This paralysis is killing the economy
By Dr Bharat Jhunjhunwala
Businessmen are complaining that the Government has gone into a policy paralysis. Required measures to jump-start the economy in face of global slowdown are not being taken. The UPA Government is dependent upon the support of BSP, DMK, SP or Trinamool to have any legislation passes in both the Houses. These smaller parties are not supporting the Congress hence the Government is not able to move forward.
Pray, why should these parties oppose such policy measures? Reason is that the proposed legislation is mostly anti-people. The Congress can possibly dare to implement these under the charismatic aura of the Gandhi family but smaller parties do not have such luxury hence they are not following the lead of the big brother.
The disconnect between the Congress and its supporting parties was most visibly seen in Trinamool opposition to opening multi-brand FDI in retail. Mamata Banerjee assessed this policy to be anti-people. It is true that FDI would make available certain imported goods at cheaper price to the Indian consumers. However, most imported goods are bought by the middle and upper classes. The poorer people working in the street corner shops stand to lose their jobs. Farmers may gain. But this big gain too will be restricted to the big farmers who can enter into a contract with the MNCs. The quantum of this gain is also not disclosed by the Government. It may be that the loss to the street corner shops is more than gain to the farmers.
Second paralyzed policy is that of land acquisition. The proposed Act is indeed better than the existing one. However, it continues to allow forcible acquisition of farmers’ land for private developers and businessmen. Third policy is of Goods and Services Tax (GST). The Government wants that excise duty and sales tax should be imposed on all goods at one single rate so that dispute and litigation can be reduced. It is necessary to take the State Governments on board to implement this because they collect and use the revenues from Sales Tax. This is good from the standpoint of economic growth but not from that of the people. Taxes will be imposed at the same rate on the poor man’s bicycle and rich man’s Mercedes car in the GST dispensation. Small states that mostly import goods and large states that export goods will be forced to impose taxes at one agreed uniform rate. This will remove the flexibility and freedom of smaller states to adjust tax rates according to their circumstances.
Fourth paralysed policy is that of subsidy on diesel. The Government has rightly linked prices of petrol with that of crude oil in the international markets. Next in line is diesel. This will impact the common man directly due to increase in price of goods that are transported. Nevertheless I support increase in price of diesel. However, this should be combined with measures to neutralise the impact on the common man. This would be appropriate if simultaneously rate of tax on goods consumed by the common man is reduced. Problem is that the Government wants to impose burden on the common man from increase in the price of diesel but refuses to neutralise the impact by giving tax concessions elsewhere.
Fifth disputed policy is that of disinvestment. Basic principle of economic reforms is that the Government’s role in business should be reduced. Public Sector Undertakings should be sold off to private businessmen in order to eliminate interference of ministers and bureaucrats. This will remove the need for the Government to impose taxes on the people to provide subsidies to loss-making undertakings. But the Government wants to do exactly the opposite. It wants to disinvest part of its shareholding while keeping intact its control over the undertakings. Recently the Government has provided funds to the mismanaged and ailing Air India. This policy will increase role of the Government by providing yet more funds to the bureaucracy to waste and leak. Sale proceeds from disinvestment will be used for increasing the role of the Government in the economy; instead of being used to reduce the burden of tax on the common man.
Sixth policy is that of generating more electricity at any cost. The Kudankulam nuclear plant in Tamil Nadu, Lower Siang hydroelectric project in Arunachal and host of thermal plants will impose huge environmental and social costs on the local people. Electricity produced will be sent out to light up the shopping malls of Delhi and Mumbai.
Seventh policy is that of Jan Lokpal. The Congress should have brought such legislation on its own. Instead of supporting the legislation suggested by Anna Hazare, the Congress is trying to entangle it in procedural technicalities. The Government does not want to provide a window to the people to expose the corruption that is pervading all around.
All the above mentioned policies are beneficial for the ministers, bureaucrats and the upper classes but harmful for the common man. Note that legislations such as the Right to Education and Food Security Act have not faced opposition from the same Trinamool and other supporters of the UPA. This proves that the problem lies not with the coalition politics but with the anti-people agenda of the Congress. Pro-people legislations can sail smoothly but anti-people legislations get stuck in a policy paralysis. The global slowdown has made the problem worse. It was possible for the Congress to pass these anti-people legislations when the economy was booming, foreign investment was pouring in and exports were buoyant. The harm to the people from these policies was, at least, partially compensated by the buoyant demand for labour and goods. Such compensation is not taking place now due to the global slowdown. This is exposing the anti-people nature of the proposed policies and making it difficult for the supporting parties to go along as was seen in the FDI episode.
It should be admitted that the Congress has implemented pro-people policies like employment guarantee and loan waiver. However, that does not cancel the anti-people nature of the proposed legislations that are lying in a limbo. BJP’s position is more people-friendly on privatisation of Public Sector Undertakings and opposing FDI in retail.
The businessmen are demanding that the Government comes out of the policy paralysis and implements some of the above mentioned pending legislations. Job of the business is to make profit. They are scarcely concerned about impact of the policies on the people’s welfare. They are justified in demanding that the Government breaks out of the paralysis. It is for the Government to come up with a package that is both people and business friendly. In my view, the present paralysis is good in absence of such a pro-people policy initiative.