Economic
Highlights
New Delhi, 9 October 2017
Economic Trap
GOVT MUST SHUN CONTROL
By Shivaji Sarkar
The Indian economy is going through a
transitory stage. It wants to free itself of the Manmohanomics, did some
critical experimentations leading too many controls that is anathema for a
party that was demanding liberalisation long before it was ever heard in late
1960s.
The process has its obvious problems.
Unwittingly the BJP Government itself has gone into doing many things that is
now being touted as efforts to control – be it bank procedures and charges,
fuel prices, rail fares, telephone connections or aadhar linking. Ideologically
for propagator of a free market this cannot be its intent.
The leftists had always propagated such
controls. They controlled even the movements of citizens leading to the
collapse of the Soviet Union and the shattering of the dreams of a communist
world.
Is the Government in a trap? If so, who laid
it? But it appears that somewhere it has gone into where it should not be. It
appears good that the Government in all seriousness has shown the will to get
out of it with immediately huddling into confabulations, looking for avenues
and even a relook at the GST.
The uneasiness was evident even at the BJP National
Executive meeting held in New Delhi on September 25-26. The Government
exemplified that it was willing to listen and redesign economy through the
Bibek Debroy committee. The response should instill confidence. But the figures
coming from Government sources or the RBI or the stock market are yet to show
the positivity, increase in private investment or credit growth or jobs.
The RBI also lowered annual growth to 6.7 per
cent. The Asian Development Bank lowers growth projections to 7 per cent. The
World Bank is more optimistic and says that the present slowdown is an
aberration. India's Gross Domestic Product (GDP) grew 5.7 per cent on a
year-on-year basis during the April-June period (Q1). The GDP growth rate
for the same quarter last year was 7.9 per cent. During the previous quarter
(January-March) of this year, GDP grew by 6.1 per cent.
The RBI estimate is near reality. The Government
says not to despair. An Indian is a born optimist and even without World Bank President
Jim Yong Kim’s recent press statements they have the hope and know destiny
would take them to the end. These call for serious retrospection beyond GST,
which would see more changes than those decided at the 22nd GST
Council meet on October 6. It makes many small changes including putting
jewelers, assuring exporters’ fast refund and relief to small and medium
entrepreneurs (SME).
But it evaded crucial decision on petrol
prices. If it is included in GST, petrol price according to estimates could
come down to Rs 40 a litre from over Rs 71. This could have been a great relief
for the economy heading for inflation.
Despite the official price index showing a
gradual spurt, prices in the market have not come down, particularly of food,
vegetables and textiles. The GST despite latest exercise has added to the
prices and bank charges, which are at a high and is stated to hit growth.
The RBI for good has not lowered interest
rates. This is affecting the poor depositors. Their interest hedging is coming
down. This needs to be checked along with tax on savings. This step is also not
helping farmers and rural depositors. High bank charges and taxes on deposits
may move depositors away from the PSU banks. It is apprehended that it might
also promote parallel unofficial banking and hawala transactions even within
the country.
Prudent tax laws are needed for promoting
growth. The concern of higher revenue is fine but taxes, income and indirect
taxes have reached oppressive level and needs drastic simplification.
Somehow the government does not consider high
road, municipal, panchayat tolls, road taxes, parking charges, metro, railway
fares and other charges as taxes.
While reviewing, a consolidated approach is
needed. Each of these reduces purchasing capacity and becomes inflationary,
impeding growth. An average Indian, even a beggar, pays over 40 percent of his
income as taxes and a taxpayer over 70 per cent. It means forgoing three to
five months’ earnings as taxes.
Higher the combined taxes, tolls and fees,
lower is seen to be growth. India needs less governmentisation, trust in its
people, including traders, in cash transactions and the approach to
financialise or tax every aspect of life needs to be given up.
A child who gets the liberty to act grows up
as a responsible person than the one who is put on virtual leash by his
parents. Likewise is the case with the countrymen. Every aspect of life need
neither be controlled nor interfered. Many great scientists, littérateurs, or
businessmen have been school drop-outs. They could act freely from schools’
controls and thrived. The nation is also treated to be like that.
The West continues to be in crisis as it has
tried to shackle the economies with financialisation. India has survived some
of the worst crisis like the fall of the Soviet Union or the great 1990 forex
crisis because it had mixed economy that was not dependent on the official
system.
Post 2008 meltdown its unnecessary
incentivisation of big houses and forcing banks to give liberal loans has led
to the present NPA crisis. Vijay Mallya is the creation of such ill-conceived
official fiats. A former finance minister’s son is said also to have been its
beneficiary in a different way. This possibly would not have happened or Air
India crashed had the government kept aloof.
This is the learning curve for the
governments. In many cases despite consensus at G-7 and G20 meets, India needs
to separate itself from the paths suggested by it. The G20 is for controls.
India has thrived through centuries when it had the least controls on
activities of the people. The forced indigo cultivation or permanent settlement
by the British for higher revenue realisation had led to ruination of the
indigenous economy as also boosting of the British and western economies. India
needs to look at G20 prescription on taxes and financialisation with
apprehension and caution. It has not been good for G7 itself.
For growth, India needs to look at its own
wisdom and listen to Mahatma Gandhi and Deendayal Upadhyay. Be in G20 but chart
out separate course. India will grow to trounce all. ---INFA
(Copyright, India
News & Feature Alliance)
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