By Anand Prasad
Despite being from the much maligned community, i.e. that of lawyers, I have been fully tax compliant for years (as has been the law firm that I helped set up). As a result, I have endured both insult and ridicule from friends and colleagues for being so – idiot or stupid were the preferred terms used.
Hence, on November 8, 2016, when the currency notes of 1000 and 500 were demonetized, I derived sadistic pleasure from the discomfiture of my critics who had avoided paying tax all these years.
Through the ensuing debate, I strongly defended the Prime Minister and his effort to take out, or in the least, carry out a surgical strike on black money. A lot of arguments against demonetization were made from a logical and an economic perspective, but my response was that the proof of the pudding would lay in its eating. Hence, I had great expectations from the Prime Minister’s end December speech. When that failed to be impactful, I laid the blame on the bureaucracy and the “mitron” jokes in the run up to the speech.
However, I did not lose hope and counted on the Finance Minister’s budget presentation to take the strike on black money forward. My expectation was that the budget would report on the success of the surgical strike and announce measures to incentivize tax compliance in the form of moving up tax slabs, including the zero tax slab. I expected that this would reduce the tax burden on those tax payers who were compliant. My disappointment was immense when the incentives came in the form of peanuts.
The budget may be acceptable from a financial prudence perspective, but it completely missed the boat on justifying demonetization or on incentivizing tax compliance. Hence, it felt like another slap in the face of both the compliant tax payer and the folks that had stood in the bank and ATM queues. This also accentuated my sense that an increasing number of the Prime Minister’s policy announcements being ineffective on the ground. With the exception of highways and a little bit in the railways sector, not much progress was happening elsewhere.
The ease of doing business had not improved on the ground, despite the spin doctored arguments presented by the bureaucracy in their fine English. As if the ability to speak the English language or use fancy jargon was a substitute for actual change.
Changes in law such as the new bankruptcy law, real estate law, commercial courts and arbitration law remain largely ineffective. Tax law and its administration continue to be difficult. While progress has been made with the GST, it is yet to become reality. It makes one nervous to think about whether there could be a proverbial slip between the cup and the lip. To compound things, nobody seems to be giving a damn about making the judicial system or the bureaucracy more effective and accountable. As a consequence, there has been very little progress with the Make in India or the Start-up India initiatives.
The Clean India idea has been subverted by an unimaginative team into a slogan, you just have to step onto the street in most cities, towns or villages for the truth to hit you in the face. I simply do not understand the grand standing around the power sector, when nobody other than in Lutyens Delhi seems to enjoy 24/7 power. The fate of initiatives like Smart City or Digital India appears to be the same, i.e. reduced to mere slogans with no change on the ground.
While I continue to believe that the Prime Minister has the right overall ideas, he seems completely handicapped by the lack of an effective delivery team. The current team appears to have mastered the art of spinning implementation failures into success stories.
I would think that the primary reasons for the Prime Minister hanging on to his popularity rankings is that, (i) on the positive, the people still do not doubt his intent and like his ideas, and (ii) on the negative, nobody in the opposition space is interesting enough to mount a credible challenge.
In this context, I could not but think of a few things that could be done differently. I do believe that the Prime Minister is well intentioned, a man with original ideas and with his heart to usher in real change programmed to benefit the people of India. On that premise, a few ideas:
1. Make the bureaucracy more effective: One does not have to be a rocket scientist to recognize the ordeal suffered in dealing with the Indian bureaucracy. It has a bunch of highly intelligent officers, who do not suffer from accountability issues, appear to be frustrated, lack motivation and are often corrupt. The consequence is an obsession with self-preservation and a lack of empathy for the needs of the citizenry. This needs to change.
As a first step, it might help to incorporate citizen feedback into their appraisal system and give it significant weightage while evaluating the performance of a bureaucrat. The same could be applied to the police. One of the modes to gather feedback from the citizenry would be to get a reaction from each citizen who interacts with the government through a simple but an effective e-platform. For example, see how the Decathlon stores gather feedback on customer satisfaction.
Also, their remuneration system, fixed + variable, could be tweaked. The variable component could be large and based on 360-degree feedback, i.e. from citizens, their juniors, seniors and political masters.
2. Judicial reform: The lack of respect for sanctity of contracts is another major issue for ease of doing business. The minor tweaking of procedural laws (example commercial courts etc.) has not been sufficiently effective. Confidence in the enforceability of contracts in an effective manner continues to be low and needs significant improvement.
To say that the system is overburdened is laughable. Citizens continue to feel the brunt of a slow judicial process. Speed needs to be recognized as an essential aspect in the administration of justice. While there are a few traditional ideas around speeding up the process and making it more effective, some thought needs to be given to technological measures like establishing judicial BPOs, use of artificial intelligence and imposing real costs on a losing party.
3. Ease of living/doing business: Since it was voted in, this government has frantically tried to popularise this initiative, but sadly only through some minor and often unimaginative changes. In that vein, a whole section of the Finance Minister’s latest Budget speech was devoted to measures to improve the ease of doing business. However, the proposals merely nibble at the fringes of what is a much larger problem.
A thought in the right direction might be in terms of replacing the approvals and licenses regime with a self- certification regime which is backed by a detailed code on compliances. There could be an annual scrutiny of a small percentage of the self-certifications and any faulty or false certifications could attract stringent consequences. There could also be a web based advisory facility, FAQs to help citizens comply with their legal obligations. Furthermore, setting up of citizen facilitation desks, say 5 in each district would be a step in the right direction. Seed funding is an issue for new entrepreneurs, but it’s significantly smaller as an obstacle than ease of doing business.
To my mind, of the many changes that could be brought about, focus on these three measures will help change some of the fundamentals in India and improve ground realities. If implemented quickly and effectively, they could not just propel the Prime Minister and his achievements into our history books but also improve our lives in the long run.
[Anand Prasad is a partner in Trilegal’s Delhi office and is part of the corporate practice group of the firm. Anand specializes in investment structuring, establishing joint ventures, mergers and acquisitions, private equity deals and cross border and domestic financing. Anand has a good understanding of evolving government policies and advises on developments in a variety of sectors and has advised clients on cross-border transactions, foreign equity restrictions, entry strategies, investment structures, competition law and employment issues. Anand also specializes in providing strategic inputs and conducting high value disputes particularly arising out shareholding agreements or in relation to regulatory issues. Anand has been consistently recommended for his expertise in Corporate/M&A by Chambers Asia-Pacific and Asia Pacific Legal 500 in 2011, 2012 and 2013. He has also been acknowledged as a prominent name for his expertise in corporate, regulatory communications, and internet and e-commerce in The Indian Lawyer 250, 2012 guide. Anand is the Vice Chair of the Society of Indian Law Firms (SILF].