Sunday, 31 January 2021

Keeping reform in abeyance is not a option (Sunday Guardian)



Instead states need to be given the power to decide whether they will continue with the old system or switch to the new farm laws.

The ultimate test of good governance is the standard of life of an ordinary citizen. Improvements in healthcare, housing, education, income and security need to take place during the term of a government. Not just China but several other countries have galloped ahead of India in per capita terms during the decades since the country became free. This shows that in a country where several codes (such as that governing the police) are well over a century old, reforms in administrative procedures and policies is essential. No such reform will be perfect, and especially at the start, there will be more than a few glitches. The rollout of the Goods & Services Tax is an example. This is a welcome reform, but the model initially adopted was far too complicated for many to comply with. As for rates, they were plentiful and much higher than what ought to have been the case in order to stimulate growth. The tax net was pegged at much too low a level of gross income, and for quite some time, compliance became a nightmare, made worse by the use of severe punishment despite the reality that most of the errors that were subject to such harshness would have been caused by lack of comprehension rather than by deliberate design. Some of these avoidable features have been removed while others still remain. The difficulty in India has been the relative lack of civil society in the designing of policies by the civil service that affect them. The implicit assumption made in the design of several such measures is that there is nothing the matter if an entrepreneur is forced to spend more than a third of his working day on matters of compliance rather than in ensuring more efficient production of goods and services. The problem is that the less time the entrepreneur has for the latter, the worse it is for the economy. The other assumption made in policy formulation is that all the officers tasked with their implementation are efficient and honest. Many are either one or the other, but not too many are both. And at least a few are not in a manner so blatant that they discredit their service through the impact of the skewed decisions they take. It is such officials who usually insist on the table of punishments being unnaturally severe, as their own capacity for extracting a bribe grows with every turn of the screw.

Just as the GST had in the beginning and to a lesser extent still has, the three farm bills converted into law by Parliament last year have their weak points, as for example a blanket exemption from courts or from any legal consequences of hoarding even on a scale that may lead to an artificial scarcity of some produce. Medicines and food items are essential to life, and should not be treated the way toothpaste or shampoo is. However, just as has taken place with GST, the correct way forward would be to implement the laws (and remove glitches as they arise during the rollout, of course ensuring that features such as granting licence to uncontrolled hoarding or exemption from any judicial procedure get removed). The manner in which the Government of India agreed to keep the three laws in suspended animation for 18 months has conveyed the unfortunate impression in India and outside that it is not willing to stay the course where reform is concerned, but will back down when it meets resistance. Especially given the motivations of some of those behind the “farmer protests” that have been taking place on the outskirts of Delhi and which moved into the city in a chaotic manner on 26 January. It was clear from the start of the protest that several of its more prominent backers were not looking for a settlement but wished to humiliate the government by forcing it to completely withdraw the three farm laws. Even the loss of face suffered by the government by its decision to keep the laws in abeyance for 18 months did not satiate this hunger for the humiliation of the Modi government. In a way, the worst of both the worlds was the outcome of not having acted at the very start of the protest in the way they finally did a few days ago. Instead, the police were made to behave as though they were sarvodaya volunteers from the start of the protests, a change in role that boosted the confidence and the efforts of those interested in inflicting humiliation. The violence which erupted on 26 January needs to be met with the reversal of the proposal that the three laws be kept in abeyance. Instead, states need to be given the power to decide whether they will continue with the old system or switch to the new laws. Should the farm laws be helpful to the farmer, as seems the case, within a couple of years, those state governments that refused the reform would reverse course. At the same time, a continuous process of review and improvement is needed in the laws and their implementation, in the way there has been in the treatment of Covid-19 cases over the year just past.

Modi 1.0 had several pluses, which is why the BJP returned to power with an increased majority in 2019. Modi 2.0 must go further and faster in reform and not keep these in abeyance because of opposition from those who would benefit politically in 2024 should the Modi government drastically fail in its $5 trillion mission. They would gain but the country would lose if reforms were kept in abeyance rather than implemented and continuously improved during the process of implementation.

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