How a falling Sensex trumped farmer suicides

A few years in the capital have taught one to be prepared for high drama whenever Parliament resumes after a break. However, no preparation would have made one ready for the week that went by, one of the craziest in news flow.

It started with the Rahul Gandhi shows, first at Ramlila Maidan and then in Parliament. The Sensex did its own show, falling from 29,000 levels the previous week to below 28,000. Then came a public suicide and the devastation in Nepal.

Amid all this, what caught this column’s attention was the strange dichotomy in the government’s reaction to the farmer protests and the campaign by foreign investors on the levy of Minimum Alternate Tax (MAT). Despite all the pressure, the government has not once suggested it is reconsidering the land bill; on MAT, though, it has been singing.

While the death of the Rajasthani farmer in Delhi has become a matter of police investigation, there is none such into the fall of the Sensex, not extraordinary in any case. People have readily concluded the fall in the index was due to the sleepless nights foreign portfolio investors (FPIs) are getting over MAT. The latter issue has been simmering for at least seven months; the first Business Standard reports on the subject appeared as early as September 2014 (https://www.business-standard.com/article/markets/fresh-tax-fears-loom-for-foreign-investors-114091601057_1.html).

The investors made themselves heard well and loudly, leading to a budget clarification exempting prospective investments. Since last week’s Sensex scare and some well-timed lobbying, the government has gone into a clarificatory mode. First, it clarified that companies domiciled in treaty jurisdictions such as Mauritius and Singapore would be exempted. Then, it said the completed assessments were only around Rs 600 crore. This led to some pink paper bashing and WhatsApp forwards that wondered if the media misquoted the finance minister on the ‘Rs 40,000 crore’ figure. Did he mean six billion rupees, which was mischievously misinterpreted as six billion dollars, people theorised on social media.

Samir Arora, a Singapore-based fund manager, had to clarify on Twitter as follows: “Samir Arora @Iamsamirarora This is to clarify that I hv not written any message expressing my views on mkt/pink papers as is being circulated on WhatsApp under my name.”

All these smell of a well-orchestrated campaign by some behind-the-scenes actors. Each time someone touches Mauritius, such drama and U-turns are repeated.

Subsequent news reports suggest the government has fallen for the trap again, as it is mighty scared of the ‘tax terrorist’ label and is trying to assuage the sentiment. Not once was it suggested to investors how taxes are important to bring down the fiscal deficit. Not once were foreign investors told how the government needed this money to fund its infrastructure investments, in turn critical for economic growth and corporate well being. Are all such macro economic gyan reserved only for suiciding farmers?

One of the concerns expressed by FPIs goes, “We have redistributed the profits of past years; how will we pay tax?” Is that the taxman’s problem? Are such defences available to common tax payers?

Finance Minister Arun Jaitley had said before last week’s drama that India was not a tax haven and it had the right to pursue legitimate taxes. He has to stick to that if he doesn’t want Gandhi to run away with his suit-boot ka sarkar slogan.