The Manifesto Game : Tweedledum & Tweedledee



Tweedledum & Tweedledee
 

 

In the land of Tweedledum and Tweedledee, what can you expect but election manifestos by ( who else? ) Tweedledee and Tweedledum, which read quite alike !

 

The Narendra Modi-led Bharatiya Janata Party, today came out with an economic manifesto seeking an India-wide Goods & Services Tax, which the Congress has been pushing for since when President Pranab Mukherjee was finance minister in the UPA Government.

 

Modi as chief minister of Gujarat had led a cabal of BJP-run state chiefs which had thwarted repeated attempts by Mukherjee, then finance minister and his successor in North Block, P Chidambaram who both sought to introduce the simple single point tax which would replace a plethora of central and state taxes and duties on manufactures, turning India into a single common market.

 

An attempt by Mukherjee, some five years back, to break the deadlock by jetting into Ahmedabad to hold direct talks with Modi did not succeed as the chief minister, while not objecting to the measure being brought in, brought in procedural objections.  Later on, attempts by Chidambaram to reach out to BJP leaders ahead of  Parliament sessions, met with similar objections. 

 

Narendra Modi with his Manifesto

The implementation of the new tax which will snuff out central excise taxes, additional customs duties, surcharges and state taxes such as VAT, entertainment and luxury taxes, lottery and gambling taxes etc., could well add 1-2 per cent to India’s growth rate, according to economists. Hence, the rush to be the author of scheme, and the desire to deny the other side the benefit of having launched it.

 

The on-going General Elections are widely expected by pollsters to yield a hung house, with BJP as the single largest party and Congress as the second largest. Regardless of which party is able to cobble together an alliance capable of forming a ruling coalition, this Government will depend on  other major parties for support in passing important legislation and hence a  consensus on GST is essential as the measure has to be passed by a two third majority in both houses of Parliament.

The original deadline for rolling out the nation-wide tax, of April 1, 2010 as well as several later deadlines have already been missed because of this crazy bit of opportunism and this may not be the end of the story if the Congress decides to do a BJP in case it sits in opposition ! 

The only major issue on which the two manifestos differed was on foreign investment in India’s $ 400 billion retail market. “Barring multi-brand retail, FDI will be allowed in sectors wherever needed for job  and asset creation, infrastructure and acquisition of niche technology and specialised expertise,” the BJP manifesto said.  Congress has already decreed it open, in the teeth of opposition from the BJP, the Communist parties and Trinamool Congress. While the Communists and Trinamool feel opening up retail to foreign investors like Wal-Mart, means selling out the country to global multinationals, BJP has more hard boiled electoral reasons for objecting to it.

 

Analysts pointed out that the 25-million strong small retail community in the country has traditionally been voting BJP and its earlier avatar Jana Sangh, hence it made sense for the party to oppose foreign investment into hyper-markets which challenge their businesses. Local big retailers like Reliance, Godrej and Big Bazaar have however not been opposed by the BJP, though business lobbies were quick to react to BJP’s opposition to FDI in retail terming it as “disappointing.” Said FICCI chairman Sidharth Birla “we feel disappointment on the stand on FDI in Multi-Brand Retail, we hold out hope for a possible review in the future.”

 

The BJP manifesto also blamed UPA for “tax terrorism” and uncertainty for denting the country’s image and creating anxiety among businesses, and promised a “non-adversarial tax environment”. The UPA government had brought in a retrospective tax law amendment after it lost a Supreme Court case against British telecom giant Vodafone from whom it had sought tax deductible at source for contracting purchase of Hutch Whampoa’s stake in its Indian arm at a tax haven. A case, which may have prompted Birla to describe the BJP manifesto as “investment friendly”.

 

The right-wing party’s manifesto also called for rationalising India’s tax system without going into any specifics. This is in sharp contrast to its 2009 manifesto where it sought raising tax free income to Rs 3 lakh a year, a demand which was echoed in a report on a Direct tax Code by a Parliamentary Committee chaired by Yashwant Sinha, former finance minister in the BJP led NDA government of 2001-2004.

 

The Congress-led UPA had  proposed the Direct Tax Code. However, it was unwilling to accept the Committee’s report in full, leading to a parliamentary deadlock on the passage of that vital legislation too. North Block had dismissed the demand for raising the tax ceiling and other sops sought by the committee, stating this could lead to an annual revenue loss of Rs 60,000 crore to the exchequer, which the Government could ill-afford. Some feel that with chances of being able to cobble a ruling coalition becoming brighter, the right-wing party now feels it is best not to make promises which may be difficult to keep.

 

However, this was not the only subtle indication that if voted to power, BJP’s economic agenda would be no different from that of the Congress. Both parties promised in their manifestos to boost India’s manufacturing sector, with BJP calling for turning India into a “Global Manufacturing Hub” and Congress calling for “building India as the world leader in manufacturing ... ensure(ing) 10 per cent growth”.



Rahul Gandhi with the Congress Manifesto
 

 

Both said they want to create a “single-window system” both at the Centre and States to expedite land, environmental, power and other approvals for investors. Both backed food subsidies, despite also calling for fiscal discipline in the same breath.

 

Not surprisingly, both BJP and Congress also promised to build high-speed rail, a project which was first thought of during the Manmohan Singh government’s as India's response to China's high speed tracks. The Government identified some six routes for taking up the high speed project. Said a Railway Board member “like everything else both parties want to take credit for whatever the system throws up which may prove popular and disavow hard decisions like raising fares and cutting subsidies, which prudent economics demand.”

The Elephant, The Dragon and the Beehive Theory

 

Rahul Gandhi at CII : India is a beehive

 

Which is stronger – a dragon, a beehive or an elephant?

Answer – they are not comparable.

Congress leader and possible prime ministerial candidate Rahul Gandhi in his first address to captains of Indian industry, stressed the need to decentralise the Indian power structure in the manner of a `beehive’ to cut through red tape to make `doing business’ easier.

His favourite description of India, of course, is the beehive and not the usual lumbering elephant that most writers and thinkers associate with India. No would he like to think of it as the dragon which symbolises India's northern neighbour China, and Gandhi does believe the three symbols can’t be compared.

Wisecracks about India being a beehive with his mother as Queen bee and everyone else as drones apart, Rahul may have a point. India is teeming with a creative if chaotic society, which encourages thought cross currents and does not shut out dissent, the way regimented societies like China does.

Elephant Vs the Dragon

The India-China debate is old, almost as old as the emergence of the two nations as independent countries in the late 1940s. And much of what he said at a meeting organised by the business chamber – Confederation of Indian Industry – has been heard before. However, he is a young leader, who should be heard, if only to find out whether he is different.

The difference between the two rising Asian economies, according to Gandhi, lies in how the two view power. "China applies power by hand - they are a manufacturing behemoth. India on the other hand applies people's power - the power of the mind."

Gandhi emphasised India needs to continue developing the infrastructure needed to unleash India’s “soft power” – both in terms of roads, ports, electricity, etc., as well as in terms of revolutionising education and linking academic research with industry.

Now that’s a good and popular way of putting it across, even if it’s slightly clichéd. But the fact remains that China has become a super-power and India is still a wannabe power. And the transformation has happened during the last three decades. Nine years of that period, saw India being ruled by his father and grandmother. Five years by another Congress leader trained by his grandmother. Another nine years by a man handpicked by his mother for the job. Someone needs to do some more explaining than the play-acting Rahul did with industrialist Ajay Shriram to explain why India’s `soft power' has not been able to keep pace with China’s `hard power'.
 

The Beehive Theory

On the other hand,  Gandhi’s  complaint that unlike a "beehive which gives every member a voice", the system in India is "clogged" and voices of many at the bottom of the pyramid are not heard, is partially true. Despite boasting of a free press and the longest running democracy in Asia, marginalisation of the poor and unheard, were and are certainly the causes for the small and large rebellions India has witnessed over the decades.

That the ‘unclogging’ of the system is happening is apparent - the number of rebellions has come down – but the few remaining ones ( and they are big ones – a Maoist rebellion in central India and an ongoing disturbance in Kashmir)  are signs  that much more needs to be done.

Gandhi of course, led his `beehive’ allegory onto a subject which was a favourite with his late father prime minister Rajiv Gandhi – decentralisation to the district and village level. The desire to decentralise may not be purely altruistic.

The Congress rule in the centre in Rajiv’s time and now, was and is being increasingly challenged at every stage by states ruled by different ideologies. This is why the Congress party wants to cut past state governments and link up straight with district level governments.

In Jawaharlal Nehru’s time, dealing with provinces was not a problem. Ideologically they were one with him. They were all ruled by Congress party bosses. The chief ministers were strong men – Dr B.C.Roy in West Bengal, K Kamaraj in Madras, Govind Bhallab Pant in Uttar Pradesh – but they were all Congressmen and consultations that the prime minister used to carry out with them on economy, polity or foreign policy were more in a closeted club-like culture.

Mrs Gandhi solved the consultation problem, by simply ignoring state governments. Her force of personality and the fact that she picked up issues which were popular with the masses, meant the states squirmed when their rights were trampled on but did not have the ability to oppose her policies.

Take the example of coal and steel freight equalisation – it hurt Eastern states the most – West Bengal, Bihar and Orissa saw de-industrialisation as a result of this mis-thought policy. But no chief minister dared oppose it as the entire deal came shrink wrapped in Socialist rhetoric which talked about bringing the benefits of industrialisation to backward regions.

In reality, nothing of that sort happened. The policy which had the central government subsidising freight cars carrying steel and coal so that they could be sold at the same price anywhere in the country, helped some moneybags in Bombay make a killing at the expense of mineral rich Eastern India. The poor states remained poor.  

Mrs G got away with it. However, that kind of a deal is no longer possible. When the Dr Manmohan Singh wanted to play down the Sri Lankan Tamil issue at the UN, his DMK `friends’ and his AIADMK `former friends’ just didn’t let him have his way.  When he wanted to gift industrialists like the Ambanis, Adanis and Tatas with a subsidy on  costly imported coal to fire their new electricity plants, by raising the price of locally mined coal which feed ageing state electricity board run electricity plants, states raised a stink, forcing the `good doctor' to backtrack.

No wonder, Rahul called for decentralisation of the beehive, and described that as the panacea for India. The Queen Bee needs to connect with the drones minus the doubting chief ministers in between.