Will try bold tax experiment for Delhi: the Arvind Kejriwal interview

Arvind Kejriwal, Delhi’s new chief minister, stormed to power in the national capital in December on an anti-corruption platform.

Last month, Mr Kejriwal barred foreign retailers from setting up shop in Delhi, a blow to  the union government’s efforts to attract overseas investment and revive the economy.  Kejriwal’s government has also offered free water and slashed electricity prices, moves critics have derided as populist and dangerous.

 

He spoke about his economic policies in this interview.

Can you share some of your thoughts on the economy? Do you see the Aam Aadmi Party as a socialist party?

We actually don’t understand all that – socialism, communalism, capitalism, right, left, centre. We are common people, we have our own problems and we want solutions. If someone comes and tells me I have a problem of water, if someone comes and tells me that, hey look, there is a solution in Left, we will be very happy to borrow it from there. Or if someone else comes and says, look, there is a solution in Right, there is a solution in capitalism, we will borrow it from there. We are not wedded to any ideology.

You’re an expert on tax. What do you think…

I think it ought to be simplified to a large extent. It has been made so complex, and in Delhi, we will try some experiment. Today only we had long meetings on can we do some very bold experiments in Delhi as far as taxation is concerned.

Such as?

I can’t disclose right now.

Why not?

Because we haven’t finalised it as yet.

You talk about simplifying tax policy. Will that be in line with the general service tax proposal?

That’s also interesting. That’s also important.

What about BJP talking about abolishing the income tax proposal. Is that a good idea?

No, I don’t think so. Indirect taxes are inflationary. As economy grows, indirect taxes ought to come down. And it’s only the direct taxes which remain the main source of revenue. And that’s the trend of modern developed countries so you can’t abolish income tax.

How do you propose generally in Delhi to finance your proposals such as reducing the cost of power and issuing some free water. At least in the medium term, there will be a government burden on the subsidy, right?

How much is it? The total budget of Delhi government is 40,000 crore rupees ($6.4 billion). The subsidies that I have announced is 242 crore rupees ($38.7 million). Still there is such a hue and cry. I’m told that golf course in Delhi, the cost of that land is, someone told me, is I-don’t-know-how-many-thousand crores of rupees, the land that has been given to golf course. And it has been given to them at 15 lakh rupees ($24,000) a month. So when you subsidize the rich in this country, no one minds that. But when you say that we will provide subsidized electricity to the poor people in the country, or when we say that we’ll provide subsidized water to the poor people, all hell breaks loose.

Do you think the private sector has an important role to play in the Indian economy?

I think at a very broad level the government has no business to be in business. The government should leave business to the private sector. We have to encourage private enterprise and I think India is a country of entrepreneurs. In India, almost every person is a born entrepreneur – a rickshaw-wallah is an entrepreneur, a farmer is an entrepreneur. This entire business and industry is shackled in the rules and regulations – we need to free them from all these rules and regulations. We need to provide them a free environment, honest environment, to do business. If we provide them a good environment, I think India will go ahead leaps and bounds

How are you planning to do that?

All that you need are good intentions. In Delhi for instance, in the last few days we have had meetings on how to simplify the trade in Delhi, on VAT in Delhi, and they are good ideas. So you talk to the people who are facing the problem and they will tell you ‘Sir, this is the problem.’ And you apply your mind and the solutions are there, it is not rocket science. Intentions of the people who are governing the system were wrong till now. If you have honest intentions, the solutions are there.

Your manifesto included not having FDI in retail in Delhi. Do you oppose FDI in retail at the national level?

Firstly, we are not against FDI per se, we are not saying FDI should not be in any sector. I think this is something that the decision has to be taken on a sector-to-sector basis. Can you give me a few examples where FDI in retail has been successful in some countries? In how many countries FDI is there in retail?

I think it depends on your definition of success. And it has become dominant in many, many countries.

Three or four arguments are being given in favour of FDI in retail. One it is said, it would provide huge choices for the consumers. I admit that. Second is that it will provide better prices to the farmers. I dispute that. If you can give me any empirical evidence, this is an evidence that can be taken from various countries. Third, is they’re saying, that on one hand farmers would get better prices, on the other hand, customers would get cheaper goods. If you could give me the evidence of that. My party did a lot of research. In U.S. itself, Wal-Mart is facing so much of resistance, right? It has led to so much of unemployment in many countries. In India, when we are struggling so much – there are a large number of people who throng my office every day and they say ‘please give me a government job’ – people are looking for jobs, people are jobless. We can’t have a model where people end up losing jobs rather than getting jobs.

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