HVK Archives: Regressive restrictions- Make honesty the best polity
Regressive restrictions- Make honesty the best polity - The Times of India
M D Nalapat
()
21 January 1997
Title : Regressive restrictions- Make honesty the best polity
Author : M D Nalapat
Publication : The Times of India
Date : January 21, 1997
By 1988, Rajiv Gandhi decided that he had had enough. He had
removed corruption from the system and given India growth rates
that rivalled China's, yet the newspapers refused to acknowledge
this.
They preferred instead to concentrate on Bofors or the volte-face
on the Muslim Women's Bill. The press, it would appear, prevented
the Indian voters from realising how lucky they were to have Rajiv
Gandhi as their leader.
Fortunately for the then Prime Minister, he had a Harvard-educated
adviser in the home ministry who helped draft a "defamation Bill"
which would have, if passed, put most journalists behind bars.
Sadly, the media did not realise how beneficial the legislation was
to the public interest. In its myopic way, it opposed the Bill and
finally got it shelved.
The proposer of the defamation Bill in 1988, Mr P Chidambaram, is
today the Union finance minister. That he has lost nothing of his
belief in tough laws is clear from the manner in which he is
introducing one punitive legislation after another. The first was
to give income-tax officers the right to levy a penalty of up to
300 per cent on unaccounted income. The next is to make the mere
possession of "unexplained" money an offence. According to this
legislation, it will not be necessary to prove that an illegality
or crime was committed to get an individual in trouble. What next,
one wonders? A law that makes the mere possession of property a
criminal offence?
Nehru Family
But one should not judge Mr Chidambaram too severely. After all, he
does owe much of his political career to the Nehru family which had
very clear views on the subject of whether Indians could be trusted
to behave as responsible adults. Under Nehru, large-scale private
business became an undesirable activity. The effects of such an
attitude are evident today, when this country has dwindled
economically. Indira Gandhi, through another finance minister, Mr
Pranab Mukherjee, raised the marginal rate of income-tax to 97.75
per cent. By the time Rajiv Gandhi came to power, it was much more
difficult to live up to this patrician legacy, though to his
credit he tried. It is nobody's case that those possessing black
money should not be punished. They should be, and severely at
that. However, before this, the tax rates should be brought down
to sensible levels. There is a strong case for just three rates of
income-tax on individuals: 10 per cent, 20 per cent and 30 per
cent. As for companies, 40 per cent should be the highest rate for
them. Should such a downsizing of rates take place, the number of
taxpayers will multiply by tens of millions, and collections will
go up.
The option is the present one of keeping in place a system that
makes it almost impossible to thrive while remaining honest, and
building up a police state to punish the numerous defaulters.
Morarji Desai, a staunch follower of Gandhji, was the unwitting
prime mover behind the growth of the Mumbai mafia. As in the
United States, these groups flourished because of prohibition.
Thanks to another of his edicts, that on gold control, an entire
community lost its livelihood. Today Mr Bansi Lal is going the
Morarji way, breeding corruption within his police by attempting to
stop the sale and consumption of alcohol in Haryana. This he did
even after it was clear that Andhra Pradesh has gone bankrupt due
to the same policy.
Deadly Contempt
This fascination for coercive methods springs from a contempt for
the common man. Those who put in place one draconian legislation
after the other believe, along with Katherine Mayo and Abbe Dubois,
that the people of this subcontinent are a dishonest, lazy lot who
deserve only the rod of enforced discipline. It has taken the
Indian diaspora to make most others realise that such a view is
wrong. If the Indian is treated as a responsible citizen and given
opportunity for growth, she or he will outperform anyone in the
world. Sadly, such a situation exists only outside India. Here the
politicians - even as they protest against proposals to make them
accountable - fashion new laws over and above existing ones. The
effect of this web of legislation is to put most productive
activities on a par with criminal acts.
Just as there was applause from "progressive" fora when Indira
Gandhi broke the covenant with the princes and abolished privy
purses, the type of legislation now being brought forward by the
finance ministry may win approval in radical weeklies. However, to
believe that they can cure the problem of black money is to live in
a fool's paradise. Unpleasant though it may be, it has to be
admitted that black money was generated largely because of the
restrictions and high taxes of the Nehru family era. Should Mr
Chidambaram move away from such a past and adopt policies that
promote rather than punish, he may find people responding much
above expectations. However, to do this he will need to change
strategy. The more the rules and the harsher the punishments, the
higher the real power (and black income) of the babu.
To avoid 300 per cent penalties, bribes will get paid. To avoid
jail, money will get locked up in gold rather than avenues that
generate output and employment. Therefore, it is not surprising
that officials insist that the "Proceeds of Crime and Prevention of
Money Laundering" bill put the emphasis not on proving guilt but on
proving innocence. Naturally, one's own people are exempt. That is
why the CBI was recently barred from investigating individuals
working under the direction of the finance ministry.
But, it would be unfair to blame just one ministry for such a
mindset. It was the "liberal" Jawaharlal Nehru who had the 1951
Press (Objectionable Matter) Act passed. It took 26 years before
this was repealed by the Janata government. There is a long
tradition stretching back centuries of the government here not
having trust in the integrity and competence of the people it
ruled. It would be a tall order for political parties to reverse
the course now and give power back to the people, which is where it
will do the most good. However, the series of draconian laws now
being framed by a ministry that is supposed to be in the vanguard
of liberalisation is disturbing.
Liberaliser's Image
If Mr Chidambaram is to justify his image as a liberaliser, he
should look for ways of creating within India the conditions for
enterprise that operate in countries like South Korea or the United
States. He should nudge the government to bring forward legislation
and policies that encourage people to use their money productively
rather than hoard it. Then, just as the people responded
positively to the good king in times of crisis, they will respond
now by voluntarily coming forward to pay taxes and fulfil their
obligations to a regime that, at last, has begun to treat them
fairly. This country is too big for the stick. It needs individuals
who not only have big minds but also big hearts.
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