outstrips its size.
Therefore, the Rajnath Singh committee has recommended a large number of measures to keep the constituency in good humour. It has made a strong pitch for maintaining status-quo on standard deduction and tax rebates under sections 88, 80L and 10 for savings.
The committee has also recommended that change under section 88 should be made only after a comprehensive pension scheme is introduced.
Besides these, the party committee has recommended that the special tax rebate given to women under section 88C should be continued as it fits well with the BJP''s focus on women.
The benefit enjoyed by senior citizens under section 80DDB for medical expenses are also likely to continue as per the recommendation of the BJP committee.
The committee''s demanding that housing loan exemptions be retained. As acceptance of this Kelkar recommendation is virtually ruled out, housing finance companies will heave a sigh of relief.
If this recommendation would have been accepted, it would have resulted in a major blow to the housing finance sector.
The BJP committee has also opposed the proposal for uniform rates of depreciation under Income Tax and the Companies Acts. This, the committee feels, would be detrimental to the growth of domestic industry.
And, indeed, the corporate sector''s bottomline would have been affected by the proposal.
The country''s large rural population''s sensitivities have also been kept in mind by the Rajnath Singh committee. It has strongly opposed the Kelkar proposal to tax agricultural income.
Aware that any such proposal has the potential to trigger off strong resentment among farmers, especially the ones rich enough to pay the tax and, therefore, influential in the rural communities, the party wants the proposal spiked.
It also fears that if farmers are taxed, the BJP would invite charges of being a pro-urban and an anti-farmer party.
While the committee has suggested that arbitrary powers in the hands of the tax authority must be taken away, it believes that pro-active measures by the tax department would be enough to control incidences of tax evasion by non-farmers.
The BJP committee has also taken into consideration the sensitivities of the strong ''Swadeshi'' lobby.
"There is a need to give close attention to the classification of raw materials and finished goods and application of slab rates to ensure that the domestic industry is protected to the extent feasible," the Singh committee report states.