India - Politics, government, and taxation

India is considered by many to be the largest democracy in the world. Inspired by Mahatma Gandhi and his Satyagraha (a unique non-violent campaign), India declared independence from British rule on 15 August 1947. Free India's first prime minister, Pandit Jawaharlal Nehru who founded the Indian National Congress, described the moment as a "tryst with destiny." Since independence, India has developed as a multiparty democracy. The Indian National Congress that led India to independence in 1947 was the largest party, governing in coalition with minor centrist parties. It was later known as the Congress Party and ruled the nation until the 1990s—to some extent through the use of corruption and intimidation. Over the years, a number of parties were formed, and the major opposition to the Congress Party comes from the BJP, which among its followers has some strong Hindu nationalists, who believe that India should not be a multi-ethnic state.

India has a federal system with 25 states and various territories. The constitution separates the powers of the government into 3 branches: legislative, executive, and judicial. The relationship between the legislative and executive branches follows the parliamentary model of Great Britain. The initiative and responsibility for executive leadership rests with the office of the prime minister, not with the president. Neither of these offices is gained by direct popular vote, however. The president is the head of state for a 5-year term and is elected by an electoral college composed of members of parliament and state legislatures. The president's role is so limited by the constitution that he or she has rare opportunities to determine national policy. The president can, however, upon the advice of the prime minister, declare a state of emergency and suspend both national and state governments, an executive tool that has been used far more frequently than the framers of India's constitution envisioned. In general, the president serves as more of a symbolic head of state. The prime minister has the primary responsibility to lead the country and is officially invited by the president to form a government and lead it. In order to remain in power, the prime minister must enjoy the support of a majority of the 545-member Lok Sabha (People's House). The president normally looks first to the leadership of the majority party to nominate its candidate for prime minister. Legislative power is vested in the bicameral (2-chamber) parliament, which consists of a 245-member of Rajya Sabha (Council of States) and the Lok Sabha. The majority of the members of the Rajya Sabha are chosen by the state legislatures; the president selects the remainder. The members of the Lok Sabha are directly elected and serve for 5 years. According to the constitution, a new election must be held at least every 5 years. If none is called before that time, parliament is automatically dissolved. India has an independent judiciary, which is headed by a Supreme Court, the highest court in the land. The president appoints its chief justice and justices. The Supreme Court acts as the court of final appeal.

The Union (federal) government of India is responsible for developing and implementing various domestic and foreign policies and sets its economic policies in consultation with representatives of the states and various other representative bodies of businesses, farmers, and labor.

The government generates most of its revenues from taxes. For the fiscal year ending 31 March 2000, the total revenue generated through taxes for the central government came to about Rs3.28 trillion (US$73 billion). The main sources of Union tax revenues are customs duties , excise taxes , corporate taxes, and income taxes . Non-tax revenues largely comprise interest receipts, including interest paid by the railways and telecommunications, dividends and profits. The main sources of revenue for state governments are also taxes and duties, in addition to grants received from the central government. Property taxes are the mainstay of local finance. In recent years, tax rates imposed by the government have been cut. The current peak income tax rate of 30 percent and corporate tax rate of 35 percent, for example, are low compared to most industrial countries. Furthermore, the peak customs duty rate has been cut to 35 percent with a promise to move towards the East Asian average rate of 20 percent.