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Shun control to achieve economic prosperity
India must separate itself from the paths suggested at G-7 and G20 meets. Prescription on taxes and financialisation should not be swallowed whole. History tells us the country has survived through centuries when control was minimal. We need to learn from our ancient wisdom
The Indian economy is going through a transitory stage. It wants to free itself of Manmohanomics — it did some critical experimentations leading to too many controls that is an anathema for a party that was demanding liberalisation long before it heard of in late 1960s.
The process has its obvious problems. Unwittingly, the BJP Government has gone into doing many things that is now being touted as “efforts to control” — be it bank procedures and charges, fuel prices, rail fares, telephone connections or Aadhaar linking. Ideologically, for a propagator of a free market, this cannot be its intent.
The Leftists have always propagated such controls. They controlled even the movements of citizens, leading to the collapse of the Soviet Union and the shattering of the dreams of a communist world. Is the Government in a trap? If so, who laid it? It appears that it has gone into somewhere, where it should not have. It’s good that the Government, in all seriousness has shown the will to get out of it. It immediately huddled into confabulations, looking for avenues and even carried out major changes to the Goods and Services Tax (GST).
The uneasiness was evident even at the BJP National Executive meeting held in New Delhi on September 25-26. The Government exemplified that it was willing to listen and re-design the economy through the Bibek Debroy committee. The response should instill confidence. But the figures coming from Government sources or the Reserve Bank of India (RBI) or the stock market are yet to show positivity, increase in private investment or credit growth or job growth.
The RBI also lowered the country’s annual growth to 6.7 per cent. The Asian Development Bank lowered growth projections to seven per cent. The World Bank, being optimistic, said that the present slowdown is an aberration. India’s gross domestic product (GDP) grew at 5.7 per cent on a year-on-year basis during the April-June period (Q1). The GDP growth rate for the same quarter last year was 7.9 per cent. During the previous quarter (January-March) of this year, GDP grew by 6.1 per cent.
The RBI’s estimate is near reality. The Government says do not despair. An Indian is a born optimist and even without World Bank President Jim Yong Kim’s recent Press statements, they are hopeful and know that destiny would take them to the end. This calls for serious retrospection beyond GST which would see more changes than those decided at the 22nd GST Council meet on October 6.
It made small changes but it evaded a crucial decision on petrol prices, which if included in GST, according to estimates, could bring fuel prices down to Rs 40 a litre from over Rs 71. This could have been a great relief for the economy, which is heading towards inflation.
Despite official price index showing a gradual spurt, prices in the market have not come down. The GST, despite the latest exercise, has added to the prices and bank charges, which are at a high and is stated to hit growth. The RBI, for good, has not lowered interest rates. This is affecting poor depositors. This needs to be checked along with tax on savings. This step is also not helping farmers and rural depositors. High bank charges and taxes on deposits may move depositors away from the public sector unit banks. It is apprehended that it might also promote parallel unofficial banking and hawala transactions even within the country.
Prudent tax laws are needed to promote growth. The concern of higher revenue is fine but taxes, income and indirect taxes have reached oppressive level and needs drastic simplification. Somehow, the Government does not consider high road, municipal, panchayat tolls, road taxes, parking charges, metro, railway fares and other charges as taxes. While reviewing, a consolidated approach is needed. Each of these reduces purchasing capacity and becomes inflationary, impeding growth. An average Indian, even a beggar, pays over 40 per cent of his income as taxes and a taxpayer pays over 70 per cent. This means forgoing three to five months’ earnings as taxes.
Higher the combined taxes, tolls and fees, lower is growth. India needs less governmentisation, more trust in its people, including traders, in-cash transactions and the approach to financialise or tax every aspect of life needs to be given up. A child who gets the liberty to act, grows up as a responsible person than one who is put on virtual leash by his parents. Likewise is the case with the countrymen. Every aspect of life must neither be controlled nor interfered.
The West continues to be in a crisis as it has tried to shackle the economies with financialisation. India has survived some of the worst crisis like the fall of the Soviet Union or the great 1990 forex crisis because it had a mixed economy that was not dependent on the official system.
Post 2008 meltdown, unnecessary incentivisation of big houses and forcing banks to give liberal loans, has led to the present non-performing assets crisis. Liquor baron Vijay Mallya is the creation of such ill-conceived official fiats. A former Finance Minister’s son is said also to have been its beneficiary in a different way.
This is the learning curve for the Government. In many cases, despite consensus at G-7 and G20 meets, India needs to separate itself from the paths suggested by it. The G20 is for controls. India has thrived through centuries when it had the least controls on activities of the people. The forced indigo cultivation or permanent settlement by the British for higher revenue realisation had led to ruination of the indigenous economy as also boosting of the British and Western economies. India needs to look at G20 prescription on taxes and financialisation with apprehension and caution. It has not been good for G7 itself.
For growth, India needs to look at its own wisdom and listen to Mahatma Gandhi and Deendayal Upadhyay. Be it in G20, India must chart out a separate course. Then, India will grow to trounce all.
(The writer is a senior journalist)
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