Many notable successes of the first term of the Narendra Modi-led National Democratic Alliance (NDA) government were reforms that reduced the powers of the Union government or its bureaucrats, or which created independent institutions and processes. The goods and services tax (GST), for example, vests the powers to set indirect tax rates with a GST Council that includes the states. The Insolvency and Bankruptcy Code created a process that, hopefully, insulates bankruptcy from political pressures. The monetary policy framework agreed with the Reserve Bank of India enhances the independence of India’s monetary authority and makes it less subservient to political directions. It was generally hoped that the NDA’s emphatic re-election would allow this benign process to continue.
However, judging by some of the actions in its initial months towards seizing greater control of processes and decision-making, it seems the concept of “maximum government” is back once again. For example, the government has introduced amendments to the Right to Information Act, reducing the independence of the Information Commissioners. Earlier their salaries and tenure were fixed by law; now they will be decided by bureaucrats case by case. Replacing a fixed statutory term that offers security of tenure with one where Information Commissioners serve at the pleasure of the government and on terms set by it impinges on institutional autonomy. Another independent institution that has seen its wings clipped is the Airports Economic Regulatory Authority, which has had the number of airports it oversees cut by half — essentially ceding control of tariffs and other regulatory measures to the government for some of India’s most trafficked airports, including those which are most likely to be controversial because of substantial private sector participation.
There have also been enhancements to the government’s coercive authority. New Home Minister Amit Shah steered the passage of a National Investigation Agency Act, which gives the agency extra-territorial powers and allows it to create special courts. Mr Shah specifically defended draconian and illiberal past counter-terror laws during the relevant parliamentary debate. On taxation, there are similar problems. The income-tax department has made certain offences related to the possession of black money “non-compoundable”, which means that paying a fine is no longer an option. Customs officials have also been given vastly extended powers in the Union Budget, including the right to attach bank accounts for six months. Trading false duty scrips has been made a cognizable and non-bailable offence. Customs officers have also been armed with the powers to demand an Aadhaar number and investigate not just violations of Customs law but “any other law for the time being in force” as long as it is “in the interests of protecting revenue” — clearly far too lax a constraint. Added together, this is a clear trend, which the government would do well to recognise and correct.
Ministers have warned industry against violating “the spirit of the law”. This is wise advice, and should be heeded. But the government must also remember that if the letter of the law becomes too harsh, its spirit is invariably weakened. A return to the principles of minimum government and minimal interference is warranted.