Positive business ambience needed

A technocrat’s comments may be taken as a rough guide to what may have gone wrong for the UPA in its second term and why it is seen as struggling now to garner the vote share that gave it five more years in office in 2009. As an adviser to Prime Ministers from as early as the 1980s to heading the innovation commission now, Sam Pitroda has been in such positions as to be able to take an objective view from outside the strictly political arena even though he has been near enough to major power centres to be somewhat subjective in the solutions he offers. However, the point he makes about the indecision that led to the impasse in the Vodafone case is a valid parameter by which to judge where the country stands in the matter of nurturing an atmosphere for business, trade and industry and how secure the business environment is vis-à-vis attracting foreign investment.

India is still a hot investment destination when you consider the multinationals lining up for multi-brand retail, but the point being made by the likes of Mr Pitroda as well as business and industry leaders is that the ambience could be better, which could happen if the old mindset of obstructionism as a way of bureaucratic control changes. The poorest principle behind the specific case of Vodafone was the nature of the retrospective taxation. While striking down the rationale of the government’s stand, the Supreme Court emphasised that it is important to provide certainty with regard to the interpretation of law so that investors can determine the tax position for investment in India. What the case threw light on was the adversarial attitude of the finance and income-tax arms of the government.

While no right-thinking person would support big business in avoiding tax, as we see amply in global giants of the new economy paying pittances as tax even in first world countries, the right of business to use loopholes in taxation law is not to be denied, even if it is to be derided as the rich perennially getting richer. If India is seen as a tough country to do business with, much of it may owe not as much to the tough clearance regime as the continuous demands for revenue-raising via various forms of tax, including the unpopular service tax regime which at one stroke alienated a very large cross-section of people. Regardless of which alliance is voted into office, it stands to reason that a huge impetus is needed now to create a positive atmosphere for business, trade and industry, which alone can revive the India growth story. The basic issues go far beyond the politics of an election year.