Our Tryst with GST* – * Conditions apply!!!

GST – The Good and Simple Tax, as our acronym lover PM touted during the launch on 30th June is finally a reality after almost 11 years of intense labour. This along with FDI in retail must count among the most awaited reforms in India by India observers.

So, the advent of a single tax which subsumes, at last count, some 17 different taxes and myriad cesses certainly must count as the single largest Tax reform undertaken in India. Not to forget the application of tax only on value added in the chain. Along with this simplification, the fact that goods from one state can pass thro different states without wait, harassment and accompanying corruption portend a new beginning for trade in our country. In the pre-GST era, logistics and warehousing strategy of companies have been dictated by tax compliance rather than supply chain considerations. In the sense, the number of warehouses and their size would be driven by billing point concerns rather than geographical spread of demand. In the GST era, warehousing will depend on supply and demand equations and not taxation points. And hence like in most developed countries, companies will get to run larger, integrated and fewer of warehouses. Development of more efficient logistics hubs, warehouse consolidation and ensuing FDI will become a reality soon. This is a new dawn for retail, supply chain and logistics industry.

So with all the seemingly obvious benefits of the GST regime, why is it that there is still some cynicism and negativity from different quarters about the move? Why is P. Chidambaram once the prime mover of GST when UPA was in power, cautioning all of us to “Get Set for Turbulence”? The GST in the current form is nowhere close to the one which was originally conceived. Rolling stones probably gather no moss. But a rolling GST gathered whole lot of moss on its way from the wisdom of empowered committees to standing committees to GST council. The current version of GST is a product of what I call “co-operative federal bullying”. The result is instead of the One Nation, One Market, One Tax premise, what we have is One Nation, One Market, One Tax name, 3 Sub Tax names, Multiple Rates, Few Exceptions, Some flexibilities and with an *. * – Conditions apply.

Being part of the GST council, the states in their own wisdom, ensured that we as a country don’t get away with a simplistic tax which may throw many Chartered Accountants out of jobs. However, I understand that without having a set of different GST rates (in some cases different rates for the same category as per user segments) or without excluding items like Petrol, Alcohol, Real estate,.. consensus could never have been built in getting GST off the ground. UPA’s failure to make GST a reality during their regime stems from this. So the choice before the centre was to accept what the states demand and bring about a not so ideal GST or wait endlessly for a few more years may be decades before some major economic crisis forces all concerned to come to an agreement on the ideal GST. From that point of view I agree with the stand taken by the Govt. to bring in GST in its present form with its shortcomings, with a hope of ringing in the changes in the coming years. Kudos are in order hence.

The Congress party which at every opportunity reminded us that the seeds for GST in India were sown by the UPA, however, chose to be petulance personified and boycotted the GST launch. While rubbishing the GST in its present form its main “anGST” against GST was that it is being rushed thro and should be delayed by 3 months till September. We all in India know that in our country whatever may be the preparatory time available, things get accomplished at the last minute. If we get more time, we stretch our deadlines accordingly. That if we have more time, we will be more prepared and can do trial runs before actual roll out,.. exists only in theory. Don’t we see in our Indian weddings, folks tying up some loose ends literally till the baraat arrives and continue to do so as the wedding is in progress?  Finally when the wedding gets over, its smiles all over.  So even after the GST roll out, there will be glitches, teething problems and surprises which I am sure we will find ways and means of getting over. Pushing back by another 3 months is not going to make things any different.

It must be commended that this Govt. stuck to the date of July 1. It would have been very easy for the PM and the Govt. to throw in the towel and put off the launch by a few months. But then, there are other implications. Come Oct. it is the peak festival and hence business season in India. Does It help if the roll out happens when India is in the midst of its biggest Annual economic cycle? Will it help if GST is launched in Jan. in the final quarter of the fiscal year???

The ruling party, the BJP counts traders as its important traditional support base for the party. That the party still decided to go ahead with the tax reform which professes maximum disruptions for this group is a significantly courageous move.  In India economic reforms have always been carried out under duress; when push comes to shove. The heralding of GST must be the 1st major economic reform brought in when not under any kind of stress but just to ease up things for the future. This certainly conjures up the arrival of Acche Din for our country.

Still our penchant for complicating things comes to the fore here as well.  Though the GST collections have to be shared between the state and the centre, could it not have been done at the back using technology rather than coming up with 3 variants like SGST, CGST and IGST??? Does the Anti-profiteering clause make sense? Will not competitive economics eventually drive pricing??

GST is indeed a Good and Simple Tax. So there is nothing like a good or better time to introduce the same. But, we should not forget that this is India and we are Indians. So, conditions apply.

Bahubali, Kattappa and some political lessons!!!

With over an estimated 30 mill. people having reportedly watched the film Bahubali 2: The Conclusion, I can safely conclude that most of those who are reading this blog by now would have! This post is not a review of the film or about how the film has broken all collection records in the country either. But about a character called Kattappa and the political lessons it holds for the principal opposition party in India namely the Congress. In the film, apart from the lead characters, Kattappa is the one who evokes much recall and sympathy – a situation very similar to what Congress (which has its own few Kattappas) finds itself today in India.  Kattappa in Bahubali and Kattappas in Congress??? Let me attempt to join the dots.

In the Bahubali series, Kattappa is an able warrior and sort of a leader of the forces of the Kingdom of Mahishmati. In terms of characterisation, Kattappa is shown as an extremely loyal, most faithful and a trustworthy soul who will do anything to protect his master – the ruler of Mahishmati in this case. He doesn’t mind others alluding him to a dog scornfully – a creature known for being utmost loyal to its master among all pets. At the same time, repeatedly he is depicted to be a prisoner of his own choice he has made in terms of being loyal at any cost. In the film there are 2 crucial mistakes he commits as a result of putting his loyalty ahead of being truthful. First, he lets the Queen announce Bhallaladeva as the King setting aside the earlier announcement of Amarendra Bahubali without making any attempt to clear the air in the Queen’s mind about the right and good intentions of Amarendra in wanting to marry Devasena. He makes no attempt to let the Queen know that Devasena likes and prefers only Amarendra to be her life partner. Second, he carries out the order of the Queen to kill Amarendra though he knew very well of the conspiracy of the Bhallaladeva camp to create misunderstanding and confusion in the Queen’s mind. These crucial mistakes deprived the people of Mahishmati the governance of a benevolent leader like Amarendra and instead were at the mercy of an unkind and autocratic ruler like Bhallaladeva.

Well, that’s what happened in the 2 part film that helped the Director weave an interesting story of palace intrigues in a huge canvas unseen so far in Indian films and create history!  But what has Congress to do with this?

Today in India, the Congress party is in crossroads and may be at its lowest ebb. The climb has been downhill since 2014 when it was reduced to an all-time low in the Lok Sabha. The string of defeats in most of the state elections since then have been catastrophic. The principal ruling party in India namely the BJP is systematically moving forward on its slogan of making Bharat – Congress Mukt. Apart from Congress there is no other party which can be called truly a Pan Indian political outfit. Under these circumstances for a democracy to be one, a truly credible opposition party with an alternate narrative is a must. Any ruling party must have at least one if not few other parties breathing down its neck any point in time for its own checks and balances. Not to mention of the country’s. And that’s why a revival of the Congress party from where it is today is a must.

Congress led UPA had their chances in changing and developing India for 10 years since 2004. I am for the moment ignoring the 50 years they had, prior to 1998.  Congress had and in fact has quite a few Kattappas in their ranks. Experienced, Able politicians and administrators who I believe had answers and solutions to the many ills the country faced when they came back to power rather providentially in 2004. However all of them ended up being true Kattappas who only put loyalty to the rulers (Gandhi family in this case) as their priority and did what served the family well rather than the country more often than not. The result – in spite of the benefit of global tailwinds helping the economy till 2010, UPA couldn’t change things much on the ground in their 2nd term and lost the elections to BJP in 2014.  The many new ideas their leaders had, got intertwined in turf battles between ministries and never were implemented with rigour. Coming back to the present, the Kattappas of the Congress continue their old ways the string of bad news at the hustings for the Congress notwithstanding. The able leaders still remain so loyal to the Gandhi family that even today they are reluctant to come out with their honest prescriptions to revive the Congress. They all make the “right” noises in public but being “right” is seldom being “honest”! The Congress today suffers from a uninspirational leadership in the Gandhi family. However the very able and even intelligent Kattappas of the Congress party continue to labour paeans on the Sonia-Rahul leadership without ever being critical of some of their moves since 2014.

My view is that unless the Congress party’s leaders come out of their loyalty web and challenge the strategy and some of the decisions of the party’s leadership thereby leading to some churn in the thinking of the party, the drive may continue to remain downhill for some time.

Coming to think of it, it took us 2 full years since Bahubali 1: The Beginning for us to comprehend the ill effect of Kattappa’s mindless loyalty to the rulers. It’s already 3 years now for the leaders of Congress to realise the ills of theirs. And if they are among the 30 million to have watched the film, it may be good to take some political lessons from the on screen Kattappa!!!

P.S: In the above piece, one can “find” Congress and “replace” with AAP and I guess most of it will hold good as well!!!

And the winner is “None of the above” !!!

It is the 16th of May. The day of reckoning for not only the candidates who are in the poll fray but also for the pollsters who have been predicting swings, vote shares and election results. I wake up early, finish my morning chores also early and plonk in front of the idiot box which will soon have experts who will make nonsense out of sense and vice versa depending on how the results swing. After all, this election has been touted as one which will change the destiny of our country in many ways than one. At this time I didn’t realize the tinge of prescience embedded in this statement.

As is the wont, the first one hour indicates only leads and everyone except the one who leads dismisses them as very early trends. But I could sense some tectonic change waiting to happen. Much to my delight, the candidate whom I voted in my constituency was leading. And whom did I vote for??? This is a dilemma I always had when I went to the booth to vote. Whether to vote on the merits of the candidate in my constituency or vote for the party I want to see in power irrespective of the merits of the local candidate. More often than not I found that the party I want to vote has fielded a lousy candidate and the best candidate in my area belongs to the wrong party. But this time, actually 1st time for me I had the option to beat this dilemma by pressing the “None of the above” button and come out happy. And that’s what I did. And in my constituency None of the above is now clearly leading.

NOTA_295x200

Wait a minute. As counting progresses, in many constituencies across the country as the experts were getting flummoxed to explain (but still manage to justify that it was a clear wave not just against incumbency but also against the challenger and all other fringe players blah blah blah) None of the above was emerging as the winner by far. By evening as the Pan India results starting coming out it is clear that the Indian voter has once again spoken and spoken smartly. In the total 543 seats for the Lok Sabha no party or a Pre poll alliance emerges with a clear majority. Reason being, None of the above win in 220 seats out of the total 543. So BJP and the NDA get stumped for the 3rd time with just 120 and 156 seats respectively. The silver lining was the Congress. Silver lining – because it is exactly as per prediction. As one expected they end up at 90 with 77 seats going to the 3rd, 4th, Nth fronts.

By evening parties reconcile to the bizarre result and start mouthing the usual “respect the verdict of the people with all humility” line predictably. One could see that it was difficult for the Congress spokespersons to hide their glee as their archrival- the BJP has been downed once again. Anish Tiwari said “Is me Kattar Soch Nahi, Yuva josh hai. Holistically is Parinam Hume manzoor hai” The mood in the BJP camp is of utter disbelief and despondency. While they had planned their campaign meticulously, they had not bargained for such an outcome at all. The BJP parliamentary party meets quickly and resolves to respect the verdict and support None of the above if they wish to come together and form the Government. Emerging out of the meeting party patriarch Lal Krishna Gidvani (summoning all his histrionic skills to hide his elation) says,

“Hum Vinamrata se maan te hain is haar

Abki bar NOTA Sarkar

Jai Hind”!

In the meanwhile all the None of the above candidates meet and elect their senior None of the above as their parliamentary leader who will become the PM. They shortly meet the President and stake the claim for forming the Government with BJP providing outside support. The next day newspaper headlines, TV tickers and Web banners scream – “Historic verdict – And the winner is None of the above”!!!

It is now the 20th of May. The dust has settled in what was a historic election in the world. India now as None of the above as Prime Minister. And the members of the Cabinet read as

Home Minister: None of the above

Defence Minister: None of the above

External Affairs Minister: None of the above

,…

,…

Ranjay Garu Ex Media advisor to PM Nanmohan Singh is still doing the TV rounds to promote his book “The Incidental Prime Minister”. In one of the channels, the anchor asks him

Anchor: So what do you think of this unprecedented election outcome now that None of the above has become the PM of India

Ranjay Garu: What is so unprecedented about this? I thought for the past 10 years we had one None of the Above as PM!!!

India is now making rapid strides in the economy front with None of the above running the Government meticulously with his None of the above colleagues. None of the above are involved in any scams and corruption is a thing of the past. In world fora, the only thing is top of the lips of all leaders is

None of the above

None of the above

What is wrong with you, blabbering None of the above, None of the above in your sleep?? This is the problem if you watch so much election rubbish on TV!!! Wake up now.

 

Na Tired,… Na Retired,…!!!

I like Jaswant Singh. I think he was arguably India’s best External Affairs minister in the post Nehruvian era. I cannot think of another politician in that time who could have handled the diplomatic fall out of the Pokhran tests during the Vajpayee regime better than him. When I recently read his book – ‘A Call to honour-In Service of Emergent India’ where he elucidates the complex negotiations he had with the US leading to the relaxing of sanctions much earlier than the world expected, my respect for him went up a few notches. So it was extremely sad to see the same Jaswant Singh last week waging a lonely battle of sorts with his party for not nominating him from the seat of his choice. When the party wanted him to retire gracefully, he wanted to retire after a last race!!! He was visibly tired. Even the vocal energy was missing. Those grandiose articulation skills which helped him stave off many a diplomatic challenge didn’t come of use in his own turf battle. Diplomacy they say is “an art of give and take” or rather “appearing to give and take”. Jaswant Singh nor the party leadership was in any mood for even appearing to give in. The result – Mr. Singh had to throw in the turban in the election ring as an independent and has been expelled from the party. While the curtain on his career is certainly down if he loses, I am not sure if the climax will be anything interesting even if he wins. With this episode, has he become a foot note a petulant one in that in the party’s history?? History will judge.

It’s not just Jaswant Singh. We have leaders across the spectrum of parties in India for whom a “graceful exit” is an alien concept. At an age of 87, one would expect a patriarch to provide abundant blessings, plentiful advice and be a fatherly figure. But, here we have Mr. Advani throwing fits about where he will contest for the next Loksabha elections. When his tenure ends he will be 92 – not an age one expects to have the energy to energize the nation of a burgeoning youthful population. Giving him illustrious company is the “Kalaignar” from South – Karunanidhi who at 90 is doing all what he can to prevent the “Rising Sun” from sinking. The visuals of an immobile leader being wheeled from meeting to meeting his mastery over Tamil language notwithstanding are hardly inspiring.

knidhi

Is it just politicians?? Nope. In sports too, we have enough examples of exits happening only when push comes to shove. It was my humble opinion that even God aka Sachin Tendulkar called his retirement a couple of years late. In the context of retirement, a very used cliché is – “One must exit when people ask why now and why not?” However if one surfs through history of legends, it is mostly of the “Why not” variety. Whether it was Kapil Dev or Saurav Ganguly. That’s why a Sunil Gavaskar who stepped down from captaincy after a World Championship win or retired from tests after one of his best knocks is still respected and that’s why a Rahul Dravid who decided to hang up at the 1st sight of self-doubt will be spoken with high regard.

This disease has plagued industrialists who run empires as well. I know of a group where the Chairman who in his late 80’s still tries to be active in running the business. He used to say that he will stop attending office the day his son (in late 50’s) starts acting responsibly which is when he attends office on time!!! And his son used to claim that he will be in office on time the day his dad has confidence in him and stops attending office!!!

Hence in this “I will not give up” atmosphere, one was pleasantly surprised to see Jairam Ramesh of the Congress declaring that in his party, leaders must retire at 70. It’s another matter that his party soon disowned his lofty comment as a personal lament.

Let me for the moment limit this issue of “No Voluntary Retirement” to the sphere of politics as that is of public importance. It can be safely concluded that but for extreme bad health nothing else stops politicians from trying to be politically active. Are physical strength and mental alacrity not critical in matters of governance? Jairam Ramesh also added “People unfortunately in India don’t know when to exit. That is why most mentors become tormentors”!!! Is this “not stepping down graciously” an “Indian” thing? For want of adequate information, I am unable to conclude. Is it time to amend laws to stipulate upper age for contesting in elections? Will the leaders who hang around themselves will ever come together to bring about this legislation?

Only time will tell. Till such time, as Atal Bihari Vajpayee a man with a liberal gift of the gab once said “Na Tired, Na Retired” will be the overarching theme for our netas. “Young nation with Very Old leadership” is what looks like is preordained for our country. But I think the time has come for a national debate on this.

“Hello!

 Is this Mr. Kejriwal speaking,…???”

 Cartoon credit: www.cartoonistsandeep.com 

Karnataka today, India tomorrow !!!

democracy-circus3In this election season, you cannot be blamed for mistaking the title of this post for a war cry of one of the National political parties say the Congress or the BJP. I.e. to capture Karnataka today and India soon after. After all, as Karnataka votes today for its destiny driver for the next 5 years (hopefully), the ball has been set rolling for a string of state elections to follow and then the final Loksabha election mid next year i.e. if the present dispensation lasts its full term. War cry of a party is last of my bother. But, loud cry I keep hearing of the Mango people is.

I cannot but avoid sympathizing with my Karnataka friends as they brave the hot may be not so hot sun and exercise their democratic right today. What is the choice they have?

• Do they again vote and bring back BJP – which made a royal mess of its maiden Southern venture?? 3 Chief Ministers in 5 years, rampant factionalism and infighting, the honour of making “Garden city” a pitiable “Garbage City” today, Corruption charges galore, No governance… have made BJP a party with No difference.

• Do the people of Karnataka repose their faith on Congress – which must take responsibility for the lack of basic infrastructure like roads,… even after ruling the state for more than 50 years since independence? Is there a leader in Congress in the state who can make it happen in the “IT” State?

• Or they throw their weight behind Janata Dal (Secular) helmed by Kumaraswamy Gowda an Ex- Chief Minister himself. If Bangalore is sick and languishing at the bottom of the economic growth table, this secular party has to take fair share of the blame.

• Or finally will the Karnataka praja make my worst nightmare true? Is he actually readying to make Yeddyurappa of Karnataka Janata Party the King or a Kingmaker?

For the citizens, today is a stressful day. The choice they have is to choose the Best among the Worst. As a nation did we opt for democracy to choose the good among the rotten? No wonder there is so much apathy among people today to go and vote. Frankly, if I feel that the candidates in the fray are not worthy of my vote, do I have a choice to express the same?

Though sitting in Mumbai I’m not in a quandary today, I’m worried. Worried because what my Karnataka mates are going through today, many of us have to endure when the time comes to vote for the party/front at the Centre. It looks like “A scam a day may soon keep Dr.Manmohan Singh away”. With an early election looking imminent, the dilemma for the voter gets bigger.

I presume that most fellow Indians have had enough of this Congress led UPA and are craving for a change. For them to satisfy their craving, they need options to vote for in the next General elections. In states where BJP is strong (and that is only 6-7 states I guess) may be they have the option of voting for BJP. But in most of the other states one has to dive into deep-sea to escape from the Congress Devil. In many states where BJP is absent or present in absentia, the people have no choice but to exercise their “Best among the Worst” rule while voting. When they do that, they give fillip by default to parties like the Trinamool Congress, CPI/CPM, YSR Congress, Janata Dal (Secular), Shiv Sena, Samajwadi Party, Bahujan Samaj Party,…,…which again start extracting their pound of flesh when the Government formation time comes. Irrespective of the national sentiment for change we may yet get a Government we never wanted. Because under the present system who will rule is decided not by “National mood” but by “Rational Greed” (Money bags, ATM Ministries, Rajya Sabha nominations,…) of the fringe parties who claim to promote the cause of Regional and Sectarian aspirations but in reality have been furthering their own “cases”.

I call this the “Democracy by stealth”. So does this “Democracy by stealth” provide the famous “Government of the people, by the people, for the people”??? I doubt.

Problem definition is always easy. Finding solution is not. Yet, let me attempt. The way forward is certainly to “CHANGE” the present system. That could be in the form of electoral reforms which include

• Clearly defining and identifying National parties which have an influence in more than few states

• Mandating only “National” parties to take part in Lok Sabha elections

• Government formations only based on declared “Pre Poll Alliances” and not by convenient “Post Poll Alignments”

• Election Commission to define a template and minimum criteria for an “Election Manifesto” essentially making the document a “Minimum Agenda for Governance” for the party coming to power.

• Election Manifestos of parties once released during election campaigns must be registered with the Election Commission

• Parties not fulfilling 70% of their manifesto promises should be disqualified from contesting in the next elections. So that there is accountability along with accounts.

Some of the above ideas are indeed outrageous and outside the realm of today’s political imagination. However I strongly feel that small changes may not work. We need paradigm shifts. So that we actually see Democracy at work and not some “Democrazy”!!!

BAN THE “FDI” – WHOLESALE I Say!!!

FDiHearing the cacophony of noises in India’s ‘temple of democracy’ last week on FDI (Foreign Direct Investment) in multibrand retail, one couldn’t help conclude that FDI is back again to haunt us. I am referring to the “Famous Desi Insecurity” among the ‘pujaris’ of the parliament temple.  In the annals of Independent India, this FDI has a long history and raises its head with alarming frequency!

  • 1988:  The topic for a group discussion in a B-School where I went for admission was “Is computerization a boon or bane for modern India?”  Today it looks like such an obvious topic to have any discussion about or have any debate at all – with computing being omnipresent on the ground, on the move and even in the Cloud! However, those days the case for computers had not been wrested. Trade Unions in many establishments across the country were up in arms against computerization which was supposed to leave millions jobless. The “INTEL” inside a PC will leak our country’s secrets and is a threat to our sovereignty was even one of the naïve apprehensions, I remember.  3 decades hence, as I create this piece in my laptop, if I attempt to explain what actually the consequence of computerization is, I will be only accused of stating the obvious.
  • 1991: The year in which liberalization and reforms were undertaken by the Government when the country was in the brink of an economic collapse. The Naysayers that time accused the Govt. of
    • walking into the trap laid by the IMF,
    • attempting to kill the domestic industry by de-licensing, by cutting import duty, by bringing goods under an “Open General license regime”,…,,…

         Nothing of that sort happened and on the contrary, India graduated from a   much contended ‘Hindu rate of Growth’ of 3 % on an average in the previous 2 decades to average ‘Indian rate of Growth of 7.5% in the next 2 decades.  We became part of the famous BRIC story that was being built globally.

  • 2001 : All around the country there was a symphony of voices about the threat of domestic manufacturing industry getting wiped out in several sectors including many small scale industries like Locks, Toys,. The government was about to remove the Quantitative Restrictions for imports across many sectors as per WTO.   The Quantitative Restrictions were hitherto acting as a protection to the flurry of imported goods except in “Burma Bazaars”.  The local manufacturing of FMCG (Fast moving consumer goods) will face a slow and steady death as the Indian consumer will be bombarded with imported “Charlies” and “Camays” – was the war cry.  10 years hence, has the local mfg. industry been wiped out?  Has the imported Camay overtaken the local Cinthol? The answer is Yes and No.  In small-scale sectors like lock manufacturing,.. due to no investments in technology, the units have been facing a serious lock out. (Eg: Lock mfrs. in Aligarh). The Chinese locks today protect most households. However in sectors where mfrs. have looked at ‘opening up’ as an opportunity rather than a threat, have upgraded their works, have got into strategic collaborations, got in investments and have eventually flourished.  Camay is produced in India now by a Contract mfr. for P&G. 

VAT introduction in India in 2005, Opening up of the Insurance sector to FDI in 2006, the Indo-US civil nuclear treaty in 2008 and now the opposition to allow FDI in multi brand retail. 

I can go on and on on the list of issues where our politicians pontificated doom and created kerfuffle.

In all these, the common thread is the Insecurity among the politicians about our own country and the lack of self-confidence or the “Can-do” spirit which today’s youth in the street display day in and day out. In spite of the fact that in all the above instances the Indian enterprise has repeatedly demonstrated that “India today” is not the one to cowed down by outside influences but is one that looks at all possibilities to collaborate and prosper.

I for one am delighted to see the opposition to FDI in retail and finally government of the day pushing it through by Hook or Crook I mean Mayawati or Mulayam!!! Going by past history and instances whenever our politicians oppose something vociferously and foretell that doomsday is here – we know what will happen.  So I believe, thanks to FDI in multibrand retail,

  • Kiranas are not going to get wiped out so soon
  • Farmers are not going to be exploited
  • Millions of Indians are not going to lose jobs

Or for that matter

  • “Will not make our children sales boys and girls”

as being apprehended.

For, advent of computers in the 80s in India didn’t leave millions of Indians jobless but created a fledgling US$100bn IT Industry that creates an estimated 230,000 jobs or round about annually thereby employing 11 million people directly and indirectly. So like computerization, retail could be a game changer. However whether this FDI policy of the Government will be a Game changer? That will keep it for my next post.

So let’s not stop the FDI (Foreign Direct Investment) in retail but ban the FDI (Famous Desi Insecurity) – wholesale which seems to have engulfed many of our politicians!!!

Postscript: The joke used to be that in the 70’s if some Govt. babu was seen wearing a denim, he was suspected to be a CIA implant and R&AW was let after him!!!

The Politics of Reforms!!!

Gurcharan Das, the erstwhile head honcho of Procter & Gamble, India is not a politician.  If he was one, I wouldn’t have to struggle so much to come up with a name of one politician who has been steadfastly and consistently pro “economic reforms” in India.  The last few days, since the UPA government announced some bold economic decisions, the debating society is back and busy discussing ‘Reforms’.   We had the normally reticent Prime Minister Dr. Manmohan Singh addressing the nation with an aim to take the public into confidence on some of the tough decisions his Govt. finally took.    There he was, espousing the need for such decisions if economy has to get back to the high growth path of the recent past years.

The question is why it took so long for the Govt. to wake up when the writing was on the wall.   In India it is an ironical fact that our leaders were and are always reformers under duress.  And Governments pursue reform path only when push comes to shove.  Since 1991, the year in which liberalisation of the economy was flagged off, successive governments in the centre and the major political fronts have always flip-flopped on the question of reforms.   Switch ‘On’ the reforms when pushed to a crisis and Switch ‘Off’ if there is none – has been the approach.

During UPA-I, the economy was on a roll due to the global economic situation overheated by excessive liquidity which helped India as well.  So UPA-I was not under pressure to perform oops ‘reform’.  As the global slowdown and the effects of “no reform” hit the shores now, It is not surprising that the government (UPA-II) decided to unleash its ‘Animal spirits’ on reviving the economy.  And it is also not surprising that you have the opposition led by BJP, opposing initiatives like FDI in Multi Brand Retail or dragging its feet on GST implementation which it had championed when it was part of the ruling front.  And this seems to be the emerging pattern for any political formation – “Reform while in power when in trouble and Oppose Reform while in opposition!!!”

 Already there is a pervasive anti UPA mood in the country as depicted by surveys of late thanks to the corruption scams, high Inflation and the rudderless economy in the last 2 years.   The few decisions taken by the Govt. in the death overs ( not calling it reforms ) like diesel price hike and the opening up of Multi brand retail to foreign chains though welcome – may not yield immediate tangible results. The impact of such decisions is always felt long-term.  They will certainly help to talk up and lift the moods of the markets which are also important.  So come 2014, it is quite possible that UPA loses power and an alternate dispensation – most likely the NDA comes to power.

When that happens – we are most likely to see a ‘Deja vu’ of the UPA –II rule.  Picture this:

  • Under the false impression that UPA –II was rejected as it pursued tough economic decisions, the NDA train will chug along in the 1st 2-3 years with “no economic reform”.  The economy then goes through turmoil due to no growth impetus.  And in the 4th year the Govt. is shaken up from its dogmatic position on reforms and announces reluctantly a few reforms.
  • The Opposition – now the Congress smarting under the defeat opposes the very initiatives it took!

So the “Start – Stop” saga of economic reforms continue and we never get to experience the benefits of uninterrupted economic reforms.  A Start – Stop system may be helpful in automobile technology to save fuel but not in economic reforms.  This means that our economy will see growth in phases and then dipping into crisis for a while before picking up again. And this may potentially stop India from becoming a “Strong Developed” nation which we all aspire to see.

How do we come out of this?  Well, here is a Utopian 5 point programme:

  • Under the leadership and initiative of the President a 5 year/ 10 year/ 15 year/ 20 year milestone document for the country should be prepared.  The President should take all the major party and their leaders into confidence while arriving at these milestones. (This can be something like the formation of the constituent assembly which worked on drafting the Constitution of India post-Independence)  These milestones obviously will be related to ( preferably limit to Top 5 issues )
  1.     Poverty Alleviation
  2.     Infrastructure development
  3.     Job creation
  4.     Health
  5.     Sanitation
  6.     ,..
  7.     ,..

(I do hope that parties and their leaders will not have major disagreements in coming to a consensus on this – atleast in public)

  • Once the milestones are decided by consensus, the government of the day along with the major opposition leaders, key bureaucrats and civil society must arrive at a doable plan to achieve the milestones.   While arriving at the action plan debates and discussions can happen and a consensus must be arrived.  It is obvious that ‘for reaching’ certain milestones like infrastructure development, job creation,… ‘far-reaching’ economic reforms are essential.
  • And once a consensus is arrived on the action plan, the government of the day should be empowered to either take the legislative route or executive route to implement those decisions.
  • A regular review of the milestones and the action plans and their progress must be carried out by the incumbent President (My mantra – What gets reviewed gets done)
  • A regular and continuous report to the Aam admi by powerful communicators in the Government on the progress of the milestones.(Regular and forthright dialogue with people – a must to assuage any misconceptions)

 Important point: These milestones are by and large supposed to survive any change in the Government or even the President.  These action plans arrived at by consensus are also supposed to survive any change in the Government or the number equations in the parliament.

By this, the reforms will be given a longer rope and chances are that they will succeed without falling into the trap of the “Politics of Reforms”.    (The side benefit is that the President will no longer be playing just a ceremonial role)

For the “Politics of Reforms” to stop we need a major “Reform of Politics”.  Can this happen?

Also pls. read my earlier post : “Blame it on India Shining” on the subject of Reforms.

I look forward to hearing your comments and feedback.