'Could not find a single person against demonetisation, got a lot of flak for reporting this fact', says Jay Panda
In a 40 minute talk at Columbia University, Jay Panda spoke on demonetisation, GST, the arithmetic of political capital, the common misinterpretation of Modi’s strengths and the building blocks for an economy to reach critical mass.
In my constituency, I found it hard to find a single person against demonetisation
In Indian politics, I come from a non political family and even after 17 and a half years in Parliament - this is my fourth term, I see myself as an outsider. Most of my colleagues are status quoists. There are those that think outside the box but the vast majority have got to where they have got because of the system, not despite it. There are few accidents like me and I think it is a bounden duty for those of us who were unintended politicians to push the boundaries. Everyone has been focused on the aftermath of demonetisation. I have been trolled, I have been attacked, I have been called all kinds of names. A month after demonetisation, and I told you, I spend 12 days on average every month in my constituency. Despite the inconvenience and the disruption of normal life, I found it hard to find a single person against it, I found no one. They were wildly enthusiastic and when I reported this fact, I faced a lot of flak. It was considered ridiculous to say that people could be enthusiastic about something like this but they were.
The shopkeeper who was finally able to buy land at fair price, post demonetisation
The impact of the black economy affects people. I had a small shopkeeper tell me that for several years, he was trying to buy a small plot of land to keep as a wedding gift for his 5 year old daughter some 20 years later. And every year when he thought he had enough money, he was short by 20 or 30 per cent because the prices had gone up. He said it was because corrupt officials, politicians and contractors used to put all their money in gold and land and he simply could not compete with them. A month into demonetisation, I asked him if it made a difference. He said of course yes. He used a phrase - the supply and demand of land has changed. Instead of me running after them, they are running after me. They are offering me last year’s prices and I’m insisting on the year before’s. Yes, of course it has hit the real estate sector and it has also hit the for profit education sector - especially the diploma mills where a large percentage of these engineers who can’t get a job are churned out. That has changed. After the Uttar Pradesh elections a lot of people accepted, grudgingly, that politically demonetisation may have been successful but economically a disaster. I don’t think so. It’s a one time shock to the system. It has hit black money. What was unanticipated is that all the currency in circulation did come back to the banks. If you remember, during those few weeks, the government kept on changing the rules. That got a lot of criticism but it was the right thing to do. These were agents, who were offering, for a fee, of course to use the dormant accounts of many poor people to put money back. The point is how much of it is accessible to those people again because the rules did change because of KYC norms. And you’re beginning to see the aftermath of that with the action against shell companies. The only debate was whether it would take a couple of quarters or a couple of years to get back on track. The hypocrisy is in saying that yes the economy is affected but black money has not been affected. That does not add up.
This is the least bad version of a GST that would have passed
GST is a different animal. It is not a one time shock to the system. It is a sustaining improvement to the system. The biggest benefit in creating a single market for the first time is almost incalculable. It is a paradigm shift. This country (US) got the Inter State Commerce Act many decades after the US became a republic. It is the same kind of transformational effect that GST will have in India. But GST is not ideal. It is far from ideal. It is complicated. Four sets of documentation, all those different slabs, many different sub slabs. There are many different rates for the kinds of sweets in a sweet shop. This is the product of a give and take system in the world’s largest democracy. I describe it thus: This in my opinion is the least bad version of a GST that would have passed. I was privy to behind the scenes negotiation, cajoling and a little bit of arm twisting. Any other version would have been worse. We often make the perfect ( version of anything) the enemy of the good. With all its complications, don’t forget that it replaced 17 different taxes in different parts of the country. The troubles are much more not for those who pay taxes but for those who never paid taxes to begin with.
The building blocks are in place for India’s economic and political tipping point. Good economics has been leading to re-election rather than traditional anti incumbency
I spend about 12 days on average every month in my constituency. That’s at the very high end of the spectrum among my colleagues. Each of our 543 constituencies in the Lok Sabha is the size of a small European country. Mine is about somewhere between Estonia and Slovenia and yet they don’t have the same kind of fiscal or administrative authority.
If you look at the 2 billion plus population nations in the world, China and India had similar per capita profiles about 40 years ago. But in these four decades, their trajectories have been very different and the Chinese economy is today five times that of the Indian economy. And that despite India not having been exactly a slouch, particularly in the last two decades. Now China can do things differently. They can step on the gas from the word go and keep the pedal on the floor for the next three decades as they have done. India cannot do that. We are very large and very diverse. I see the Indian journey as a long process of putting building blocks in place and then comes a tipping point. There are no guarantees of course. We have had economic liberalisation for a little more than a quarter century. This has changed the trajectory of the Indian growth story. But despite that, when Professor Bhagwati and Panagariya’s 2013 book ( Why Growth Matters) was written, it was seminal and important because we were debating - merely 25 years into liberalisation - we used to have these long and painful debates in Parliament about whether growth is important ! You can argue whether growth is sufficient but to argue whether growth is important…Finance Minister after Finance Minister had to justify why growth mattered. This was 22 years after 1991. Similarly, 23 years after 1991 was when the emblem of the command economy the Planning Commission was done away with. It has happened because these building blocks are in place. I posit that 2014 was the first time that a winning candidate made a pitch to get elected on the basis of economic reforms and good governnance. You’ve had many campaigns that have run on the price of onions and the threat from across the border. But to actually put it into phrases like minimum government, maximum governance and to hold out the hope that there would be dramatic economic reform which was already happening at the state level. Even 15 years ago, the data was already showing that good economics has been leading to re-election rather than the traditional anti incumbency we have seen in Indian politics.
Modi was supposed to be this Rube from Hicktown…instead we got a foreign policy PM
This present government has a lot to do with the economic and political tipping points of India. When this Prime Minister took office, he surprised a lot of people by turning out to be a foreign policy prime minister. If you went by the Indian media’s general characterisation of him, he was a Rube from Hicktown. Yet it turned out that, unbeknownst to many people, over the decades, he had spent a lot of time in this country (US), in China, in Japan besides his more than a dozen years as the head of a large state (Gujarat). That was supposed to be his metier when he became the Prime Minister but right off the start, he was a foreign policy Prime Minister and a very ambitious one. I don’t think we’ve seen this kind of thrust on foreign policy since Pandit Nehru’s times. This is despite three Prime Ministers since that time who had already served as foreign ministers. This was at a time when India’s sheen had been taken off and I think he has been successful in repositioning India. The response is overwhelming from policy makers and the average cab driver.
People who can wax eloquent about the US Senate’s filibuster rules don’t seem to understand that without a majority in the Rajya Sabha, you cannot pass bills
Economically, from 2014 onwards, there was a lot of debate in India as to what would be the next big reform in India. There was a lot of criticism initially that this government was not getting down to economic reforms. It’s ironic because within the first three or four months, this Prime Minister made a risky reach. He tried to undo the land acquisition act, which has been considered by many to be a major bottleneck to investment and economic growth. It turned out that if everything worked like clockwork, it would take 55 months for any land to be acquired by any investor. And nothing works like clockwork. It was an ambitious reach and there were those ordinances because the Bill couldn’t be passed. He (Modi) had to step back because it became a wedge issue that got the entire Opposition to align. Now I find it amazing that people don’t understand the simple arithmetic of political capital in India. People who can wax eloquent about the US Senate’s filibuster rules don’t seem to understand that without a majority in the Rajya Sabha, you cannot pass bills. And even if you have a majority, even then you have to carry your party. Since then, many baby steps have been taken. As Amitabh (Kant) pointed out, at least 1200 regulations have been phased out.
This is the (lightly edited) text of Jay Panda's 40 minute speech at Columbia University titled "India's economic and political tipping point". Panda spoke on demonetisation, GST, the arithmetic of political capital, the common misinterpretation of Modi’s strengths and the building blocks for an economy to reach critical mass. Reporting, photo and video by Firstpost's Nikhila Natarajan
Reporter's note, by Nikhila Natarajan in New York: The Bhisma Pitamah of right wing economists Jagdish Bhagwati who openly backed Narendra Modi’s candidacy for Prime Minister in 2014 and has given demonetisation his unambiguous thumbs up hailed Member of Parliament Baijayant ‘Jay’ Panda as an “amazingly competent person” who is Prime Minister material, at Columbia University in New York City.
“Many of us hope that one day you will be the Indian Prime Minister. He (Jay Panda) is an amazingly competent man, taking great interest in the issues of the day,” Bhagwati, one of the most respected trade theorists of his generation, said.
Jay Panda is a four-time Member of Parliament from Kendrapara constituency in Odisha and a founding member of the Biju Janata Dal (BJD) party - Odisha’s ruling party. Panda is an early investor among his peers on the international speaking circuit.
Bhagwati introduced Jay Panda to a select audience of about 100 economists gathered for a Festschrift at Columbia University in honour of Arvind Panagariya, who, until recently, was Vice Chairman of NITI Aayog.
Known to be addicted to witticisms he picked up in Cambridge of the 1950s, Bhagwati poked fun at government processes and shone a light on why he is cheering Panda on for India’s top job in the future: “Like those who live in the US know that executive action is a big thing here because you can’t get things through the Congress. The trouble with that is because it is easier to impose, it is also easier to revoke. But way back I asked Jay about it and he pointed out how you can renew ordinances again and again. If you can do that, it undermines the legitimacy of the Congress or (Indian) Parliament and so we must worry about it. Jay Panda was the first person who drew my attention to this, the same thing is happening in France. Today this is a big, big issue. I am particularly grateful to Jay for pointing this out early in the game. To find politicians who are interested in the issues is not easy. Most of them get tied up in a variety of issues like getting re-elected and so on. Jay, however, has managed to retain his intellectual curiosity,” Bhagwati, renowned for his acerbic sideswipes of fellow academics, said in praise of Jay Panda.
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