Dear finance minister,
The problem with most neo-liberal economists ( the Chicago boys led by Professor Arvind Panagriya and company) who are advising your government is that they are fossilised with traditionalist thinking – like trickle-down growth models which insist that rising tides will lift all boats together.
The latter is a failed experiment worldwide, because among others, it relies on two fundamentally flawed assumptions.
First, it assumes transparent state governance; instead, what we have is crony capitalism. This is India’s Gilded Age.
Second, to expect Big Business to not extract profits at any cost to maximise shareholder value is being prodigiously naïve.
The twin conditions give rise to oligarchies. Why does a country with over 1000 million mobile subscribers have just three telecom operators, two of whom are financially kneecapped? Why does a burgeoning airline industry have just two principal actors, one of them owning a network of flying jets under different brand names? The absence of industry competitiveness is hurting ordinary consumers, but the government is allowing plutocracy.
Big Business dictates pricing terms, given their near-monopoly status. As activist Jim Hightower rightly said, “The corporations don’t have to lobby the government any more. They are the government.” The fact that more than a year after the damning Hindenburg report on the Adani Group, the latter remains the darling of the stock markets is a manifestation of your government playing footsie with powerful industrialists who are a law unto themselves.
Governance is shambolic. How are you planning to address the elephant in the room?
I hope you will desist from deploying the double-engine spin doctoring that has been done of late – “India will be the third largest economy soon at US $ 5 trillion size”, yada yada, which is like saying that my newborn son will be five years old in 2029. Yes, but that cannot be an accomplishment surely; it ought to get there under a normal GDP growth rate.
It may be more pertinent to point out that on per capita income basis, a fairer measure at US $ 2400 per annum, we are laggards at 142 out of 197 countries, and the lowest among G-20 countries. India’s female labour participation rate is 28%, far lower than Indonesia (53%) , Kenya, Philippines, Bangladesh ( 37%) and China (61%).
The income inequality in India is worse than under British rule, according to World Inequality Lab. Over 30% of our children under 5 years have stunted growth. As India Ratings recently pointed out, India lost nearly 16 million jobs and Rs 11.3 lakh crore in GDP, and 63 lakh informal sector enterprises were shut down because of the triple whammy of demonetisation, a ham-handed GST execution and the thoughtless imposition of a nationwide lockdown in 2020.
Fiscal prudence is a good thing, but is rural beggary justified to please international credit rating agencies?
The promised V-shaped bounce-back post-pandemic never happened. It was a K-shaped recovery, as was evident over the last few months over the most ostentatious in-your-face vulgarity ever witnessed, even as reports came in that just over 50% of Indians have three meals a day.
In a prearranged interview, Prime Minister Narendra Modi seemed kosher with the lopsided income distribution, though. “Shall I make everyone poor?” – his petulant riposte uttered with palpable condescension was perhaps a perfect valentine to our political reality, which is that we must reconcile to the poor-rich divide under your dispensation.
Does your government have the courage to impose a wealth tax on the big boys of the billionaires’ club?
It will help if you make India’s official numbers more credible too; for instance, you claim that there is no poverty, but concomitantly distribute 5 kg free food grains for five years for those at the bottom of the pyramid (810 million people). Do you see the intrinsic contradiction? Or is it just using public resources for electoral politics? Some clarity will help.
In 2019, you announced with much fanfare that there would be a corporate tax-rate cut that would result in a revenue loss of Rs 145,000 crore per annum for the government. The ostensible reason provided for public consumption was that this whopping foregone income loss would boost private investment and create jobs. Dalal Street hailed you as their new nonpareil messiah, and head honchos of India Inc (including those who hold big fat weddings) were unequivocally thrilled. Naturally.
Over the last five years, without compounding, the approximate aggregate revenue foregone is an astronomical Rs 8.7 lakh crore. Can you tell us where the jobs are? Where is the capital investment? Did companies merely absorb the resultant savings or distributed them as dividend and profits? Is that why we are seeing a bull run on the stock markets which is in complete contrast to ground realities?
India’s unemployment rate is 9.2% as of June 2024 (CMIE), and private investment as a ratio of GDP is 29%. The election results of 2024 should wake you all up from your hallucinations. How long can we ignore inequality that threatens to get progressively worse? Young, educated graduates are ready to be part of paramilitary forces in the wars in Gaza and Ukraine. Can you see the inveterate desperation? India’s median age is 28.
While the farmers, poor, youth, the middle-class and honest taxpayers struggled to get basic rights and suffered high food inflation, they also liberally contributed to the government exchequer by paying through their nose in GST collections (the poorest 50% give a giant 64% share in the indirect tax booty). Is that morally right? We have the ridiculous anomaly where the personal income tax collections exceed corporate tax collections. Gross Tax Revenue as a percentage of GDP is a low 11.1% as of 2022-23. Your ‘Make In India’ has been an unmitigated disaster, with other South East Asian countries benefiting from the ‘China +1’ diversification plans.
Incidentally, since your ministry endorsed the electoral bonds scheme, which is akin to a state-sponsored mafia operation of extortion based on empirical evidence in the public domain, will we see a detailed investigation of every quid pro quo case?
Lastly, you need to ponder: private sector will not invest as long as you terrorise them with the Enforcement Directorate, Central Bureau of Investigation, and Income Tax department trinity hanging like a Damocles sword over their head, while the blue-eyed boys are laughing all the way to the bank and luxury cruises.
It is time for a course correction.
Regards and best wishes.
Sanjay Jha is a former national spokesperson of the Indian National Congress party. He also worked as a banker and an internet entrepreneur.
