Saturday 18 April 2020

Citizens Call For a Modi-fied Economic Response to Covid-19 (Sunday Guardian)

Sectors such as pharma and IT can be expanded, using the global opportunities opened up by the pandemic.

New Delhi: In 2013, a few voices had warned of the need for UPA-era thinking to be swiftly eliminated from the next government, which was predicted by a few from 2010 onwards and by most from 2013 onwards to be led by Narendra Modi. The 2013 argument about avoiding the “UPA policy and personnel trap” was that only a comprehensive “Modi-fication” of processes, personnel and policies could lift India from the consistent undershooting of potential since the 1950s. This was a period heralded by the era of Soviet-style institutions, mindsets and policies. Groups of officials, businesspersons and politicians including the “PC Network” (whose influence has continued well beyond 2014) used inside information, fake news and skewed policy to grab riches at the expense of the broader society. The “PC Network” comprises individuals in each of the Four Estates, and works to ensure that its members get inserted into key positions even while those few who are opposed to this band of profiteers remain excluded. Officials who are part of the PC network are serenaded by a fawning chorus of praise from PC-oriented elements of the Fourth Estate, with their misdeeds either covered up or camouflaged as furthering the public good rather than vested interests. Over the decades, through gaming of the investigative agency, import-export, stock exchange and other key components of governance and the economy, members of this network have accumulated wealth to a degree as would raise envy in New York. With the advent of Modi 2.0, some of the key figures of the PC Network have begun coming into the spotlight of investigative agencies that were earlier either complicit in or complacent about the manner in which this network used insider power and information to convert vast tranches of the economy into a rigged casino guaranteeing wealth for them at the expense of the common citizen. Economic and financial policy in particular has been a favourite hunting ground of the PC Network, the shadow of which has now started to be removed under the alert and vigorous eyes of Modi 2.0.

Together with the 40-day lockdown, across the country, individuals and institutions, both public and private, are calling for a dynamic “Modi-fied” economic policy. Sectors such as pharma and IT can be expanded, using the global opportunities opened up by the pandemic. Such measures would enable India to emerge the winner from a pandemic that strong steps by PM Modi in the health sphere have thus far blocked from becoming an Italy-style typhoon. A similar active role by the Prime Minister in the framing and implementation—at the soonest—of the economic aspects of dealing with the Covid-19 pandemic in India is needed. A few steps which would help ensure a double digit growth trajectory for India soon after the Covid-19 shadow passes are detailed:

(1) Automatic 100% FDI approvals across sectors, except for a few—repeat, few—specified exceptions where FDI proposals should be submitted in advance to the relevant authority. Unless a negative nod is given in 45 days, the proposals should be deemed as approved. In a few specific cases, the period for decision on approval may be explicitly extended within 15 days of submission of the proposal to 90 days, but not more. India is not a weak country any more to be unable to meet threats to its interests. Under Prime Minister Modi, the integrity of India is protected in such a manner that it is not possible for external actors to function inside the country in the manner they were used to in previous regimes. It may be remembered that Deng Xiaoping launched a similar reform, which enabled China to overtake India at speed since the 1980s. When Chief Minister Modi visited Beijing and Shanghai in 2011, this writer spoke of him becoming for India what Deng was for China, a transformational leader. Deng opened the doors of China to FDI, including from moneys accumulated abroad by overseas and other Chinese, and it was this bold policy that created the spark which ignited the massive growth engines of the Chinese economy. In the same way, 100% Foreign Direct Investment should be permitted to come to India by the automatic route. Any suspicious case involving significant threats to the security of India can be dealt with under an unobtrusive surveillance mechanism. Such a move on FDI would assist in sending the market value of assets in India higher at once, thereby preventing the distress selling of Indian assets that has been taking place since the period when Congress president Sonia Gandhi took full control of the government from a Prime Minister convalescing after massive heart surgery in 2009. The reputation of Manmohan Singh, among the finest human beings on the planet, would not be what it is today were he to have decided to decline a second term.

(2) A FEMA for income tax, i.e. reduction and simplification of income-tax. Lower rates generate more revenue. In 1997, this writer had asked in the Times of India for tax rates to be slashed to 30%, 20% and 10%. These were the rates in the 1997 budget, and the effect on revenue was profound. P. Chidambaram as Finance Minister, when his effective boss was Sonia Gandhi, was a disaster, moving away from the gentle touch of the Narasimha Rao and Vajpayee past to UPA-era Police Constable ( PC) methods that have been allowed to linger within the portals of North Block for too long. Tax rates should be reduced, slabs brought in line with inflation. Importantly, just as FEMA replaced FERA, tax codes should be reformed in such a way that the emphasis is on getting additional revenue rather than clogging the courts and jails at the expense of revenue settlements even more than is already the case. Income-tax laws need a FEMA in the manner this was introduced under Prime Minister A.B. Vajpayee, and Prime Minister Modi is strong enough to ensure a change from “police constable” methods to a system and processes that accept the Indian citizen as being responsible and honest unless (in rare instances) being proved otherwise. In such cases, the penalties should be financial rather than penal. The country needs money, not more expenditure on the prison system, the few exceptions being income from occupations such as extortion or narcotics.

Another way of promoting employment would be to introduce a GST and income-tax write-off for units employing more than a given unit of labour per Rs 1 lakh of capital invested. Those with a higher labour slab (as compared to capital slab) would enjoy tax benefits. The present tax system permitting depreciation benefits companies seeking to replace labour with machinery.
(3) The Goods and Services Tax needs to truly be a “Good and Simple Tax”. This is possible by:
(a) slashing slabs to 5% and 15%;
(b) eliminating those businesses with an annual turnover below Rs 10 crore or individuals with annual income below Rs 15 lakh;
(c) exempting items of common consumption such as food items from GST;
(d) making the filing of returns quarterly in the case of payees with a turnover above Rs 1,500 crore, twice yearly for those with a turnover in the Rs 100 crore-Rs 1,500 crore range and annually for those with an annual turnover of less than Rs 100 crore and above Rs 10 crore.

(4) Using corrupt officials to harass rivals is a practice which needs to be eliminated, and for this, the ED, CBI and DRI should concentrate on a much smaller caseload, leaving smaller cases to more routine investigation. Officials should be protected from harassment for taking decisions, including for some that may go wrong, unless collateral motive gets clearly established in advance. Much more transparency and broader accountability is needed in the functioning of agencies with vast power, which itself needs to be whittled down to levels more suited to a democracy.

Punitive powers need a relook, and ombudsperson systems need to be created on a decentralised level. Having a single Lok Pal to fight corruption in India is a measure that seems more than usually optimistic. The investigative agencies and safeguards to their misuse need to be accessible in multiple places rather than citizens having to go to the national capital or to state capitals for needs that ought to be settled at most at the district level. Online resolution of problems should be multiplied and finally made the norm. Constant monitoring is needed to ensure that undue influence is not brought to bear on the investigating officer. Overall, once a situation gets created in which they can function in a transparent and professional manner, several of the IPS, IAS and IFS officers in India (together with the other services) are—on a person to person basis—among the finest in the world. Administrative reform is a needed supplement to economic reform, and now that adequate knowledge of the processes of governance at the Central level has been picked up, Modi 2.0 can proceed to design and put in place a 21st century administrative structure for India that replaces the 19th century model (with a few elements of the 20th century thrown in) which comprises the governance mechanism of a country that has the potential to be the next superpower, after China and the US. In particular, an overall climate free from the fear of arbitrary action is essential for rapid growth.

Among the pitfalls to promoting investment in India is the manner in which agencies such as the National Green Tribunal have blocked the setting up of enterprises on multiple occasions. Each decision of theirs needs to be concluded only through a public hearing and need to be accompanied by a fact sheet showing the cost to the economy if a decision gets taken to stop a unit from coming up. Certainly plants have rights, but so do human beings in India to a decent life, something that environmentalists seldom seem to consider in their prescriptions. Of course, it needs to be repeated that the day needs to soon arrive when a Chief Justice of the Supreme Court will change the way the judiciary functions in the comprehensive manner in how CJI J.S. Verma created the Collegium system and walled off the higher judiciary from external interference in processes of selection. Courts need not only more judges and staff but far less cases that each takes up, many of which may not be entirely worthy of the court’s time. Timelines need to be fixed such that the maximum period for a case to be finally decided does not exceed five years, while the median time should be a year or less. The Supreme Court and the Law Ministry need to work together on such an overhaul of a system that has some of the finest juristic talent in the world.

(5) If India is to seriously compete with China in becoming a global manufacturing hub, what is needed is to establish pre-fabricated housing complexes for temporary workers around manufacturing complexes. Such housing is an essential part of infrastructure and need to be developed at speed, so that the next pandemic (and there will be more) does not cause the problems seen in Mumbai and Delhi during the Covid-19 outbreak. Such housing will also incentivise migrant labour to return to locations where they are needed.

(6) Expansion of the education sector needs special attention, especially the use of online methods. Educational and entertainment programs designed for migrant labourers could also be developed under the Skill India rubric. The use of online systems for teaching needs to be encouraged. A way to garner jobs and resources would be to assist in setting up individuals with language skills to launch online courses in the English language for those in other parts of the world seeking to learn the international link language. India could be the world champion in the teaching of English as a second language across the world. Other centres could train teachers in Portuguese to enable them to go to Brazil and others in Russian to enable migration to another country needing an influx from outside that is compatible with the culture and disposition of the Russian people, who are among the most admirable in the world. India lost the chance under Jawaharlal Nehru and Indira Gandhi to send millions to countries such as the UK that at the time welcomed immigration. Given the immense goodwill President Jair Bolsanaro and President Vladimir Putin have for Prime Minister Modi, certainly hundreds of thousands of law-abiding citizens from this country could be welcomed in giant states that have immense gaps in their existing manpower, including in schools, farms and health facilities.

The strong action in the health field taken by Prime Minister Modi appears to be ensuring that India escapes the worst of the Covid-19 disaster, and will soon be on the road to the pre-Covid-19 situation in terms of health. What is needed is a similar set of actions, this time designed to ensure that the economy emerges from the Covid-19 pandemic in even better shape than when it entered it. This may seem a big ask, but “Modi hai to mumkin hai”.

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