Yesterday’sDeccan Herald carried an interesting article about the Finance Minister pleading with states to reduce or return taxes put on exporters. The argument goes something like this:
Stating that exports are under some stress due to the rapid appreciationof the rupee against the weak dollar, Mr Chidambaram said, the Centre has announced major relief packages and we are hopeful that these will bring some measure of relief to exporters.
“The central government rebates or refunds every tax that is payable or paid and if attributable to goods and services that are exported. I submit that state government should do the same,” Mr Chidambaram pointed out.
Now, the question of being a “liberalised” economy and what it implies. Simply means bringing down all barriers to movement of goods and capital across country borders. Under ideal situations, this is supposed to work for the ‘good of all’. Never mind ideal situations may never be achieved. A few implicit assumptions that I see in this model are:
- All people share want similar things.
- All markets are of the same type.
- All can judge their self interest.
- Everybody has a chance.
Of all the assumptions, the last one is probably the craziest. Anyways, since the time of the liberalisation in India (which, Khilnani says, was forced down India’s throat) the main line of rhetoric from all spectra of the political scene has been of removing corruption, transparency, efficiency, installing a meritocracy and so on. The Government is simply a hindrance, the smaller, leaner (and definitely meaner!) State is what is being aimed for. But as Amartya Sen notes (regretfully almost), India never had the social infrastructure which would enable every to grow in a liberalising economy. The pains of transition are being meticulously documented by a large body of academics and activists, for a posterity that may not see an India that is as divided as it is now.
The main issue of the schism that has opened, especially with regards to governance, is well articulated in this video of Solomon Benjamin, an independent researcher from Bangalore. Every system of governance has implicit or explicit normative principles, which help to differentiate between ‘right’ and ‘wrong’, or (more importantly from a governance point of view) ‘legal’ and ‘illegal’. With Bangalore being claimed for its own by the IT sector, who want to have a say in the ways the city is governed (BATF being a prime example), a large shift has taken place in the concentration of power towards promoting a singular, ‘globalized’ view of the city. Since the corporates are obviously being managed better than the State, it ‘makes sense’ to imbibe ideas and governing principles from the ‘highly qualified’ MBA’s.
The reason why I brought up the previous point in a post about how liberalised we are is simply to show the image being portrayed of corporations being meritocratic, efficient and transparent entities, which manage to shun politics and do things in a streamlined, process-oriented manner. The news article that I linked to puts a big question mark on these assumptions. While all these are probably very true within any corporate, I fail to see how it applies without. A corporation manufactures a strictly controlled environment with controlled behavior expected of its members. Rather than shunning politics, it sets up a power structure which makes it possible to work with the adjectives listed above.
Coming finally to the question of how liberalised we are, a liberalised economy would imply that the market is the sole judge, jury and executioner. From the viewpoint of large corporates, not necessarily in IT, let us examine how true this is. First is the question of land. Sprawling campuses amounting to hundreds of acres are quite frankly not affordable or viable to companies like Infosys at market rates. It is the government that through arms like KIADB buys land at sub-market rates and transfers it to the corporation. If Infosys ever goes into the red, it can sell a few of its campuses and easily recover! The market is ignored here. Similarly, the SEZs provide innumerable tax holidays which are again a blatant distortion of the market prices. This implies that it is not that Infy and Wipro are competing on intrinsic efficiency, but by deliberate and substantial support from the Government. This is not a capitalistic model, but at best a market socialism. The amount of subsidies are said to amount to 100,000 crores, which is far bigger than the amount for the National Rural Employment Guarantee program, which is being decried as a handout. The best part comes when the dollar appreciates: there is again huge lobbying to return taxes back to help them cope up! What kind of meritocratic, transparent or efficient model of business this is, I can hardly imagine. The BIAL not only got invaluable land at agricultural prices, but wants no competitor around, and wants to charge a fee for passengers who use the airport!
The call for liberalisation, from this angle seems sheer hogwash and definitely does not apply to everyone, especially those who are its flagbearers. It applies to small shopkeepers, ‘illegal’ manufacturers, ‘pirates’, hawkers ‘violating’ zoning regulations and rest of us, sheep-consumers. Better to know what is happening than to stay in a euphoric mood about what India is becoming.