Thread by @shyamsek

This year's central road and infrastructure cess is expected to top Rs. 4.5l crore.

The Agri infra development cess will collect 50k crore.

We are taxing the present very heavily to invest for the future.

1/n

From 2018-19 to now, this allocation to Central road and infra fund has more than quadrupled. It was 90k cr in 2018-19.

#Cess has been the major National capex funder for our country.
2/n

The fuel cess was raised significantly in 2020 by reducing excise duty. This was one of our economic responses to the Covid crisis. Money was moved from divisible central pool to the infra fund.

This was aimed at force-spending on infra. Rapid Asset creation was the goal.
3/n

The populist approach would have been far easier. Centre could have kept taxes lower & not invested in infra. This would have put states squarely in the dock. VAT Revenues would have been 25% lower. Cess cushions the state revenues while lowering central excise collections. 4/n

The 100000 lakh crore target for infra spending is still a very distant dream if it has to be funded this way. Government was the last man standing in infra. Private players simply didn't have risk appetite or balance sheets in 2020. Remember, Reliance deleveraged hurriedly. 5/n

The big step (or was it misstep? ) to encourage investment was reduction in corporate taxes. It was supposed to spur big pvt investments. The evidence is still coming. Politically, it gave ammunition to critics. "you gave away money instead of investing it" is now a warcry. 6/n

Taxing capital gains on equities, imposing a Superrich tax surcharge & lowering corporate taxes sent out mixed signals. Govt taxed the rich more and put more money in the hands of corporates. It was a gamble.

Only, time will tell if it can pay off. 2021-22 is our big test.7/n

If direct tax collections and GST significantly beat budgetary forecasts (which seems highly probable) government has a choice to make. Lower cess and rely on its own resources for meeting its infra spend. Or, use additional resources as a cushion for "other contingencies". 8/n