Populism As An Antidote To Anger

Populism as antidote to anger

‘Courage is contagious’- Julian Assange

Canadian essayist and author of non-fiction and novels too, John Raslton Saul, interviewed on his way to the Jaipur Literary festival 2014, spoke elliptically, in difficult to understand and subtle concepts, like literary figures often do.

Writers, tend to explore the evolution of ideas against a backdrop of real events. It is for us to surmise what they see as cart, or ekka gharry, if you want the sports version, and what indeed, as horse.

This one, Mr. Saul, is trying to put some life into the Indian PEN Chapter. You could call it his bureaucratic purpose in coming here. But he has been before as well. That makes you think. And India does qualify as an instant addiction. Where are you going to get to see so much life?

But, Saul did say one thing in his interview, amongst several obscure things, with Karan Bhardwaj, that resonated immediately with what’s being going on in India.

Paraphrased; he said populism is a sign   of anger. Interesting comment, this, and instantly right if you think about it.  But which end of the stick? Is it a dissatisfaction with governance, corruption, or, since it is perpetrated by people, either in power, or seeking it by making populist promises; is it a kind of bribe to make the anger of being neglected and exploited go away?

Is it the equivalent of the ostrich burying its head in the sand, as just a gesture, too little too late, but still capable of causing axphysiasion?  

Did enigmatic beauty and consummate actress Suchitra Sen die this week at age 82, or the day that  her soul mate Uttam Kumar died three decades ago? If you let it, it can haunt you. Besides, you know the truth, and it is most impressive.

The action is a little bit like busy parents making ‘quality time’ for their children, and hoping hard that they won’t consequently be cross with them.  But what do people at the receiving end of populism think of it? Are they viewed as reparations, compensation for injustices and harm done, designed to assuage hurt, or entitlements, or katputli puppetry, starring themselves as mute puppets of no consequence either way?

Are recipients of populist measures grateful, or provoked, into even greater anger under the surface by the staged generosity? After all, recipients of largesse are expected to make happy, and keep the transaction simple between the perpetrator and the victim.

Is the chowkidar-style worn muffler accompanied by a tubercular cough this winter’s statement? And the Gandhi cap, abused with paper manifestation and slogans, the actual, the authentic, cap for all seasons?  

Sadly, everyone is rattled enough by the AAP manifestation to adopt that silly cap. BJP personnel wear a saffron version with ‘Modi for PM’ written on it. Mayawati has a much more chic light blue Gandhi cap with dark blue elephants on it!

Only Congress moves around bare-headed, possibly shame-faced,  or in jaunty Himachali topis! There is no real respite though. Their man in the hills is battling corruption charges.  Not very well, but just like the octogenarian manifestation he is.

The Congress Party believes it is justified in its bounty to the underprivileged and poor because they are both impoverished and deserving. This much is obvious. They do not answer the question as to why such a situation obtains, after 66 years of independence, for so many, and with the Congress at the helm of affairs for most of these years. Why has the country failed to grow and prosper with so much potential?

Instead, Congress has thought fit to just step up the largesse, like Cicero’s Romans, with their bread and circuses.  That was in times BC. But Congress is positioned shamelessly with this lurid excuse for an excuse masquerading as action, just prior to the general elections 2014.

It is a kind of veiled apology perhaps, like a roué might make to his much betrayed ‘beloved’. To the public, it is an ointment offered, to rub on the bruises of anti-incumbency. The Congress policy makers probably do not like to introspect.

Why do it, when there is such anger against its non-performance and corruption. Congressmen and women like to say, and believe, that their achievements have not been properly publicised. Congress does not see or accept that it has not performed, and been corrupt, to such a massive degree. It prefers to be populist, and wants you to forgive and forget. It wants a third term in a row.

Most economic observers feel that unless a reformist and stable government emerges after the elections, the Indian economy could go into a downward spiral for at least the rest of this decade. This is on top of the fact that it is already halved in GDP terms over the last five years. But there are enough foreign governments who do not mind if this is so. A weak India is easier to both exploit and bully. China is the one that got away, while America was away, trying to tame the USSR.

But two Asian superpowers without being particularly beholden to the West would be intolerable and make it very hard to dominate South Asia and the Asia-Pacific. Japan is already feeling the pressure from China, and much of ASEAN has capitulated to the Chinese dragon, hidden under the niceties of diplomacy.

India is being encircled by China, and pushed around on occasion so that it knows its place. And America wants a vassal state in us, plain and simple, as the price of its support. They cite Pakistan to us privately, while damning us with faint praise publicly, and suggest we learn how to behave with the globocop, meaning themselves, from our thoroughly compromised neighbours. To the US, we are no better.

There are indeed gains to be made, the dog will get his bone, but the Faustian pact is a must.

So what is it that people in the Congress party and in rag-tag  NGO-bred outfits like the AAP who openly favour Maoists and separatists actually want? Who briefs them, and whom do they get their real sustenance from? Why are they so willing to sell the country down the river, and in the case of the Congress, plunder the country mercilessly while they are about it?

That is not to say the anti-corruption crusaders, swearing by all that his holy now, won’t be audaciously corrupt once they get their own feel properly under the table.

The Americans don’t much like Narendra Modi, and it has nothing to do with Godhra, though much is always made of it. America likes its ‘friends’ to be pliable like Tony ‘poodle’ Blair of the UK, the custodian of the much vaunted ‘special relationship’.  TIME Magazine has recently said as much. Though its body copy is still couched in terms of the visa issue, and how this might change because of President Obama’s bias towards the US ‘national interest’.

But the truth is, the Americans perceive Modi as not easy to push around. And in the meantime, in the run-up to the general elections, the powers that be in this country have to keep Modi safe from massive security threats and very real dangers to his life.

The US is not looking forward to a NDA government. It has had a bad enough time trying to get Congress/UPA to do its bidding, given our inconvenient but functioning democracy. Now the prospect of a right- of-centre NDA coming into power, and determinedly putting the interests of India, particularly its security and economic interests, first, is not very exciting to them. And God forbid if the NDA, should it form the next government, proves less easy to corrupt.

How on earth can it still be business as usual for the US then?

(1300 words)

January 18^th, 2014

Gaautam Mukherjee

Stand-ins and Cut-outs

Stand-ins and Cut-outs

Like Mikhail Gorbachev’s presiding over the destruction of the USSR in the name of glasnost and perestroika, the Congress Party/UPA has been shockingly cavalier with security issues and terrorist attacks in the interests of vote-bank politics. They are not even afraid to sow the seeds of balkanisation by being soft on separatists and Maoists in a diverse country like ours.

Not satisfied with its own cynical disregard of national security interests, Congress is busy encouraging its cat’s paw, the fledgling AAP, to further stir the hornet’s nest. Sandeep Dikshit, the former Delhi CM’s son and Congress MP, is said to be guiding the puppet CM Arvind Kejriwal’s policies as per AAP insider turned dissident Vinod Binny. Sandeep Dikshit on his part, in probable  embarrassment and self-defence, has said that: ‘ The AAP, which began as a party with issues has become a party with personalities’.

Meanwhile, the AAP blatantly boasts Maoist sympathiser Binayak Sen and Kashmir separatist sympathiser Prashant Bhushan, who has allegedly worked as a lawyer for some of the Kashmiri separatists, in its National Executive. Bhushan, who is also a founder member of AAP, and has reportedly donated Rs 1 crore to its coffers, is brazenly promoting the idea of withdrawing the Indian Army from both hot-spots.

This fanning the flames of sedition is AAP’s only national level security initiative in its weeks in power. And the only economic initiatives are subsidies on water and electricity. But both have post-election/government formation riders and codicils, which actually make a total travesty of both  election promises. This too has been pointed out by Binny. Besides, AAP may not have the financial wherewithal or the legal mandate to see it through.

There are also other worrying election promises pending implementation, such as making contract workers permanent government employees, without any word on how it will be paid for. There is the regressive blocking of FDI in multi-brand retail which would have brought in foreign investment, training, lakhs of jobs, user convenience, a modern cold-chain, keener and more competitive prices at retail points, and more income for all in the supply chain, including farmers.

But AAP apparently has absolutely no interest in growth. No ideas either on the planned progress of Delhi, apart from grandiose promises on more schools and rhetoric against corruption. And their infantile action in this latter regard so far is to ask for a CAG audit of electricity distributors books, and mount ‘citizen stings’ on Government babus.  

And now, even as the AAP plans its national foray, and sharpens its attack on the BJP at probable Congress behest, there are no ideas on anything else.  Being against corruption is probably AAP’s one big idea. However, there is no attempt on its part to book any of the many Congress people known to be corrupt in Delhi!

Mercifully, we may be witnessing the unravelling of the fledgling AAP Government already. At least three dissident AAP MLAs have already appeared, making its future survival somewhat uncertain. There are allegations of blatant power hunger and dictatorial behaviour on the part of Arvind Kejriwal. This, in  addition to his being a Congress puppet.

CM Kejriwal, ever-ready to rush to the media, is seen tripping over his own daily pronouncements. His attention is already directed towards the Lok Sabha. Kejriwal probably dreams national level dreams, and plans to contest 400 Lok Sabha seats. But will Kejriwal survive as the crusading, incorruptible leader he purports to be, or be exposed as a poseur and charlatan  as some in the AAP and elsewhere would have it?

Meanwhile the AAP Government is visibly out of its depth. The rapes are continuing unabated in the ‘rape capital of the world’. The Janata Durbars have been abandoned in the midst of chaos and overreach. The anti-corruption help-lines are swamped and inadequately manned and deliver no satisfaction. The so-called citizen sting operations using cellphone audio recordings are  probably not legally admissible. The knee-jerk scrapping of FDI in Multi-brand retail  is sending out negative signals internationally. There is total silence on infrastructure issues. Permanent jobs have been promised to many working on a contract basis without budgets to sustain them. Three-wheeler fares are set to rise because the three-wheeler drivers supported the AAP campaign. But cooking gas prices are also set to rise. Vegetable and other food prices have gone up again since AAP took over, even as they have fallen elsewhere.  AAP’s subversive sallies with regard to the separatists  and Maoists are as  both dangerous and mischievous.

Apart from the dissidence we also have the doubtful ethical standards of his Law Minister Somnath Bharti, communal and anti LGBT comments from prominent AAP MLA Kumar Vishwas, a rush of opportunistic joiners of this most opportunistic of political parties, some of whom, such as Capt. Gopinath and Mallika Sarabhai, have also, quite rightly, given the supposedly moral tone off AAP, turned instant critics.

Congress may be fervently hoping that AAP will somehow thwart the BJP/NDA bid for power at the Centre. But for that, AAP needs to at least survive intact, as a political party and in its minority government. This may not be the case from present rapid developments.

It is probably accurate to see the hapless if brazen and value betraying AAP Government as no more than the Congress Party by another name. As for probity, justice, integrity and its other fine sounding promises; expect it from the Congress/ AAP at your own peril.     

(866 words)

January 15^th, 2014

Gautam Mukherjee

Tamasha Politics Won't Fill Bellies

Tamasha Politics Won’t Fill Bellies

The way out of the economic quick-sand we find ourselves in is through promoting growth unabashedly. This might seem obvious, but the UPA Government has not been able to find a way over the last five years. Economic growth, above all else, is what Narendra Modi stands for, and is offering the nation if the NDA is elected into power. And he has a track record to back up his ideas over 15 years of good governance,  and without the corruption that  has been endemic in  UPA rule.

All of big business in India, much of small and medium enterprise too, backs his vision. So does foreign business interested in India. Ditto for the FII community, as well as the prospective flood of  new FDI money. International rating agencies have stated their confidence about the Indian economy going forward under NDA rule, but not so under other dispensations. The domestic  stock market has been reflecting this preference as well. And the construction industry is holding its breath and marking time like all of business and industry.

Narendra Modi’s Gujarat has seen over 10% growth per annum in Gujarat year- on- year. There is a visible prosperity in Gujarat, and signs of substantial progress no matter where one looks. NaMo and the NDA now seeks to spread this prosperity all over the country and sustain it over the coming years. It is a thoroughly believable pitch in consonance with the aspirations of India’s young population.

Everything else, all the other ingredients that are competing for prominence: transparency, governance, reduction in corruption, less VIP culture, more connection with ordinary people, etc. are ancillaries to the main objective of growth. To put it another way, desirable as they are, will all the other things put together make up for the lack of progress that is emblematic of the present picture? Without growth how will the country be able to make progress in future?  And yet, neither the Congress, nor any other political party seems particularly bothered about growth in this election season, with the exception of a NaMo led NDA.

The Socialist Nehru/ Indira Gandhi/ latter part of the Sonia Gandhi era, have all been big on ‘social justice’ without being able to deliver any, except in the form of fiscally damaging subsidies and freebies. They have delivered dismal growth rates of around 2% or less, the present dispensation reducing an 8% GDP to 4%, and this has driven India deeper and deeper into chronic poverty and backwardness. This sad economic performance has nevertheless been accompanied by a laughable hauteur and liberal pontification on how the rest of the world should conduct itself!

India, for all its size and potential, has been ignored and derided for all the 66 years since Independence as a consequence. It is, even today, neither a practical force of any kind in world affairs, nor a particularly reliable ally, except in a wordy, theoretical and preachy manner. 

The last time it showed the world anything of acknowledged value was when Mahatma Gandhi’s non-violence helped secure India’s independence, bracketed though it was with Netaji Subhas Bose’s more robust opposition, and the ravages of the Second World War. The post-colonial Indian experience is characterised with performance that is uniformly below par despite pockets of excellence and achievement. While we are a nuclear power and missile builders, capable of a demonstrated degree of scientific achievement etc., our social and developmental performance has been constantly blighted by the chimera and confidence- trick of Socialism.

 And the world’s Communist regimes have fared even worse, every one of them. China, the one that got away, succeeded only when it dumped its unworkable Communist ideology in economic matters.

The present political discourse is, once again, in danger of losing the woods for the trees. India, ill served by Socialism, nevertheless lets the virus run on strong in its veins. It is suspicious of business and industry led growth because of long and unfair indoctrination and brainwashing.

Every national election, in five years or sometimes less, tends to become yet another referendum on competitive Socialism, rather than a robust comparison of which party has the best blueprint to lead this country into prosperity. The Indian psyche is somehow ashamed of thinking rich. Instead there is always a melodramatic orgy of emotion expressed on misery, deprivation, injustice, corruption, poverty, class and caste and communal violence, fear-mongering, and so on, without any  thirst for the cure for these age-old problems. We like to deliberately muddy the water rather than commit ourselves to growth like the Japanese and Koreans did, or like the Chinese today who are well on their way to becoming the world’s number one economy in times to come.   

So once again, as the media, ever keen on a juicy story to follow, chronicles the daily tamasha on populism being perpetrated, we need to remember that constant Socialist experimentation can become ruinously expensive and destabilising . Publicity-seeking on the basis of a facile righteousness will not bring home the prosperity we need. There is, now, once more, a great outcry against corruption, and a Socialist emotiveness about ‘democracy’.

But in all of this, there is little or nothing being said by any of the political parties other than the NDA, about our poor economy getting worse on all parameters by the day. And if this is not addressed by the new Government in 2014, most of our dreams of equity and social justice just cannot be realised.  

(911 words)

January 12^th, 2014

Gautam Mukherjee

Usher In A Universal Bank Transaction Tax...

Usher In The Universal Bank Transaction Tax To Liberate The Poor And Rich Alike

Those who think a universal Bank Transaction Tax is unfair to the poor need to realise the quantum of indirect taxes everybody who lives in this country actually pays. Every item and service is loaded with unavoidable taxes unless, as in some cases, one pays for it in cash and refuses a bill. Most things, from toothpaste to TVs are ‘tax paid’ already and cannot be sold for very much less than MRP. The dealer margin is the only narrow variable left to the seller despite the competition.

Petrol and diesel at the retail pumps, crippling the country for its knock-on effect on all prices, could be half the rate without all those indirect taxes. Our cars and motorcycles could cost half too. Every item used in construction is loaded with indirect taxes. Our clothes, our processed foods, our merest purchase, even our medical treatment, are all riddled with taxes. Anything imported, with rare exceptions, has large taxes on it. 

All raw materials used in manufacturing have taxes on them at every stage of value-addition, and there are more taxes on the finished product too. Is it any wonder that we are internationally uncompetitive in all our export efforts without duty drawbacks and exemptions?

Despite this reality of a nation groaning under some of the heaviest indirect taxation in the world, irrespective of income levels, most people focus on and associate taxation with Income Tax. But Income Tax is actually paltry in terms of overall yield, a little sliver of the tax pie, and is extracted from just 1% of the total population. And even taxing the very rich, today mostly also the most productive people in the country, and their profitable companies, has no great impact on the total amount needed.

We need trillions of rupees to run the country, our gargantuan Government which employs millions, as well as pay for its growth and betterment. It is the last that suffers in the consequence, with State after State in gross debt, technically bankrupt for long, and unable to spend on infrastructure after paying out the establishment costs and salaries. Even subsidies are paid on borrowings at State level and via deficit financing by the Centre. The truth is, this is, and has been unsustainable, for quite some time, but the Government has been brushing this unpleasant truth under the carpet for future successors to deal with when the unavoidable tipping point of a crunch comes.

This proposal of a universal Banking Transaction Tax is something of a panacea, and is not coming to merely serve the interests of the elite. There is no right-wing Swatantra Party’s Minoo Masani or eminent jurist Nani Palkhivala advocating abolition of general taxes in 2014 to serve their capitalist ideology. Today its votaries are practical people who are keen to stem the unsustainability of the present taxation regime.

They include popular Yoga Guru Ramdev, Harvard Professor and B JP ideologue Subramanian Swamy,  BJP prime ministerial candidate Narendra Modi, BJP President Rajnath Singh, former BJP president Nitin Gadkari, Senior BJP leader and top lawyer Arun Jaitley, various taxation experts who consider the idea thoroughly feasible, some prescient economists and journalists, representatives of key trade bodies and chambers of commerce,  foreign professors and economists in the US and EU who are also coincidentally thinking of reforming their own tax regimes along the same lines. The New York Times, notorious for its left-wing views, has been airing the notion on its Op-Ed Page too. 

The Congress, the SP and the AAP are not for this, because their constituency, the great poor masses will disappear and so will their raison d’ etre. As long as the current tax regime sustains, the status quo will remain, and this suits the professional Socialists as opposed to Nationalists, who want to be seen as pro-poor and feast off the stance. If everyone benefits, the  social liberation it will engender will change the equation. The new situation cannot sustain povertarian politics with its emphasis on welfarism and freebies and concomitant mai-baapisms.

Reserve Bank of India Governor Raghu Rajaram is making efforts to extend banking services to the under-privileged and poor at the bottom of our very wide pyramid. Banking itself is poised to grow substantially with the imminent issue of many new banking licences, and the nexus between PSU bankers and their corporate clients under political pressure, resulting in the highest ever NPAs, is also likely to change for the better as a consequence.

Most financial corruption is a result of unreasonable and restrictive laws and punitive tax rates. It is seen all over the world that no amount of surveillance and strictness has been able to eliminate it. But by the same token, it is evident that if the financial laws and processes are simplified and rendered transparent, the need to conceal income and avoid taxes also sharply reduce as the incentive to do so becomes unattractive.

Tax administration and compliance in this country has a chequered record, and the Government suffers routine shortfalls against budgeted collections. A Bank Transaction Tax, applied automatically, can eliminate this chronic inefficiency once and for all, while increasing the yield at least four fold, even on the basis of just the 20% of transactions that are conducted via the banks at present.

Without indirect and direct taxes there is little or no need to conduct cumbersome transactions in cash. An entire shadow economy can thus join the mainstream domestically, and trillions of dollars stashed abroad can come back to help develop our economy.

Not everyone wants this kind of radical change, as it will mean a loss of power for some. But for the country, this kind of worthwhile and bold tax reform by a victorious BJP/NDA Government could transform the Indian economy.

(958 words)

January 9^th, 2014

Gautam Mukherjee

NDA Needs A Big Idea

NDA Needs A Big Idea 

The NDA is in desperate need of a big tsunami of an idea to surge into power in May. Particularly, as it is to play its hand in a contentious, much fractured field. But a big idea has at last been mooted- abolish all direct and indirect taxes, both on individuals and corporations, it says, and replace it with a universal Bank Transaction Tax.  

That bank transactions currently account for just 20% of the total, actually tells you the size of the black economy. A 2% transaction tax on this lot alone could yield more money than the maze of direct and indirect taxes put together.  But, the embrace of this bold new idea needs to be just so, dramatically clear-cut. No timid tweaking and tinkering with the tax and exemption rates will suffice.  That will emasculate it and render it useless in electoral terms.

This abolish- all-taxes proposal, being considered by the BJP at present, is brilliant in its simplicity and can at one stroke, reduce the black economy both substantially and voluntarily, provide a major fillip to business, industry and employment, reduce prices and inflation, boost GDP, encourage fresh investment from abroad, and encourage the trillions of dollars in black money stashed abroad to return on its own.

It will also cut reams of red-tape, and necessitate the redeployment of armies of government employees into more productive functions. More and more economists in India are coming around to backing this idea, and several have swiftly laid out very attractive illustrative scenarios on its efficacy going forward. 

America too is coincidentally looking at calls to abolish corporate taxes in order to stimulate industrial investment and consequent job generation. It too has a marginal tax rate of about 35% for companies that, with the availing of exemptions and incentives, can be brought down to 23% or sometimes less, very much as in India.  And Indian industry, for different reasons, is falling behind every day because of lack of fresh investment, modernisation, and of course, the recessionary conditions presently.

India’s Congress Party has tried to play to the gallery to the hilt with its own big ideas, namely the Food Bill and the Land Bill, in addition to its many extant welfare schemes even though they are a big burden on the exchequer. Its aam aadmi plank may have been hijacked by its junior partner, but Congress has moved fast to keep the AAP within its own fold going forward. The AAP, beholden and subsumed by the Congress, means that whatever seats it wins at the general elections, will be used to back the UPA.

There’s also the wholly curious but noisy anti-corruption crusade, with everyone, in the Congress, BJP and AAP sounding bugles about it. The middle-class loves to fantasise about a corruption free polity but there is no magic wand available to bring it about. The yearning for it is both sweet and a little absurd at the same time, not because it is not a laudable objective, but because corruption is more of a demand and supply issue than a legislative matter.

Arvind Kejriwal of AAP is sure to choke on his anti-brastachar promises, sooner rather than later, as he is buried under an unmanageable avalanche of corruption under his very nose in the Delhi Government. The Delhi Jal Board stings by TV channel Headlines Today are just one little sample of what he has to deal with. It is not as if nothing will be achieved, but it is going to be a long and winding road to the finish-line. Even in totalitarian China, where corrupt people are frequently shot, corruption has grown apace with its development!

Besides, a thousand Lokpals can’t make India corruption-free, no matter how many people they prosecute. And there is the nagging feeling about the integrity of such Lokpals themselves, given their temptations. The Indian judiciary, right up to the top, sadly, has its own corruption problems too.

The very laws, too many of them, full of discretionary powers, create convenient bottle-necks to exploit. They are the root cause why someone in power can demand and extract a bribe. That, and the fact that our extremely over-burdened and slow judicial process has practically made it impossible to receive justice. The lack of accountability that comes from permanent government jobs and a closed club of elected politicians also makes things difficult. The public therefore would do better to demand growth and progress and let prosperity reduce the need to be corrupt. Cutting down, rationalising, and modernising our tangled jungle of laws, while increasing the size of the judiciary could also help.

BJP’s prime ministerial candidate Narendra Modi in scores of very well attended rallies has tirelessly pointed out the shortcomings of the Congress regime, its ineptitude, its failures on the security and economic fronts, its cynical vote-bank politics, the immaturity of its ‘Sahebzada’, its corrupt ways  and so on. But all this is essentially negative in character, as negative as the Congress constantly harping on  BJP’s alleged communalism.

Still, NaMo’s efforts have produced spectacular results, combined with those of the two incumbent BJP Chief Ministers and a former CM as challenger. But still, the Congress is down but far from out. It is working hard to keep the NDA, and Modi, out of power at any cost, by either positioning itself at the head or at the tail of a coalition, no matter how few seats they are able to bag by themselves. Its recent propping up of the AAP in the Delhi Vidhan Sabha clearly spells out its survival strategy. The articulate if untried AAP is expected to nevertheless cut into the urban vote with its high profile rhetoric against corruption and its passion for populist freebies. The restive regional parties have several prime ministerial aspirants of their own, and are chafing at the bit to form a front for the Congress to back-stop.

The BJP, always in difficulty when it comes to allies, because of its perceived, if false, anti-minority stance, is looking at the rivalries between the regional parties, such as that between the DMK and the AIDMK, to secure its post-poll numbers.  But, all analysts agree that it will find it difficult to form a Government if it does not win over 200 seats on its own. Particularly, given the current mood of the regional parties, who want to run the Government themselves this time. So, it needs to do something urgently to bring in the surge in popular support. Eliminating taxes could be this catalyst, to win the elections, cut the generation of black money, and unleash the development potential of the country.

(1,105 words)

January 7^th, 2014

Gautam Mukherjee

Abolish Income Tax...

Abolish Income Tax…

Harvard Professor, Economist, Independent Thinker, and current BJP ideologue Mr. Subramaniam Swamy’s maverick suggestion of a few years ago to abolish Income Tax has come back to the table. This time, for serious consideration by the BJP. Earlier, Swamy, in his political party of one, had mooted it as his personal opinion.

Now, the abolition proposal is combined with a plethora of other taxes such as Sales Tax, Excise Tax, Service Tax, and several other indirect taxes that have cropped up since. The Pune think-tank which put the presentation forward, wants them all discontinued. This very attractive idea, at least for the much burdened 35 million urban Income Tax payers, will definitely prove very popular if presented as an election promise.

The proposal may well be included in the BJP manifesto for the 2014 general elections.  Certainly, BJP needs a big and popular economic idea to counter the massive Congress welfarism and the fledgling AAP’s one note samba on corruption!  Abolishing these vast network of taxes, paradoxically will both cut costs, red-tape and corruption, and actually increase the Government’s take on a much surer basis via a new Bank Transaction Tax contemplated at  1% to 1.5% on every transaction.

Mr. Nitin Gadkari, the former BJP President, heads the committee that is working on the BJP vision document, and Mr. Swamy is the committee’s convenor. They revealed this proposal under consideration at an interactive session with industrialists at the PHD Chamber of Commerce recently. Though it sounds too-good –to-be-true, it was naturally enthusiastically received.

This get- rid- of-taxes idea is combined with a less feasible proposal to abolish Rs. 500 and Rs. 1,000  currency notes. In an this era of high, 20% per annum retail inflation, and a massive underground economy that parallels the ‘official’ one, taking out the high-value notes will not work.  Also, to directly attack the Black Economy will be dangerously destabilising. But like the famous Laffer Curve which shows greater tax compliance with lower tax rates, cited by Mr. P. Chidambaram for slashing income and corporate tax rates in his then ‘Dream Budget’, this move too will encourage  people to not conceal income over time.

And as Yoga Guru and BJP- backer Baba Ramdev, though no economist himself, said: prices of goods, services and things will come down to half if these taxes were to be jettisoned. It is true enough that the tax load on everything is of that order currently. This move would likely have a massive deflationary effect, but there is still the ‘imported inflation’ via our 80% petroleum needs to consider.

But, cutting taxes will certainly encourage savings, business, industry, services, FII and FDI investment, etc. and go some way to obviate the need to conceal income, the Bank Transaction Tax notwithstanding. Currently, it is difficult to invest black money in the white economy, except via elaborate ‘laundering’ operations.

And the change will probably have a good effect on the value of the rupee. Of course, the rupee value is also dependent on the bringing down of the fiscal and current account deficits, the cutting unproductive Government expenditure, the growth in the GDP, its composition, food prices/agricultural yields, industrial productivity, commodity prices, imports versus exports, banking efficiency, the monsoon, peace on the borders, and several other issues.

This radical idea will take some thinking through, but nevertheless has an undeniable transformational potential.  And, it may serve to steal some of the Congress and AAP populist/wefarist thunder with its urban- voter- friendly out-of-the-box thinking.

For those who are alarmed with this radical suggestion, let us highlight the fact that many of the taxes such as excise, service, sales, octroi, and VAT are routinely evaded resulting in budgeted shortfalls. They are also sources of acute corruption and collusion with the Government agencies overseeing their administration. The multiple taxation regime is also inordinately expensive, sometimes more costly than the collections it yields, bewilderingly ambiguous, complex in its applicability and exceptions. It has such with wide areas of official discretion, that it is very difficult to administer honestly no matter how well-intentioned the top people may be.

The abolition idea is said to have both the Party President Rajnath Singh and the prime ministerial candidate Narendra Modi’s backing. And now Baba Ramdev has thrown his activist’s weight behind it as well.  Former Finance Minister Yashwant Sinha is apparently against the idea. But perhaps he should reconsider. This is an election of populist ideas against which staid and conventional good economics does not look too attractive. Sinha’s objections are to the feasibility of the Bank Transaction Tax of 1 to 1.5% on every transaction, because he doesn’t think the banks can administer it properly.

Gadkari however expects the number of banks to rise substantially with new banking licences on the anvil. Mr. Sinha must be worried about Government coffers not being directly filled by tax officials, and some degree of loss of control over the finances outsourced to banks. But, he must be aware that it costs more to collect these various taxes via the huge and inefficient departmentaI apparatus, than the actual yield.

Income Tax has long been a notoriously losing proportion, as well as a source of ‘on-demand’ harassment.  Very few of our apparently eligible citizens who are not Government or Corporate employees with their tax deducted at source, actually pay the correct amount of Income Tax despite the CBDT’s efforts. Income Tax payers number only 35 million souls, even after 66 years since independence, out of a current population of at least 1.2 billion!

It is also true that bank transactions presently account for some 20% of the total. In other words 80% of all business transactions are conducted in cash. But the Government is much more likely to get more of the black money into the official system if there is no multiple taxation. And a lot of money, running into trillions of dollars by some estimates, stashed abroad, could find its way back voluntarily.  

(991 words)

January 5^th 2014

Gautam Mukherjee

This Emperor Wears People Power

This Emperor Wears People Power

The fairy-tale talks of an Emperor who was naked but thought he was dressed in rich raiment. This latest Chief Minister of Delhi, no fairy himself, has dressed himself, from muffler to sandals, in people power. He is still 8 inconvenient seats short of his Stalinist ambitions, but these are being provided by a Congress Party keen on being the power behind the throne. Meanwhile Delhi State is bent on taking one reckless populist step after another with no revenue generation scheme in sight.

Mr. Kejriwal is meanwhile glowing and bristling with potential threat, as if he has invented populism for the very first time. His party-men say you can topple us in Delhi but the ‘people’ will make you pay for it nationally.  This one is aimed at Congress along with threats to investigate corruption in their past 15 years of rule. For the BJP, some AAP spokesperson has indicated that AAP might abolish the MCD altogether for its corruption!

Truly, the AAP is basking in national attention, and expects to use its actions, pronouncements and speeches in Delhi as a catapult to get themselves into the Lok Sabha.  All their atmospherics are deeply embarrassing to other seasoned politicos, but amuse those who enjoy their discomfiture.

Whether it is the speed of their actions taken, or that disconcerting advertisement of a paper cap, the sandals, the off- the- street clothes, the Metro and three-wheeler travel, it all makes for a spectacle. But the AAP is a very disturbing phenomenon, instant ‘street creds’ on steroids is now holding the levers of power in the capital, and plainly stating its menacingly ‘honest’ intentions.

Then, there is the CM’s own bush-shirt, sweater, muffler, frequent coughs and high fevers, that do not however stop the ringing, absolutist sound-bytes on TV. All this, contrasted with his impossible to ignore IIT Kharagpur and IRS credentials, his Magsaysay Award, his NGO network, which suggest he knows exactly what he is doing. Arvind Kejriwal is no aam aadmi , but his moment seems to have come.

Plus the on-target talk of an additional 45 Night Shelters for the shivering homeless to be built in 72 hours, the use of own, modest transport, the ‘no’ to Government bungalows and ‘lal battis’, the use of minimal police security, the small set of AAP ministers announced, the new broom sweeps clean symbolism etc.  All of it is resonating with the poor and the beleaguered. The long ignored urban middle class is basking in its overnight prominence, and are also absolutely delighted with the AAP talk of ending corruption. The politicos too are spooked. They quickly passed the Lokpal Bill, pending for decades, in both houses of parliament, before it could make more trouble for them.

The Kejriwal brand of Far- Left Socialist demagoguery is so expert and striking, that many highly educated, well-to-do and accomplished people are beguiled into calling it revolutionary and fresh. Perhaps it is, compared to the blundering politics as usual, but please note that the AAP never ever speaks of earning any of the money they seem so ready to spend!  They are all about a clean-up, but who’s going to do the ramping up of the Government’s and indeed the people’s finances? The amazing thing is nobody seems to be worried about the economic thinking of the AAP, so caught up is everybody in the theatrics of this moment. Right now, AAP is spending the surplus left to them by the Congress Government, itself gone in thirty seconds before it.  

Another one of AAP’s young representatives said it will not be building more flyovers, implying the money is going to be spent on schools, subsidies for the poor and so forth.  If the Congress said 145 new schools, the AAP has been asserting they will build 500!  And the talk on better governance, ration cards, babus working without bribes etc. is also music to people’s ears. But let us not hold our breath on better infrastructure. There is not a word on such matters.

Such is the emotional connect achieved by this audacious stance, that most people assert cynicism has no place in any gazing at the AAP. But despite the improbable razzle- dazzle, the open your hearts, minds and purses (Pay in Rs. 2014 each to AAP online), pitch; the middle class supporters of the AAP who are not closet Communists, need to reflect.

They are unlikely to receive a corruption-free polity just because AAP says so, however zealously. Lenin, Stalin, Mao, even Naxalite Kanu Sanyal in West Bengal, have said it all before Kejriwal,  with precious little to show for it except misery and disruption. Though, it is conceded that the corrupt may indeed become a little wary and cautious till the AAP stumbles and loses its shine.

Meanwhile, it seems apparent already that the bulk of the middle-class and above in Delhi will most likely have to put their money where their mouths are, irrespective of whether they support AAP or not, via higher taxes and levies imposed. Reckless subsidies, people friendly measures, and giveaways to the poor, help build excellent political muscle. Congress knows it. And now the AAP is going one better.

But how long AAP will last in the Delhi Government, is dependent on how much traction it demonstrates in its efforts elsewhere. If it does well, it will be encouraged as Congress’s B Team. It could take away votes from the BJP/ NDA, the regional parties too, and possibly add a little lost sheen to the Congress as well. If not, it will be shown the door very quickly.

But, AAP is already talking over the heads of the current political dispensation. It is speaking directly to the people’s hunger for change. It is saying it will change all Government into its responsive and honest avatar.  Kejriwal is aiming for the prime-ministership himself.

It may be good however to remember that these liaisons between aspiration and reality are never very neat. The poor don’t really trust their sympathisers, and their awakened desires tend to be somewhat endless and difficult to fulfill.  The bourgeois have always been mistrusted by the poor and working classes, seen as some kind of hapless buffer, at the mercy of the powers-that-be. Where would one peg Arvind Kejriwal, who has made a Faustian pact with the Congress? And who speaks of himself as synonymous with the voice of the people?

It is a good thing we are a functioning democracy in the end, when such a motley collection of DIY and change-artist do-gooders pop up and wag their fingers at the rest. But let us not get ahead of ourselves.  Much has happened in just one week. What miracles might the AAP pull off by next week, let alone in the months to come?

(1,130 words)

January 2^nd 2014

Gautam Mukherjee