Is it all over for the India story? (Article)
New Delhi, May 30 (ANI): It all seemed to be going very well. Till recently, India was hailed as the future economic powerhouse and emerging super power. International industrialists, businessmen were moving to invest in India. They had confidence in India's democracy, rule of law and fairness of the Indian system even as they were aware of the corruption, corrupt practices and bureaucratic hurdles. Their local partners usually cleared those hurdles.
Then comes along some clever income tax assessment officer, creates a huge tax demand against Vodafone the largest investor in India's telecom sector from abroad. And the case of Vodafone explodes on the international economic scene. The Indian administration looks the other way even as the Vodafone fights through the taxation and legal system and finally gets a reprieve from the Supreme Court of India. That should have closed the issue.
The budget of 2012 opened a Pandora's box by bringing in legislation on retrospective taxation, and GAAR (General Anti-Avoidance Rule) mainly to fix Vodafone. Why so in the face of judgment by the Supreme Court of India is the question that the world is asking of India.
How -so- ever much the protagonists of these provisions may shout that the legislation is not aimed at Vodafone, no one in the world of international finance and investment is prepared to believe India. A huge mistrust has now been created all over the world about investing in India. The first casualty of this mistrust is India's rupee. Despite the reserves being good, there being no run on the banks or flight of capital from India, the rupee continues to fall.
By their lack of foresight or an understanding of the world of international finance and investment, the Indian leadership has created a crisis that could have serious repercussions for the economic health of the country. Who are these managers of Indian economy? Most of them great professors, people filled with theoretical book knowledge, politicians who have hardly ever worked in the world of business and industry. They are the experts.
An apt writing of Ayn Rand that was sent to me recently perhaps best describes the crisis that India's growth story faces. It reads "When you know that in order to produce you need to obtain permission from men who produce nothing, when you see that money is flowing to those who deal not in goods, but in favours, when you see that men get rich more easily by graft, rather than by work, and your laws no longer protect you against them but protect them against you, you know that your society is doomed". Is this what is now happening to India now?
India's middle class was the envy of the whole world till recently. All of a sudden, the fall of the rupee, rising prices and rising inflation all seem set to destroy a large section of that middle class- the families that earn between Rs.10,000 to Rs.50,000 per month. Has anybody worked out the impact of rising fuel prices, rising inflation and depreciating rupee has on these families? They are doomed. And politicians of India cannot understand this, for they have hardly ever earned their living.
Let us not forget that the so called economic reforms were not brought about by design, but by the force of an economic crisis that India faced when it had to mortgage part of its gold reserves.
Surely the story may have been different had Rajiv Gandhi not been assassinated? The so called economic reforms that Manmohan Singh and Narasimha Rao introduced were the minimum that the World Bank demanded for giving a loan to India to ward off further mortgage of Indian gold reserves, and to enable India to meet its international commitments.
Today, India faces crises on multiple fronts. The country has ushered in huge welfare plans which are no more than doles being given out in the name of MNREGA and so on. Instead of empowering the poor and illiterate to get jobs, the country is guaranteeing minimum number of workdays to the poor at the cost of the state. It is all very good if you can afford it. Printing currency notes under deficit financing and then distributing them only accentuates inflation. It still does not bring votes to those who fathered these ideas.
Any nation where the cost of energy is high can hardly ever grow rapidly. The cost of energy in India is among the highest in the world. Look at the pricing of petrol, diesel and other oil products that carry a huge tax burden. India's financial planners are using energy as a revenue-generating source. Indirect taxation carries a huge burden even for the poor of the country and here again India has one too many indirect taxes.
Successive finance ministers have been making promises of cutting the deficit and bringing about austerity in government. But how can that be achieved where we have already created a class of rulers and administrators who continue to enjoy low price economy while the "aam admi' bears the burden.
In order to cut deficit, the size of the Government itself has to be cut. It should begin from the top.
If the India story is to be revived and if it is to avoid a serious crisis of its own making, then the government needs to do something to deal with this situation. he world is now waiting for India to take action. The world knows that all is not well. India's own industrialists are making new investment abroad rather than at home. How do you expect foreigners to come in then?
In the world today, there is serious crisis of confidence in India and its political system. India's image has taken a very serious beating in the light of huge corruption scams that have emerged in the last few years. There seems to be no end to them. A situation exists today wherein any foreign investor is afraid of committing any funds into the country. here seems to be total lack of faith in the country's regulatory system and its management. That faith cannot be revived by mere assurances. Some one will have to have the courage to take the basic first steps to restore order in the system.
Last, but not the least we need to take a hard look at the taxation system and the kind of taxes being levied. Industrial and economic revolution in India can only come through low cost energy.
The crying need for India is for the leadership to move forward with a vision. t is time for honesty and hard decisions to take the country and the nation to its next stage of growth. Will the current crop of politicians be able to do that? (ANI)
Attn: News Editors/News Desks: The above article is written by Mr. Prem Prakash, a senior journalist and chairman of ANI Media (P) Ltd.(ANI)
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