A Hole In The Rupee

In early 2001, Gen Pervez Musharraf, in an attempt to pull Pakistan back from the brink of economic disaster, decided to take some bold steps to increase the government's tax revenues. Acknowledging that the tax-paying population of Pakistan is minute—dramatically smaller than India's—he brought the army into the business of surveying Lahore's mandis. It was no secret that the traders there give no bills and pay no taxes. The traders downed shutters, which by itself was a suicidal step in the long-term, but reinforcements were arriving. The next day, the clerics, the jehadis and the fundamentalist parties threatened street agitations in support of people who were plainly un-Islamic profiteers, black marketeers and usurers. These incidents didn't go unnoticed among Indian analysts whose business it is to predict Pakistan's future.

India has just completed a cabinet reshuffle, the central shift being the swap between the finance and foreign ministers. Economic analysts have been unanimous in their prescription that Jaswant Singh's first priority should be to revive the stock market, restoring to Indians their long lost 'feelgood' factor. The rest will apparently take care of itself. But, figuring inconspicuously in Indian news last week is a comedy to replicate Musharraf's lost battle against the Lahore traders. There are apparently 12 lakh registered commercial enterprises in Delhi state. Not all have bothered to register, so at a rough guess they probably actually number 18-20 lakh. Now Delhi may not be Switzerland, but it is presumably better administered than Bihar or Orissa. Yet, the number of commercial enterprises that pay excise is just 1.5 lakh or roughly ten per cent. The mind boggles to imagine what percentage of enterprises pay excise in Bihar. So an attempt to register all commercial enterprises in Delhi brought about the same traders' strike as in Lahore. But India is not Pakistan, or is it? The next day the Delhi politician 'intervened' on behalf of the traders and the drive by the excise officials was called off. Certainly the excise department are no angels, and like the other three departments under the finance ministry are adept at converting what would have been public income into private profit. This is an old game, invented and refined by the East India Company officials who retired to vast country estates in England while the company closed after 1857 with only a few pounds in favour of Balance Creditor.

But why is this important to our security? The answer can be found in a study by an American NGO on 'Policing in India'. The study looked at the responsibilities of the Indian police, their motivation, their training and finally the salaries they are paid. While the conclusions are fairly lengthy, the critical bit was that if a man can be trusted with a gun to shoot people and he could also be relied upon to discriminate between an honest citizen and a crook, then paying him Rs 4,000 a month is ridiculous. But that is what the government can afford, since the four departments that collect revenue, collect so little. Hence the deficit is large and there is no money to pay government servants an honest wage, hence they fiddle the accounts and that's the reason most police carry only a bamboo stick. The NGO went on to say that an Indian sub-inspector is probably the equivalent of an average American cop. The country might as well do without those below him.

Jaswant Singh has apparently gone beyond the advice of the economists in recognising that the country is being looted by a number of people—some in government, some outside. The world is also moving to different views on the meaning of corporate governance. Apparently everyone knows what has to be done to run a government, or a company, but very few actually get it done.In America, people are looking for doers, not idea men. The fact is that the Indian state collects very little of its taxes, and hence the state is unable to perform any of the roles only it can do. Eventually, it is state poverty that affects every other department in India. Vajpayee may dream of a diamond of expressways but it's Tibet that will be connected by a railway to Yunan in five years. Lhasa will have a motorway through Xinkiang to the areas of unrest in Uighur. Which property owner in India doesn't know that he need pay only half his property dues if he gives the inspector one-tenth for his private purse? This is why property taxes are fixed absurdly high, so that nobody reasonable would want to pay. This is also the reason why successful self-assessment schemes are constantly spiked by the municipalities themselves. Indian urban decay has its roots in bankrupt municipalities. Jaswant Singh doesn't have to worry about the people of India, it's the government that is crippling the country and government servants who convert state revenue into private income. It would be wonderful to give Kashmir an economic package that no one can refuse, but that would hardly be fair on Uttaranchal and Jharkhand who also need to kick-start their new states. In ten years, the Chinese would most likely have solved the Tibetan question, the Tibetans will have been seduced by Lhasa shopping malls and a quality of life better than any in eastern India.

The new ministers don't need any new ideas, they need people who can get things done like the most brilliant executive in India today who built the formidably difficult Konkan railway, and is now building the Delhi Metro, and whose name most people don't know.