PM Modi, Make 3 New Year Resolutions For ‘Minimum Govt’ Legacy

Raghav Bahl suggests some new year resolutions to PM Modi to redeem his promise of ‘min govt, max governance.’

Updated31 Jul 2018, 10:53 AM IST
6 min read

“I am back in the USSR. You don’t know how lucky you are boy

It was most uncanny that I woke up with this marvellous Beatles song, composed in Rishikesh, playing in my head. I guess dreams can be as predictive as they are based on premonition. Because the first newspaper headline l read that morning was from Reuters: “Modi’s office urges use of Indian products after rails controversy.”

I rubbed my eyes in disbelief. I pinched myself to check if I was still sleeping. Were we back in the 1970s? The era of protectionism in a state-controlled (nay, state-strangled) economy…

Unconscionable for Indian Tax Payers and Consumers

The facts are messy. The Modi government promulgated a Public Procurement (preference to ‘Make in India’) Order of 2017 which mandates that “each tender must be examined from the point of view of Indian manufacturers.”

It gives a straight (unconscionable?) 20 percent, yes t.w.e.n.t.y percent, price advantage to local manufacturers, damn efficiency and consumer interest! And if a foreign supplier still wins the bid, half of the order has to be given to an Indian manufacturer.

Back in the 1970s, India was starved of foreign exchange, so at least there was an excuse. Today, we are bulging with $400 billion, and yet our government has the medieval smarts to order its departments to willingly swallow this fly (a literal translation of that graphic Hindi phrase, makkhi dekh kay nigalna).

The latest makkhi swallower is Indian Railways, whose global tender for track modernisation steel could be struck down, unless it gives preference to SAIL and Indian companies like the JSPL, who may not have either the capacity or specialisation to do the job. And yet the railways have to pay 20 percent more, and waste time.

Who ultimately pays for this economic foolishness? You and I, of course, the stupid Indian tax payers and consumers.

Maximum Government, Maximum Economic Statism

My mind jerked right back to April 2013, when I had hosted a Think India Dialogue with then Chief Minister (and PM-candidate) Narendra Modi. The theme was that exciting phrase ‘minimum government, maximum governance’ coined by him.

Modi was the great hope for all right-of-centre economic thinkers like me. He would slash government intervention, shrink the state and free up entrepreneurs. 

Unfortunately, 43 months out, Modi’s government carries the opprobrium of being Big State. It’s getting bigger, more intrusive and most discretionary, with every passing day. Its motto can be restated as ‘maximum government, maximum economic statism.’

But since a new year is always a kindler of hope, can the Modi government imbibe the “spirit of 18” in 2018?

Can it still roll back the State and redeem quite a bit of its earlier promise, even if less than 18 months of its tenure are left?

I believe it can make a few key amends with just three new year resolutions. Here they are.

One: I Resolve to Abolish GST's Anti-Profiteering Body, E-Way Bill & Invoice Matching

PM Modi, Make 3 New Year Resolutions For ‘Minimum Govt’ Legacy
(Photo: The Quint)

The goods and services tax (GST) is a MASSIVE reform. To have one tax in a diverse, federal country like India, removing all cascading infirmities and logistical friction, is a huge achievement, and kudos to M/s Modi & (Finance Minister) Arun Jaitley. Even some of the irritating compromises – like keeping petroleum, alcohol, real estate other provincial taxes alive in the interim – are acceptable. But three crippling measures are examples of state overreach which end up vitiating almost every Modi government initiative:

  1. The National Anti-Profiteering Authority is an anachronism! It’s not even medieval; it betrays a pre-historic dread of competitive, free markets. Imagine asking a consumer to file cost details of a product; then intruding on the producer to verify the details; finally, ordering the seller to lower the price, or, hold your breath, to “return the undue benefit availed of, with interest at 18 percent!” Simply unbelievable that a modernising economy, wedded to the principle of free and competitive markets, could be embarking on such misadventure.
  2. E-way bills have to be generated for every transaction above Rs 50,000 – yes, just Rs 50,000 – which will be tracked on real-time basis, within each locality and across state borders, with inspectors having the power to stop/check at their whims! Hey sir, can I please get the obnoxious, but predictably corrupt, Octroi Tax back, please?
  3. Invoice matching takes the bureaucratic cake! Imagine, I have paid the tax on all my sales, but when I ask for the refund against my purchases (which is the core promise of a scientific GST), I am told, “hey wait, you will get your refund only when the person who has sold to you has filed his returns and taxes!” Pray why, sir? I have done my bit, I have no responsibility or wherewithal to collect taxes from defaulters, so why am I being penalised for the government’s failure to catch the dodger? Why have I become the fall guy just because the government is unable to do its job or another person is playing truant?

Just killing these three monstrously Statist measures will allow the Modi government to reapply for the tag of a business-friendly administration. Just do it in 2018, sir.

Two: I Resolve to Make the Bank Recapitalisation Bonds a Genuine Equity Instrument

PM Modi, Make 3 New Year Resolutions For ‘Minimum Govt’ Legacy
(Photo: The Quint)

The Modi government has won tired accolades for its “bold reform” in announcing bank recapitalisation bonds. Frankly, this is such a statist, un-innovative and old-world move that I am left speechless by India’s cravenness. This instrument was deployed in 1991-92, when the country was bankrupt and the government was somewhat justified in using a sleight of hand to bail itself out – ie, transferring the liabilities on a bank’s books to the asset side, and shoving the contingent liability (which actually increases the government’s fiscal deficit “invisibly”) off the balance sheet.

If any private owner were to do this, he would be in jail for misappropriating public funds. But the government got away with this ploy in 1992 because of the financial emergency.

Now imagine using similar chicanery when you are supposedly in the pink of economic health? How utterly unimaginative and babu-like!

So what else could have been done? Well, there are a million possible structures, dictated by bright minds who understand equity dynamics – for example, how about a deep discount rights issue with attached warrants, underwritten by the government for the same amount of cash that it has committed to the bank recapitalisation scheme? With one stroke, you would have raised double the amount of equity capital with the same cash liability.

Unfortunately, the babus on Raisina Hill don’t understand this stuff – and the Modi government is too hidebound and statist to explore new ideas.

Three: I Resolve to Re-Box Aadhaar Into a Benefits Transfer Programme, and Not Make It an Instrument of the Deep State

PM Modi, Make 3 New Year Resolutions For ‘Minimum Govt’ Legacy
(Photo: The Quint)

Just this decision can help the Modi government shake off tonnes of statist dust. Aadhaar was an outstanding innovation to give each Indian un-duplicate-able identity so that the welfare state could transfer benefits to him or her without leaking or wasting them away to theft and corruption. Brilliant, in idea, conception and execution!

But then, the Modi government thought up other tricks.

Link it to your bank account so I know if you are buying gold, porn or popcorn. Link it to your kids’ nursery admissions, so kidnappers could potentially get a treasure trove of actionable data. Link it to NACO so I can blackmail you for being a closet HIV patient. 

I have deliberately exaggerated the last two examples to ram home the dangers of putting people’s bio-metric identity “on sale.”

It’s a veritable bounty for criminals and the deep state.

The government must roll back Aadhaar’s overuse/misuse in 2018. This is an imperative.

Back in the USSR…

Ultimately then, Prime Minister Modi may fail to redeem his 2013 pledge of ‘minimum government’ wholly, but paraphrasing his bete noire, Pandit Jawaharlal Nehru, he can still do it substantially by implementing the three resolutions above in 2018.

Else, many of us will be singing:

I am back in the USSR
You don’t know how UNLUCKY you are boy

(Breathe In, Breathe Out: Are you finding it tough to breathe polluted air? Join hands with FIT in partnership with #MyRightToBreathe to find a solution to pollution. Send in your suggestions to or WhatsApp @ +919999008335)

Liked this story? We'll send you more. Subscribe to The Quint's newsletter and get selected stories delivered to your inbox every day. Click to get started.

The Quint is available on Telegram & WhatsApp too, click to join.

Published: 30 Dec 2017, 04:02 AM IST
Stay Updated

Subscribe To Our Daily Newsletter And Get News Delivered Straight To Your Inbox.

Join over 120,000 subscribers!