Pitroda has done enough damage already

So, Sam Pitroda, Rajiv Gandhi’s old buddy, thinks that inheritance tax may not be a bad idea.

After all, they have it in America, he says.

 

I was watching a video of Pitroda’s interview to Money Control where he began well by trying to debunk the idea that a future Congress government would rip the shirt off your back, tear your wife's mangalsutra off her neck and give all of it away to less advantaged people. (Or, judging by the BJP’s imaginative election claims, they would give it to the minorities.)

 

   All went well in the interview till Pitroda explained that while it would not rip your shirt off, the Congress would consider introducing an inheritance tax in which over half of your wealth would go to the government and not to your heirs.  This was not a bad idea, Pitroda said, America did it. (It doesn’t but that’s another story.)

 

   Now, this is all conjecture but I am guessing that Pitroda, the only Gujarati (apart from the late Ahmed Patel) to have had much influence with the Gandhis, had been put up to target the Gujaratis whose wealth had risen dramatically in the Modi years. It’s an issue that Rahul Gandhi and various other Congress leaders have repeatedly hammered away at. The nation’s wealth is being diverted to a few individuals, Rahul keeps suggesting. We will stop this and help India’s poor.

 

   Yes, okay. But how will Rahul and his party do this?

 

   At first Pitroda sounded reasonable enough in his Money Control interview. He spoke of restrictions on monopolies and regulations that would prevent a few groups from owning everything. But then, he suddenly pulled the inheritance tax idea out of his hat.

 

   Pitroda has been around for a long time and is generally regarded as a thoughtful and serious man whose finest moment may have come when he built STD booths during the Rajiv Gandhi years. But, I suspect that with the passing of time, he has forgotten many of the things that happened during the Rajiv government.

 

   One of them was the abolition of inheritance tax (or ‘estate duty’). The Rajiv Gandhi government had done the sums and discovered that it cost more to collect inheritance tax than the total receipts from the tax. The law was a holdover from Indira Gandhi’s Garibi Hatao days, and as Rajiv worked to erase memories of that socialist period, he recognised that inheritance tax served no purpose.

 

So why is Pitroda bringing it up again? Perhaps he was too busy building STD booths in those years to notice what Rajiv had decided. Perhaps, with the passing of years, he has just forgotten what happened in the 1980s.

 

   For whatever reason, Pitroda’s reference to the revival of inheritance tax came as a boon to the BJP. The Prime Minister who has recently warned about the Congress’s desire to seize the wealth of middle class Indians and to distribute to its vote-bank must have been delighted to have this confirmation from a major Congress figure who has known Rahul since he was a child. And the other Gujaratis who were the targets of Pitroda’s surprising policy statement must have been relieved that the idea was now out in the open so it could be shot down. (Which it was when the Congress dissociated itself from Pitroda’s remarks.)

 

   In current Indian politics, there are two big conflicts that politicians return to again and again. The first is caste. It dominated Indian politics for decades but then it ceased to be a major factor for nearly two decades. Indira Gandhi won her massive 1971 mandate without any appeal to castes and when the Janata party defeated her in 1977, caste was not a major factor at the polls. Nor was it in 1980 when Mrs. Gandhi returned to office. And Rajiv Gandhi’s massive 1984 victory cut across caste lines.

 

   But caste came back to haunt Indian politics in 1990 when VP Singh notified the Mandal Commission recommendations and unleashed a wave of backward caste politicisation that ensured that caste would become a major factor at Indian elections in the future. Even though VP Singh lost the General Election that followed and slowly slipped into obscurity, he was able to brag: “I may have lost but my agenda won.”

 

"Because the Congress cannot use religion to counter the BJP, it has fallen back on caste and class."

   Legend has it that LK Advani set off on his Rath Yatra and increased the focus on the Ram Temple issue in 1990 because he was concerned that VP Singh’s emphasis on caste might damage the BJP’s prospects in North India.

 

   So caste and religion became the two prime determinants of Indian voting behaviour.

 

   But before that, there had also been class. When Indira Gandhi split the Congress in 1969 and pretended to be a socialist, she framed her rhetoric in class terms. She was going to protect India’s poor from the rich people who had gained control of our resources, she proclaimed. And once elected, she continued with ill-advised nationalisations and punitive tax rates.

 

   In today’s political scene, shrewd leaders pick up elements of these traditional formulas and wage their battles. Part of the BJP’s appeal is religion (just listen to the speeches the Prime Minister has recently been making on the campaign trail) but the electoral deals and alliances Amit Shah has worked out have always have a strong caste component.

 

   When the Congress beat the BJP in 2004, it went back to the Indira Gandhi idea of class inequalities. But Sonia Gandhi did not threaten to take away anyone’s money or wealth. Instead she appealed to those at the margins of our society who had not gained from liberalisation. The launch of such welfare schemes as NREGA which transferred money to the poor without using the market was her way of reducing inequality.

 

   It is a mark of the shrewdness of Narendra Modi that he has incorporated most of those welfare schemes into his government’s platform so successfully that the BJP is able to deny, straight-faced, that they were first launched by the Congress.

 

   Because the Congress cannot use religion to counter the BJP, it has fallen back on caste and class. No national party has called for a caste census as vociferously as the Congress. And the attacks on those who have got rich in the Modi era are vaguely reminiscent of Indira Gandhi’s rhetoric.

 

   These are several problems with the Congress approach. It might earn brownie points and a few cheers at rallies by attacking the Ambanis and the Adanis. But it forgets that the nature of wealth has changed in India since the days of Indira Gandhi.

 

   In that era, wealth was the preserve of a traditional bania class. Now, it is much more widely distributed. The tech revolution and the growth of the Indian economy have enriched people who have nothing in common with the old style industrialists that Mrs. Gandhi attacked. The middle class has also worked hard for its money - and it is now much, much larger than it was in Indira Gandhi’s time.

 

   When you talk about taking away the wealth of these people and of ensuring that they can’t pass it on to their children because it will be seized by the government as inheritance tax, you set off alarm bells. There are other ways of dealing with fat cats who have profited from this regime, so why use a blunderbuss when a targeted campaign would work better?

 

   I am not sure the Congress gets this. Sam Pitroda made his money in Chicago. Rahul Gandhi has never held a steady job in India. (Contrast this with Rajiv who was aware of how much of his Indian Airlines salary went on taxes and Provident Fund.) The leadership of the Congress has no understanding of the new middle class and its priorities.

 

   I am sure that Pitroda had the Congress’s best interests at heart. But the best way for him to help the party is to take some strong, sticky tape, paste it all over his mouth and then spend the rest of the campaign in silence.

 

   He has done enough damage already.