‘Suit-boot ki sarkar’ taunt made tough for govt to undertake corporate tax reform, says Arvind Subramanian

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Updated: Oct 12, 2019 12:49 PM

"I don’t want to go into all the personal angles here. But looking back I realise that the taunt of 'suit, boot ki sarkar', that the government was vulnerable to, also made it difficult to undertake the corporate tax reform," said Subramanian.

“New welfarism that burnishes the pro-poor credentials that then you acquire political capital to do the more difficult reforms like corporate tax reform,” he said.

While the corporate tax rate cut, announced by the Finance minister Nirmala Sitharaman in September this year, was actually thought about four to five years back by the NDA 1 government and then dismissed, the ‘suit-boot ki sarkar’ jibe also made it tough for the government to undertake the corporate tax reform, said Arvind Subramanian, former Chief Economic Adviser and senior fellow at the Washington-based Peterson Institute for International Economics. Subramanian was speaking at the O P Jindal Distinguished Lectures at the Watson Institute for International and Public Affairs, Brown University. Former Congress President Rahul Gandhi had mocked the Narendra Modi government as a “suit-boot” government in October 2014.

Subramanian added that this “new welfarism that burnishes the pro-poor credentials that then you acquire political capital to do the more difficult reforms like corporate tax reform. There is a deeper thing going on which we can’t dismiss so easily and the corporate tax reform is an example of that.”

Calling UPA-2 as paralysis and Modi-1 as hyperactivity with a vision, Subramanian said that this vision that offered people essential goods and services including bank accounts, toilets, cooking gas etc., must be acknowledged even as other reforms might had implementation challenges but they didn’t lack in vision. 

Also read: Government to issue new ration cards only after bogus ones are eliminated

“New Modi welfarism is public provision of essential goods and services: cooking gas, toilets, banks accounts, power, housing and medical insurance and now water. It is vision…political strategizing plus energetic implementation and follow-up, must be acknowledged,” he said in his role as commentator at the lecture series ‘India’s Economy: How Did We Get Here and What Can be Done?’. While for the Insolvency and Bankruptcy Code it’s proving to be insufficient, however, he said that the original idea cannot be faulted, adding that “even demonetisation cannot be accused of lack of vision.”

However, Raghuram Rajan, former RBI Governor and Professor of finance at Chicago Booth School disagreed with Subramanian’s claim of reforms backed by vision. Rajan said that it is “strange to call demonetisation as something with vision,” and argued that whether there was a coherent vision. “Of course, everything has a vision behind it but the question is: is it a coherent vision? Is it a vision that takes us forward? Unfortunately, I disagree with you on it.”

Rajan later stressed on the reduced investments in India compared to its peers being a great area of concern while the country is required to boost its growth. He referred to the study on GDP growth by Subramanian that hinted at a mis-measured growth and said that India had substantial investment, credit growth and rise in exports and imports before 2011 however after that “what we have seen is everything has gone down except the GDP numbers.”

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