In an exclusive chat with The Dialogue’s Founding Editor Kazim Rizvi, India’s leading economist and politician Dr. Subramanian Swamy talks about the current trends in our governance, politics and economy.
Below are the excerpts:
GST, India’s boldest tax reform since independence was recently rolled out. There have been some voices in the Opposition, primarily Mr. Chidambaram, who calls it an “imperfect GST”. What’s your take on it?
You see for him to comment on it is strange because he was the one who sort of claimed its parentage earlier when it was been passed. It was passed unanimously. At no stage did the Congress party move even a small amendment. I think in the history of Parliament we have never had a situation where 100 percent of the parties voted for something you see. There was no dissenting voice. The only dissenting voice was mine. And it was not based so much on GST as it was based on the GST-N which nobody knew existed, which is also Chidambaram’s invention, primarily to siphon off money. It was a private limited company which was empowered to devise the computer programme to bring all the 44 lakhs companies we have in the country and their data and feed them into a giant computer programme and then assess how much revenue should be assigned to the states and how much should be assigned to the centre. So I objected to it saying that all this vast data would be available to private companies which were holding majority shares and it was those private banks like HDFC, ICICI that are owned by foreign shareholders. So they are not even Indian companies. So I said why not public banks? Or Indian public sector companies? Or alternatively do a security check and see what safeguards are necessary. This was one objection I had.
We recommended demonetisation as one of the many measures and in that we said before implementing it you must have at least 6 times the 100 rupee notes that we have in circulation, and 200 rupee notes should be introduced.
The second objection was that the vast amount of private ltd company wont use any of its funds, you see, the central Government would give lump sum grants which will be then utilised for financing the computer programme, that was to be given to Infosys and the Infosys had been given an advance of 1400 crores. So I said this should be audited by CAG. On both these Mr. Jaitley and earlier on Chidambaram very clearly said that they would not agree to it. But fortunately the Prime Minister towards the end agreed to it. So he met both my objections. He ordered the security clearance and the second was the CAG auditing of these companies.
As far as tax the rates and so on is concerned, these are all ad hoc matters that can be rectified as we move on. At the moment it is false to say that GST has been rolled out it has not been, what has been rolled out is the intention to start the proceedings. It is the engagement before marriage; there is no marriage yet.
So now for Congress party at this late stage to find faults is ridiculous. They never found fault with what I raised. It is just their frustration.
Noble Laureate Paul Krugman recently stated that demonetisation may not have caused as big a damage to the Indian economy as it was thought out to be. DO you agree with him?
You see these foreign experts I don’t think too much about them. He is an expert but he still is a foreigner and the Indian economy requires much more depth. Even Indians like Raghuram Rajan were out of depth. The problem with demonetisation was the backup support that probably the PM took for granted did not exist.
First of all you suddenly declare that all these 500 rupee notes are null and void now people were doing transaction with them should have had the option of some other currency notes. There was no new currency printed in the anticipation of this move. Not that we didn’t know that this is something we are going to do. During the 2014 elections PM Modi set up a committee called the Committee for Strategic Action and I was made the chairman of that committee. We recommended demonetisation as one of the many measures and in that we said before implementing it you must have at least 6 times the 100 rupee notes that we have in circulation, and 200 rupee notes should be introduced. And then I said that the ATMs have to be sufficiently upgraded because private companies run them. But none of this was done. And suddenly we were left with a cash crunch where people had to stand in lines. It did not backfire on the PM because he enjoys a certain credibility and people felt he was trying to do something and much of the complaints were from the rich people. The average person said yeah we were suffering so no harm but look at the rich people who are screaming.
The only contribution Mr. Singh did was he did not resign. Had he resigned then Rahul Gandhi would have been the PM.
Therefore because of the lack of backup support of the Finance Ministry, it is the Finance Ministry at fault. What really happened, if we put it bluntly, was that if I had 10000 rupees in black money earlier, I now have 7500 rupees of new notes of black money. Rs. 2500 went to the bank officials, informally ensuring that your black money was converted to new black money. Therefore the black money economy is alive and kicking
How do you think we can move forward and curb the menace of black money?
We should abolish income tax. Only thing that you can be hurt is revenue that you get which is about 4 lakh crores. But by abolishing the 2G spectrum license and ensuring an auction you get 4 lakh crores a year. Then this coal blocks – scrapping those discretionary allotments you get 11 lakh crores. If you sincerely bring back the black money from foreign banks you will get 120 lakh crores.
There are 70 secret banking countries in the world. A few of these include Cayman Islands, Virgin Islands, Bahamas and Macau – the safest place. All this put together you can get black money back. There is a UN convention that provides a way which requires a legislation from the Indian Parliament.
But why abolish Income Tax?
It is an incentive for black money. The issue is people become vulnerable and there becomes a new class of people who abide by paying income tax and one that doesn’t. And soon enough those who don’t get as much social status as those who do – it is bad for the country. You can’t collect it because your income tax officials are paid by and bought. And therefore my opinion is why have it? Ours is not a very progressive IT process where you are using it to reduce inequality. You have other ways of revenue and those should be looked upon.
Women are innately equal to men. We are a de-facto Hindu Rashtra. Indian constitution has everything I want.
We have been reading off late that India is witnessing an era of jobless growth. That the same rate of growth rate today is not producing the same number of jobs as it used to back in the 90’s and early 2000’s. Do you agree with this theory?
The rate of growth of employment generation has been steadily declining since 2011. Most of it is due to Raghuram Rajan’s policy of raising interest rates that has knocked the bottom out of the small and medium industries that used to produce bulk of employment generation. Mr. Rajan’s policy of raising rates to reduce inflation actually ended up making the cost of capital so high that small and medium industries decided to fold down. So its not that there was growth and there was no commensurate employment. It is just that people were getting laid off, because the industries were closing. Because of the high interest rates they were not be viable. There were other trends also that were also negative. I think Commerce Ministry produced an unprecedented results of consistent decline of both export and import growth rates. As a consequence, many of these exports industries wound up and many of them that were dependent on imports of spare parts etc. also shut shop. So I have written a letter to the PM where I have listed five storm signals for the economy, which I have so far not made public, because some time should pass.
As far as the GDP growth rate is concerned I wrote a paper with Paul Samuelson that is now being applied by the EU – what is the most optimal way to conduct an index? If I were to apply that to our growth rate then our growth would not be 6 or 7 percent, but maybe 5 percent. You see this index numbers is a complicated subject. He was my teacher but in class I started correcting him and the he told me why don’t we write a paper? That’s how it happened and was published in the American Economic Review in 1974. But I don’t get into this because I have a conscience as a party man and as an economist and therefore I don’t make a big fuss about it. Having said that, nobody would dare to debate with me on this.
The PM often talks about demographic dividend and utilising the young hands towards nation building. How do you think we can deliver on this front?
One of the worst things that has happened to India is 10 years of UPA. Much of these negatives trend are an outcome of policies that followed that period. Manmohan Singh has unfairly got this credit for the 1991 economic reform. It was my blueprints during my time as the Commerce Minister and subsequently and Narsimha Rao’s courage to get it implemented. I also held a cabinet rank position in PM Rao’ Ministry as Chairman of GAT committee. I am an eyewitness that Manmohan Singh was extremely unhappy the way he was abused in the Parliament for being called an American stooge. If as a Finance Minister he did all these wonderful reforms, then why is it that as the PM he didn’t do any? He should have restructured the whole tax system.
All the important portfolios of Brahma’s cabinet are with women. Finance is with Laxmi, education with Swaraswati, defence is with Durga.
There are 3000 commodities under excise duty, the first 21 give you 91 percent of the revenue why do you need the rest of the commodities in the excise? 10 years of UPA has been for bleeding and sucking out money for corruption. Ultimately it is the political will that matters, which was there during Narsimha Rao’s tenure but not in the UPA’s time. I produced the blueprint but I don’t get the credit, because I hand it over to him as he got it implemented. I got the trade reforms implemented but then Chandrashekhar’s Government collapsed. During Narsimha Rao’s period the fact is the it was him who did it. During the 10 years of UPA Mr. Singh was just a mute witness. On corruption he always had the right view. He told Raja in a letter that you auction the blocks, Raja said that I have taken the permission from the highest authority. Mr. Singh had to put up with it. The only contribution he did was he did not resign. Had he resigned then Rahul Gandhi would have been the PM.
Finally, what are your views on women empowerment and how can we as a country move forward to ensure equal rights for women?
I believe that Hindutva is the answer. All the important portfolios of Brahma’s cabinet are with women. Finance is with Laxmi, education with Swaraswati, defence is with Durga. For women’s honour we went to Mahabharat war. For women’s honour Ram went to Sri Lanka. So I mean women played important role in the Hindu culture.
Women are innately equal to men. We are a de-facto Hindu Rashtra. Indian constitution has everything I want. Even ban on cow slaughter is there in the Indian constitution. There is nothing new that will be added by the Hindu Rashtra concept legally. But it is the Hindutva spirit, where we extol the women’s role as a mother, sister, where we treated her equally. When Shankaracharya had to debate with Mandana Misra, two greatest scholars of two different fields who would be the umpire, the wife of Mandana Misra was chosen. So I think that tradition has to come back.