Date with Desai

To India's able Finance Minister Morarji Desai, austerity is a way of life. Not only is he a vegetarian and a teetotaler who fasts for a day and a half every week, but he is also a hardheaded fiscal conservative who derides pie-in-the-sky welfare schemes and is an ardent believer in pay-as-you-go financing. Last week Desai presented the Indian Parliament with an austerity budget that will put the entire nation on the Desai standard.

To finance India's herculean task of equipping its armed forces against the continuing threat of Chinese aggression, Desai boosted the budget by a staggering 33% to a record $3.8 billion; defense expenditures alone jumped 70%, to $1.8 billion. But Desai refused to squeeze the money out of the government's costly Five-Year Plan or even to rely on large-scale deficit financing. The cost will be borne by India's population--whose per capita income last year was $69.

Personal income taxes in the lower brackets will be increased as much as 450%. Import duties on most raw materials, machinery and manufactured goods will be boosted from 15% to 55%. All of India's taxpayers will have to deposit up to 3% of their after-tax incomes in government savings accounts; businesses whose after-tax incomes exceed 6% of their capital value must pay a 50% tax on all subsequent profits. All basic household goods, cloth, food and cooking fuels will be hit with new taxes. Only exceptions: sugar, shoes, rice and matches.

Adverse reaction to the budget was surprisingly mild. Some businessmen protested that Desai could have eased the tax burden by slashing unnecessary government expenditures; others pointed out that India might have been spared the crushing new taxes if the government had spent enough money in the past to have made a more creditable showing against the Chinese. Grumbled one: "This is a high price to pay for Ladakh--even assuming we do get it back." But most Indians closed ranks behind Desai. Said one government official: "The budget is the clearest answer yet given by an Asian democracy to Communist expansion."

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