By Vijay Rajvaidya
The Honorable Finance Minister of India, Mr. Arun Jaitley, gave a keynote address titled, “India – The New Land of Opportunity” at an event jointly organized by the Confederation of Indian Industry (CII) and The Indus Entrepreneurs in Palo Alto, CA on Jun 23. The event was supposed to be a platform to further explore PM Modi’s clarion call to build and strengthen diaspora engagement with India.
Mr. Jaitley is a good speaker – he spoke without notes and was coherent, consistent, and convincing.
A slight tremor of 2.8 on the Richter scale was registered during the talk. Needless to say it went unnoticed – just as most of the regulatory reforms Mr. Jaitley has affected since he took over as a Finance Minister. Even the post-speech Q and A didn’t focus on the regulatory and taxation regime which directly affects the investment and ability to do business in India.
Mr. Jaitley spoke with conviction and without subscribing to any political or economic extremes. He was emphatic in his message that Indian citizens in lower middle class and economically weaker segment have high aspirations and improving their lot is of prime importance for his administration. He was clear that he doesn’t subscribe to the “welfare state model” which discourages wealth creation and believes only in redistribution of stagnant resources. He aptly called it “distribution of poverty”. His administration is dedicated to creating conducive environment for overseas investors by bringing corporate tax in line with other competing economies of the world; invest in infrastructure to facilitate efficiency and growth and to reform the regulatory regime.
This is where I thought “rubber meets the road:” the complex and entangled regulatory environment. For example, take the case of The Company Act of 2013 (which I erroneously called Company Act of 2014 and was corrected by Mr. Jaitley) is described as a monster, even after thirty or so amendments by the new administration, by the Company Secretaries and Chartered Accountants in India. The act can be comprehensive, but the process to register and run a company need not be complex and entangled. We seem to equate the two.
Mr. Jaitley also talked about his efforts to stem undocumented transactions in cash, in other words, generation of black money. Since Real estate is one of the biggest sources of creation of black (unaccounted cash) money; to my dismay I found out that his solution is a law which limits cash transactions to less than INR 20,000!
In my opinion this is where the problem lies: Indian government enacts new laws for each instance of non-compliance and makes the process more complex, hoping it will cover holes which allow cash transactions. They don’t seem to understand that if a person chooses to transact in cash, thus not paying tax on full amount, he/she is already not complying with law. It’s not difficult and unconceivable for this person to flout another law limiting cash transaction.
Therefore, the need of the hour is not more regulations but less of them. There are very simple solutions to this problem which modern advances in technology have enabled but they are beyond the scope of this report.
It was great to hear Mr. Jaitley because he was genuine and believable.
Though Mr. Jaitley tried to explain away the apathy of Indian bureaucracy, it remains a big deterrent to achieving his government’s “Make in India” and capital investment goals. It is intellectually stagnant, mediocre in vision and unwilling to transform.
We need drastic, not incremental change in this government’s thinking in order to make India a welcome destination for overseas capital.
Vijay Rajvaidya is the Managing Director of India Currents magazine.