Modi Model should replace Chidambaram constructs

Modi Model should replace Chidambaram constructs

By M.D. Nalapat | 17 June, 2017
There is still a strong residue of the past and its practices. Now that three years are over, we are entitled to expect much more Modi and less of the past in the future.

News reports are that some Members of Parliament (MPs) asked Civil Aviation Minister Ashok Gajapati Raju for “automatic upgrades” to Business Class on all flights, whether these be the national carrier or private airlines. The journalistic fraternity needs to identify the names of the individuals who made such a request. MPs, after all, are expected to be Representatives of the People, and it must occur to even the less curious of them that few of their constituents can even afford to travel Coach Class, as air travel remains a luxury for the overwhelming majority of citizens of a country that remains low income despite seven decades of freedom. In case any MP were to initiate a Private Member’s Bill limiting the moneys spent out of the exchequer for the total expenses of each MP to an annual amount that does not exceed ten times the per capita income of India, that would be welcome. Judging by the SUVs they alight from, and the dresses and watches they flaunt, it would appear that a large proportion of our MPs resemble US Senators, all of whom—bar perhaps the forgiving (Hillary Clinton) Bernie Sanders—are millionaires, if not billionaires. In memory of Mahatma Gandhi, it is time our MPs ensured that their own lifestyles conform to those of what Gandhiji termed the “dumb millions”. Television channels need to regularly air the lifestyles of individual MPs and their families, to check on how closely these reflect the realities of existence of those who voted them to their high responsibility. Public service is precisely that, service to the public, and this is scarcely possible if those involved live in the way this country’s colonial masters did. Gandhiji taught the value of sacrifice, but these days, the only “sacrifice” those who constantly repeat his name indulge in, is to go once every year to Rajghat and sit in mock contemplation, while the cameras roll. 

As for our underpaid officials, an amazing number of them seem to have mastered the art of sending their children to study in expensive foreign universities, or ensuring that their spouses regularly go to Europe for shopping expeditions, despite the pathetic salaries that the Government of India pays even its top officials. It is, of course, entirely coincidental that most of the time spent by successful businesspersons in India is devoted to sharing quality time with officials and politicians. Certainly our officials need to be paid more, and a way of ensuring that would be to create a “revolving door” through which jobs could be exchanged between government and private sector, thereby allowing individuals to spend some years in the underpaid world of officialdom, before replenishing bank accounts in private entities. Those who claim in feigned horror that such a move would encourage corruption, are being hypocritical, as the present watertight silo system of official recruitment and staffing has nevertheless led to substantial graft. Only leaner procedures and greater transparency in operations (for example, through a deepening of the RTI and in more hearings and processes being streamed over the internet) will lead to a cleaner administration, not straitjacketed recruitment systems that consider public and private service as mutually hostile entities. 

A businessperson takes a loan from a nationalised bank, usually after being recommended to the chairperson by a bank director appointed for the purpose. He then ensures inflated prices for imported equipment, thereby getting back the money spent on equity within a few months of the commencement of operations. Further purchases for the entity go to swell external bank accounts, even while the business gobbles up more and more tranches of funds. Finally, when it becomes impossible to lend any more money for the sole purpose of repaying old loans, the company goes “sick”, while the owners create new “healthy” entities that enter the same cycle. A regulatory environment of high taxes, North Korea-model regulations and lack of accountability and transparency in decision-making has ensured that only crony capitalists thrive on one company’s crash after the other, in their path towards hyper riches hoarded abroad, while bona fide entrepreneurs go bankrupt or leave this country. India needs a new class of entrepreneurs not tainted by the practices of the past, but for this to occur, there will need to be a substantial reduction in the difficulty of doing business, and a fall in tax rates. Officials look only to covering the current year’s expenses while fixing tax rates, neglecting the fact that over a three- or five-year period, lower rates lead to much higher collections. We need to exchange the Palaniappan Chidambaram model of vexatious rules and constant harassment for the Narendra Modi model of “minimum government, maximum governance” i.e., low rates and low penalties, leading to high compliance. The absurdly high penal rates set for black money disclosures during the past few years has led to the pathetically low level of recoveries seen thus far. Less than one dollar out of every two thousand dollars of illegal income banked abroad had returned by 2016, when a more rational penalty structure would have led to a manifold increase in such recoveries. Similarly, hyper-high penalties for declared illegal domestic income have led to a similarly low level of success of the black money mop up schemes. 

There is still too little of Modi in several of the fiscal, regulatory and monetary policies of a government the people elected to power with a Lok Sabha majority entirely because of their faith in the PM. There is still too strong a residue of the past and its practices. Now that three years are over, we are entitled to expect much more Modi and less of the past in the future. A qualitatively new generation of entrepreneurship, of officials and of politicians, is needed for India to succeed in becoming a middle income country during the next decade.

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