It is interesting to see the enthusiasm in the equity markets in the last couple of weeks, caused primarily by the inflow of foreign institutional investor (FII) money. Those in the know explain that in the anxiety caused by the announcements of bringing back money stashed by Indians overseas, some funds are already entering the financial markets through FIIs. Good for us, of course. But this also illustrates how easy it is to keep money overseas and to bring it in and take it out, and how difficult the task of locating it and bringing it to account is going to be. Things are easier now compared with 2001, after the agreements on financial intelligence units, as international banks are prepared to share account-holder information. Earlier, it was necessary to prove that there was an investigation against the person and that there was sufficient proof that the accounts represented illegal money: Since last year, there are several agreements that have enabled sharing of information on a much easier basis.
This is, however, useful only if accounts are in individual names. If they are in the names of entities or trusts, with the beneficiary being another trust in another haven, investing as FII through a developed country such as France (easily possible), then you have a problem in identifying the people and bringing back the money.
After all, those who have parked the money overseas are fully conscious that they will be discovered one day, and would be hard at work now covering their tracks. I think it is important that there be a fine balance between incentive and punishment if we are to make this happen.
It is important that there should be some reaching out to these account holders, through an amnesty scheme or similar measures. At the same time, there should be exemplary punishment in a few cases, to act as a deterrent for others. It is clear from the public support for this idea that, as in the rest of the world, there is resentment against those who have got rich very quickly, but this is a matter that has to be handled with finesse and maturity. Perhaps we should have a minister just for this. Meanwhile, if the Left or the Bharatiya Janata Party are in government, we can expect large fund inflows in the short run—perhaps being short on the dollar under these assumptions may not be a bad idea.
And this leads to the second thought. This time around, it is evident that the discerning public is clear about what it expects from the government. The bringing back of money parked overseas by Indians and Indian entities is one such initiative.
There are others as well.
There is a positive image of the performance of ministries, particularly the non-Congress ministries. The railways has come in for universal praise, as well as rural development, civil aviation and telecommunications. The ministry of corporate affairs has modernized itself in the last five years. The performance of governments in Madhya Pradesh, Chhattisgarh, and Bihar has shown that people are eager to embrace the gains of development.
At the same time, there is concern over the uneven performance of ministries such as finance, home, power, coal and mines. There is a feeling that a lot of opportunities were lost, and that we could have been better off. The more people I talk to, the more people tell me that they hope they will get a good minister who will deal with terrorism, power, agriculture, education and with infrastructure and urban transportation.
The average person is less concerned about the esoterics of monetary policy and fiscal stimuli, and more about what the government can reasonably be expected to do—and is articulating these thoughts in fairly clear terms.
A lot of questions I am asked centre around who will be the minister in charge of the railways, or of power etc., not who will be the prime minister. The last five years have shown that the “performing” ministries have done so without help or hindrance from the Prime Minister’s Office: It is clear that people will be happy if there are enough performers in the cabinet, and not worry about their politics.
The low turnout at the polls is perhaps indicative of low expectations of overall governance, whatever the combination—at the same time, having seen outstanding performance in some sectors in the last five years, the public is eager to see more of the same.
For example, many would be happy to see the railway ministry in the same hands as before. In the same breath, many would like to see change in ministries that have recorded poor performance: national highways, for example.
For me this is a positive sign that people are recognizing performance and individuals. The “stable” government that people want could well be that with ministers from whom performance can be expected.
S. Narayan is a former finance secretary and economic adviser to the prime minister. Comments are welcome at firstname.lastname@example.org