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Taxation in India

Read Shri Manivannan's post on the other thread to do with H2O. In Pune too, one consultant on such matters had said, there is enough water to go 24/7. The problem is convincing our people who would rather store it in buckets and syntex tanks and then waste it instead of a central resovoir.In the same thread, a question had been posed - how much value are we ready to place on 24/7 supply? Rs 5 per house per month? More or less?

This applies to the healthcare thread as well. The reason why we are in shambles with regards simple provisions of life is our low tax revenues. From my last reading just about 5% Indian pay tax. Contrast that with Brazil, another developing nation, where the figure was 27%. Add to this the never ending tax sops to IT and then the future SEZs........where is the money to build the social infrastructure for a country of 1 billion and more (1.5 by 2025).

Rightly or wrongly people working in agriculture do not contribute to tax collections. 3/4 Indian's still work in this sector.

What is the remedy? This is where the social / health insurance schemes come in to frame. In UK, firstly no one can get a job without a National Insurance number. Secondly, anyone who earns just £110 per week or £5280 a year (average salaries in UK are probably 20K a year). So someone on minimum wage given the tax slabs, earning 5280k / year will actually not pay tax at all. BUT, this person still has to contribute 11% of the salary and the empolyer has to put same amount in to the social security pot (National Insurance, Health Insurance). In fact, if I hire a nanny to look after my kid so i can get to work and pay her £6 per is for me as an employer to ensure that I contribute 11% towards the national insurance. 

It thus means that all of a sudden, though the tax paying base is small, when it comes to revenue collection, the base is flung wide open - generating vast sums of money othewise not possible. But the money now available can be exclusively pooled for providing rationalised public services that directly connect with human development indices. 

Yes, the maid who may wash your clothes, broom your living room, cook the sabzi and does so in many other houses, may or may not go past our taxation thresholds but there is / should be no reason why  she should not pay a small amount for her welfare and then us as employers to match it.

This and plugging the gap on black economy and wasteful tax sops (Tata Nano would still have happened without tax sops as long as there is no red tape and there is a market, it only may mean it would have been a 2 lakh rupee car) will generate vast amounts of money to revive India.

Of course structure of accountability are important, as are competent people - but with decent salaries, we would leapfrog in to getting there. This is vital as services need rationalising (just as bus routes) - its not about 100 CT scanners in pocket of country when 10 CT scanners for that region will suffice, we just do not need that, rather the other 90 can be depolyed in rural India.

One only needs looking at NHRM outlay, compare it with Metro rail projects outlay and the difference is stark - imagine you are in remote Karnataka with no water, a PHC with no electricity or doctor, a broken school without enough money for the mid-day meal, imagine bowed legs due to lack of vitamin D, a bulging tummy due to malnutrition, scabatic skin ...............imagine 900 million people living in squalor and abject poverty .................imagine..................what should be our priority?


kbsyed61's picture

This is from a funding the program!


Thanks for writing such a lucid piece on funding or financing side of national health program. This is one piece of the bigger puzzle. The important piece is the placement of the right system and infrastructure. As you had mentioned in another post, What is missing in all of the govt's flagship programs (Old & New) is the administration that delivers.

We have the infrastructure but is not in sync with needs and times. Could you pls share your thoughts on how to structure the system itself in terms of supply side matching with the demand or ability to match to the numbers. The point I am eluding to is number of primary health care clinics  that are needed to feed into a district health centers or a hospitals. The number of big hospital or clusters that could serve these smaller hospitals with all the specialties.

I am confident if there are incentives and promises kept, people will definitely participate in such programs.

With the new Union Health Minister in place, he seems to be promising to listen to the sane advices, not like the earlier one who seems to have spent all his 5 years in removing the AIIMS chief.

asj's picture

Supply V Demand


Thanks for raising this. The biggest lesson on the matter of demand and capacity has come from my work in UK. The basic principles are common to all. When CIRT says the norm for managing a good bus based PT is 40 buses per 1 lakh population, it would probably be stupid to invest is 100 per lakh - it would be an economic suicide. Would Reliance Fresh set up two of their shops next to each other?

Coming to health - demand and capacity norms exsist. In one word the answer lies in sound understanding of 'epidemiology' which gives us incidence and prevalence of all illnesses. From this it can be worked out fairly easily how many inpatient beds are needed, how many docs, nureses, etc.

WHO suggests that developing nations have about 4 beds per 100k (I will need to check exact figures). But we have only about 1.5 But here to there is a massive skew. South Mumbai has JJ, Nair, GT, Cama, Bombay Hospital, Breach Candy, Jaslok, Saifee, Parsi Gen, and dozen other hosiptals and at least 3 dozen additional CT/ MRI places - and I am not including the plethora of polyclinics and nursing homes which defy all health and safety norms and are allowed to mushroom in what were designed as residential flats. Here in this pocket of Mumbai, the number of beds even shames Western standards. But this lop sided investment which is largely driven by private enterprise and so called market forces (which is effectively, where in India will you find people with money to pay for medical services) starves the rest of India.

Its a bit like BMTC saying there are two main roads in Bangalore, here there is a demand, we will run our buses and make a profit and forget about rest of Bangalore (this is happening as we know from other threads). 

Nothing I say suggets we spread the love but make losses. Every NHS hospital has to balance their books and show they are not running in losses. But there is no pressure to make huge profits for the sake of filling CEO and share holders pockets as the principle is different. The whole of Hounslow Borough in London has one hospital. There just is no need for any further investment in more hospitals - planners won't allow it just because of whims and fancies of someone with money.

Coming to point on PHC - asI said before - what is the point of having a bus stop next to our home when there will be no bus for next 4 hours? World Bank reported in British Medical Journal that PHCs in India have been built but there is no water, no electricity, no medicines, no doctors...........what is the point.........its a waste of money.

Also as I pointed out in the other thread, the Govt is doing injustice by claiming to build such PHCs in the name of 'prevention' - PHCs do not have any role in prevention of illnesses. Beyond vaccination, medicine has very small role in area of prevention. Good nutrition decides whether one has enough immunity, water supply (24/7 is better than periodic, for decades its known that hollow pipes with no water breed germs), sanitation and sewage, education - the choice of lifestyle differs with education and not whether there is a PHC or not, knowledge decides how preganant women care for their unborn, knowledge and education helps people use birth control which is available in every nook and corner without need of a doctor.

Instead of a PHC, this ghost service, I would rather have 3-5 GPs per village and pay them a handsome salary per month to do the job, they can then be linked up with regional DGH, which in turn can link up with regional multi-speciality hospital.

The way it works in UK and many other developed nations - for a given population, there are X number of GPs...........then one District Gen Hosp with say 300 beds...........then they link up with specialist centres. So as I said above, Hounslow has one hospital, The adjacent borough's of Hilingdon, Ealing, Brent & Harrow each have one DGH ................all of them together link up with one central specialist hospital with where exclusive work is done - liver transplant for e.g

Other than emergency care which can be availed of in any casualty across the country, I have to use the designated services for the area I live in. Its simple.

And yes, people in this forum will be quick to point out media reports of waiting lists in NHS..............this is a function of unrealistic expectations of public and also sub-optimal resource has nothing to do with the model of delivery. Indian doctors, nurses etc work hard..........I used to see 40 patients in 4 hours in Nair UK, we manage 4 in that much time due to paper work. But accountability can't be achieved without keeping meticulous India we need to get the balance right and not go to the extreme of paperwork consuming more time than clinical work. Hence I do not worry about waitlist issues of NHS. Further, waitlists apply to planned care, emergency care is available 24/7, a 999 call ensures you get  a state of art ambulance inside 10 minutes with trained paramedics - in contrast what happens in India is a joke.........either you get a poxy Maruti van which is rusted or you run around making calls to different hospitals (there are some now that for a premium will send out even a doctor in the ambulance), find the right price for your pocket..........valuable time lost if you were suffering from angina.........just ridiculous.

But then we need money for a good service. This thread is more about how Govt continues to bleed of its revenues for all the wrong reasons. Its about what the Govt can do to generate revenues............why should farmers not contribute to social security / National insurance - I believe they should irrespective of whether we believe they should or should not pay taxes as they work with perishable goods.

And the above model should apply to every one, even those in temporary India, including public service, the usual loophole is to employ temps as then no one has liability for their benefits, there is no need for contributing in pension pots and so on. I don't think this is on.........its time to give up on such useless models.

The question is are we ready to shell out the money? How many on this forum are ready to pay double their current property tax? Almost everyone who blogs here are employers in their own right - we have the maids, the drivers, the cleaners.....we employ them...........are we ready as employers to contribute in to the insuarnce schemes? Let us stop expecting good things will happen for cheap. Good governance needs money, how many here would have taken jobs as civic engineers, managers and the rest and not sought out other pastures if the job offered the right salary - our public services are uselss not just because they are corrupt, they are bankrupt and they do not have the money to hire competent people (there are many competent people who have benefittef from positive discrimination in India, but even they fly the nest in no time).

We are thus left with incompetents running the show. I would think most IAS officers are competent, but a good leader is oft as good as his team, its silly to expect IAS officers to come up with miracles when they are surrounded by staff who have no clue and politicians who are dictated by want rather than need (ie Greed). In Pune the PMPML has to shell out 20 lakhs to get private consultants prepare a tender for acquiring buses on PPP - why are we paying these people salaries?

And we can't have the nonsense of - first accountability then more taxes or insurance....both have to happen simultaneously, if at all, we need to generate the money / revenue and then create public pressure to ensure it is used wisely.


Nitinjhanwar's picture

What is panchyat enforcement doing in India?

Supply and demand is always co-related with

population density and literacy.

That is what the village panchyats are

supposed to be strenghened.

Scenario one : A villager comes to mumbai for

speciality centre. He will have to be taught what is a bus ruote,

local rail route and how to not be cheated.

The other option is that make the facilities available near him.

Ratio of bed per population is not valid in India

caus the attendent space is not factored in here.

Nitin Jhanwar



kbsyed61's picture

Data and modeling a system!


Thanks for writing such a detailed reply. With given details I am tempted to model a proto type health care system. But my intuition tells me that there must have been already existing models from medical and business fraternity that was not given due consideration.

ASJ, do you know any such study or project plan which could be worth looking at?

asj's picture

Yes, there are many models

There could be as many models as many countries, but successful systems have one thing in common - they are almost always public funded. Cuba spends 5th of US but has better health indices. Sri lanka and Bangladesh are better off than India on mortality indices.

I have over 4 dozen references, hence I said there ought to be a white paper like document. I have limited time and tend to chip away (I am compiling a paper).

Bottom line though is finding the money, nothing will happen without it and we have to go past vote bank politics to consider the steps above (every successful democarcy has something similar to social security payments/health insurance payments separate to general taxation - we don't).

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