US bullying spurred Green Revolution. Let tariffs give us a Business Revolution

Illustration for representation |Ramandeep Kaur | ThePrint

In the context of the rather rude and outlandish posture toward India that US President Donald Trump has taken, we are tempted to hark back to 1971 — to Richard Nixon and Henry Kissinger calling us “bastards”, sending aircraft carriers to intimidate us, and actually inciting Maoist China to attack us. I would argue that this historical reference, while valid, is not the most relevant one.

The incidents we should remember go back to the mid-sixties, when we were abjectly dependent on American food aid. We were literally living from “ship to mouth” as we tried to cope with multi-year droughts and pervasive inflation. President Lyndon Johnson was upset that, instead of supporting the American position in Vietnam, India had been uppity enough to mildly criticise US actions in that unfortunate country. Johnson would deliberately delay American ships by a few days to teach us a lesson to punish us for our impertinence. An independent foreign policy on India’s part then, as now, was met with disdain and hostility.

What lessons did we learn? In the fifties, the Films Division propaganda documentaries shown in our cinema theatres did cover big dams, but greater attention was paid to steel plants. This changed in the sixties. Shastri coined the expression “Jai Jawan, Jai Kisan”. Our fourth five-year plan was put on hold. We undertook a national “plan holiday”, and our newspapers began talking about farmers, the “food problem”, and agriculture. To her credit, Indira Gandhi built on Shastri’s initiatives. It has been reported that she said she never wanted India to be so dependent on foreign food again. Herein lay the seeds of what went on to be called the Green Revolution.

Perhaps the present crisis and trauma can force our country into something resembling that special moment we found in the sixties. Perhaps we can radically alter our business environment.

 

Seeds of self-reliance

Appointing C Subramanian as Minister for Agriculture in 1964 was a stroke of genius.

Despite his earlier inclinations toward a soft Gandhian socialism, Subramanian had inherited a healthy, sceptical empiricism from his political guru, C Rajagopalachari. He quickly understood that the food required for urban and semi-urban India could only be provided by farmers with larger landholdings. Subsistence farmers with small plots created very little marketable surplus. Without taking the socialists in his party head-on, and defying the savants who argued against diverting scarce resources from industry to agriculture, Subramanian decided to go in for old-fashioned economic solutions focused on incentives and risk management.

He offered farmers who produced foodgrain surpluses guaranteed offtake at an attractive guaranteed price. Until then, our farmers had been accused of being backward, primitive, and unsophisticated. But wonder of wonders, farmers — especially those in undivided Punjab with reasonably sized holdings — responded to the incentives and guarantees (which mitigated their risks) with rare vim and gusto. Very soon, the warehouses of the newly formed Food Corporation of India were overflowing with foodgrains.

Subramanian was fortunate to have as his colleague the redoubtable MS Swaminathan, who championed new hybrid seeds, intensive fertiliser use, and focused farming techniques. Punjabi farmers responded with enthusiasm and energy. We must also acknowledge the contributions of a Rockefeller Foundation employee who went on to win the Nobel Peace Prize. His name was Norman Borlaug, and he developed the hybrid dwarf wheat in Mexico. This was before the Rockefeller Foundation had been transformed into its current leftist avatar.

The Green Revolution has not been without its costs. In some years, we have a glut in procurement, with large quantities of wheat and rice rotting away. Every now and then, there are corruption scandals in the Food Corporation of India. Large subsidies have resulted in excessive use of fertilisers and pesticides, contaminating our soil and environment. Provision of subsidised and free electricity (incidentally, not one of Subramanian’s ideas) has led to a depleting water table and salinity in the land.

Admittedly, these are all undesirable consequences of the Green Revolution. But from a strategic perspective, “food security” for a country that was once constantly caricatured as a beggar nation means something.

For decades now, we have been not just self-sufficient but surplus in foodgrain production. No foreign leader can taunt us anymore by holding back shipments of food aid. In fact, on occasion we provide food aid to other countries. The national trauma of the sixties served as an impetus for a dramatic change in our country’s position. And therein may lie the kernel of an idea for dealing with our current situation apropos of trade and tariffs.

National business prevention act

 Recently, a friend of mine quite innocently asked: “Why don’t we do more business in India?” She was reverting to simple, old-fashioned economics à la Subramanian.

The response to her question has to be a grim one: we are discouraged from doing business in India by thousands of different laws and regulations.

Our governments employ hundreds of inspectors, tehsildars, and tax officials. There are registrars, deputy registrars, and sub-registrars. We have “approving” authorities and officials who can “object”, and therefore may or may not provide us with the elusive “no objection certificates”. Add to that commissioners, deputy commissioners, assistant commissioners, chief commissioners, tribunal members, and judges who can specialise in delays and injunctions.

Effectively, the message is that Indian citizens should not do business. We are not merely non-incentivised to do business, we are actively disincentivised from doing so. The fact that many of us are foolhardy enough to try is a tribute to our masochistic tendencies and to our outsized optimism.

My friend Gurcharan Das once told me that our ancients, like Chanakya, argued that “shadbhaga” — one-sixth — should be the state’s share of the national output. We have no such dharmic restrictions. Every official who finds a way to squeeze out more revenues is a hero of our bureaucracy. His valour is surpassed only by the official who is relentlessly obsessed with preventing loss of state revenue. It is as if the state exists to collect revenue and not to promote the welfare of citizens.

Perhaps we can radically alter our business environment so that we don’t have to keep giving negative answers to the innocent question posed by my friend.

 

Starting the Business Revolution

Here are some suggestions which I believe should be considered not just by our state, but by our society at large:

1. Establish one GST rate for ALL goods and services. It does not matter if the rate is initially high and brought down later. Multiple rates lead to confusion, litigation, transaction costs, and people trying to game the system.
2. Bring petroleum products, alcohol, and real estate under GST. Irrespective of which party is in power, every state government will oppose this, as these items provide states with unfettered revenues and, more importantly, ministers, officials, and inspectors with “income”. This is where society must step in. Citizen associations and individual citizens should lobby strongly for this change because it benefits all of us and only hurts the “vultures” who are holding us back.
3. Pass a law or ordinance stating that the government will NOT appeal any decision it loses at the Tribunal level. Today, such losses are automatically appealed because no official wants to be accused of causing “revenue loss” by accepting a bribe from the taxpayer. That is why fixing a monetary amount below which an appeal will not be contested is a bad idea. If we fix Rs 1 lakh as the threshold, it is almost inevitable that an envious colleague will complain against me — claiming I decided the dispute amount was Rs 80,000 by ignoring interest and penalties. And that I did this because I was bribed, thereby causing a “loss of revenue” to the government. This approach penalises correct decisions through the threat of bribery accusations and poisons all decision-making.This ONE decision will not only inject adrenalin into our capital markets, but also considerably de-clog our courts, where the state is the predominant source of litigation. There will be a loud campaign that this will be hurtful to the country as Tribunal members will be corrupted. It is important to note that such objections will come from officials and lawyers who profit from the present system of endless appeals. Here again, citizen associations should step in. The state should appoint competent, honest Tribunal members and stop using this absurd excuse to pursue endless appeals to higher and higher courts. At the end of the day, if some mistakes happen, then so be it. The benefits of this change will be immense. We can afford a few mistakes.

4. Abolish the over 26,000 provisions which criminalise a businessperson for trivial, inappropriate, and antiquated reasons just for starting or running a business. These clauses were identified in a report by Teamlease RegTech and Observer Research Foundation. Reduce the 69,233 compliance requirements it identified to 10, and the more than 6,000 filing requirements to 6. And PLEASE do not appoint a committee to “look into” these findings. They have been meticulously researched and discussed in the public domain for some time. Let us just run with them. Again, if some mistakes arise, that is OK. We can correct them later. We should not delay further for fear of making mistakes. Let us not forget that we live in a world where tariffs on our products can go up every two weeks. We are short of time.
5. Quickly, really quickly, amend our nuclear liability law. This is a stupid law that Dr Manmohan Singh was forced to acquiesce to by his dim-witted leftist allies and the luddites within his own party. Without this change, we will be marooned on a backward island as the rest of the world goes ahead.

We should actively encourage small and medium-sized plants, both on a captive basis and with the flexibility to sell commercially. This should be in the public sector, the private sector, and in joint ventures. Let a hundred flowers bloom. We have missed many buses in the past. This is one bus we should not miss.

6. 6. Announce a systematic year-by-year reduction in our income tax rates for individuals as well as for corporations. The goal should be to hit 16 per cent or Chanakya’s shadbaga within a few years. We should plan on being a country of high incomes, high wealth, high prosperity — not a country of high taxes.
7. Encourage the Reserve Bank to keep our currency always a tad undervalued. This is the single most effective anti-tariff measure we can think of.

I have deliberately kept the list of suggestions small, but they are all radical ones. Many more can be added as we go along. It is important that we, as a country, undertake difficult tasks just as Subramanian & Co did. We can then use the current situation to create a Business Revolution to match the Green Revolution.

In a few years, we can sit back and congratulate ourselves that we no longer need to reach for aspirins every time we are faced with a threat or with blackmail from abroad. We could then resemble our neighbour to the north, which until recently spent forty years making life easy for its businesspersons.

Jaithirth ‘Jerry’ Rao is a retired entrepreneur who lives in Lonavala. He has published three books: ‘Notes from an Indian Conservative’, ‘The Indian Conservative’, and ‘Economist Gandhi’. Views are personal.

(Edited by Asavari Singh)