- kewal sethi
why business in india is not flourishing
why business in india is not flourishing
why business in india is not flourishing
to understand it, let us delve in the past.
the muslim rulers of the day in delhi occupied much of the area of north india which they lost to the local warlords and regained from them from time to time. warfare constituted the main events in those days. the administration was wholly army oriented. the subedar appointed in a region was a military person. his chief concern was to maintain his strength and to be prepared for rendering armed forces assistance to the sultan of delhi. he had to collect taxes to finance this obligation. the collections had to match the expenses. no questions asked from subordinates how they do it. it was not till sher shah suri that they thought of having a record of land holdings. the main cause of indifference was that all the time, the rulers were engaged in defending their power and prestige. from 1206 till 1526, there were four dynasties and fifteen (main) sultans (apart from the weak successors of main characters who held nominal power till the new dynasty removed them).
they never had the time or the inclination to have a system for collection of taxes.
contrast this with the ancient hindu system. chanakya describes in details how much taxes are to be collected depending upon the category of the producer of crops or the goods. farming was the main activity but trade, metallurgy, business also contributed regularly to the treasury. even the ganikas - whom we would now describe as sex workers - were taxed. it was a regular system and worked well as the expenses were kept within limits. gupta empire continued the tradition.
the southern india was largely free from such conflicts in the beginning but with the coming of rulers like bahamni kingdom in the seventeenth century and later on successful adventurers like haider ali and tipu sultan, and finally the british over lordship brought this part of the country swiftly to the level of rest of india.
onto the present day. the present government also survives on taxes. there is no other way. but the system has changed from the muslim days. now taxes are on production of goods, sale of goods, services, and also on income.
in return for taxes, the main duty of the state was, or should have been, to provide for security. maintenance of army (or police, if you so desire) was a must. not only in the cities but also on the highways, security should be ensured. the sultans or the mughals did not do that. but there was another angle. in the old days the possession of arms was not controlled (as it is now). the major players in trade could organize their private security detail but there was no succour for the minor players. this is not possible now as the british introduced strict control on possession of arms and the tradition continues.
in the sultanate and the mughals, the peace was elusive. it was a saga of constant warfare. most of the time to capture or recapture the territory. then there were too many rebellions, too many local chieftains fighting for their rights. and when these were taken care of, the princes took off, jahangir (then saleem) revolted against akbar; shahjahan (then khurram) revolted against jahangir (though some would say noor jahan), aurangzeb revolted against shahjahan. the first two lost, the third one won and imprisoned his father. with all this upheavals, little time was left for setting up a stable administration and taxation system. the businessmen and the citizens were left to their own devices for safety of property and trade.
the maratha ascendency did not make much difference. while in directly administered areas, there was non-exploitative taxation. there were taxes on trade etcetera and also a modicum of security. apart from providing security for inland trade, for the first time, marathas also had a naval force which protected the merchant vessels on high seas and they also extracted tax from the european and other traders. in the areas, not directly administered, which paid tribute to the suzerainty of marathas, the chauth (fourth part of revenue, and sardeshmukhi (ten percent of revenue) were enforced. the collection was left to the local overlords with all its shortcomings.
then came the british. they were just handful and they set up a system of collection of taxes on a regular basis. due to the initial mistake of permanent settlement in bengal, bihar and orissa, (which then constituting single province), the collection of revenue was left entirely to the jagirdars. for the remaining conquered areas, they had a different system for land management. locally appointed patels, assisted by government officials, collected the revenue. but the revenue was on fixed rates. security for the trade was still a distant objective. this was still a military expedition and the conquest of new territories continued. the last mysore war was fought in 1799; the last maratha war in 1818. the pindaries were active till 1822.
even after defeating the main contenders for power, the british were too small in number to have a positive type of administration. with the help of the group of indians, they had to contain the aspirations of other indians. it was not an era of peace; it was era of suppression all-round. the petty quarrels between the people were sent for adjudication but crime against state were suppressed mercilessly. the multiple atrocities of police were well known and were not frowned upon by the british because it helped them in maintaining their exalted position.
the independence did not bring any change in the police setup or methodology. with the opening up of the areas, a process which started in the british days and continued afterwards, the scope of piracy and dacoity had declined. but the delay in justice, owing to lethargic system of jurisprudence still has the people at the mercy of police and other miscreants. the mafias have flourished, very often in collusion with powerful politicians. whether these are coalfields of dhanbad or the concrete jungle of mumbai, the mafias are quite powerful. the methods may have changed but the objectives remain the same. the judiciary sees it and does not see it. the delay in the police investigation adds only to the delays in the courts. the situation in civil cases is, if anything, worse. with no one behind bars, neither party (as a matter of fact their lawyers) is in a hurry to reach conclusion. the enforcement of contracts is difficult exercise and very often, the parties try to reach decisions out of court. where the government is involved in these cases, even compromise is frowned upon. this is not the atmosphere for the business to flourish or for the trade to expand.
faced with the situation, we look for the excuses. the greed of the politicians as well as their inexperience in economic matters matter a lot. the entrepreneur, faced with insurmountable hindrances looks for shortcuts, very often extra-legal. fortunately, the license permit quota raj has been abandoned but its after-effects linger on. it is difficult to change the mindset, nurtured over decades, when there is no incentive for doing it. it is a wonder that even in these circumstances some do flourish. the consequence is not an increase in pride to have such enthusiasts but jealousy. the others are on the lookout not for prescriptions of success but for loopholes which can bring adverse notice for their activities.
and so the game goes on. while other nations, having overcome the hiccups, are advancing, india is left behind. we go on paying lip service to ease of business but do not venture to change the system which forbids it. it is difficult to decide who is greater culprit – the politician with eyes only for the next election; the judiciary, ultra conservative and free from any answerability to the society; the bureaucrat who dislikes being disturbed out of his comfort zone; the businessmen who are keen only on increasing their income; the workers, intent upon extracting a little more from the system; or the helpless public bystander who is just forced to look on and is incapable of interfering.
innovation is the key to progress. individually the indians are amongst the brightest which is testified by the indians holding exalted positions in united states organizations and elsewhere. but collectively they lack the zest to discover new routes to success, aspire for new summits to be conquered. it would be considered reactionary to say that a thousand years of habit prohibits initiative for improvement. and so, it follows that only way to progress is to reignite the spirit of enquiry, of competition (in the positive sense), of discovery, of innovation, of experiments, of learning from mistakes, of learning from the failures and successes of others, of giving up traditional ways which inhibit progress, of state taking responsibility for ease of business in a time-based manner. these are not the days of laissez faire. control of quality, of profitability, of ethical practices, of justice are a must. and the most essential is the speed of decision making, the speed of the adjudication, the speed of punishing the culprits (economic as well as criminal), the speed of recognition of talent and their rewards. a change of mindset of the rulers, the judges, the bureaucrats, the police, the workers and also the people at large is essential to achieve these objectives.