By M D Nalapat
When Prime Minister Modi comes up with a transformational idea, care should be taken to ensure that the details get worked out by those who are not Lutyens Lok.
On a scale unprecedented since the days of Prime Minister Indira Gandhi, the NDA II government headed by Prime Minister Narendra Modi has effectively won control of both the Lok Sabha as well as the Rajya Sabha, and now its own candidates will soon be installed as President and Vice-President of India. Both the executive as well as the legislature have come under its sway, which means that from now onwards, there are scant obstacles to fulfilling the task that Candidate Modi promised to achieve, which is to ensure “Achhe Din” throughout India through double digit growth. India needs to grow on an average of 12% for a generation if it is to ensure that its society gets largely free of the tensions that have been all too obvious between different segments. 6.7% is just not enough for social stability in a context of the substantial annual growth in numbers of the population and the coming of age of a young, aspirational cohort that will not be satisfied with the low level of income and flawed basket of rights of previous generations.
Every ministry and department tasked with matters dealing with the economy needs to make sustained growth the focus of their actions, and not other metrics that are of interest only to mutual fund managers from the US and Europe, who have since 1993 been making a lot of money out of India, for example, by frequently and silently promoting a bull run in select stocks through the narrow base of share indexes, thus ensuring that retail investors come in at elevated levels, and then selling out to them at a huge profit. Of course, each time this tactic leaves hundreds of thousands of small investors the poorer. And whether in the form of royalties or allocation of expenses towards boosted “Headquarter” costs, billions of US dollars get sent out of the country each year by entities that employ very few people and do very little for the overall progress of the economy. At the same time, the home governments from which such entities come insist on concessions concerning intellectual property rights, health and pharmaceuticals, WTO, climate related issues and much else.
Thus far, Lutyens Delhi has been expert in giving away major concessions and getting a pittance in return. Take for example the Missile Technology Control Regime, which India has signed. This ought to have been done only after we got the extra layer of security from interference provided by membership of the Nuclear Suppliers Group. Without NSG cover, India has joined the MTCR—and soon the Australia and Wassenaar groups—in a subsidiary position to NSG members. Successive Lutyens-led governments in India have given this country the worst of both worlds, by (correctly) not joining several groups and yet abiding by their restrictions when the very purpose of not joining was to act in a manner freed of such curbs. India would, by now, have built up an average $10 billion annual trade each in space, nuclear energy systems and in missile sales by 2017, had the Lutyens Zone abandoned its craven refusal to take advantage of the freedoms that its stances against discriminatory treaties gave this country. There is no gain to an individual who is free, yet persists in remaining in jail. Now that Prime Minister Narendra Modi is soon entering the fourth year of his term, it is likely that “Lutyens barriers” to action will swiftly get dismantled by him and India act in a manner such as that other Giant of Asia, China, does.
Prime Minister Narendra Damodardas Modi comes up with ideas that have the potential to change India, but thus far, many of these measures have been diluted by Lutyens Lok involvement in the process of finalisation. An example is demonetisation, where avoidable errors such as a mismatch between ATMs and currency sizes caused delays. Another drawback was the lack of attention paid by the RBI (which acts like a Lutyens fragment, although based in Mumbai) to ensuring that liquidity in the economy remain unaffected by the revolutionary decision on DeMo made by the Modi government. This columnist would have instead suggested a 5% deduction on total bank deposits over Rs 1 lakh, that would be used to fully recapitalise the banking system. These would be paid back through Income Tax (IT) payment deductions beginning from the third year and continuing for three more years. Recapitalised banks would result in more bank lending (which is far too low at present), thereby ensuring higher growth and therefore enough additional revenue to take care of the revenue loss through the IT deductions.
Another necessary policy that has been implemented by Modi is GST. But it ought to have been implemented within the first year of NDA II, in the glow of the May 2014 Lok Sabha victory. Given that the measure will take between two to three years to get digested by the economy, such a process of re-adjustment would have been completed by now, rather than remain incomplete even in 2019, the year when Lok Sabha elections next take place. As for the compliance issues created by the GST, these often result in a substantial number of units and individuals in effect being asked to go through college board examinations without having completed even elementary school tests. Rather than introduce a hyper complex system and afterwards seek to simplify it, it would have been best to initially put in place a system where compliance was not as big a practical difficulty as it is in the present GST framework. Instead of One Country One Rate, there are now multiple rates each for the Centre, state and inter-state. When Prime Minister Modi comes up with a transformational idea, care should be taken to ensure that the details get worked out by those who are not Lutyens Lok, so that the full effect of Modi’s planning can be felt on the economy rather than get diluted through Lutyens style dilution of a grand idea.