Governments in deep financial trouble turning to businesses for advice on reinvigorating the economy and kick-starting a cycle of growth and prosperity is not new. Centuries ago, when an entire line of French emperors fought ruinous wars and bankrupted the economy, they paused to conduct an event not too different from our modern-day investor summit, hoping to create “confidence and boost business sentiment”. The most profound suggestion offered by any businessman, but unlearnt by all governments throughout history, was in a meeting in 1681, headed by Jean-Baptiste Colbert, a powerful finance minister, in which Le Gendre, a businessman, said, “Laissez-nous faire (Leave us alone, or leave it to us).”
It is time to tell India’s finance minister Nirmala Sitharaman just that. If the BJP government sincerely wants to reinvigorate economy, jumpstart growth, usher in investments, enhance confidence, increase consumer demand and enable job creation, abolish personal income tax. The over Rs 5 lakh crore collected as personal income-tax from Indian taxpayers, mostly salaried employees, under the best government will serve the economy less well than it would in the hands of the people themselves.
Yes, the BJP government has been setting the mood to make a coup of an announcement, perhaps before Diwali, to usher in electrifying good news, but actual proposals like toying with slabs, reducing a percentage, would hardly work. If the government wants an extraordinary turnaround in mood, it must make extraordinary concessions, without worrying about either a political fallout or of being dubbed anti-poor and pro-rich by the Opposition, or get caught in the games of bureaucrats and officials — who would never want to lose their power to harass taxpayers. Dull, insipid concessions from the government on the front of income-tax would yield equally dull and insipid results.
Ms Sitharaman needs to resort to innovative political coinage, like “pro-middle class”, for instance, and take a bold plunge. Money in hands of citizens, especially the middle classes, would achieve so much more than merely “enhance consumer demand”. It would mean a historic moment seized and a metamorphosis in the government’s approach to creation of wealth — not by government but by the people. Money in the hands of the middle classes would mean more spend, greater demand, higher and faster investment and job creation cycles in the shorter term. In the longer term, we will create more families with higher levels of prosperity — a larger base of people with higher risk appetites, many of whom would potentially become angel investors for future start-ups. A $5 trillion economy means creating an ecosystem where several billionaires and multi-fold more millionaires work and are invested in the country and economy.
Let the wise technocrats work on alternative fund-raising methods to manage the fiscal deficit. Let the additional pressure of reduced revenues push a whole new generation of reforms, privatisation and a massive exiting of the government from businesses across industries and domains.
For too long, Indian politics has professed love for the poor on a precondition that they must forever remain poor. It is time to stop viewing the middle class Indian as a cow to be milked, annually, 30 per cent at source. Unsheathe them as a force instead, a force to trigger and multiply the economy. Let them become a racehorse instead. They will gallop, and India will win....