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.
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