It appears like the Congress led UPA Government is jinxed and cannot govern without controversies and political firestorms driven because of scams involving humongous financial irregularities and astronomical amounts. The Government is once again in the dock because of its hazy policies. The Times of India rocked the entire nation this morning when it published a story on its first page which claimed to have possessed a copy of the draft report of the Comptroller and Auditor General on coal blocks allocations which said that the Government had lost about Rs 10.7 lakh Crores by not auctioning coal blocks and by extending undue benefits to public as well as private sector enterprises. The CAG last year had pegged the amount of loss caused because of the non-auctioning of the 2G airwaves at Rs 1.76 lakh crores.
Although this figure remains disputed till date but the fact is that this scam could be six times the worth of the 2G scam. What ensued next was a very predictable pandemonium inside Parliament. Finance Minister Pranab Mukherjee issued a clarification in the Lok Sabha and said that the CAG’s report was just a draft report till now and was yet to be finalized. The PMO also issued a statement in which it said that it had received a letter from the CAG this afternoon in which the CAG had written that the report wasn’t final yet and the figures quoted were based on certain observations which are yet to be thoroughly examined and discussed. Whatever be the outcome of this report, I think it’s time for the Government as well as the industry captains to revisit certain policies which include concessions, waivers and incentives being granted to corporations. It’s not unethical to give industries concessions because industries require boosts and they are also run by citizens of India but what we need to ensure is that national resources are not illegitimately privatized. Natural resources happen to be the property of the public and the Government is its custodian. It’s the job of the Government to ensure that if any concession or incentive is handed out to the corporations then the benefit of that concession reaches the citizens. If it hasn’t then it’s nothing but a fraud involving immense national treason.
People who can afford to pay heavily are not at times charged highly because the Government intends to hand out corporate subsidies to them so that their input expenses go down and they sell the product attained by means of a subsidized resource or contract at cheaper rates to the consumers but many a times the corporations acquire resources at cheap rates and then they sell it to other corporations at very high rates in the name of dilution of equity. Some corporations don’t do that but then they go on to charge a lot more from the consumers for the sake of greater profits and completely ignore the Government’s intrinsic intention with which they were handed out these benefits. At times the corporations lobby for such kind of policies and the Government functions under their behest to facilitate this loot. This is unjustified and a dubious practice.
India’s growth story ever since de-regulation in 1991 has been both awe-inspiring and meteoric. The pace with which the Indian Economy went on to expand its GDP made the whole world take notice of India’s economic juggernaut. Within a period of decade’s post-globalization, India along with China was labeled as ‘superpowers’ in the making. However, two decades have now passed since the end of the infamous license raj system in India and things seem widely improved but the year 2011 saw a slight dip in the growth rate of India Inc. Analysts say that this down stride is not to be taken lightly and if India Inc intends to keep the cash registers rolling they have to take certain drastic measures or else the alphabet ‘I’ will most commonly refer to Indonesia instead of India on the map of global economic affairs.
There are umpteen reasons behind the stalling or slowing down of the growth process in India. The first and the most evident one is policy paralysis or governance deficit. Leading industry players were the first ones who brought up this issue after an ample number of reformatory measures were put in the cold storage or on the backburner by the Government of India. It’s a world renowned fact that political instability leads to economic instability and India’s fractured polity doesn’t help the cause. Amidst a politically volatile environment, the over embattled Union Government of India has lost the appetite for reforms and a disrupting Opposition only adds to their woes. This problem of policy paralysis can be overcome only when all the stakeholders involved in the political spectrum of India rise above partisan politics and get back to the job of legislating. All parties need to be fully committed to getting the Indian Economy back on track and for this purpose; a broad consensus needs to be evolved among all the stakeholders on key reform issues.
Another major headache for the Indian Economy has been inflation or price rise. This has developed because of the imbalance in demand-supply proportions. Many a times, more of demand and less of supply escalates the price of commodities and items. Several corporations indulge in hoarding to artificially force the prices up in order to register higher profits. The Government needs to crackdown upon all those who indulge in hoarding to keep the prices in check. Secondly, the Government needs to build an investor friendly environment by doing away with complicated rules and regulations which promote red tape to pave the way for the entry of new firms in the industry to increase supply and to bring the spiraling prices down. The complex issue of the ever-growing fiscal deficit has also given sleepless nights to India’s economic policy makers. One of the solutions to the complex problem of fiscal deficit is by cutting down on various subsidies, be it food or petroleum. However, to enact this proposal the Government will need to muster a lot of courage as subsidies happen to be integral electoral issues in India and a reduction in them would mean a substantial vote swing away from the incumbent government.
A string of more problems faced by the Indian economy are primarily interrelated. They are the issuing of pink slips to employees, sharp fall in per capita income, foreign firms exiting the Indian market, etc. India needs to come up with landmark legislations to deal with these concerns. We need to open up the closed doors of promising Indian sectors like retail. This will bring in the necessary capital which will serve as a boost for the beleaguered Indian economy. The entry of foreign players into the market will also ensure hiring and some talented individuals are sure to meet the cut. The capital brought in by these firms will inject a fresh breath of life in the industry. This investment will be of high criticality and will save the economy from getting derailed. The entry of foreign players will also ensure the entry of better and more feasible technology. India is bound to benefit technologically by such measures. Overall the solution looks to be very simple on paper; open key enclosed sectors for foreign investment, they’ll bring in capital and technology, hire employees and will help in pushing up profits and per capita income. We also need to put a brake on the trend of foreign firms exiting India successively. This has been happening because of the lack of skilled labour in the industry. This concern needs to be tackled with a more holistic and far sighted approach. India needs to improve its education sector vastly and needs to inculcate technical know-how among all students attending the various temples of learning across the nation. This will improve the quality of students graduating from colleges and universities who in turn will turn out to be better skilled professionals in the field. But this is a long term measure and will require tons of patience.
Even though the year 2011 raised many critical questions for the Indian economy but the fact that the Indian growth story has ended eludes all aspects of truth. India is very much on the path towards inclusive growth and if we are able to resurrect certain faulty sectors within a feasible period of time, the Indian economy will very soon become an even more powerful force to reckon with.
Black money is a big concern and this concern was raised by veteran BJP leader LK Advani in his Jan Chetna Yatra. The Yatra wasn’t a big success but following that Mr Advani moved an adjournment motion against the Government in the Lok Sabha which was swiftly defeated by the Government. The debate on black money was a bit disappointing for me as it came to a very timid ending. Plus the response from both the Government and the Opposition wasn’t very encouraging. They were indulging in scoring political points instead of addressing the issue. Only a few looked really committed to the cause.
The first issue which was put on the table was the one concerning the revealing of the names of all those who had a Swiss Bank Account. The Government turned down the request and rightly so. The Government has got information of these accounts by means of international treaties which it signed alongside many countries. These treaties are governed by strict secrecy laws. The Government cannot make public the names of the account holders. If it will do so to fulfil the political appetite of a hungry Opposition, then it will violate an international treaty and won’t get any further information regarding accounts held by Indians in Swiss banks thus bringing to an end India’s search for its lost billions in the form of tax evasion. Naming the ones who feature on that list is not the solution to the problem. Effective measures need to be enacted to punish those who’ve committed the crime.
Secondly, the list also comprises of the names of a few legitimate account holders. The Government cannot make public the names of all those who have a legitimate bank account overseas. It would violate their privacy. In fact it cannot even make public the names of the illegitimate account holders because of (a) International treaties and secrecy agreements the treaty is governed by (As I stated earlier) (b) Because of citizen’s right to privacy. Recently a court in India instructed Delhi Traffic Police to stop posting the photographs of all those who broke traffic rules on Delhi Traffic Police’s Facebook page as it amounted to breach of privacy.
The second issue which was raised was regarding the amount of black money stashed abroad and the size of the Indian Black or Parallel or Shadow Economy. Organizations including the BJP Task Force have come up with estimates on this but it’s something which is based on assumptions rather than on facts and numbers. The Government has no record of this. It just has the names of those who have Swiss bank accounts, not the amount of money held inside them. The Government has assigned the job of predicting the amount of black money stashed abroad to a number of financial organizations operating under its umbrella. Mr Pranab Mukherjee, the Hon’ble Finance Minster, said that India entered into a pact with Switzerland in which they assured the Indian Government of prospective information in relation to Swiss Bank Accounts starting 1st April 2011 but denied them retrospective information in relation to bank accounts of Indians in their country. I side with the Government on this particular point too.
The third issue was regarding the steps taken by the Government to tackle this issue. I would like to criticize the Government a bit on this. Even though Mr Mukherjee highlighted the work done by the Government in relation to black money but I wasn’t convinced. Mr Mukherjee even promised Mr LK Advani a white paper on black money but that isn’t enough. He quoted financial experts who said that the Indian Government has made a huge progress within no time on this matter but the fact remains that there are serious loopholes. Till now the Government should have clearly categorized the names of the account holders under two categorizes, legitimate and illegitimate. The Government should have tried to analyze the accounts of all the illegitimate account holders. What kind of wealth (tax evaded money, ill gotten money, money earned by indulging in illegal businesses) could be inside that account? I am sorry to say that the Government hasn’t done that. The Government needs to expedite the process and progress immensely. The UPA Government cannot escape the blame by saying that the NDA during its regime did nothing about it. The UPA Government is a sovereign government with a great set of duties on its shoulders. It needs to operate with efficiency and honesty. It shouldn’t try to look out for an escapist route. They’ve been elected to address issues like these. If they’ll fail to do so then they’ll also be shown the door just like the NDA was by the electorate of India.