Why fix what aint broken?
Raghuram Rajan was in town last week. His book tour, which attracted wide media attention, coincided with the recent release of RBI’s Annual Report to bring back the focus on an old heartbreak, demonetisation. Both Rajan and RBI sidestepped the controversy. Gracious as ever, Rajan even said he had no issues with the Government and was even ready to come back. But yes, he also said in response to a specific question that the decision to demonetise was not his. He watched it on TV like all of us. I presume his jaw dropped as well.
We are, by now, quite used to watching institutions being undermined. UPA did it. NDA does it. Trump does it all the time. So to say we are surprised by this revelation which may not be true. We knew all along it was a political step meant to demonstrate how corrupt the earlier regime was. Not that this was unknown to anyone. The NDA came to power purely on the promise of moral governance. Its mandate was to clean up the mess left by UPA2. In particular, the scams the media had a field day reporting.
In the past three years, we have not seen many of those scams unravelled. Nor the guilty punished. But yes, the Prime Minister has repeatedly reminded us (sometimes even from foreign lands) how bad those times were. But instead of moving on, cleaning up the mess and getting back to serious governance, the NDA is still busy attacking the Gandhis.
Creating a Congress-mukt Bharat appears to be more important to them than creating a corruption-mukt India that it had promised. And then, as India cruised along on a buoyant economy where our GDP emerged as a world beater, came the coup de grace: demonetisation, a step taken, in the prime minister’s memorable words on November 8, to finish off black money, terrorist funding and fake notes.
Forget the damage caused to the credibility of our currency and the hardships millions endured. We can wish them away as collateral damage. The hard truth is: We blew up an entire mountain only to find a tiny rat beneath. RBI refused to give out figures for months on end. But now we know. Over 99% of the scrapped Rs 1000 and Rs 500 notes came back. Only Rs 16,050 crore out of the Rs 15.44 lakh crore of the demonetised notes did not return, disproving all the exaggerated claims about the size of India’s black economy.
The fear of large amounts of counterfeit currency in circulation proved false and, as we all know, terrorism has actually increased post demonetisation. So much for change. The focus has now quickly shifted to GST and digitisation, and how to force through Aadhaar, one of UPA’s worst legacies.
The underlying argument remains intact. The corrupt Indian must be brought to heel.
But where’s the corrupt Indian? The CBI has an abysmal track record in proving corruption. All it has done over the years is give a handle to parties in power to harrass opponents. The RBI statistics have now buried the myth. What it has actually proved is that India is an old fashioned and highly successful cash economy where people are not very comfortable with change.
If this means that the Government earns less tax because not everyone pays his or her dues, then the answer clearly lies in tweaking tax rates. All over the world it has been observed that lowered tax rates increase revenue. It has happened in India too on the rare occasions when the Government has stopped attacking tax evaders and incentivised them instead.
But Governments are stubborn. They invariably look away from failure and persist with their misguided policies in the hope that one day they will be proved right. So harassment continues in the name of fighting tax evasion. Claims of black money are constantly exaggerated. And the common citizen suffers at the hand of tax authorities while those who actually generate black money get away scot free because nothing can be proved against them. And our informal, bustling cash economy, one of the finest in the world, gets a bad name.
Small businessmen are forced to shut down their businesses. Small traders lose currency and their means of livelihood. Jobs disappear. And the much flaunted GDP figure hurtles down by a staggering 2%. China, next door, regains its stature as the world’s fastest growing economy while we look silly, trying to repair what was never broken in the first place.
I am not a status quoist. But the current worldwide obsession with disruption worries me because we are taking perfectly good institutional structures and breaking them down under the pretext of change. Does it really matter if the traditional Indian economy—the farmers, landless labourers, small shopkeepers, traders and tiny businessmen who live hand to mouth (to use a familiar colloquialism) kept alive their amazingly robust cash economy instead of migrating to digital, something they are unfamiliar with? Do they have to have Aadhaar thrust on them just to prove Nandan Nilekani is a genius because he has created a wonderful device of mass surveillance? Must the Government tinker with what is working so perfectly well for India and try to replace it with things that are totally unfamiliar just to increase its tax revenues?
The rich is not hurt. It never is. Its nexus with political power insures it against all disruptions. The poor in India, who have so little and who live so precariously, all 60% of them, have to bear the brunt of all such brutish experiments. Spare a thought for them.
It’s time for another election.
It’s time for another election.
https://blogs.timesofindia.indiatimes.com/extraordinaryissue/why-fix-what-aint-broken/
Saving the International Economic Order
This autumn, the IMF and the World Bank will once again hold their annual conference in Washington, DC. At a time when the liberal international economic order that these institutions underpin is under threat, they cannot afford to stick to business as usual.
LONDON – This autumn, the International Monetary Fund and the World Bank will once again hold their annual conference in Washington, DC. At a time when the liberal world order that these institutions underpin is under threat, they cannot afford to stick with business as usual. Instead, they must consider deep reforms – and that will require abandoning the paternalistic, even hostile, tone that has often dominated discussion of the topic.
Since the election of Donald Trump as US president last November – the culmination of an upsurge in nationalist-populist sentiment across the Western world – the weaknesses of existing multilateral frameworks have come increasingly to the fore. But the current crisis of the liberal world order has been a long time in the making.
In fact, it has been apparent since before the turn of the century that the post-World War II governance structures were untenable, because the assumptions that formed their foundation were beginning to crumble. In particular, with emerging economies, especially China, on the rise, the division between the West and the “rest” was narrowing fast.
Yet the global economy’s institutional underpinnings – the IMF and the World Bank – have remained largely unchanged. Indeed, the multilateral institutions on which global governance rests do not look all that different today than they did in 1944, when Britain’s John Maynard Keynes and America’s Harry Dexter White convened representatives from 44 countries in in Bretton Woods, New Hampshire, to design the post-WWII international order.
https://www.project-syndicate.org/onpoint/saving-the-international-economic-order-by-paola-subacchi-2017-09?barrier=accessreg
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