Both Financial Scams And Scandalous Policies Are A Great Learning Experience For The Unwashed Masses

Raman Swamy

Major financial scams are like crash courses in mass education.  There is no better way for the common man to gain instant knowledge about specialized subjects without having to go through college and university. 
Crores of Indians learned a lot about defence contracts and howitzer field guns thanks to the Bofors scandal.  The 2G spectrum scandal provided valuable insights into the hi-tech world of wireless telephony.  The Vyapam scandal lifted the veil on the shortest route to a medical college admission or a government job. 

Similarly, the fodder scam, hawala scam, coal allocation scam, Satyam scam, Telgi scam and Harshad Mehta stock market scam were all, if nothing else,  highly effective facilitators for rapid learning of complex processes and practices that would otherwise have been beyond the comprehension of lay citizens.

Demonetization and GST imposition have not yet been exposed for what they are – major financial loot-and-plunder scams -- but already they have enhanced the knowledge of the masses about the fundamental concepts of monetary economics, such as currency, banking and indirect taxation.   

On the first anniversary of note-bandi, the ordinary Indian probably knows as much about cash and currency as the present Governor of the Reserve Bank (which, truth be told, is not saying much, because Urjit Patel does not give the impression that he really knows much more than the hapless victims of November 8 and July 1).   

Demonetization Day is being “celebrated” on November 8, as Black Day by the Opposition and Black Money Day by the ruling coalition. 

The general impression is that there is time enough to celebrate the first anniversary of One Nation One Tax, which is actually a misnomer because there are five tax slabs.   But even three months after implementation, GST is still a work in progress on two broad fronts --  rate fixation and technical glitches.  

The chopping and changing is still going on.  Indications are that on Friday, when the GST Council meets in Guwahati, tax rates on at least 200 items could be cut from 28 percent and some sweeping changes may be announced in terms of simplifying procedures and enabling small firms to file just a single return filing form.   

Rahul Gandhi has dubbed the GST as a ‘Gabbar Singh Tax’ and Dr. Manmohan Singh has said that GST and Note-Bandi have together instilled a “deep-rooted fear of tax terrorism” among the business community. 

Even if one brushes aside such criticism as standard Opposition negativism, there are some serious economic analysts who are beginning to wonder whether a “unifying tax regime” like GST is practical for a country like India, even after further efforts to smooth out the numerous wrinkles that have emerged. 

There is a school of thought that is worried that the main objective of the GST -- to forge a single economic marketplace -- may prove a mirage because of the timing of the imposition.  Right at this point in the country’s developmental history,  economic disparities between the various states of India are at their  peak.  In the pursuit of “one nation, one tax”, several States have sacrificed their fiscal rights.  Such economic disparity combined with India’s unique political diversity would inevitably give rise to unending fractious demands.

Explaining this paradigm further, the economic analysts say India is currently experiencing what they call a “3-3-3 Paradox”.  The three richest States are three times richer than the three poorest states.

According to Praveen Chakravarty of the Mumbai-based think-tank IDFC Institute, such a high level of regional inequality is currently the highest since Independence. 

Consider these verified facts and figures –
*   Four States (Gujarat, Maharashtra, Tamil Nadu and Karnataka) account for as much inter-state trade as the other 25 states combined.

*   One-fifth of all passenger cars and two-wheelers are sold in just two States—Maharashtra and Tamil Nadu.

*   The average Tamilian earns Rs1.4 lakh per year, four times more than the average Bihari’s annual income of Rs35,000.

*   What is worse is that India is the only large country in the world that is experiencing sub-national income divergence, which means that the income gap between the richer and poorer States continues to widen and not shrink.

*   Moreover, continuing the discrepancies further, the average Tamilian is 31 years old and a matriculate; while the average Bihari is 19 and a primary-school dropout.

From the purely political point of view too thre are certain visible hurdles.  Under GST rules, regional political parties will, for the first time, continue to have full political powers to govern their States – but without full fiscal powers of taxation. However, unlike national parties with a high-command culture, regional parties cannot easily be coerced into a “national” narrative at the risk of alienating their specific voter base. 

The hard reality is that nearly two-fifths of India’s GDP and one-third of the population are governed by regional political parties that have no electoral presence outside their specific states.

Even after the BJP’s recent election victory in Uttar Pradesh, more than 50 regional parties have as many legislators in State assemblies across India as do the two national parties, BJP and congress, combined.

These are not just points to ponder over.  They are virtually insurmountable hurdles that cannot be wished away merely by asserting that things will soon settle down.   It is more likely that they will not.   

Whatever happens, one thing is for sure – by this time next year, the Indian citizen would have learned a great deal more about India, its economy, its diversity and its politics. The learning process would be in the best way possible – by personal hardship and bitter experience.

Nov 08, 2017

Raman Swamy [email protected]

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