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Nothing like a crisis to give politicians a backbone

J Mulraj | Updated on May 15, 2020 Published on May 15, 2020

The aim of political parties in a democracy is re-election. Which means that they do not take decisions which they perceive would be unpopular. Unless they are pushed into doing so by a crisis.

The 1991 financial crisis pushed the then PM, Narasimha Rao, of Congress, into allowing Manmohan Singh, then FM, to open up the economy. This led to a wave of growth as the fresh air of liberalisation breathed life into a moribund industrial sector whose neck was choked by red tape.

Similarly, the current Covid crisis is likely to give the Centre and the States the backbone to tackle problems created by inaction.

This columnist had, in the early ’90s, attended a FICCI AGM as an observer. It was during the Congress Government and industry representatives asked questions on labour reform to PA Sangma, then Labour Minister, and to Balram Jhakhar, then Agriculture Minister.

An eminently sensible suggestion was made to Sangma, to permit industry to fire, after due process (investigation and compensation), an employee on disciplinary grounds, without seeking government approval (necessary for any company employing more than 100). This would be limited to 3 per cent of the workforce but that would be enough to ensure discipline, and would be fair to labour as due process would be followed. Thirty years later, under a crisis, some States have suspended some labour laws. If the then government had the backbone, it could have been done over three decades back.

Instead, Sangma deflected the question by stating that if God was unable to control two persons, Adam and Eve, from taking a bite of the forbidden apple, how could he, a mere mortal, control millions? Good for a laugh, but did not address the suggestion.

Another industry representative had, three 3 decades ago, suggested contract farming, in order to boost agricultural production and productivity. Farmers would hold on to their land, and commit their produce, at attractive prices, to the corporate buyer. The buyer would insure the crops, farmer suicides would abate. Balram Jhakar similarly ducked the suggestion.

We are paying the price now. Surplus labour from rural areas are the migrant labourers who go to cities for work, and live in horribly overcrowded slums. Political leaders provide protection from eviction, in return for their votes. We are paying the price for that, as the Covid-19 timebomb in slums such as Dharavi, with 12 lakh people living in 2 sq km, is waiting to explode.

Why can’t politicians do what they are elected to do, viz. provide good governance?

The government has announced a ₹20-lakh crore economic relief package. It is yet to come out with out-of-the-box ideas to raise resources. This column had, on April 11, suggested five ideas https://www.thehindubusinessline.com/markets/some-thoughts-on-raising-government-resources/article31315162.ece

Resources are desperately needed, and call for desperate measures. Why not settle tax disputes, starting with the telecom dispute over AGR, which is a bizarre claim (taking an 8 per cent share in revenue of non-telecom-related income). This is twisted to exempt companies such as GAIL and PGCIL, which also have telecom operations for internal use, from the impact (imagine if GAIL’s gas transmission income is taxed at 8 per cent). Settle this, across the table.

The only casualty is ego.

Vijay Mallya is offering to repay the entire loan. Negotiate payment of interest dues and settle the matter. Do it with a host of other disputes. Our legal process is too slow and the government needs the money now. Desperately.

Think of other new ideas. Not ones that have failed, such as like wealth tax.

Tax agriculture income over a certain threshold. Say ₹24 lakh (versus ₹5 lakh for others). Anyone earning more than that is not a small farmer. Everyone knows that tax free agricultural income is just a laundry for black money of the polity, big business and professionals. Shut the damn laundry!

Get a backbone!

In order to attract FDI that is leaving China, providing land is a necessary step, but not enough. India’s raking in Ease of Doing Business is 63, out of 186 countries. Use the new vertebrae to improve the weakest of the criteria. India is 163rd in Enforcing Contracts (shameful), 154th in Registering Property (pathetic when they can use blockchain to ensure proper records), 136th in starting a business (will foreign investors be attracted?) and 115th in paying taxes (inspector raj, who benefits?).

The Government should have a plan to push these 4 parameters, where India is weak, to improved levels. There must be a revamp of judiciary (work with it to ensure a time-bound trial with only 1 adjournment per side) and a revamp of inspector powers.

Yes, India does have an opportunity to attract FDI. But we need to raise our levels of governance, administration, and judicial standards to global standards. In so doing, if we have to replace ego with humility, arrogance with common sense and greed with honesty, why, then, something good will have come out of the pandemic!

The writer is India Head — Finance, Asia/Haymarket. The views are personal.

Published on May 15, 2020

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