India Positive Read online

  ‘Yes, the BJP has a communal ring to it, but who cares, if they can make India rich,’ was how many non-traditional BJP voters justified their votes for Modi in May 2014. These voters led the BJP to a big victory, and we got a stable, right-wing government. Many thought the Indian economy would now fly. People expected the fiery Gujarati entrepreneurial spirit to reach the PMO, a departure from the slow, soft-spoken, academic style of Manmohan Singh. The ‘nayi bahu’ excitement around Modi was unprecedented. And as anyone who has gone through the ‘my nayi bahu is the best’ phase will attest, when you expect so much, some disappointment is bound to follow.

  Yashwant Sinha’s 2017 open letter on the economy had relatively few defenders outside the BJP. Objectively speaking, it was low on data. It was also somewhat alarmist, predicting an extremely unlikely ‘crash landing’. However, it did make the point that this turbo-powered government may have underperformed in a core area—the economy.

  There is no denying that India’s GDP growth continues to slow down. Given our low base, we should have been close to a 10 per cent annual growth rate by now. So why are we at 5.7 per cent (or 3.7 per cent, according to some)? This hasn’t hurt the BJP politically yet, given that the masses don’t track GDP like the experts. However, once there’s a media perception that this government cannot deliver growth (and hence jobs), the message will trickle down. This would destroy the roaring tiger image of the Modi government and advance the (embarrassing) possibility that the Manmohan Singh government, for all its policy paralysis, could deliver better on growth. That’s bound to hurt the BJP’s chances in 2019.

  Little wonder then that the government went into defensive mode, calling out naysayers and pessimists. Naturally, it is concerned about the self-fulfilling nature of economic pessimism. If everyone believes times are bad, tightens their purse strings and reduces spending, then the economy does indeed suffer. Euphoria 2014 becomes Doubts 2017 which, in the worst-case scenario, turns into Despair 2018, and so on.

  How did this happen? Is it due to specific measures like note-bandi and GST? Or is it something about the government’s attitude that is hurting the economy, these measures being just a manifestation? Chances are that it is the latter.

  When Modi came to power, entrepreneurs across the country believed in him. His energy, zeal, hard work and belief in India continue to be inspiring in some ways. However, the BJP government seems to have become obsessed with one thing—black money.

  In our country, a lot of black money holders have done business for decades in a culture of tax evasion. These people, a few hundred thousands of them, control our economy, creating millions of legitimate jobs and adding billions to the GDP. What do we do in this situation? Suffocate them, and the jobs they create, to death? Or do we live with both the good and the bad they represent, and softly move them towards a cleaner system? Should we teach them a lesson for being bad, and risk businesses shrinking and jobs disappearing? Or should we come up with easier ways to make the transition so that ways of doing business in our country get cleaned up over time?

  There are no easy answers. However, GDP data indicates that this government may have been a bit too strict. Today, the entrepreneur fears the taxman. Nobody wants to take big risks to grow in this atmosphere of fear, despite assurances from the tax department that they will refrain from unnecessary harassment. There are so many new rules that, if someone wants to make a businessman’s life difficult in this country, they can. And if the entrepreneur goes into consolidation mode, we will have an economic slowdown for sure.

  The government also seems to have fallen behind on the concept of ‘change management’. When you are making life difficult for people, you have to give them incentives to accept the discomfort. If the GST switchover was going to be cumbersome, the least the government could do was to reduce rates drastically in the ‘change management’ phase. Instead, for many products and services, rates were higher than before.

  Noble intentions to clean India up are not enough to ensure that people cooperate through the change. Every transition, even if it’s for the greater good, has to be managed well. The government needs entrepreneurs if it wants the economy to grow in double digits. Teaching them a lesson may be justified but, sadly, it will hamper growth. Taxes should be kept low, as getting through the transition smoothly is more important than penalising defaulters. Instead of playing the strict teacher trying to get the homework done, the government would do better to slowly turn them into motivated students who want to do their own homework.

  @chetan_bhagat

  Hate Modi or BJP. You have the right to. But think twice before painting Congress in pure gold. Don’t forget massive scams in their time, where spectrum, coal and even games weren’t spared. Citizens have to make a choice during elections, but then must keep all parties accountable

  1,936 replies/ 5,854 retweets/ 16,735 likes

  @chetan_bhagat

  Petrol Diesel prices too high. Said it before saying it now. Taxation on fuel needs to be revisited. People are suffering. Inflation will rise. Why not just simply bring it under GST?

  440 replies/ 843 retweets/ 5,170 likes

  Cracking the GST Puzzle

  It’s a modern reform implemented with an archaic sarkari attitude, so here are five ways to set it right

  Confession: My brain is fried right now. Reason: I have spent the last several hours trying to figure out the Indian government’s GST return filing processes. I am still somewhat confused. This, when I have a business degree, worked at an investment bank for a decade, and analysed hundreds of annual reports for companies.

  Ask any tax expert in the country and they would agree. The GST puzzle is so complex that it feels like a cruel and nerdy prank played by taxmen on India’s entrepreneurs. It would be funny, if it wasn’t real and didn’t threaten millions of businesses and jobs across the nation.

  The technically complex design of the GST returns process assumes that every businessman in the country is an experienced Munimji and entrepreneurs have nothing better to do (such as running their businesses) than fill out multiple puzzle-like GST forms every month. So while an American business may be figuring out how to make app-based sales or invest in new technologies, the poor Indian business is busy scrambling to figure out and meet three (yes, three!) monthly deadlines for GST returns.

  It is a classic case of tax nerds imposing their jargon on helpless users. The tax department continues to say they want to be more taxpayer-friendly, but they have always lacked customer focus—evident in their process design which assumes that users have advanced taxation expertise. Small wonder, then, that GST is fast becoming unpopular.

  This is unfortunate because this tax reform actually has the power to change India. For a few silly reasons stemming from sarkari attitude issues, the entire GST programme risks failure. The only silver lining is the fact that the GST council continues to meet and revise its processes. This at least shows a willingness to take feedback. If that is indeed the case, here are some practical suggestions to save GST’s reputation and India’s economy.

  One, GST rates are too many. The more rates there are, the more complex the forms and processes get, and the more discretion the authorities get to tinker around. This is the complete antithesis of what GST set out to do. There needs to be only one GST rate, and an exempt list. If you are itching for more rates, just have two. No more.

  Two, the GST rates are too high. There are too many items in the 28 per cent category, and even 18 per cent is too much. Right now, input cost GST reductions are not being passed to consumers, and probably won’t be for a few years to come. Hence, GST rates need to be reduced considerably for the medium term. The government must note that, for many who pay income tax, GST comes out of post-tax income. To gouge people is to upset people. The ideal GST for the moment would be 10 per cent flat for almost all goods, with a higher rate of 15 per cent for some items, if absolutely necessary.

  Three, the ‘pleasure equals more taxes’ attitude h