Friday, November 16, 2018

A weak state is better for growth and for citizens.

India has reduced the number of people in extreme poverty so that "Nigeria now houses 88 million extremely poor people compared with just 63 million in India, or 4.6% of the population. This means that by 2025 less than 0.5% of Indians will be extremely poor," wrote S Dhume. "This will dwindle to a mere 0.1% of the population by 2030." Paradoxically, economic growth has been strong under weak governments and not under strong ones. "For the first four decades of independence, single-party majority governments delivered anemic growth." "Between 1950 and 1980, India's economy expanded at an annualised average of of 3.6%. Per capita income grew at a sluggish 1.5% per year." After reforms in 1991 "per capita income has grown on average by 4.9%. Since 2004, it has grown even faster -- by 6.1% annually." So what about the present government? The BJP won absolute majority in the Lok Sabha with 282 seats out of a total of 545, which is now down to 269. So how has this government performed? Prime Minister Modi suddenly announced demonetisation of high value rupee notes on 8 November 2016, hoping that a large part of the notes would not be returned and the Reserve Bank would pay a huge dividend to the government for the reduction in its liabilities. More than 99% of notes have been returned. Farmers have not recovered from that shock as food prices continue to remain subdued. Tax inspectors have been given draconian powers, "On trade, tariff loving bureaucrats have prevailed over liberalisers. And while an elegant simplicity marks goods and services tax in most countries that have adopted it, in India it is a hot mess designed to to privilege discretion over clarity." India has a deep state "in the realm of economic policy", wrote RS Kapoor. "Unlike in a conventional sense, however, India's deep state is impersonal; it is not about a set of entrenched people but an institutionalised mindset which is innately anti-business." Controlling prices of drugs has restricted growth in pharmaceutical industry. The National Anti-Profiteering Authority has accused Hindustan Lever of making Rs 3.2 billion in excess profits by not transferring the benefits of GST to customers. The Minister of State for corporate affairs is to investigate 1,000 companies to see if they are spending on Corporate Social Responsibility. While forcing some sectors to reduce prices the government wants to increase the price of farm produce by increasing the Minimum Support Price and is uncomfortable with deep discounts offered by e-commerce companies, wrote A Ranade. Having surreptitiously passed the Aadhaar bill as part of the Money Bill, so as to avoid the Rajya Sabha where it does not have a majority, the government forced every citizen to provide fingerprints and iris scans making it the largest surveillance system in the history of the world. The Indian state is anti-people. Better for us if it is weak.

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