Narendra Modi is widely expected to be the country's next prime minister. If this happens, business people uniformly expect "good governance" - except good governance is an undefined term; it means different things to different people. For some, clearing files that may contain gold-plated capital expenditures or lucrative coal blocks is good governance. For others, it could be allowing or not allowing foreign direct investment in the retail sector.
For the vast majority of the population - especially the middle class, the poor and small-business people - good governance possibly means sensible laws and the implementation of such laws without favour: in other words, a regime of the "rule of law". This, when combined with a reasonable degree of freedom, allows people everywhere to do wonders all by themselves.
Unfortunately, many of the existing laws that govern business - and our lives - have been inherited from the British and are defunct or absurd. Some serve only one purpose now: that is, regular extortion by government officials.
There is no dearth of people who have researched this area thoroughly. They can regale Narendra Modi with something like the East Punjab Agricultural Pests, Diseases and Noxious Weeds Act of 1949, which applies to Delhi. According to Bibek Debroy, who has written entertainingly and extensively about Indian legal absurdities, under this act, "if Delhi is invaded by locusts, the collector can call upon all adult males to help in destroying locusts and it is a crime to refuse. You will be notified about locusts through beating of drums".
Mr Debroy gives many such examples, the fruits of his extensive research in the late 1990s. The Bengal Bonded Warehouse Association Act, 1838, stipulates that only residents of the Presidency of Fort William in Bengal can be its directors and the association can sell its property only to the East India Company. The 162-year-old "association" has not yet been dissolved. India's central bank is a temporary institution under the Reserve Bank of India Act, 1934.
Apart from such irrelevant central laws, we have tens of thousands of state laws. Then there are rules enacted by the government under legislation; such rules outnumber the laws by 20 times. To this, you can add notifications and circulars. Then there are decisions and individual interpretations by judges.
A brush with any of these could be depressing and debilitating. At our office in Mumbai, we are blessed with occasional visits by petty officials of the municipal corporation who may ask to see a Lime Wash Register. Yes, you need one, according to them. An architect told us that partitions of any kind are illegal because the law says you need to allow free flow of air across the office. This law was enacted by the British for public health well before room air conditioners came into use. Municipal inspectors smile and tell you that "you will not be able to comply with the rules we have".
The Centre and states together have almost 31,000 laws. Many new central laws are added every year. The "socialist" regimes of the Nehrus and Indira Gandhi, the "rights-based" regime of Sonia Gandhi, and the concerted action by militant non-governmental organisations (NGOs) have created many new laws with draconian provisions. There are old laws that hinder free movement of goods and services in an era when there is a "broad consensus about economic reforms among all the parties", as intellectuals like to parrot.
Well, the Essential Commodities Act of 1955 and the Agriculture Produce Marketing Committee Act do not permit free movement of agricultural produce. Politicians and officials rarely talk of removing such restrictions mainly because they are breeding grounds for corruption - with the officials lying in wait to trap unsuspecting citizens. I have not even gone into the huge delays in delivering justice through the existing legal system.
A bigger issue is the implementation of laws without favour. In India today, the rich and powerful can get away with sidestepping laws that harshly penalise others. Defaulting on depositing provident fund dues or tax deducted at source can attract penalties, including imprisonment; some businessmen escape this treatment. If you haven't repaid your loan, banks will take away your assets; Vijay Mallya, however, is most likely to escape the well-established rule of law. This is not an isolated case. Indeed, the most glaring example of the breakdown of the rule of law is a dramatic increase in non-performing assets 10 years after the government enacted the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
This law was enacted specifically to deal with rampant bad loans in the late 1990s that bankrupted government-owned banks. These banks then needed to be recapitalised by drawing upon thousands of crores of taxpayers' money. The law was specifically meant to plug this problem forever. And it was easy to do so. Lending laws can be among the simplest. Banks are supposed to lend against security and, at the same time, keep a margin, backed by a strong law that the government gave them. There was no scope for banks to end up with large bad loans again. So, how have we landed up exactly in the same situation 10 years later? Taxpayers' money worth Rs 14,000 crore had to be pumped into government banks last year to save these institutions. Why are successive finance ministers and finance secretaries not responsible for this? To my mind, there cannot be a more open-and-shut case of misgovernance, a more glaring example of the failure to implement even a new law.
Rahul Gandhi said last year that we seemed to be looking for "the man who comes in on a horse, the sun in the background, and he is going to fix everything". If Narendra Modi becomes prime minister and can deliver governance through the rule of law, he may end up looking like that man, at least for some time. This is because there is just too much to be done, and plenty of it is quite easy to fix.
The writer is the editor of www.moneylife.in editor@moneylife.in
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