India needs a pragmatic policy matrix, not measures driven by the TRP cycle.
Those who argue in favour of hyper-expensive welfare schemes designed to provide some income to the underprivileged are correct in pointing out that the super rich take away a much bigger share of national resources. Among HNIs, the offenders are those who make billions by getting public sector banks to loan them huge amounts of money, and thereafter use the services of financial consultants to siphon the cash away towards locales where money hoards can easily disappear. Instances are many in which such a game plan has been resorted to multiple times, each time passing off a Ponzi scheme as genuine business, which ends deliberately in the collapse of the sacrificial goat of a company and the accumulation of more “non-performing assets” (NPAs) in the balance sheets of banks. Often, such depredators relocate to countries where they are safe from authorities in India. Should the DRI or the ED quiz the financial advisors of such runaways, they would soon be able to learn how and where taxpayer money has disappeared to. However, these “legitimate” experts in money laundering usually have as their closest friends those high up in the political and bureaucratic system, a factor which has protected these “financial advisors” from the investigating agencies. These have become expert in catching a few smaller fish every now and again to keep television anchors busy, while the sharks remain unmolested.
However, the fact is that those who take bank loans with the intention of not repaying them but siphoning off much of the amount are an easily identifiable handful. The majority of entrepreneurs are honest, although many are facing ruin because of the sluggish business environment caused by high taxes and interest rates and an exceptionally high degree of discretion in the hands of officials, not all of whom are honest. As a consequence, such innocent businesspersons too run up NPAs. Unlike what is the practice in India of erasing the distinction between crookedness and bad luck, the “Ponzi minority” alone ought to be punished. If India has not so far been able to replicate the double digit growth rates that post-Deng China has enjoyed for a generation, the reason is that the bureaucracy has acted as though the minority of crooks is representative of the majority of businesspersons. Just as “hard” drugs (such as heroin and cocaine) need to be given police attention, rather than “soft” (i.e., marijuana), the ED, DRI and other agencies need to focus on the few Ponzi scamsters to ensure that the moneys get returned, in some cases in exchange for freedom from prison. At the cost of being politically incorrect, let it be repeated that a businessman in jail does little substantive good to the hundreds of millions of the poor than an individual who pays back to the exchequer the bulk of what he in effect stole from the banking system. Attention needs to be on those who, (a) have clearly acted in a Ponzi mode, and who have (b) major bank loans outstanding that co-exist with records of extensive overseas and domestic assets.
It was Industry Minister Narasimha Rao who kick-started reform in India in 1992, by freeing much of industry from the licence raj, and it is expected that much more reform along the same lines will be accomplished by Prime Minister Narendra Modi as he gets into his stride in Year 3 and Year 4 of his term. In contrast, Finance Minister Manmohan Singh was responsible (through a tax and duty structure that penalised domestic industry and gave an unbeatable advantage to imports) for the early smothering of the computer hardware industry in India. As a consequence, this country spends more on importing computer and related equipment than it does on buying oil and gas. However, because the government left them alone for a while, the IT software industry developed, as did telecom. From 16 million telephones a generation ago, this country now has nearly 900 million phone connections, landline and mobile, even in locations where there is no electricity or infrastructure. From a base of zero, there are now more than 300,000 telecom towers, although double that is needed for universal and high quality coverage.
Narendra Modi is right. Digital India is the only way India can ensure that its billion-plus people secure jobs and an income adequate to live a dignified life. But for this to succeed, there is need to avoid policy errors as levying tax on a buyer (Vodafone) or blocking major overseas investors (such as the Malaysian top executives of Aircel Maxis) from ever coming back to India. Those politicians and officials who connived at Aircel Maxis chicanery need to be sent jail, and the businesspersons concerned be made to pay up the money lost through official corruption. Such recompense, rather than be subjected to warrants that are unenforceable, are the way forward. Prime Minister Manmohan Singh’s equating of the bribe giver and the bribe taker was wrong. The former should be given a pass in exchange for making up the loss to the exchequer and providing evidence against the politicians and officials who took bribes and other favours from them. Within India, the people of Gujarat are known for their pragmatism. In the witch-hunting culture that the nation is witnessing since the 2010 Commonwealth Games scandal (where again none of the truly big depredators appear to have been netted), it is such pragmatism—which focuses on concrete results rather than televised symbolism—that India needs. Only such a pragmatic policy matrix rather than measures driven by the TRP cycle will ensure that India’s entrepreneurs generate the tens of millions of new jobs needed to protect India from a desi version of the Arab Spring rather than remain paralysed by fear of a midnight knock.