1. Institute Estate Tax
There is vast wealth inequality in India. Today’s India resembles the robber baron age in the US with its own Carnegies and Rockefellers. These are the new Royalty in India which continue to enjoy the riches of the past like the Rajas in independent India did under the system of privy purses. It is time to tax inheritance of large amount of wealth. For instance, in the US, estate tax is required for estates with gross assets exceeding 11.18 million USD, and the tax can be as high as 40 percent. [https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax]
This tax should appeal to both free market advocates and socialists alike. Free market supporters of the tax, including Adam Smith would argue that people should be able to get to the top of the market through earning wealth, based on meritocratic competition, not through unearned, inherited handouts, which were central to the aristocratic systems they were opposed to. Estate tax also creates an incentive for the wealthy to be involved in more philanthropic causes. A 2004 report by the Congressional Budget Office in USA found that eliminating the estate tax would reduce charitable giving by 6–12 percent. [https://en.wikipedia.org/wiki/Estate_tax_in_the_United_States#Arguments_in_support]
Studies indicate that Indian billionaires’ wealth as a percentage of national income in India, had increased from a low point of less than 1 percent in 1996 to a whopping 22 percent in 2008. In 2012 it stood at around 10 percent. Current Gross National Income of India is around 2.6 trillion USD. Further about 43 percent of India’s billionaires came from sectors that the researchers classify as “rent-thick,” that is, those enjoying what economists would consider above-normal profits because the companies possess certain privileges. [https://india.blogs.nytimes.com/2012/10/30/indias-billionaire-wealth-sign-of-a-healthy-or-an-ailing-economy/].
Taxing the wealth of this clique of super rich would help level the ground for all players in India, spur new levels of philanthropy – as the some may give a large proportion of their wealth to a charitable trust like Bill Gates, Warren Buffet, and Mark Zuckerberg. It will bring in substantial extra revenue for the government by taxing a small fraction of the population. Interestingly, the 1953 Estate Duty Act did in fact institute an estate tax, but it was repealed altogether in 1985.
2. Better and Fewer Laws
Too many laws make for a lawless society. Too many out-dated laws from pre-independence era continue to exist today. Too many laws are enacted without regard to practical concerns of implementing them.
Any regulation or law that is from before independence should have an automatic sunset clause unless it is over ruled by a legislation.
The Parliament should have a year around body that is authorized to recommend nullification clauses in laws that seem to be either not in sync with laws passed more recently, or there is evidence that the cost of these laws in terms of enforcement and bad unintended consequences is too high to justify their continuance. People can come to this body to make a case for high burden of a law. The set of cumulative amendments from this body will be automatically taken up for debate at the beginning of each session. In some sense this would be similar to the law commission of India, but this body will be under the Parliament of India, and hence will be more effective in changing and simplifying laws.
There should be a budget office of the Parliament that gives an assessment about the implement ability of a bill in terms of money and resources, and also tries to estimate the impact of a bill if it is turned into a law. There should be a practice of having this assessment out before starting the second reading of the bill. This will help advance the debate about a bill on the practical aspects.
There should be an office of the Parliament that studies new laws passed in democracies around the world and leverages the debates around the world legislatures to create a report for the Parliament. The report updates the Parliament about the new laws created world over, how they relate to the laws and context in India, and recommendations for taking up similar laws or amendments in India. This will help India leverage the learnings from world over and be on the forefront with major democracies in tackling new challenges like privacy, crypto-currencies, and human rights.
3. Debate Focused Week in Parliament
Of late the Parliament of India has become a body that goes through the motions to pass laws with little or no debate. There are very few debates in the Parliament of India that match the debates that occurred in the Constituent Assembly of India in terms of substance and quality. There are a lot of issues, both old and new, that need vigorous debates for clarity and consensus to emerge. The Parliament of India should regain its place as the best platform for conducting these debates where members of Parliament can debate these issues without a vote. Voting is controlled by the party whip. In these debates without a vote, the MPs can speak their voice without being curtailed by a whip. In order to ensure that these debates don’t become like a reality television show where disruption is the best way to get attention, the chair of the house should not allow a live telecast of these debates. In fact, they should release the written transcripts of the debates first, and then release a video version of the debates where any disruption is scrubbed off. These debates will help firm India’s vision around key long-term issues like health, employment, education and equality. The first week of each session of Parliament can be used for these debates. Reserving a week exclusively for this purpose where no voting motion can take place, would have likely have better chances of going through without disruption. If it goes well, the success of the first week would also help set the tone for smooth functioning for the rest of the session.
4. Better Environment for Entrepreneurial Growth
India needs a lot of new ventures and industry to grow and well employ millions. Thus, we should have environment where creation of new wealth is encouraged, supported and celebrated. In emerging markets about 80 percent of billionaires are self-made. In India that number was at 63 percent in 2014. Also, about 43 percent of India’s billionaires came from sectors that the researchers classify as “rent-thick,” that is, those enjoying what economists would consider above-normal profits because the companies possess certain privileges. [https://www.livemint.com/Companies/PbdzOUOXCC5M2pVKlRQOaJ/How-many-billionaires-are-self-made.html, https://india.blogs.nytimes.com/2012/10/30/indias-billionaire-wealth-sign-of-a-healthy-or-an-ailing-economy]. It is a shame that we have a calcified set of billionaire families in India. It is indicative of the favourable bias of the system towards the existing mega rich, and barriers to entry for new players. The mega rich can solidify their positions by using their resources and easy access to power corridors to navigate a cumbersome regulatory framework. The new players find it harder to be heard. The entrepreneurs need a voice to argue for a better environment for wealth creation.
There should be an elected body (Panchayat) which will have representatives from SMEs (Small and Medium Enterprises) and start-ups from all over the country. This Panchayat should be a body under the Parliament of India. The Panchayat will hold multiple discussion sessions. At the end of each year, the Panchayat should issue a joint report that will speak of the current status, concerns and demands of start-ups and SMEs in different areas. The report’s contents should be formally supported by majority of the members of the Panchayat, so that it represents all stakeholders. This communique will help get clarity on what is needed to make it easy to establish start-ups and SMEs and help them thrive. This report should be submitted to the Parliament of India and debated on each year.
Further, laws and regulations should be crafted and amended so that there is progressive burden of regulation. There should be almost zero regulation while registering a company and it should gradually increase from there on. It still takes around 17 procedures and 17 days to start a new business in India, compared to 1 procedure and half a day in New Zealand. [http://www.doingbusiness.org/en/data/exploreeconomies/india#DB_sb]. We should have a system where it takes no more than a day to start a business, and most regulations should progressively come into force as the business grows.
5. Employment Tax Credit
One of the biggest issues facing India is the low number of well employed people in India. There is a low number of employable people in India. There is a scarcity of institutions that train people to acquire skills to be well employed. Tax policy should be used to create more skills and employment. Companies that create well paid jobs should get a tax credit. In addition, there should be tax credits for companies providing apprenticeship positions. Apprenticeships should be formalized so that the apprentice can learn a skill that is transferable across companies in the industry. Companies in an area should come together to define apprenticeship certificates that all companies in that area recognize. Similar ideas have been in practice in USA and China [https://www.irs.gov/businesses/small-businesses-self-employed/work-opportunity-tax-credit,https://www.reuters.com/article/us-china-economy-employment-idUSKBN0NM32D20150501].
6. From Farming to Industry
A disproportionately large proportion of the population continues to work in agriculture that accounts for a relatively small share of the GDP. There is a need to move from farming to industry in a way that is least disruptive to the vulnerable population that is dependent on farming for subsistence. Currently farmers/farm labour and industry have an antagonistic relationship. Often, industry needs land that farmers hold. Farmers view industry with scepticism that industry will cheat farmers to grab their land and their livelihood. The price at which land is bought from farmers is always much lower than the price a few years later when the industry has invested a lot in the land, and it attracts a lot of demand for housing and support industries. So, farmers feel cheated. Also, there can be cases where some hold out land owner gets paid a lot more than the rest causing moral hazard issues.
Farmers should come together to form land corporations/cooperatives that can still give each farmer complete control of the land they own but form an instrument for purchase/ long-term lease of large piece of land by industry by negotiating collectively. This land corporation should negotiate for both cash and equity in the industry being setup so that farmers get good initial compensation and become part owners of the enterprise being setup in a substantial way making their incentives align with that of the industry (giving equity to employees and key stakeholders to align incentives is a common practice for industry and start-ups). This will help create a better political climate for less red tape and increased ease of setting up businesses that are profitable. There should be laws and institutions to make sure that the power imbalances between these land corporations/cooperatives and large industries don’t lead to malafide deals, and each land owner is providing informed consent.
In addition, each industry should buy major land areas through auction where they are negotiating with at least two land corporations. That will bring out the real value of land and not lead to inflation of cost just because there is interest in the land by an industry.
7. Replace MSP with unconditional cash transfer
The system of minimum support price (MSP) for certain crops has led to a distorted economic system in India where bumper crops lead to ruin of farmers. Further all Indians suffer as we end up producing a lot more gains than we can consume or store properly, but there is wide spread malnutrition due to lack of access to cheap sources of protein in our diet. Studies have found 42.5 percent prevalence of stunting in children under the age of five. [https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4005205/]. I propose a direct cash transfer to farmers for minimum sustenance regardless of what crop they choose to plant and abolishing the minimum support price regime altogether along with subsidies for water, power and fertilizers. Cash transfers have shown significant welfare-improving impacts, both economically and psychologically, for transfer recipients.
[https://www.poverty-action.org/study/impact-unconditional-cash-transfers-kenya]. Cash transfers will also help correct the economic incentive structure in agriculture. Farmers will be free to produce commodities that fetch high profit in the market because of the high price these commodities attract or because of the low input cost. The farmers can also choose to leave the land fallow for a time and conserve the water, soil and energy resources. Hopefully, this will also reduce debt incurred by farmers to finance the expensive inputs for many prevalent crops.
8. Term Limits for the Office of the Prime Minister
Prime Minister Modi is currently 68 years old. Following on his own policy, Prime Minister Modi should announce that he will retire from politics after 75. Further he should state that he will not seek a third term and rather advocate for term limits for the office of Prime Minister. This will be a strong counter to people who perceive him to be a power grabbing dictator and say 2019 may be the last free election. That will also give a big boost to BJP in the election making next 5 years of Modi govt a scarce one-time opportunity. It will also shift the focus of the party on developing younger leaders that can lead the party in the future. Term limits for the high office of the land will free up the Prime Minister from worrying about getting a third term in office, and shift his focus towards creating a lasting legacy by spending all his political capital in the second term. The Unites States has a two-term limit for the office of the President that was the tradition since George Washington, and was incorporated into the Constitution through 22nd amendment.
9. Open Public Data
Since its inception, 2018 has been the best year for Right to Information (RTI) in terms of the largest number of RTI applications being filed and the lowest rejection rate [https://indianexpress.com/article/india/highest-rti-applications-filed-2017-18-lowest-rejections-since-2005-cic-data/]. Just having a right to information (RTI) law is not enough. We need laws that increase transparency like open data in govt by default. We should be using this data as a resource to gain better insights through increased access to this data, and application of machine learning and data mining tools. In the US, the Open, Public, Electronic, and Necessary Government Data Act (AKA the OPEN Government Data Act) is about to become law. This codifies two canonical principles for democracy in the 21st century. First, the public information should be open by default to the public in a machine-readable format, where such publication doesn’t harm privacy or security. Second, federal agencies should use evidence when they make public policy [https://e-pluribusunum.org/2018/12/21/congress-made-open-government-data-the-default-in-the-united-states/]. India should be instituting a similar law to encourage more data driven policy making.
In addition, there should be a rule to declassify all records related to policy making, cabinet decisions, Parliament, and judiciary after a period of 30 years. This is a common practice in many democracies.
Access to this data will create a culture of transparency, improve monitoring of multiple government programs, and hold government accountable. It will also help in research to develop more effective policies.
10. Negotiate (defence) deals better
When you are negotiating with two sellers at the same time to get the best deal, you have a lot of leverage to play one against the other. It seems like that this practice was followed while evaluating the bids for Medium Multi-Role Combat Aircraft (MMRCA), but then the government picked one winner before a lot of negotiation was left to be done. There were two contenders short listed by the Air Force in 2011 for supplying the MMCRA. The government picked Dassault in 2012 based on their lowest bid but further negotiations carried on till 2016 [https://www.thehindu.com/news/national/rafale-deal-case-a-timeline/article25741453.ece]. Picking a single early winner shifts the balance of power in favour of the seller. It would have been better had the government continued to negotiate with both suppliers until the final agreement was signed. For instance, in US, when Amazon was scouting for its second headquarters it negotiated with 20 cities simultaneously until the very end.
11. Bigger role for the community
Partly by design the Indian state is organized in a very top down manner with a powerful central government, weaker state governments, and very weak city/town/village governments. Too much accumulation of power in the centre has led to a situation where more than a billion people rely on hundreds of people in the centre to change their fortune. This setup creates a helpless citizen who has little agency to change her own community and neighbourhood. As India urbanizes at a fast pace, the urban infrastructure remains woefully inadequate to serve the needs of rapidly urbanizing India. The rich in cities end up creating walled gardens of private infrastructure that adds to the tragedy of the commons.
There is a need for more empowerment of local and hyper-local governments in cities, towns, villages, and neighbourhoods (mohallas). These governments should have enough means to raise money and resources, enact rules, and enforce them so that citizens have more direct and accessible means to change their community and surroundings. These local governments play very important role in economic growth and politics of countries like USA and China. We can directly attribute many positive features of cities and towns in the US to strong and active local governments – like keeping the cities clean, development of schools and parks, and creation and enforcement of civic rules. Local governments’ revenue in the US is around 6.8% of GDP [https://www.usgovernmentrevenue.com/total_revenue_2019USpn]. By contrast the urban local governments in India have tax revenues of around 0.75 percent of GDP [https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/82500.pdf]. Local economic development (LED) is a critical for developing countries like India to develop faster, better, and in a more inclusive manner [http://www.ilo.org/empent/areas/local-economic-development-led/lang--en/index.htm].
12. Free Market Solution to Ram Mandir Issue
One of the problems with Ram Mandir issue is that it may set a precedent that would be applied to myriads of places and monuments. Some even claim that there are temple ruins under the Taj Mahal. I don’t think we should be digging up past so far back to assign property to someone. Where will it stop? It is not uncommon for monuments and even temples to be built from ruins of another monument [https://scroll.in/article/767065/war-trophies-when-hindu-kings-raided-temples-and-abducted-idols].
A way out, that will also set a good precedent, will be to acknowledge that Ram Mandir dispute is just a property dispute and needs to be settled as such. The trustees of the Baabri mosque own the property that is valued many more times by Hindus. To gain ownership of the property, the Hindu organizations should pay a sum that would get the current owners to sell. So, if the trustees get say 7000 crores for that property, they can use it to better maintain mosques elsewhere which are of greater religious and historical significance.
