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Quick Take: Good governance pivots on management of paradoxes

By IndianMandarins- 27 Dec 2018


If the NaMo administration has been seen failing in the last four and a half years on its promise of "minimum government and maximum governance", it may be largely due to the inability or unwillingness or both of the PM to manage the paradoxes of the agricultural economy, GST - and now startup economy.


While the government's patent failure to manage the paradoxes of agricultural economy and GST regime has provided the opposition with the much-needed ammunition to question the government's sincerity towards farmers and small industrialists and traders, the FinMin's insatiable greed to increase its revenue earning at any cost including taxing investments -Angel tax is a prominent case in point - may cause incalculable harm to the growth of startups in the country.


No country in the world is known to have ever taxed investment. But India is as unique as its founder state Magadh.


In these columns, we were the first - when no one was even remotely aware of -four and a half years ago to point to the emerging paradoxes in the agricultural economy and how these paradoxes, if not managed well in time, could prove to be the Government's Achillie's heels. And lo and behold, that has happened.


Similarly, before introducing the GST regime, if the government had shown the conscious volition to minimize the problem associated with the filing of GST returns (which could have been advised by any practising chartered accountant), small businesses, which form the core of the BJP's support base, wouldn't have been wounded and thus alienated as badly as they actually did.


The combined consequences of the failure to manage paradoxes of the agricultural economy and GST regime have triggered a triple NDA failure to retain three northern states of Chhatisgarh, MP, and Rajasthan.


Now, let's deal with the failure to create a conducive environment for the growth of startups. In this case, the government initially got two things right.  The first was providing matching funds to venture capital funds and, thus, providing a multiplier-effect for local capital. The second was transforming the Department of Industrial Policy and Promotion (DIPP) into a champion for startups within GoI- like the way it was turned into a vehicle for improving the country's position in the World Bank's Ease of Doing Business ranking


Venkatesh Shukla, President of TiE (The Indus Entrepreneurs, Silicon Valley, US), writes: "With competent leadership, DIPP has served this role well. But its effectiveness is limited given that the best it can do is to educate and persuade other parts of the government to do the right things without having the authority to make it happen". Indianmandarins has learned that on the issue of taxing Angel investment, it was never consulted.


Shukla adds: "After a recent outcry, a typical bureaucratic response came in: we will go easy on enforcing angel tax for the time being. Translation: we are not going to solve the core problem, so we have control and discretion over you, and please keep knocking on the door for our benevolence. License Raj again, anyone?" He points out: "Guess how the most promising startups are dealing with such idiocy? By incorporating abroad, even if the entire workforce and market are in India. It’s India that’s the big loser."

Clearly, India is no longer seen "reforming, performing, and transforming" as the PM claimed from the ramparts of the Red Fort On 15 August 2018.

(By M K Shukla)

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