Any meaningful discussion on the economy veers towards the importance of reforms. Minimum, if not zero, discretion on the part of government is a prerequisite for wealth creation and prosperity. Since free market is the sine qua non of growth and development, economic reforms are a must. It needs to be asserted here that political reforms are also a must.
We are not talking here about the subjects that commentators and analysts have been discussing for decades — election reforms, anti-corruption measures, anti-crony steps, and so on. What we mean here is a code that the entire political class should adopt with the objective of immunising economic development from political maneuvers, manipulations, and machinations.
The lack of such immunity has caused immense harm to investor sentiment and the business climate. A recent instance of politics hurting economy is the series of raids the Income-Tax department and the Enforcement Directorate carried out against the businesspersons and associates reportedly close to Chief Minister Ashok Gehlot. Dozens of premises in Jaipur, Kota, Mumbai and Delhi were searched by the officers.
The timing of the operations by the two departments, both under the Central government, makes them look like politically-motivated. This is not to suggest that Bharatiya Janata Party has invented the abuse of agencies; this was done by the Congress long before when the BJP became a major party.
Even today, when the grand old party is but a shadow what it was in its glory days, it has not shed old habits; it still uses the levers of power with impunity whenever and wherever it can. So, the Gehlot government didn’t have any compunctions in directing the Rajasthan police to serve Sachin Pilot a notice under Sections 124(B) dealing with sedition and 120(B) conspiracy. It is instructive to recall here that in its 2019 election manifesto, the Congress had pledged to abrogate the sedition law. Gehlot may be feeling happy that his party didn’t the last general poll, for it would have deprived him of the opportunity to abuse the law!
While politicians attack each other, abusing whichever government organs they control, the real sufferer is the economy. Such actions vitiate not just the political atmosphere but also the business climate.
It is a well-known fact that Indian industrialists generally support all parties, though some — very few actually — who align their fortunes with those of some politicians or parties. At any rate, it is the personal choice of businesspersons to support whichever party they want to. Penalizing them for this choice not just militates against the spirit of democracy but also adversely affects their morale.
In effect, it dampens their enthusiasm to invest in India. And, of course, there are cumbersome clearances, complicated compliances, archaic labor laws, tight regulations, socialist-era rules, et al — the entire ecosystem has an institutionalized bias against wealth creators and investment. Unsurprisingly, the wealthy are moving out of India. In 2018, 5,000 high net-worth individuals (HNIs) left India left for foreign shores.
The Hindu reported on September 11, 2019, “As per Henley & Partners data, there was a 33 per cent increase till date in Indian nationals applying for residence programmes for 2019, when compared to the whole of 2018.” Henley & Partners is an investment migration firm that specialises in helping wealthy individuals obtain second residence or citizenship.
Earlier, in March 2018, a Morgan Stanley study had also highlighted this disturbing development. The Economic Times reported on March 19, 2018, “India has lost the highest percentage of dollar-millionaires to migration since 2014, ahead of China and France, with the crackdown on black money being the most plausible reason for the exodus. Nearly 23,000 dollar-millionaires have left the country since 2014, with 7,000 leaving in 2017 alone, taking India to the top of the exodus charts.”
The rough treatment meted out to the rich is a major cause of this exodus. Unfortunately, little has been done to stem either the exodus or check the mistreatment of businesspersons. Politicians of all parties continue to misuse government agencies as we mentioned above.
Against this backdrop, it would be unrealistic to expect HNIs to invest money in India.
Investment presupposes an amiable policy framework. The Narendra Modi government has done well to introduce a slew of reforms in the last few months, especially in agriculture, offering choice to the farmer to sell his produce and removing outdated restrictions.
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Now, the government should initiate another set of reforms, political ones. It should try to evolve a consensus among all parties that businesspersons are not dragged into the political battles. This will help not just the rich but also the economy, for they will be enthused to invest in India.