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Political price for economics

The burden of compliance creates suspicion in the minds of people.

Political price for economics
If ever an election was fought and decided on the undertones of economic issues, Gujarat one was.

The astute politician that Narendra Modi is, he had realised this and even stated it upfront. He was prepared to pay a political price for his economic policy decisions. The Gujarat election results vindicate that assessment. How?
BJP should have turned out a far better result in the state than it did. Here was a Gujarati Prime Minister leading the country, with confidence, scoring several domestic and international wins. He had met the global leaders and dealt with global affairs successfully. Pakistan, after all, was somewhat cornered and the US, even if for its own reasons, was bearing down on it much to our rejoice.
The economy had gained global acceptance and money was flowing in. Stock markets were somewhat dizzy and giving good returns. Prices were stable and continued growth was taken for a given. Money matters, and in Gujarat it does more intensely.
And yet, BJP has just managed to retain its government in the state. It has lost marginally here and there, but by and large kept its hold. The powerful Gujarati Prime Minister had campaigned indefatigably, along with his formidable political strategist to lay out the ground plan for the election battle. These are weighty plus points to have swung the voters and create favourable atmospherics for achieving at least a Congress-free Gujarat.
And yet, it is the Congress, under its callow leader, that has resurged in the state. It is as if, despite the party's lackadaisical record from similar leaders, the proverbial phoenix has come back into life from ashes. Was it due to the metamorphosis of Rahul Gandhi as a political leader under some unseen hands, mostly suspected residing abroad, that carved out this new image, out of the plastic clay that the in-house prince of the first family was.
All these factors might have contributed their mighty little. But it is the enormous economic policy decisions of last one year that appear to have done the trick.
Demonetisation, immediately followed up with introduction of the so-called "Good and Simple Tax", as Modi once described it, would have subtly changed the Gujarati mindset to their leaders.
The indications had come quite early. In October, I was travelling in Uttarakhand and trying to assess the impact of the Mudra loans in creating either jobs or giving a boost to small businesses. While passing by Haridwar, I happened to come across a couple of young Gujarati young men. Hoping that talking to them would offer some clue to the newer kinds of micro-loans which the government was claiming to have worked wonders, I struck up a conversation.
It was a kind of mild surprise that the Gujaratis were indignant about their supreme leader Narendra Modi and regretted that the government policies of demonetisation and, worse GST, had ruined their small businesses. "If our business was going full steam ahead, do you think we would have had the time to spend two weeks here and get to see some places", he put a counter question.
But then, what was so wrong with such a right policy – that is, a nation-wide regime of a single tax framework replacing a plethora of taxes of varying rates across states and even within states? The young businessmen read out their litany of problems with the GST regime, which was making their business a hugely onerous task. It was not the policy of a uniform tax throughout the country, but the paraphernalia of compliance that was doing the wrecking, he explained.
Indeed, the over-burden of compliance had for one created a fear of government interference in the day-to-day life of businesses and of businessmen and women. It was constant tracking of their activities through a myriad of instruments from multiple GST returns every month to the requirement of stating PAN and still lately Aadhaar numbers of buyers and sellers. The end result of all these tracking, people feared, would complete data transfer about every business and trade to the hands of the government.
Mind you, sharing information is the bugbear in this country. Every sample survey data collectors at villages and towns had encountered this problem. While collecting consumer expenditure data or even employment data or other economic surveys, the numerators had invariably found reluctance on the part of the people being surveyed to even part with information on family income and sources of income. They invariably hedged and hawed.
Secondly, GST is a piece of impeccable public finance wisdom. But bringing into the tax net in one stroke when they were used to paying none, generates inescapable resentment. The GST regime had, in fact, anticipated this and had allowed exemptions. But then, the system put compliance burden to those who were exempted by requiring reverse charges and what not. These have since been partially rectified, true. But then, the initial damage has been done and suspicion raised.
Thirdly, the company entrusted with formulating the IT backbone for the GST system had done — to say the least — sloppy work and the huge initial system bugs had spoilt the new mechanism, to begin with. The systems faults have now been openly recognised and are hopefully being addressed.
And then, trying to take credit for introducing what was a simple tax makeover with a historic mid-night session of Parliament and doing the entire pageantry about a so-called culmination of a Second Freedom for India was a crass miscalculation.
Going by the account of Saki Mustaad Khan in his Maasir-i-Alamgiri (History of the Court of Aurangzeb Alamgir), the subject is reported to have said; "Life changes in a moment", this could be life-changing moment for national politics just now.
We were riding on the crest of a wave. BJP was unconquerable. Its march has not been checked. But somewhat slowed down at least for the present. If this is the verdict in Gujarat, then getting an absolute majority in 2019 could look askance. That will mean an era of drift as coalition in the Centre could result in fuzzy times as we had in the times of second UPA. At least for the next couple of decades, we would continue to have a strong Centre, which should at least not give rise to the umpteen numbers of scams.
If there is just one single score in this innings of BJP, it is this: so far, we seem to have avoided the multi-crore scams.
(The views expressed are strictly personal.)

Anjan Roy

Anjan Roy

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