And, in response to the post below, I got an email from a friend asking what the "other 65%" of Indians did, whether they just fed off welfare. Is there even welfare?" My reply turned into a leangthly disquisition, which I paste below. (Anyway, it's the other 96.5% of non-tax paying Indians. Not 65%! By comparison, I think the US's tax-base is in the 40-45% range ... )
Well it's a tax base of three point five percent. (Actually, it's more like three, it turns out). So, not the other 65%, but the other 97%. What do they do? A huge number are farmers -- agricultural income, (farmers make up some 70% of the population, that's 700 million people, and agricultural income is a little less than 20% of GDP.) is never taxed. Quite a few of these (30-40 million?) are quite rich and wealthy, while the rest eke out a living off the land as best as they can.
The poverty rate is about 26%, so ~260 million people live under the national poverty line. However, the way this line is defined is a bit controversial. The official definition set up in the 1970s said that if you earned enough money a month to buy food to give you 2400 calories/day, then you were not poor. Think about that: the assumption is that such a person spent all his/her income on food alone. A more realistic definition would place a much larger number of Indians in the ranks of those considered "poor."
So, what do those other millions who don't pay tax do? Survive. A few, very few relatively speaking, might even thrive.
Welfare? There is no public welfare system in India. If you don't have enough money to survive, well, too bad. Beg, plead, give yourself over to bonded labor, or, like so many millions, move to a city and scratch out a living somewhere in the invisible margins.
Public health? Don't ask. Most hospitals expect cash payments up front. Insurance covers a minuscule proportion of the population. It's not as bad as in China, but in rural areas it's horrible. Even in Bombay, there are only 55000 hospital beds in a city with close to 20 million inhabitants.
Education? A joke. A joke. This despite the fact that until now you paid an additional 1% of the amount of your tax as a cess for education. It goes up to 2% this fiscal year. Teachers are pathetically trained, in many places there are no school buildings, or no teacherss or no students (in the poorer areas parents would rather their kids start work and bring in some cash than waste their time on an education that gets them nowhere). There really isn't anything such as universal primary education. Indians, at least educated, well-off Indians, love to make fun of the woes of America's educational system. We don't even come close. It's because the elite can so easily and completely seal themselves off psychologically from the vast majority of their countrymen, that Other India.
The problem isn't the high taxation per se (though that is problematic as well). It's the fact that so many more people who can afford to, do not pay any income tax. (They do, of course, still pay tax in the form of sales tax, or indirect taxes on the transport of goods and so on. Food -- as in produce, grains etc. -- is still sales tax exempt, thankfully) And, the larger problem is the phenomenal, staggering, absolutely mind-boggling amounts of government waste. I don't know the numbers, but between waste and graft, I'd suspect a large chunk of one's tax rupees ends up benifitting no one, except the state's functionaries.
If there is something remarkable in all this doom and gloom it's the Indian spirit of survival. People still manage to live and some prosper. As the economy grows -- and that's the only way out, I'm convinced. No amount of heavy-handed communist-style top-down redistribution will do anything -- as more people enter the middle class (whose size is the same as the population of the United States) -- hope emerges for more at the bottom. The challenge is to make sure they don't get left behind.