India’s Gandhian economic policies get diluted

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Geopolitical Notes From India

M D Nalapat

Both Prime Minister Narendra Modi as well as high officials in the Finance Ministry especially during the period when the Goods & Services Tax (GST) was conceptualised and implemented) are followers of Mahatma Mohandas Karamchand Gandhi, who was declared the “Father of the Nation” by the post-1947 government. Unlike Motilal Nehru, who made sure son Jawaharlal reached the highest positions in the Congress Party during his lifetime, Mahatma Gandhi was content to let his own children make it through life without any assistance from him. There was an incident in South Africa when he chastised both his wife and son for having helped themselves to an extra spoonful of sugar, another when he denied a scholarship to study in the United Kingdom to his own son, who subsequently was thrown out of the Mahatma’s household and who ended up on the streets, begging for scraps. Once, the Mahatma and spouse Kasturba were in a train compartment when their estranged son appeared on the platform outside and gave his most precious possession at the time, an orange, to his mother through the window of the railway compartment.
The Mahatma and Kasturba were surprised to meet their first born. But with the steely determination that was so much a facet of his personality, the Mahatma refused to even look at his eldest son, who by this time was visibly starving and reduced to beggary, and did not allow him into the compartment. The train soon left the station, leaving the Mahatma’s son behind and his mother crying in silence, holding the orange in her hands. That was the last that the parents saw of their son . Such conduct was unlike the Nehrus, who were wholly unrelated but exceptionally close to the Mahatma, where each generation worked hard and long to ensure a better future for the next. In the case of the Mahatma, the nation was his family, so much so that his own family was given zero priority in his activities. The Nehrus ensured that three of the members of this Kashmiri Pandit family became Prime Ministers of India, and there is hope and expectation within the family that the great-grandson of Motilal Nehru (who was recently made the fifth member of the Nehru family to head the Congress Party), Rahul Gandhi, will before long become Prime Minister of India.
This could well happen should the disappointing economic results of the present BJP government continue on its unsatisfactory trajectory, with unemployment rising and small and medium enterprises strangled by lack of bank finance The point to note is that the country’s leading expert on Gandhian economics, Hasmukh Adhia, was promoted as Finance Secretary by Prime Minister Modi. However, Adhia must not be overly concerned about the decline in industry, especially large manufacturing industry. The Mahatma was opposed to manufacturing industry, preferring small and cottage industries (which means those that could produce goods from home, so small were they). Money was anathema to the Mahatma, who left little besides a pair of glasses, a set of slippers and a watch when he passed on in 1948 as the consequence of a shooting. Barter was preferred to money, and the Narendra Modi government did its best to give barter a boost when it withdrew 86% of the country’s currency at four hours notice on November 8, 2016. This single step has had the most consequences on both the economy as well as the political fortunes of the BJP.
Prime Minister Modi still stands by demonetisation (DeMo) and defends the move strongly. Recently, he promoted “DeMo Das” (another official who along with Adhia was the public face of demonetization) as Governor of the Reserve Bank of India, where Das can carry out more experiments in Gandhian economics, perhaps by ensuring yet another round of demonetization. Indeed, this is a step that several in the all-powerful Lutyens Zone of Delhi say is being considered by the Gandhians who have such a significant influence on policy in the Modi dispensation. A key financial expert and formulator of DeMo, Swaminathan Gurumurthy, has been appointed to the Board of Directors of the Reserve Bank of India by the Prime Minister in order to better ensure that the RBI make citizens in India follow the maxim of “Simple Living and High Thinking”. Gurumurthi himself lives a very simple life in Chennai and spends much of each day in thought The way the Goods & Services tax (GST) was conceptualised and implemented by the Narendra Modi government, it is clear that the Modi GST was based on Gandhian economics. There are several steep taxes, such as a 28% tax on cement, so as to ensure that more dwellings get built out of the simple clay favoured by Gandhians (and on which there is no tax).
Luxury items such as the better class of hotel rooms were steeply taxed so that people would live more simply while travelling. Luxury items were taxed at the highest GST rate, no matter if these provide more employment if allowed to get produced in larger quantities. Surprisingly, hundreds of millions of citizens of India do not want to live their lives in accordance with the desires of the Father of the Nation. They seek even a few luxuries, and yearn for more rather than less wealth. They prefer city life to rural simplicity. There has therefore been a backlash against the constrictions on the economy created by the complex and steep GST, especially within the trading community. Despite its passion for Gandhian economics, the imminent parliamentary 2019 polls means that the BJP government has had to move closer towards what this columnist had suggested from start, a GST with a single, much lower rate for ease of implementation.
On December 22, GST rates were cut on several items a few days after Gandhian economist Adhia argued for high rates in an oped. Finance Minister Arun Jaitley (who till then had defended high GST rates) is now expressing the view that “lower rates are better”, although Gandhian economists may not agree. Although in the past Finance Minister Arun Jaitley (who is among the country’s top lawyers) had called those asking for a single GST rate as” unsound, he has now come out in favour of a single rate. Of course, the non-Gandhian changes will be more popular and more conducive to growth than the anti-consumption focus of the earlier GST structure. Should Narendra Modi shift from the economics of Mahatma Gandhi to that of Deng Xiaoping, India’s GDP would grow by 12-15% annually rather than hover around 7%, a rate too low for comfort. Will the Gandhians in the Modi government permit such pragmatism in policy, or will the Mahatma’s idealism once again trump practicality? Only Prime Minister Modi knows the answer.
—The writer is Vice-Chair, Manipal Advanced Research Group, UNESCO Peace Chair & Professor of Geopolitics, Manipal University, Haryana State, India.

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