If it comes to power, BJP to cut interest rates, abolish income tax

If the BJP comes to power, its economic policy plans could include immediate cuts in interest rates, elimination of select subsidies and exemption from income tax for individuals other than billionaires.

Former Union Minister and BJP leader Subramanian Swamy told The Hindu that he believes Reserve Bank of India chief Raghuram Rajan will have to go for having failed to manage inflation and interest rates: “If Rajan gets one more term you can safely say bye to all investment and therefore high growth in this country … he’s from [University of] Chicago so he is not fit for this country … there they believe that more free market the better but in India market failures take place and you’ve got to correct for that.”

“We need to immediately drop interest rates … doesn’t mean that we do it in one go … there can be a road map but businesses must know that cost of capital will come down.”

Deposit rates, on the other hand, need to rise, according to Dr. Swamy. “Bank account holders must get assured 12 per cent interest on deposits of three-year duration.”

A proposal to abolish income tax over five years has found many takers in the BJP, said Dr. Swamy, adding it could not be discussed during an election campaign to avoid being seen as pro-rich. “Only the richest 40,000-50,000 … the billionaires … must pay income tax but they must be allowed to deduct savings parked in certain productive instruments from their taxable income,” he said.

On new jobs, Dr. Swamy said, “Agriculture will be the most important industry for a government led by the BJP’s prime ministerial candidate, Narendra Modi.”

“Modi will focus on building agriculture as an industry and will free up exports of dairy products and food grains etc with full backend support for cold storage as there is no other real way creating jobs in rural India.”

The Gujarat model has proved that subsidies can be eliminated, especially in the power sector, Dr. Swamy said. “I am not in favour of subsidies at all; The PDS [public distribution system] should move to coupons encashable by shopkeepers only through a bank account to eliminate leakages,” he said.

Asked why the BJP manifesto does not specifically address the issue of subsidies, Dr Swamy said, “Revolutionary ideas have to be introduced in small doses and cannot be outlined in the manifesto.” The 2014-15 Interim Budget presented by the UPA government in Parliament in February provided Rs. 2,55,708 crore for subsidies or more than a quarter of the proposed total net tax revenue for the Centre.

Dr. Swamy said the loss of revenue on account of the income tax proposal could be made good by the proceeds from auction of natural resources such as spectrum and coal. “All natural resources will be auctioned to mop up the rental income in the economy,” he said.