Govt might have slowed down growth but no price is too great for curbing black money

There is a view the Modi government with its obsessive fight against cronyism and black money has slowed down the economy. The black money law, transparent auction of coal, the upcoming GST and direct benefit transfer of numerous subsidies, it is felt by these people, have all contributed to pushing black money underground. And this in turn has had the effect of stifling industrial growth with its chain effects on employment generation and revenue collections, is the charge against the Modi government. [caption id=“attachment_2265372” align=“alignleft” width=“380”]  Representational image[/caption]The argument has verisimilitude but deep inside it is flawed. It is of a piece with the tax amnesty school which justifies periodic tax amnesty schemes on the ground that the money lying frozen or sloshing around in subterranean channels must be allowed to surface and bankroll the mainstream economy. Such a cynical if not ringing endorsement of amnesty scheme thinks nothing of the demoralising effect such schemes have on the honest taxpayers and the bad precedent they set in that they engender converts from taxpaying to non-taxpaying category either themselves if they can shake off the taxmen through multiple entities or goading their progeny into the path of disrepute. No price is too heavy for upholding transparency and fiscal honesty, even slowing of growth. At the same time there is considerable truth in the assertion that unreasonable laws and imposts are bound to be looked askance at. The Modi government must do the following among others to sustain the moral high ground it has taken while reviving the economy: 1) Usher in state funding of election. Cynics would say parties would in such a milieu have best of both the worlds - take money from the state as well as black money from industrialists. But this would be a transitory problem as we migrate from cash economy to bank economy. More importantly, the signal the move would send out would be so powerful that it cannot be repudiated from subsequent dispensations in the Centre; 2) Carry the black money law 2015 forward as it is meant to be. Contrary to the belief in some quarters, it was not an amnesty scheme but a riot act. Come April 2016, those caught with their pants down had it. Cynics once again aver smugly that the smart crooks will not be caught with their pants down. The Modi government has OECD nations by its side and should not relent. 3) GST law rollout brooks no delay. The flaws in it must be removed, chief among them being leaving out of a few goods like petroleum products and liquor. The audit trail left by invoices through the supply chain would have its benign effect on direct taxes collection as well; and 4) Presumptive taxation on traders must be implemented meaningfully. As is it is floundering at the altar of implementation. Given the fact that India is a land of traders, tax collected from this hitherto hard to tax category will not be small. The above was seemingly a catalogue of anti-evasion measures but looked carefully they also have built in features to encourage business and investment. GST will lead to lesser tax for the consumer and lesser inflation thanks to removal of cascading effect. Presumptive tax would lead to reduction of personal income tax as well in addition to the corporate tax reduction already promised by the Finance Minister Jaitley. Land pool method so successfully adopted by the AP government must be adopted by all states. BJP-ruled states must lead from the front. Industrialisation will pick up. The government must disinvest especially from the likes of Air-India and put the money in power, road and water projects. If above measures are taken, the Modi government need not sound even remotely apologetic for its measures to foster transparency and fiscal honesty. It is good that the government and the RBI are working in tandem to foster banking culture through banking for all, mobile wallet and other initiatives. If cash is choked, black money would be choked.