Good to see the ongoing debate on governance, politics and reforming of the INDIAN TAX SYSTEM stirring up in India in the past few weeks. But by looking at the BIG PICTURE it’s clear that country isn’t just struggling cause of lack of good governance and good governance although essential but on its own won’t go far enough to move the country forward. It is quite evident that the country has been suffering from a severe lack of good reforms and efficient policy decisions but the again a good policy or much needed reforms can only be executed or delivered by an efficient delivery mechanism.And so far this has been India’s major problem because the existing administrative system is simply not fit for purpose. The reality is that a high percentage of the administrators(managers) coming out of the current Indian Administrative Services (IAS) program do not have the right training or the essential background on public policy administration and execution.
A good an innovative policy requires an efficient administrative infrastructure that is not just able to cope with the task at hand but also able to improvise by working closely with the relevant ministerial department on perfecting the policies if and when required. It should also be extremely reactive and responsive to its users / customers i.e. the citizens requirements. The administrative infrastructure created during the British Raj to govern India clearly needs to be revamped and updated. For example we can’t expect to run super fast trains on British Raj Era railway infrastructure without revamping and updating the existing railway infrastructure of the country and this is just common sense. So in short the existing policy delivery mechanism / infrastructure is quite simply outdated. And the problem is not that there is a shortage of talents when it comes to good public administrators but the system simply fails to keep the talent because it isn’t attractive enough. Historically India has produced amazing MINDS and even today the country has no shortage of Talents but the problem has always been the mindset of the Indian society.
Any good system requires a regular overhaul and upgrading and the current IAS program that more or less serves as an operating system to administer and govern INDIA is simply too old and is in need of immediate radical reforms to make it fit for purpose. And here is what the government of the day should look at, a good manager will need to be paid appropriately so what’s the harm in creating a private sector type bonus system linked to verifiable results and overall performance of an official. And the same should apply to ministers. The ministers and the managerial staff will need to work on making various administrative branches of INDIA INC more efficient and responsive and deliver better return on assets for the shareholders i.e. the citizens.
Corruption won’t go away on its own or by street protests or by a creation of new political parties. Also elections and governance etc won’t necessarily solve India’s problem in my own view. If you think the same way you will get to the same place so clearly the country needs to start the process of revamping it’s overall mindset and find a new approach. And this has to come and be driven by the society itself. So a lasting and sustainable change has to come from within. For example lets start with small things if people living in the same community decided to work together and started keeping their streets and town cleans then automatically the entire city will start to look and feel cleaner. Similarly, if people decided and encouraged their friends and families to look at the bigger picture and not to take short cuts for example when getting their kids admitted to a school or getting a normal job done or even when attending prayer events in temples the society will then start to look less messier and more organised as there will be less incentives for folks to ask for favours. It is important to understand that a vibrant bribe culture in India isn’t going to go away just like that and also on the flip side the fear of getting caught might in fact discourage the decision making process making the situation much worst so the people will need to take the initiative and lay the foundation that will bring about the required and essential change in the overall mindset of the Indian society. In other words the society of the day needs to get on 2014 bandwidth.
And obviously the government has a very important role to play by working together with the society and facilitating this change by starting with creating incentives within the existing system. For example, if the government comes with an investment or a social investment program then why not also create a provision where up to 10% of the allocated fund could be paid in bonuses to officials in charge of administering and executing that particular program or policy similarly if a government department is announcing a tender then why not create a BONUS pool of 5 % to 10% that could be paid to the department in charge of the particular project or tender irrespective of who wins the tender. This will mostly likely remove the need for companies to submit unrealistic bids in order to simply secure the project by finding a way to bribe the officials. Also the officials will know that irrespective of who wins the tender their bonus is guaranteed. This by no means should be taken as encouraging corruption but in fact these steps could provide the right incentives by taking away the motivation behind corruption and there are a number of practical, simple and innovative steps to create the right incentives. For example, every government secretariat could have a simple fast track service for citizens and people willing to pay higher fees will be able to access that particular service on fast track basis. Some of these incentives are probably already there. Also why not create a donation incentive so if customers are happy with the services provided by the officials in a particular department then they could donate towards the annual bonus fund. A Corruption that is under the carpet can kill any economy and unless we find a way to start paying people fairly we can’t take the moral high ground and expect people not to take bribe as most of them get involved in corruption because of their obligations towards the family and in a way they do have the right to do what is best in the interest of their family. So this is why it is important that we explore all the practical ways to remove the corruption embedded in the system say.
Now with regards to the TAX Code debate well a country where roughly only 4% of the population pays income tax clearly needs to do better and this will not only require the government of the day to make radical changes in the overall tax structure but also the people who are happy take to the streets to show their anger against corruption will need to have a serious look at themselves in the MIRROR and ask themselves what is their own contribution to the country that they claim to love so much. Talk is generally cheap and easy and most of us are good at it. A big economy like India can’t abolish the personal income tax system altogether, it is simply unrealistic and most probably a wrong debate.
Indian Tax system today heavily relies on indirect tax revenues including of VAT, sales tax, excise duties among others to pay the country’s BILLS. And no doubt the system is struggling cause of corruption but this isn’t just an INDIAN phenomena. Having said that it is surely getting entrenched in the DNA of the Indian society and people will need to realise that if you build yourself a US 100 million dollar mansion in a neighbourhood where the rest of them can’t afford even a US $5,000 house then you are making a serious mistake because you may end up having to spend millions on security etc so why not instead help build your immediate neighbourhood and by this I mean building a good road, a good sanitation system, may be a good school , a good medical centre and then build yourself a billion dollar mansion ( if you can afford it ) because in this case the new neighbourhood will be anchored around you and it always be grateful and most likely you will see significant benefits from your investment in the community. And this is not socialism but just smart and sustainable investment.
If you want to change the country then you will most likely have to start with changing yourself, your own family, neighbourhood and the city. So I will encourage the society, the government and the entrepreneurs to take the important first step and in a society where people like to follow and copy others it is highly likely others will follow suit creating a trend. Collaboration can help us climb mountains and help us get to the moon so the various communities will need to come together and work towards making a better India. A crisis also provides opportunity but it is important not to get overwhelmed by the CHAOS because a grinding process isn’t all smooth and beautiful so I believe it is time for the Indian society to look at the big picture knowing well that it has a truly historic opportunity to take the country forward by playing an extremely important role and in the process it could also set up a good example and precedent for similar societies living in the developing world going forward.