Politics Of Policy | Rein In The Gunslingers

Every since he took charge as Prime Minister, Narendra Modi has been tirelessly working to restore the credibility of government as a partner of job creators. By launching the Make in India campaign, Modi has attempted to change the mindset of the bureaucracy towards investors and entrepreneurs. Industrialists are not just profit seeking, selfish entities. They are critical contributors to development, employment and national well-being.

With his focus on start-ups, Modi is forcing the governance systems in the national and state governments to recognize and respect the efforts of new ideas and new ventures. Without sparing rogue companies and willful defaulters, the Modi government is steadily creating a new atmosphere of constructive collaboration between government and business.

Some parts of the government though are still pushing back. Individual officers, departments are using outdated rules and processes to undermine the efforts of Modi.

Two recent developments must be flagged. The tax notice to Vodafone and the forced merger of National Spot Exchange Limited (NSEL) with Financial Technologies India Limited (FTIL). While the Vodafone case is under international arbitration, the NSEL FTIL merger order has been challenged in the Bombay High Court.

Despite assurances by Finance Minister Arun Jaitley, his officers continue to chase Vodafone for disputed tax liabilities. While some officials say that the tax notice was routine, it shows that there is lack of harmony within the departments. Investors are seeking a promise from the government on predictability and consistency in tax policy.

Even more insidious is the decision by the government to force a merger of two private companies. In a surprisingly development, the Ministry of Corporate Affairs (MCA) issued a fresh order for the forced merger of NSEL and FTIL. Under an executive order, the government has forced itself into the boardrooms of two private companies and has superseded them even though the matter is being challenged in the court.

The message being sent to domestic and global investors is that government of India will take charge of private companies if it feels that they have broken the law. This is a dictatorial act that has no place in an ecosystem with strong corporate governance laws.