Monday 29 June 2015

We need Modivians, not Nehruvians (Sunday Guardian)

M.D Nalapat is the Editorial Director of The Sunday Guardian.

PM Modi needs to examine the record of his ‘Lutyens Delhi’ year and wrest control of policy from the Nehruvians to empower the Modivians.
he world of politics is composed of three groups, (i) idealists (ii) those who mimic idealism to mask the pursuit of self-interest and (iii) realists, who frame policies which reflect the factual situation prevailing at the time, rather than go by textbook representations of reality picked up in Chicago University or at Harvard. The Supreme Court of India has yet to rule that India's first PM should join Mahatma Gandhi in the list of those the court has in its wisdom decreed should be exempt from any comment couched in less than adulatory terms. Hence, it can be legally said, even in India, that Nehru was conspicuously unsuccessful in transforming the country into a nation of saints modelled on the Mahatma. Even Nehru found such a metamorphosis difficult to achieve, which is probably why he chose to reside in the most opulent government-owned residence in Delhi (save the Viceregal Palace) once sworn in as Prime Minister, evicting the Commander-in-Chief of the Indian armed forces from his York Road eyrie in the process. Since then, however, every PM save perhaps Chandra Shekhar and Narasimha Rao have framed policy on the assumption that officialdom — if not the entire population of the country — could comfortably fit into the procrustean bed of virtue regarded as natural for them by leaders swearing by Gandhi's vision of a perfect society, one marked by a voluntary vow of poverty and the rejection of such acts of barbarism as sex and the consumption of alcohol. Although surveys of such subjects seem a trifle scarce, anecdotal evidence indicates that neither of these evils has been banished from the land, even in Gujarat, where successive governments have sought to make saints of the local population by the Iran or Saudi Arabia method of using law to ban human behaviour seen as unsaintly.
While successive Chief Ministers in Gujarat may have uncritically followed the Morarji Desai model of seeking to cut and chop human behaviour to fit the procrustean bed of their liking, in most other cases of an excess of idealism, the actual motivation is greed. Policies dressed up in idealistic verbiage usually have the effect of sharply increasing the volume of graft in the country, as the numerous laws against the generation of black money show, including the latest effort. Apart from North Block, no individual (who is sane and with an IQ beyond that of a moron) can believe that another sane and non-moron individual would voluntarily declare moneys stashed abroad if he or she faces the certainty of losing 60% of it through taxes and penalties and the risk (if an Income-Tax officer decides) of paying out much more than the whole of the hoard, should the 90% super penalty be levied. The only way a reasonable sum of moneys (which in the estimate of this columnist is a minimum of $150 billion) could have been secured would have been through a scheme which levied a moderate penalty of 20% on the amount repatriated, with prosecution only in cases of irrefutable evidence before an independent tribunal of the moneys having originated from terror or narcotics. Even this low rate of penalty would have allowed the exchequer to gain $30 billion, or a sum sufficient to launch a countrywide programme of bringing infrastructure to 21st century standards from its present status of being anchored in quality in the 19th century. However, this would have been anathema to the "idealists" in North Block, whose desire to punish and control trumps by a substantial margin what little instinct they have to fashion policies, which actually deliver results rather than languish as avenues for the enrichment of politicians and officials.
In a country where fewer than 5% of the population pay any discernible level of direct tax, and more than 90% are outside the tax net, what is the logic in making criminal the purchase of (heavily taxed) goods and services? Given the hell that tax administration is for the taxpayer, with the P. Chidambaram doctrine of zero taxpayer rights still in force, to expect that about 25% of the population will move into the direct tax net is to be "idealistic" i.e. hypocritical.
Only low rates and humane enforcement will result in higher and higher drafts of people getting into the direct tax system, as took place in periods where sane policies were followed, as by Chidambaram in the Deve Gowda ministry or Jaswant Singh in A.B. Vajpayee's. And what are we to make of RBI Governor Raghuram Rajan, who wants to force hundreds of millions to become customers of US-based credit card companies the same way as his guru Milton Friedman sought to impose an "idealistic" (i.e. ruinous) economic policy on much of South America, thereby preventing that continent from competing with North America and the US for at least a generation? Rajan talks of non-performing assets without mentioning that his interest rate policies are responsible for much of the slowdown in industry witnessed during the past few years. Now North Block wants to spend billions of dollars in "recapitalising" state-owned banks rather than selling equity in them to investors who ought to be given a major say in management, if not outright control.
PM Modi needs to examine the record of his 'Lutyens Delhi' year and transition to a period of low taxes, low regulation, low interest rates and a high degree of freedom for educational institutions as well as the people at large. Another year of Lutyens Delhi-style policies and whichever party claws to power in 2019, it will not be the BJP. Modi is a realist, not a mock-idealist in the V.P. Singh mode, and he needs to wrest control of policy from the Nehruvians to empower the Modivians.

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