India needs radical change, here and now!

We desperately need to put in place a government that will govern by taking tough steps without fearing or favouring any ally or opposition all in overall national interest

 

Communism and socialistic systems crashed after glasnost and perestroika in the Eastern Bloc. The state-administered bail-outs and stressed assets are the outcome following the crushing collapses in the Wall Street in the heart of capitalism—Uncle Sam’s United States of America. It also brought about the peoples’ movements of Occupy Wall Street across the US, which rapidly spread to the Eurozone with the PIGS—Portugal, Italy, Greece and Spain—going belly up and pulling down economies of England, Germany and France. In the Middle East, Algeria, Tunisia, Egypt, Bahrain and Yemen have seen regime changes. Some time back Indonesia, Thailand in the Far East and Argentina and Mexico in Latin America went into traumatic crisis situations.

We, in India, were able to withstand the crisis situations initially because of an insulated rupee and fairly strong fundamentals thanks to an astute Reserve Bank of India (RBI) governor who refused to institute full convertibility of the rupee. Our bludgeoning domestic middle-class market absorbing all that is produced or imported, booming stock market and good monsoons went into the phases of Shining India of high growth rate.

There was an unexpected fall of gross domestic product (GDP) growth down to 5.3% in Q3 of 2011-12 from 9.2% of the same period of the previous year, pulling down the rate of annual growth to 6.5%, the lowest in nine years—an alarming situation. The poor showing of the economic parameters has forced the analysts and raters to take a grim view. In March Standard and Poor’s (S&P) found that the weak asset quality and earnings across the Indian banking sector with credit growth was predicted to fall to 16% from the earlier 23%.

Continuous imports and withdrawal of foreign institutional investors (FIIs) has led to balance of payment (BOP) problem. Unless the government reins in the fiscal deficit, India’s inflationary bubble will burst leading to the downgrading of India’s sovereign debt. All this is but a cumulative effect of past inactions. In 2007-08 the GoI overspent its income by one-third by financing over one-fifth of its expenditure through borrowings in 2011-12, the borrowings coming from two-third of its total earnings and one-third of its total expenditure with fiscal deficit crossing 68% of its revenue leaving very little for investment in growth oriented projects. According to a FICCI study the plunging of the GDP from 9% to 6% has robbed 30 million jobs that would otherwise have been created—13 million young people of working age without providing any opening for their livelihood.

The economy can only be put on track by doing what it takes by injecting into it more vigour to make up for the  lost time. The GoI’s strange weak defences by attributing all too global downturn, domestic coalition compulsions are mere hog wash that no longer stump the aam admi.

The entire nation knows and the outside world too knows that it is the present government’s gross mismanagement of the economic affairs and massive corruption that is primarily responsible for the sordid state of affairs.

Yes, the Western meltdown is bound to have a cascading effect on India in the days to come because of shrinking overseas investments, fall in export offtake and their declining realizations and inward remittances.

Today it is the inertia at the top policy making, be it in exports of commodities or food products, lethargy and irregularities in dealing with issues of auction of scarce resources including coal and spectrum, FDI, reforms in banking, insurance, pension, investment in infrastructure, roads, rail and transport, petroleum pricing. They are all self-inflicted maladies of serious neglect. Like headless chickens the government is now running around in search of water to douse the fire when the fire of inflation is raging madly with food prices shooting over 100% in the last few months.

The other lame excuse is not taking policy decisions because of Election code of conduct. Today there is a statement to the effect that decisions on certain critical issues are held up because of the presidential elections! It is not the presidential election per se, but fearing and favours of parties to garner support that is tying the government in knots. There are either parliamentary or assembly elections all through the year which should under no circumstances come in the way of taking vital economic decisions. 

The latest straw on the camel’s back is the virtual stoppage of any economic decision making at the bureaucrat-babu level at Delhi because of the proposed elevation of the current finance minister to the country’s presidency and the consequential cabinet reshuffle.

The president had to back out of major misdemeanours of taking her entire extended family on her international junkets and aborting the construction of a mansion on defence land and close relatives charged with criminal activities. The former chief justice of India is under the scanner. The Parliament is dysfunctional, spending much less time on legislating and more on cross shouting. It is apparent that no segment our society is clean! All the more the need for urgent changes.

It is high time we give a fresh mandate to a new dispensation that will pull the country out of mess that is created by the UPA-2. Even if it means a national government not necessarily all elected. After all, the US Cabinet members are not elected.

We desperately need to put in place a government that will govern by taking tough steps without fearing or favouring any ally or opposition all in overall national interest.

After all we are fundamentally strong economy, with a vibrant stock market, a banking system that is far better and capitally adequate than prevailing in the West, robust manufacturing and service sector. We are blessed with the best of human intellect, a growing middle-class that makes do without much exports and above all adequate natural resources. Sadly lacking unfortunately is the will to get going.

This brings me to some really radical demands; please bring in another long-sighted Interim 2012 Budget substantially raising the taxes on the super rich by bringing in the tax net on their untaxed agricultural, dividend and capital gains incomes. Also to tax their financial wealth with limited exemptions of one self-occupied residence.  Bring back gift tax and estate duty which is going great guns all over the West. Reasonably high thresholds need to be introduced for all.

Re-roll the Railway Budget, even if it means another Rail Mantri after serious bashes, to bring in greater safety and security for the rail travellers. Had this been done we would not have witnessed the Hampi and Dehra Dun crashes, we still keep our fingers crossed no more?

Reuters has just put out a new US Internal Revenue Service data containing startling revelations of six rich families paying no federal income taxes in 2009 though reporting of average incomes $202.4 million each.(http://link.reuters.com/vec68s). Another six paid no tax and another 110 just 15% or less. Overall 400 paid an average of federal income tax at the rate of 19.9%, the same rate paid by a single worker earning just $61,500 per annum. “The top 400 earned five times that much every day.  Just 82 of the top 400 were taxed in accord with the Buffet Rule proposing a minimum tax of 30% on incomes greater than $1 million. This report covers only the 400 highest income reported in their tax returns and not the 400 highest actual incomes which are much more. By what economic, political or moral standard should the working stiffs be forced to pay their taxes immediately, while plutocrats pay by-and-by? Any why should anyone who makes more than $200 million live tax free... these are hard facts about the zero-to-low tax burdens of the richest Americans promoting a class war.” 

Today, all that is said of the US is more aptly applicable to our Indian conditions where we have more and more crorepatis, the local  equivalents of billionaires or Ultra-High Worth Individuals, with high-end swanky residences, with in-house jacuzzis, gyms, swimming pools and helipads on terraces, limos, private planes, yachts, farm and beach houses. They itch to figure in Forbes’ lists of billionaires and yet pay no or extremely low taxes while millions of their folks die of starvation and malnutrition, heavy debts and no toilets (our Planning Commission spends Rs35 lakh on ‘repairing’ just two toilets!)  Yet they are unable to justify the per capita average income of Rs28 per day that is equivalent to US 50 cents.

The old order has to change, here and now, enough is enough!

(Nagesh Kini is a Mumbai based chartered accountant turned activist.)

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