Indian GDP growth has picked up, as is clear from the chart and will continue to grow. Unfortunately “in 2011, Transparency International ranked India at 95th place amongst 183 countries in perceived levels of public sector corruption and in 2014, India saw a reduction in corruption and improved the ranking to 85th place. India’s absence rates are one of the worst in the world; one study found that 25% of public sector teachers and 40% of government owned public sector medical workers could not be found at the workplace.” The new government has taken numerous steps to remove corruption and increase its ability to deliver money directly to its citizens, thereby avoiding all middle men.
Arun Jaitley the Finance Minister of India tried to explain the recent de-monetization and other governmental actions, “Expenditure required for poverty eradication, national security and economic development have to be compromised with on account of tax non-compliances. For seven decades the Indian “normal” has been to undertake transactions partly in cash and partly in cheque. “Pucca” and “Kachha” accounts are a part of the business language. Tax evasion has been considered as neither unethical nor immoral. It was just a way of life.” At the height of this national tax avoidance mind set, tax avoidance became the most exacting science in India; as in 2015, only 24 lakhs (2.4 million out of a billion) declared income above Rs.10 lakhs ($ 15,000).
He went on to explain with the deposit exceeding 12 trillion rupees, “Not only has the money lost is anonymity, it’s owners, after being taxed, are entitled to put it to more effective uses. The size of the banking transactions and consequently the size of the economy is bound to increase. In the medium and long run, the GDP would be bigger and cleaner. Money entering into the banking system and officially transacted would give an ample scope for higher taxation – both direct and indirect. The Centre and the State Governments would both stand to gain. The economy would also be serviced by both cash and highly digitized transactions.”
He continued, “The Prime Minister was being futuristic, and thinking of a more modern, technology driven cleaner economy. He is now speaking of cleaning the political funding systems. His opponents want a cash dominated, cash generating and cash exchange system to continue”
I agree largely with the intent of the Benami Act to stop corruption and the various other measures like De-Monetization; and use of Pan and Adhar or electronic IDs, to facilitate digital payments. Modernization at the source will increase transparency and increase usage of the modern banking and digital economy. With reform of the indirect taxation later with GST, taxation at the sales points will be easier to enforce, and unite the nation under one law. The foundation of India as an economic powerhouse is being carved out anbd new paths beiung laid out for its economy. The new laws are being enforced, to drive the spending of vast amounts of money, on education, healthcare, infrastructure and poverty eradication, that India truly needs. Too long has the shadow economy kept the nation back, as bribery and tax avoidance, became part of the national character. It is time that the soft state economy, face a hard reality, that its time has come. The Indian economy is growing and will continue to grow for decades, and it is up to its government, to come up with enlightened economic reforms.
My hope is that the Indian populace and its leaders, continue to find the means to improve the joy of their citizens. There is enough work to do for the next century, and level headed down to earth leadership, is required for progress. This government at least has ideas, and is risking its future, in carrying them out. It is time to change all that old ‘normal’ and break through to the new reality of increased productivity and ease of doing business. Thank god there are some much needed leaders, who are ready to sacrifice their people to hardship and inconvenience. Let us see what the next budget lays out, as it may be one of the more important ones, in a long time. We need some hard decisions and stronger actions, to continue to make the foundation, for the twenty first century where finally India emerges as a great nation. Henry Miller once said “One has to be a lowbrow, a bit of a murderer, to be a politician, ready and willing to see people sacrificed, slaughtered, for the sake of an idea, whether a good one or a bad one” -Henry Miller, writer (26 Dec 1891-1980)