Ahead of the Union Budget next month, Nobel laureate Abhijit Banerjee said the government should not cut corporate taxes. The corporate tax rate was reduced to 22 percent from 30 percent in September last year.
“There is no need for a further cut in corporate taxes. The corporate sector is sitting on cash and not investing due to a demand problem. The government needs to get the demand side going,” said Banerjee.
The economist suggested the government should consider direct cash incentives to boost demand. He said there is no evidence of an impact on labour supply when cash incentives are provided, adding that the government should use the existing financial infrastructure of bank accounts (referring to the Jan Dhan Yojana) to make cash transfers possible.
Banerjee added that there is a need to bridge the gap between bankers and small businesses. Speaking on micro credit, he said that it benefits only 5 percent of the beneficiaries who have been entrepreneurs even before micro credit was provided to them. He added that it does not enhance the standard of living.
On the issue of farm loan waivers, he said they are indicative of an underdeveloped machinery to help people in distress. It is an inefficient and unfair means of compensation as only those who have availed loans benefit.
Speaking on the Citizenship Amendment Bill, he said that giving enormous power will become a challenge in governance. “We should worry about creating structures of state making people feel vulnerable,” he said.