Every citizen, resident, non-resident, naturalised or otherwise, straight, LGTB, of whatever religion, belief, ethnicity, or non-belief, whether ‘challenged’ or not, born through a natural process or otherwise, has to adhere to the constitution. This is a social contract. The social contract defines our duties, responsibilities and of course, our rights. Hence, it defines Governance. Similarly, it also defines the duties, responsibilities and rights of the institutions. We are supposed to have some ‘independent’ institutions, as defined and protected by the constitution. They are there to protect the citizens of the country, especially the poor, disenfranchised and exploited. That is what we, the lesser mortals, understand as good governance. When we see, understand and interpret this as not happening and when we see these guardians of the constitution not taking ownership and responsibility of their own actions then governance fails. Citizens will follow the norms of what they see and perceive. If a policeman has to bribe to get a ‘favourable’ posting then he cannot be expected to be honest in performance of his duties.
The same holds true for Corporate Governance. Corporates are a sub-set of a larger Venn diagram. If they see the larger public institutions compromising on ethics and morals then they will follow that path.
There is no need to support this with examples from our daily life. This is about ethical governance.
We have always looked at ‘Compliance’ as corporate patriotism. This mostly meant that the corporates paid minimum wages, looked after their employees, paid rightful taxes and followed the law of the land. Then came in Corporate Social Responsibility, moral patriotism. The corporates were expected to go beyond the organisation and contribute directly to the society, document, prove it and stand scrutiny. The Constitutionally set up bodies are not open to such scrutiny. The corporates are expected to do what these institutions were set up to do. Now the new mantra is economic patriotism. Next in line will now be financial patriotism. With the Government treasury starved of funds, the corporates would be expected to bail out the country, with higher taxes, gift tax, estate duty, wealth tax, capital gain tax, equalisation levies and monetization of refunds. Next in line would be Manufacturing Patriotism. India’s dream to snatch business from China!
Should constitutional responsibility be abrogated to corporates in the garb of forced patriotism?
ECONOMIC DISRUPTION
The country is facing a severe economic downturn, by whatever name you would like to call it. Much before we went into a lockdown, there were unacknowledged signs of rising unemployment, industry slowdown, lack of demand, lower credit off-take, coupled with the collapse of banks and the NBFC sector, etc. Even the lower petroleum prices could not rescue this. The government in its wisdom raided the family treasure, the RBI declared dividends, the PSU’s were bled and the deficit limit was compromised. The intention was to revive the economy. Then COVID hit us.
I am not an economist neither am I a soothsayer, just a concerned citizen of the country.
With the lockdown in place, the government receipts from GST (minimum sales) has crashed, there being no income, hence, collection from Income Tax will be minimum, the collapse of real estate and mutual funds means lower capital gain taxes, local state taxes on stamp duties, alcohol, have also come down. The government has very little resources to invest or even meet its regular obligations, like the payment of salaries.
RBI has been buying USD and we now have reserves of over USD 500 Billion, but what we are not being told is that India’s external borrowings have exceeded USD 500 Billion. The rupee is being protected from getting battered. If the rupee is allowed to slide then the exports become profitable and the imports become expensive. I am sure there is a method to this madness.
So what options does the government have? Raise taxes? Introduce new taxes? Aggressively follow up on pending demands? Chase the defaulting corporates? There is a fear that Wealth Tax, Estate Duty, Gift Tax might be reintroduced. We could also see some new Cess.
The Government in its wisdom has started collecting taxes by raising taxes on petrol and diesel. This will lead to higher transportation charges and hence, inflation.
The Government is also very keen on bringing back the concept of the Jan-Dec financial year. This will have a major impact on Corporates. Is this the right time to do this?
The Government has to ensure a well thought out long-term economic policy and not a knee jerk reaction. With GDP numbers globally going south, attracting investments through friendly and easily understood long-term policies, which are not retrospectively driven harsh measures, is very important. It is not just actual action but also the perception that needs to be amplified. This will help India meet its China dream as well.
Are we professionally, intellectually, ethically and morally ready for that change?
