This is the month of the year when Indian middle class expects some crumbs from government. It expects those crumbs in annual budget presented by finance minister on the last day of the February. It has no expectations from the government during rest of the year. Even in budget this expectation is in the form of some tinkering in income tax rates. It is such a naïve thinking that one can laugh at the foolishness of the Indian middle class.

Whether it is controlled economy of pre 1991 era or liberalized economy of post 1991 era, middle class has been a loser in India as the politics never changes. After the liberalization of the economy, economics of the country is not solely dependent on budget. In fact except the rate of taxation, everything can be changed any time by the government or regulatory authorities. Then why middle class put so much importance on budget? As far as rate of income tax is concerned it is much below the 97.5% rate of socialistic era and hence much change in this rate should not be expected in it. Does this fact make annual budget useless to middle class? Answer is emphatic NO. In fact this is the time when focus should be shifted from income tax rate to policy matters as in that area only it is getting robbed.

Since independence the politics of the government makes middle class the loser. Upper class has its own lobbying power. Hence all the economic policies and taxation policies are tempered in its favor. This lobbying happens so silently and smoothly that no one gets any idea of it. Effect of this smooth job is felt when public pays through its nose. Lower class is the largest vote bank for every party. It, therefore, is given impression as it is being pampered. Although most of the money earmarked for it, goes to the pocket of politicians and bureaucrats. This class is not affected much by economic policies as its aspirations are low. It leaves only middle class. This is mostly salaried class hence it is forced to be honest as far as paying taxes are concerned. Naturally it has to suffer the most too.

Middle class now suffers more due to other policies of the government than rate of income tax. An honest person who earns his money by hard labor pays tax at the rate of 30%. On the other hand a person sitting on the computer and doing day trading of shares has to pay only short term capital gain tax at the rate of 10% only. If a person, who saves money to build the house, wants to sell his house for some reason, he has to wait for 3 years to avail the benefit of long term capital gain tax. On the other hand if a person is holding shares, he has to wait only one year to take advantage of long term capital gain and there is no long term capital gain tax on investment in equity. Such policies of the government encourage gambling and discourage hard labor. Middle class is impacted as far as investment of his savings is concerned. We all know that to get better return on investment, one has to invest in equities now. The working of Indian stock market, however, is so opaque that it leaves ordinary investor at the mercy of investment sharks. It seems that no law and logic is applied on stock markets. In this scenario an ordinary middle class investor is in danger of losing his savings. But the policy makers are so much under the influence of big money bags that they are not bothered about the regulation and transparency of Indian bourses. Recently government made it mandatory to provide PAN for investment in mutual funds. This single step forbids a large section of public, which doesn't file in come tax return, from investing in equity market. This step makes sure that people with low income are not welcome to invest in stock market.

As said earlier, rate of income tax is moderate now. But the taxation on goods of consumption is still very high when we compare with other developing economies of the world. This means that Indians are subjected to double taxation effectively - income tax and consumption tax. For example a TV is subjected to excise duty of 7% in Thailand, but it is 35% in India. This is making life of Indian middle class still difficult. Apart from rate of taxation on different goods, manufacturers and producers are indulging in cartelization. By making cartels they are free to rig the prices of their products. Politicians and bureaucrats are promoting it for obvious reasons. Continuous hike in the prices of steel and cement is the clear example of this cartelization and its effect on public. Same phenomenon is observed in the pricing of drugs. Government can change its policies at any time under pressure of any

lobby or company. It can increase petrol and diesel prices any time by citing the rising crude price. It, however, doesn't feel prudent to lower its own taxes on crude to keep petroleum prices in check.

Common man doesn't know about these games and hence continue to suffer silently. The need of the hour, therefore, is the spread of knowledge. In market economy, knowledge is the necessary weapon for common man. Days of uninformed financial decisions are over. Middle class has to drop this income tax centric attitude. Now if middle class wants to save itself from the onslaught of the government policies, which are always influenced by different lobbies, then it has to remain informed and united. Same time if middle class wants to have good returns to beat inflation on its investment then also it has to remain informed and financially educated. So ever increasing Indian middle class become finance savvy and get united to avoid exploitation by the system.

m_vivek32@yahoo.com (Akriti)