NCPA - National Center for Policy Analysis

Supply- Siders In India

March 6, 2001

"Finance Minister Yashwant Sinha offered plans last week to liberate India's economy," says Investor's Business Daily. The plans for tax cuts, privatization and some limits on government spending may lay the groundwork for a supply-side revolution in India.

Since 1991, India has been removing the bureaucratic shackles of a socialist economy, and in the ensuing decade entrepreneurs have changed the economy and spirit of India, according to Gurcharan Das, author of "India Unbound."

  • Under Sinha's proposal, India would cap its high excise tax on large items such as cars at 32 percent, have the dividend tax paid by companies from 20 percent and trim income tax surcharges that are as high as 15 percent to as little as 2 percent.
  • Personal income tax rates would fall from 35.1 percent to 30.6 percent; corporate rates would fall from 39.66 percent to 35.1 percent.
  • More state-owned industries might be privatized, including telecoms, automakers and Air India, just as a majority stake in the state-owned aluminum company was sold last week.

Left-wing opposition politicians criticized the plan for offering scant tax relief for the poor. But in India, only 2 percent of the population pays income taxes, so it is impossible to cut taxes for most people.

Source: Editorial, "India's Supply-Side Revolution," Investor's Business Daily, March 6, 2001.

 

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