Where there’s freedom to deliver – Former President, FICCI

FICCI
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Economic freedom is usually defined as a fundamental right which empowers everyone to work, produce, consume and invest as they please, while remaining unconstrained by the state (ethical boundaries applicable to such freedom go without saying).
For the largest number of individuals in any society, economic freedom really implies the ability to earn a sustainable livelihood, supporting day-to-day needs, medical and educational spends, and getting a fair shot at climbing the next step in the economic ladder. Yet, when articulated by economic researchers, the focus of such freedom shifts from individuals at large to businesses/commerce and wealthier people — that is, essentially communities with means.
Of values and spirit
The last Economic Freedom Index places India 112 out of 159 countries based on 2014 data, but such data-based formal surveys do not capture the underlying ‘spirit’ element. Therefore, on the premise that the pursuit of respective economic interests by resourceful categories usually results in the greater prosperity of society, the discussion here is limited to their economic freedom (or lack of it) and the role that government plays in sustaining the same.
A strong, limited (yet effective) government continues to be the best assurance for protecting societal values and promoting commercial imperatives.
Free-market economies work best when government creates broad frameworks/rules that allow private capital space and freedom to deliver, and in turn multiply investment.
Therefore we must be acutely sensitive about feelings on any undue imposition by government or its many associated arms — including regulators, banks and professional institutes, among others. Being half-way into the tenure of the government is a good time to evaluate reality.
A realistic evaluation
The present Government advocates the idea of “minimum government maximum governance”.
This generates resonance in a constituency that is relevant to the economy, yet pales in terms of its electoral significance. “Minimum” relates not just to the size of the Government but to the habitual control or influence of its agencies on enterprises, and this makes the slogan relevant to this constituency.
The Government has shown its capability in improving governance at the Centre; but whether we are headed to a ‘minimum’ or even an ‘optimal’ level of government is a moot question.
It is easy to concur that there was much to be fixed in the economy. But this also made it tempting to try and mend what is not broken. Can we examine if we are writing some laws in reaction to the dismal speeds of judicial dispensation (or an impression that India may have been a ‘soft-state’ in punishing crime)? Or if policies are increasingly prescriptive and potentially intrusive (more so when our past shows how draconian rules can be exploited)? One always runs the danger of creating strategies on the basis of ‘feeling’ or ‘sounding’ good, rather than ‘doing good’ in the larger context. More often than not, there is short-term applause even for sub-optimal policies.
While framing policy it is essential to keep our eyes fixed — like Arjuna on the bird’s eye in the Mahabharata — on the ultimate goal: generate livelihood opportunities for a million people each month for 10 years. Our ‘globally highest’ growth rate has not generated livelihoods at this pace.
A much stronger investment cycle to supplement consumption-led growth is required. This calls for much more cohesive policy, certainty and economic freedom than today.
The Prime Minister’s declaration of India being the most open economy in the world for investment has to be proven in earnest, and must correspond with hard facts.
A good market and ease of doing business are necessary but not sufficient conditions to invest.
Every class of investor must feel he is in a fair and secure environment where the greatest risk is business risk.
May I suggest we supplement the effort of looking at useless and old laws by simultaneously generating critical feedback on economic laws, procedures and rules introduced over the last five years, and judiciously evaluate the implementation at the ground level? Are they true to intent or are any open to abuse — for example, to be used as rent-seeking means? If so, what is the quick-fix remedy?
Good intentions upended
As has been argued, good intentions are often distorted through poorly written or inadequately thought-through laws/regulations, and indifferent or insincere implementation.
At the end of the day, the biggest confidence-builder for upright businesses is that they will not be unduly burdened or harassed and that the occasional guilty party will be rapidly brought to book.
For example, it is entirely possible that steps taken to address crony capitalism-effects in banking have inadvertently queered the pitch for borrowers in genuine difficulty or, indeed, enterprises seeking to borrow on fresh investments. (The difficulties are never due to lack of resources — the reservations are generated by the stipulations under which these are made available).
Again, quick refunds or efficient communication for income tax are a bonus for many simple taxpayers (and generate good optics); but the proof of the pudding is in how the tax authorities deal with businesses going forward.
While there is a welcome move to expand the taxpayer base and punish delinquency, it will be wonderful when current taxpayers are convinced about not facing fishing expeditions.
Evaders must be disciplined, based on evidence, but broader confidence must not wane.
India is pushing ease of doing business. Yet, such ease alone is insufficient to overcome hurdles created by inadequate competitiveness. The latter is critically important to protect market shares of Indian production — both in exports as well as domestic markets (in the face of general imports or free trade agreements).
India cannot afford to lose livelihoods due to growing gaps in competitiveness, even as many variables are beyond the control of business.
In terms of passion in supporting economic freedom, our political leadership deserves top marks.
Accordingly this discussion is not criticism but suggestions for introspection and review to ensure that enterprise does not feel restrained now, or indeed in the next decade.

IndianBureaucracy.com wishes the very best.

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