THE ECONOMY IS NOT GROWING BECAUSE OF OUR MINDSET

We are no more the fastest growing economy in the world. Growing at 5% and slowing down in 5 successive quarters, we are way behind even Bangladesh, which is growing at 8% today! So where did our growth engine get derailed? The nearly absent opposition will say it was when we crossed the stations of demonetization and then G.S.T. The government will tell you it is a global slowdown and we cannot remain insulated. They are both lying and they know it. The cash crunch of demonetization era is long gone and there is no dearth of available cash now. And if the U.S elephant of an economy with a much higher base can grow at 3% then where is the global slowdown? Why can’t the much smaller Indian economy be quick and nimble as a deer? Why should investors take the risk of unnecessary government interference, whimsical and ever changing rates and rules of taxation, unfavorable land acquisition and labour laws for that extra 2%?

We started the business of Make in India with so much fanfare, so why is the manufacturing sector in doldrums? It is so because of the mindset of our successive governments. Yes, successive governments, because nothing has changed. We were in the Nehruvian left of centre before 2014 and we have moved to Modian further left of centre today. Profit was sin then and it remains so even now. That is why it is taxed mindlessly so that the government can finance most fancied welfare schemes and waive farm loans annually. In the last seven decades it has failed to realize that if the entrepreneur does not plough his/her profit back in business, the latter will not grow, will not employ more people, will not manufacture more and remain competitive for export.

When Dubai, Singapore and Hong Kong are bringing down taxes to attract business we have 28% GST on hotels and cars and then wonder why the tourism and automobile sector are not picking up and why are FDIs not deluging these sectors? The fact of the matter is that our every government is uncomfortable if the investor makes a profit and a new tax is legislated to grab a disproportionate share of that. So why should they Make in India? In the business world taxation is inversely proportionate to growth and employment.

The health sector is an excellent example of government mismanagement. Government hospitals are few and far between, poorly staffed, ill equipped and on the brink of collapse because of the patient load. Till very recently the small and medium non-corporate private hospitals were filling up the void and offering affordable healthcare to the poor. These were small set ups with modest facilities and so were affordable. The government targeted them with a ton of rules and regulations – accreditation, facility standardization, fire norms, waste management regulations, labour laws……you name it. The judiciary went hammer and tongs against the doctors adjudicating penalties and fines in crores. Little did they realize that ‘best’ is the worst enemy of ‘good’, and the once affordable hospital and doctor became expensive and out of reach of the poor. When the court opines that you must have an I.C.U to perform surgery then many small nursing homes can either exist at the mercy of a license raj or shut down. These doctors went to work in the corporate hospitals but their patients, who cannot afford these hospitals, were left high and dry! So the doctor survived but the entrepreneur in him/her died and so did countless jobs created by them.

This is a government elected with an overwhelming majority and so as it should be in a democracy, I will take the liberty to presume that its decisions are the will of the people. By this logic I have to say that we in India are anti success, anti achiever, anti wealth creation and thereby anti investor. FDIs will only flow in when they will have no other option. We are to them an unpredictable oasis and not a freely flowing big river. When local investors find it difficult to negotiate the talent crunch, the skill deficit, the labour laws, the land acquisition laws and the unpredictable maize of taxation, the foreign investor has to be truly out of his mind to fight the third world problems and invest in India.

The achievers, the rich, the industrialist and the capitalist and the entrepreneurs are the engines of our growth. We cannot expect to rein them in, cut them to size, make them anaemic by taxing them and hope to gallop along the highway of growth. This will only slow down our economy and it has. The fourth industrial revolution has already arrived and China has leapfrogged into pole position because they have invested in education and health. We need to emulate them and if Modi 1.0 was about cleanliness, roads, cooking gas, housing and electricity, let Modi 2.0 be about education reforms, labour reforms, land reforms, lower taxation and encouraging entrepreneurship.     

The government has to realize that in a growing economy the rich will get richer; that is not bad because it will ensure growth and employment and make the poor richer too. By indiscriminate taxation and unfriendly regulations the rich are surely getting poorer and have no money left to employ the poor!