The Small Bang Theory

The problem with big ticket change, those revolutionary measures that everyone is always salivating over without knowing what exactly they should be, is that it can swing both ways. If it works, well and good, but they can just as easily implode. Liberalisation was forced on India after an economic crisis of such severity that its gold had to be mortgaged. There was really little to lose then. But that doesn’t mean that if it had been done ten years before it would have worked just as well. Modern economic history is replete with nations—Russia after the break-up of the Soviet Union, for example—that allowed reform a sudden free rein and it led to the rise of the worst forms of capitalism, like oligarchies and dictators. Gradual is good; it is safe and also prudent.

For months before the Budget, it was pegged by many as the most important one in recent times, one that would finally allow the new Government to pull all their cats out of their bags. It has turned out to be a Budget that few have any quibble with but no one thinks is the promised revolution. Imagine for a moment if the Finance Minister did decide to embark on something extraordinary. In taxes, at least, he is aware of a proposal that some sections in the BJP itself were toying with before the elections. It is the idea that India should do away with all direct and indirect taxes (income, sales, VAT, etcetera) altogether and replace it with a Banking Transaction Tax. That would be an economic reform unlike any that India has ever seen. While speaking to the member of Arthakranti, the think-tank that was lobbying for it, I was struck by how beautifully simple and logical it was. They had all the numbers down and counter arguments to every objection. On paper, it seemed to be the answer for every issue that bedevils taxation—from tax avoidance to collection to corruption.

Implementing such a proposal would make this Budget the most radical one in Indian history. But no one would be clapping because they would be paralysed with fear from the change itself. The only ones happy would be the banks who would then replace the Government as tax collection agencies and make huge profits from their fees. Such a big change, even if ultimately salutary, would always be like walking with chaos chasing one step behind. And you have no idea what are the forces being unleashed to slow you enough for it to catch up. That is why big bang reforms are best when taken after long deliberations, tested extensively and having resolved as many disputes as possible to arrive at a final shape. Like the Goods and Services Tax.

The big bang that matters is the direction of change, and in that, the mention of social security in this Budget is one. In a country like India, pensions, health care, insurance, employment and dole, food security, etcetera, for everyone is going to be a distant dream. But even thinking in that direction indicates that as a society there is now a premium on quality of life. It might be tokenism at the moment and riddled with delivery issues for decades. But beginnings are also something to feel good about.

About The Author

Madhavankutty Pillai

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