The best poverty alleviation scheme is faster growth: Arun Jaitley

Finance Minister Arun Jaitley says while corporate India and economic thinkers have grown out of the regressive mindset of the mid-70s, politicians have not

It is only today during this function that I realised that Business Standard was born in 1975. Probably that's the only good thing that happened in 1975. When I look back, probably 1975 was the most terrible year in Indian history. The Founder of Business Standard must have been very entrepreneurial to take the risk of starting a business newspaper at that time. It was a period when inflation was touching over 30 per cent. And the actual thinking in the government was that if you locked up a few people and confiscated their properties, India's economic problems would be solved. And that was the thought behind the cabinet note which decided to enact the law relating to confiscation of property of economic offenders and smugglers.

In terms of politics, 1975 was the year when we literally laid the foundation of converting India into a dynastic democracy and that process continued for almost four decades. It is only now that we have realised that a large democracy like India can't function in that manner. The myth about dynastic democracy was demolished for the first time in 2014. And almost every party, which relied only on caste support and dynasty, lost. And if you look at corporate India, almost all award winners today are those who didn't emerge out of family-held holdings, who thrived for excellence, used the opportunity particularly after 1991, unleashed their own energies and became market and global leaders in their own right.

However, the more things have changed in the last 40 years, at least some of them have remained the same. Look at the 20-point programme of the 1975 period. The thought process behind that was that you distribute whatever are the existing resources, you distribute poverty and therefore emerge as progressive, rather than concentrate on increasing productivity. And since whatever was big was necessarily evil, businesses must not be allowed to grow beyond a point.

Thankfully, corporate India and economic thinkers have grown out of that but politicians have not. This is unfortunate as this is a crucial period for our country when decision-making has to take place fast. Can you eliminate poverty by not concentrating on generating more wealth and not concentrating on higher growth? The present government has made an important choice and it's this: The best poverty alleviation programme probably is to grow faster and use the additionality of resources to enrich the poor. Efforts to enhance the growth rate can't be dismissed as pro-rich.

We've tried to open the doors for investment as far as possible; we've consciously tried to solve some of the taxation issues and we have started the process of ease of doing business - whether it is acquiring or running companies. One of the initiatives in the Budget which relatively went unnoticed was the appointment of a small group to consider the possibility of starting businesses in India under a single regulatory mechanism instead of the present system of having to go to 20 different offices and spend half a decade before you can actually start production.

We struggled to develop a consensus on the Goods and Services Tax (GST) and I am glad that most states have come on board. On direct tax reforms, we have announced a road map for becoming globally competitive. Our bad luck is that we get very little as tax but we still enjoy a bad reputation of being a high-charging nation. And therefore, we have decided to rationalise the tax rates and start the process of phasing out exemptions as fast as possible.

But there are several challenges. Some political groups still relish the idea of obstructing the growth process. We have to fight this. The best that the obstructionists can do is to delay a legislation, and nothing more.

Another important change that has taken place in the last few months is this whole acceptance of the idea of co-operative and competitive federalism. When the Finance Commission came out with its somewhat surprising report saying pay your states a lot more, many advised us to go slower, because today if you take the national basket of all taxes (Centre and states), as against 49 per cent last year, states will now get 62 per cent. But we decided to go ahead as we genuinely believe in shared sovereignty. I do believe that state Chief Ministers are going to spend a large part of this money for popular welfare - whether it is infrastructure creation or poverty alleviation.

The coal auctions seem to be indicating that in his calculation of Rs 1,86,000 crore losses, Mr Vinod Rai (the former Comptroller and Auditor general) was being somewhat modest. The spectrum auctions seem to be indicating the same amount. We have decided to share the entire proceeds from the coal auctions with coal-producing states, most of which are in the eastern part of the country barring Chhattisgarh. These are the states that require resources the maximum. So for somebody to say that I will obstruct a law that mandates a transparent bidding process is going to be very difficult, just as it will be very difficult today to sustain and justify the economic policies of 1975. India is not going to accept anybody who wants to go back to non-transparent process of allocation of natural resources.

I do believe that a sense of fairness will ultimately prevail. For, India has moved on from the days of 1975. There is a huge class in India which is still struggling but which is extremely aspirational; which has hunger but also has a very large ambition to move forward; which is getting access to the whole world and is seeing that we can beat others in competition. Ten or 20 years down the line, it is from this aspirational class that you will have a new set of Indians who are going to build this country. And I have no doubt that Business Standard will continue to be a great witness and a commentator to the history that this country is going to make.

(Edited excerpts from the minister's speech)

VOICES

"The BS awards are the most sought after in corporate India because they are given purely on merit. That is why we still cherish the award L&T got a few years ago"

A M Naik
Chairman, L&T

"The FM's speech eloquently highlighted that it's a great pity for India if the path to development is going to be obstructed by the Opposition."

Sam Balsara
CMD, Madison World

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Sanjay Nayar
CEO, KKR India

"We were very impressed with the entrepreneurship that we saw in this year's award list and recognition to the increasing role of technology in modern businesses"

Noshir Kaka
MD, McKinsey India