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Why Rahul Gandhi needs to be careful

By Bhupesh Bhandari
Last updated on: May 08, 2015 11:45 IST
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I don’t know if Rahul Gandhi, back after his 58-day break, has pushed the Narendra Modi government on the back foot, but I do know that he has slammed the land acquisition bill for being anti-farmer and pro-business, accused the government of carving out the internet and handing it over to corporations (whatever it means) and realised that builders are out to cheat home buyers. He has accused Modi of running a “suit-boot ki sarkar”.

Gandhi’s line of attack is very clear; he wants to position himself as the leader of the common man. In the bargain, business has become the villain in the pack, the source of all evil. Those who have followed his speeches in the last few years will tell you this is not a new cause he has picked up: during his campaign for last year’s general election, too, he had taken a similar line, but people didn’t buy it and the Congress suffered its worst electoral defeat ever. Thankfully, the “sab businessmen chor hain” rhetoric doesn’t work any longer.

Now, it’s yesterday once more. If Gandhi’s fight is with business per se, I suggest he should take a refresher course in economics. India has reached a stage where the business community cannot be wished away. Fortunately, the common man has come to realise this. For inclusive growth, it is important that jobs should be created. And who will do that? It is business that will do that, including builders. The landless poor cannot be absorbed in the services sector: the burden has to be borne by manufacturing and construction. By trying to incite public anger against business, Gandhi is not helping matters.

If Gandhi wants to highlight cronyism, then it’s a different matter. It is a scourge and has no place in a modern country. But cronyism of the worst order one saw during the rule of the United Progressive Alliance -- first in the allotment of spectrum and then in the allocation of coal mines. It was under the UPA rule that Kingfisher Airlines was given more and more accommodation by the public-sector banks even though it had gone into a tailspin. For Gandhi to now turn around and accuse the Modi government of cronyism is a little strange.

So far as the builders and their shenanigans are concerned, there is no denying that the sector desperately needs a regulator. When Gandhi says that the real estate regulator bill proposed by the UPA has been tweaked to favour builders, he is probably referring to the clause that 50 per cent of the money collected for a project has to be kept in an escrow account and can, therefore, not be used for any other purpose, against 70

per cent recommended in the UPA bill. Given the high value of land in the country, 50 per cent is sufficient safeguard, any expert will tell you. Anything more will starve the sector of growth capital. The idea is to help the sector grow, not strangulate it.

But there are two other changes in the new bill: one, commercial real estate has been included in it; and two, builders are forbidden from changing the design and structure of the project midway without the consent of two-thirds of the buyers. The two will help restore investor confidence. Does this amount to a sellout to the builder lobby? I don’t think so.

Every state, Gandhi ought to know, has its own real estate laws -- that’s why you don’t have countrywide builders in India, most of them are happy to work around one city. In almost all states, the laws have deliberately been kept complex and opaque so that builders have no option but to pay speed money for the various clearances. Since he has paid for the land, which is invariably a large sum of money, the builder cannot allow it to stay undeveloped for long. He has no option but to grease all the palms to get his project off the drawing board.

This speed money then makes builders overbuild, cut corners and dupe buyers. Worried so much as he is about middle-income home buyers, Mr Gandhi should first nudge the Congress governments in various states to clean up the mess. A regulator serves no purpose unless the laws are made transparent and objective.

From what I understand, the Modi government is paranoid about being accused of cronyism -- to the extent that it could become counter-productive. (One reason why some businessmen say they have lost confidence in Modi is that they have no access to him.) It was in full display recently when Modi said that the country can’t have two sets of law: one for Mukesh Ambani and the other for the common man. Also, the kind of crackdown one saw on corporate espionage, where some of the country’s top business houses were allegedly found snooping into government files illegally, has never happened before. In earlier regimes, middlemen had unlimited access to the corridors of power. Not any longer. Is that aiding cronyism? I seriously don’t know.

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Bhupesh Bhandari
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