States need to distinguish between rich and poor farmers: CEA Arvind Subramanian

NEW DELHI: Chief economic adviser Arvind Subramanian on Friday further stoked the controversy over imposing tax on farm income and said that 29 states have option to levy tax on agriculture income and a clear distinction has to be made between rich and poor farmer.

"Nothing prevents state governments from taxing agriculture income. The constitutional restriction is on central government taxing agriculture income. There too, one could make a case that this is a choice open to 29 state governments and if there are willing takers,” he said adding there is a need to make a clear distinction between poor and rich farmer.

"Why is it that it is very difficult to make a distinction between a poor farmer and a rich farmer-....When you say farmer, people think that you are going after the poor farmer. So what is it about political discourse that does not allow these distinctions to be made. Why can't we say, rich regardless of where they get their income, should be taxed,” said Subramanian.


Earlier this week, finance minister Arun Jaitley Finance Minister Arun Jaitley had said that the government has no plans to impose any tax on agricultural income. Niti Aayog also issued a clarification and said that newspaper reports on the Aayog proposing a tax on agriculture income is neither the view of the Aayog nor is such a recommendation made. This had come after Niti Aayog member Bibek Debroy had said that agricultural income should be taxed.

On the global front, the CEA noted that while hyper globalisation is dead, globalisation is alive.

“We may not get rapid increase in the trade in the world but we are not going to get rapid declines either. So it's not a bleak scenario,” he said adding India has interest in keeping world markets open. “Therefore we need to take leadership and that leadership means we should also be willing to open our markets in return for others opening their markets. That's why features like European Union, Free Trade Agreements are worth thinking about,” he added. The CEA cautioned that in order to be more open, one supporting policy with experience shows is that you have to have a supportive currency.