New beginnings

Slowly, but surely, Narendra Modi is dismantling the system that perpetuated corruption and crony capitalism

By Mohan Sule

History is rife will tales of retreating armies wasting the land so that the occupiers end with a pyrrhic victory. In recent times, the Gulf War is an appropriate example. Iraqi troops set Kuwaiti oil wells on fire as they began withdrawing from their invasion early 1990s. Now something similar is happening in India. The difference is this time the victor is making sure that the vanquished never ever again are able to go back to their days of benign feudalism. Slowly but surely the edifice that sustained and spread politics of patronage to every institution in the country for more than 60 years is being dismantled. The rotting monument to deification of political families, built by those campaigning on the platform of wealth distribution and equality but making a comfortable political career out of poverty perpetuation on one hand and crony capitalism on the other, is being brought to ground, brick by brick. Siphoning off tax payers’ money as public sector bank loans, to industrialists practising hedonism and farmers deprived of basic infrastructure, and then waiving them off had become the norm and so also subsidized services. The Robin- Hood-like actions were masked as magnanimous gestures underscoring the compassion of the ruling clique. Since May 2014, such brazen acts of financial impropriety are becoming rare. Top appointments in banks, now considered the fountainhead of corruption, are now the responsibility of the Bank Board Bureau. Loans are being sanctioned without phone calls from the High Command.  Political opportunists are now calling for farm loan waiver, comparing it with the recent action of some large public sector banks categorizing certain big-ticket loans as duds.

Fortunately, the clamor has not gain traction. On the contrary questions are being raised as to who had green-lighted the largesse without adequate collateral and how the central bank remained mute even as more credit was extended to the defaulters. Brakes were applied only post May 2014 and the move to provide for the non-performing assets should be seen as cutting losses. Also, many borrowers were hamstrung due to two years of drought and slowdown in the US and EU and Japan markets. The Jam trinity of Jan Dhan, Aadhar and Mobile is the centerpiece of efforts to cut out middlemen from any transaction. The zero-balance account’s core theme is to bring the informal and marginalized sections into the banking system and to get the attendant benefits of cheaper loans, freeing many from the tyranny of the neighborhood loan shark. It will also create a credit history of the borrowers. The unique identity number will boost mobility and provide an easy path to claim subsidies and insurance payouts. The cell phone is poised to take over as a power platform to merge as well as access facilities. In addition, GST will prevent tinkering with indirect taxes by the profligate Central and state governments to finance their populist schemes. This was the easy way out for lazy as well as venal policy makers to punish or reward competitors of friendly donors. Of course, items within the four slabs can be shuffled as per the evolving environment in the new regime, but not the tax rate.

The debate over demonetization’s objective is fruitless. The fact is it can achieve multiple tasks. Apart from making counterfeiting difficult and sucking out unaccounted cash, the amnesty scheme has given an idea about the identity and earning capacity of the depositors. The cribbing about inadequate liquidity is a covert form of pressure on the government to go back to the old ways when cash transactions dominated the GDP. Inconvenience in obtaining bank notes is pushing users to opt for various digital modes of payment. The unexpected calmness with which Indians have gone about exchanging their old currency has belied the expectation of opposition parties of a tumultuous reaction that would have forced the government to roll back fully or partially the move. Perhaps the adversaries of Narendra Modi underestimated his resolve in facing any backlash from those singed from the stern measure. It must be said he has more credibility than the critics in convincing the population that the discomfort is worth the effort for lower inflation and taxes and towards transparency going ahead and that there are various platforms that are quick and efficient to conduct daily business. More needs to be done to ensure that the efforts are not undone due to minor glitches. The first is availability. The second is affordability of the alternatives. The third is widespread dissemination of information. Sometimes surreptitiously, sometimes in full glare, Modi has succeeded in loosening the nuts and bolts of the gigantic machine that thrived on funds without accountability.