It is time that we set our house in order

India's economy is in serious trouble. The rupee has dropped to its lowest since the high of being at par with the U.S. dollar, when India emerged as an independent nation.

Its value is almost equal to the numbers of years since the British left. Tragic isn't it? Throughout the struggle for India's independence, corruption in the government run by the British was not an issue on which the movement for freedom was agitated. Bureaucracy and the Viceroy's Council (an equivalent of India's cabinet today) were seen to be above board.

In his speech at Cambridge, when the Prime Minister Dr. Manmohan Singh, received a doctorate from that university, he praised the British administration of India.

The period of World War Two saw a large number of contracts being given out in urgency for the war effort. In many cases, there were hardly any tenders. The Government of India then was concerned with any allegation of wrong doing or corruption in the allocation of such jobs.

Thus, as soon as the war ended, the British Government of the day created the Special Investigation Police to independently look into all such contracts and allegations. That department was converted into what is today's CBI, albeit it is no longer independent.

Independent India opted for a socialist pattern of society for itself, even as it retained the capitalist structure of the economy inherited from the British. The structure had been functioning well. The socialist pattern of society called for an economy in which the rich were to be taxed heavily. It was thus that the tax on incomes beyond Rs. 20,000. 00 per year became extortionist. And here, begins the saga of corruption in the income tax department and evasion of tax by all those who could manage it with or without the connivance of the tax officers. Indians at large soon learnt to live with this situation and corruption in the income tax department has become a part of life in India.

The socialist pattern of Indian Society soon led to the emergence of the "licence permit raj" and discretionary powers with ministers and senior bureaucrats. India's economy came to be known by its "Hindu" rate of growth which meant it could not even keep pace with inflation, and just grew by two percent or so if at all. A point came when Indians could NOT buy even an air ticket to travel abroad without filling what was known as the "P" form and getting it approved by the government. The basic allowance for travel abroad was USD 8.00 yes eight dollars, and the famous film maker Raj Kapoor even made a movie on the subject "Around the World in Eight Dollars".

India's growth suffered. Those with initiative and ambitions left for foreign soils to seek opportunities there. Those with power to turn and twist the "licence permit raj" to their advantage with 'contacts' among the politicians and bureaucrats flourished in India.

There were just two rickety cars available in the market and those too had a black market value on them for the production capacity was poor. Such an economy was sooner or later is destined to fail. The country, thus, came close to bankruptcy in 1991 when it had to mortgage part of its gold reserves to meet its commitments.

It is at that stage that the World Bank came to India's rescue imposing conditions that were meant to say "good bye" to the licence permit raj and open up India economy. Prime Minister Narasimha Rao undertook the task of dismantling the Communist style economy with his finance Minister Manmohan Singh. Thus began what has come to known as reforms to the Indian economy. India opened its doors to foreign investors and at home, Indian businessmen were to be made free of the shackles of the licence permit raj. Suddenly, Indians realized their potential of being able to do things and create wealth. Foreign investors started coming in and the Indian economy was looking up and began to be compared with China's.

Old habits die hard. Economic reforms unfortunately did not mean that discretionary powers of ministers or senior bureaucrats were taken away. The net result was that at a time when India's economy began to take first steps, yes first small steps, towards achieving a global standard, came the scams and corruption charges all because, those in charge of getting rid of controls, restrictions, 'licence permit raj' and the like, failed to rid the system of evil of discretion and favouritism.

The government failed to take steps to discipline and bring into line its taxation departments. The foreign companies and investors who came into India are now beginning to understand the cruelty of this corrupt extortionist system.

What began with Vodafone is now engulfing other companies as well who cannot find ways and means to adjust themselves with India's corrupt Income tax, service tax, VAT, customs and all other revenue departments.

Nokia is said to have threatened to quit India and move its operations to China. IT IS BECAUSE OF ALL THIS THAT FOREIGN INVESTMENTS INTO INDIA ARE DRYING UP. No one is now convinced abroad if India is a good destination for business.

The last four years of the UPA Government have hardly seen any governance, but the government has been kept busy by the scams and charges of corruption that emerge by the day.

That certainly is not the way to administer a country. Law and order, primary duty of any government, has also taken a serious hit. The cost of all this is too heavy for the people of this country to bear.

To continue to blame external factors for the mess that we have created with our economy won't convince anyone. The simple fact is that the crisis that India is facing today has been made by indecisions of its own government.

In a globalised economy, there is no escape for the country from adopting world standards of efficiency and administration. India's place as the second largest growing economy of Asia has been taken away by the Phillipines! How is it that they have not been impacted by foreign factors?

With the growth rate of Indian economy falling, growing unemployment, rising population and rising expectations when our people see other developing countries moving ahead in leaps and bounds, India can ill afford not to be energetic in dealing with basic issues that ail her system. The leadership of the government is resorting to time worn solutions which cannot deal with the crisis that India is in. Neither the economic growth will pick up nor will the rupee rebound unless the country deals with factors that are keeping foreign investors away.

The demon of corruption has to be killed in all government departments, including the revenue and taxation wings. Taxation laws need to be simplified so that there is the least possibility of misinterpretation.

The government needs to look at and learn from the huge deal which Vodafone has just concluded with Verizon, amounting to USD 130.00 billion, and yet, the British may not be able to collect any tax because Vodafone has rightly used the provisions which help it escape that tax.

The fundamentals of the Indian economy are not weak. Indian businessmen and industrialists have shown their acumen in the two decades following the partial liberalization of the economy following the crisis of 1991.

The world needs to be assured that India means business and respects rule of law. It is time that we set our house in order. (ANI)

Mr. Prem Prakash is a senior journalist and chairman of ANI Media (P) Ltd.