BJP leader and Rajya Sabha member Subramanian Swamy
BJP leader and Rajya Sabha member Subramanian Swamy
(Photo by Sonu Mehta/ Hindustan Times via Getty Images)

New Delhi: The government has messed up the macro-economic system over the last five years and currently to revive demand, it should have abolished the income tax rather than cutting corporate tax which will yield no result for economic revival, senior BJP leader and current Rajya Sabha member Subramanian Swamy said on Wednesday.

Swamy, a former Union Law and Commerce Minister, on Wednesday launched his latest book "RESET -- Regaining Indian's Economic Legacy" and talked about the evolution of India's economy while suggesting ways to revive it.

The book was released by former President Pranab Mukherjee.

Critical of the series of recent government measures to pull the economy out of the slowdown, Swamy also termed the previous five years of BJP rule as bad for the macro-economy.

"The government, in the last five years, has been doing things which are bad for macro-economics. The Prime Minister has done good works in micro-economics in Ujjawala, providing LPG connections to women in rural areas... But macro-economics is the whole system... and the whole system has been put into a mess which requires rectification and that can not be rectified by individual measures like reducing taxes for the corporate sector," Swamy told IANS in an exclusive interview.

"Abolishing income tax had been a very salutary (step), the middle class would have been very happy and they would have saved the money. The problem with corporate sector is that demand is low, so demand can only come when you empower the people, the people means income tax and that should have been abolished. Reducing corporate tax is of no use. Because they can only increase more supply but if there are no buyers, then there is no result in increasing supply," he said.

Earlier, while speaking about his book, Swamy said: "We need a new reset for our economy. We did not perform at macro growth level. The savings were inefficiently used. The country needs 10 per cent growth for 10 years if we have to eliminate unemployment."

Asked why after so many steps, the situation has not improved as demand has not picked up, he said: "Because Finance Ministers in our BJP government don't know any economics. That's the problem."

Responding to a query if at the moment, the government is indulging in fiscal profligacy to come out of the current slowdown, he said: "They don't even know what that means... the question in what they are doing is ad hoc. I have been writing since 2016 that this collapse will come. That time, people thought I was being critical, but now they know."

Swamy said the country is heading towards a lower growth than 5 per cent but it can be turned around.

"The issue is we have to grow at 10 per cent for 10 years, then only you can solve the problem."

Finance Minister Nirmala Sitharaman, in a big move on September 20, made several announcements for the corporate sector -- sharp cuts in corporation tax among a series of announcements that can cause total revenue forgo of Rs 1.45 trillion per year.

All domestic companies to be allowed to pay corporation tax at the rate of 22 per cent (effective rate 25.17 per cent including cess and surcharge) against the existing rate of 30 per cent. Any new domestic manufacturing company, incorporated on or after October 1, 2019, will be allowed to pay corporation tax at the rate of 15 per cent (effective rate 17.01 per cent). No MAT will be imposed on these companies either, and to provide relief to companies that continue to avail of exemptions and incentives, the rate of MAT has been reduced from 18.5 per cent to 15 per cent.

There is also relief to listed companies which have already made a public announcement of buyback before July 5, 2019 and no tax will be levied on buyback of shares in case of such companies.

Now enhanced surcharge introduced by the Finance Act 2019 shall not apply to capital gains arising on sale of equity share in a company/unit of equity-oriented fund or unit of business trust liable for securities transaction tax, she announced and enhanced surcharge shall also not apply to capital gains on sale of any securities, including derivatives, in the hands of Foreign Portfolio Investors (FPI).

Before this government announced sops for the export sector through export finance, for the real estate sectors, a bank consolidation drive by merging 10 PSU lenders to 4 PSU banks and withdrawing income tax surcharge on FPIs.

Sitharaman had announced withdrawal of enhanced surcharge on capital gains from equity for individuals, and HUFs. While presenting the Budget in July 2019, she had introduced a surcharge on individuals earning more than Rs 2 crore.

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