Modi Cut India’s Taxes, Corruption, and Regulations

(p. B1) MUMBAI, India — A jeans maker saw his delivery costs cut by half when the highway police stopped asking for bribes. An aluminum wire factory faced only three inspectors rather than 12 to keep its licenses. Big companies like Corning, the American fiber-optic cable business, found they could wield a new bankruptcy law to demand that customers pay overdue bills.

Prime Minister Narendra Modi promised nearly five years ago to open India for business. Fitfully and sometimes painfully, his government has streamlined regulations, winnowed a famously antiquated bureaucracy and tackled corruption and tax evasion.

. . .

(p. B5) Mehta Creation, a jeans maker in a dilapidated concrete building in the northern outskirts, paid a welter of taxes until two years ago. That included the dreaded octroi, a British import from medieval times that allowed states and some cities to collect taxes whenever goods crossed a boundary.

Mehta Creation’s budget was contorted by corruption. To avoid the octroi, which could triple the cost of a delivery and add delays, Mehta paid drivers about $5 for each parcel of jeans and then reimbursed them up to $6 per parcel to bribe the local police at every border, said Dhiren Sharma, the company’s chief operating officer.

Mehta’s costs dropped after the government abolished 17 taxes, including the octroi, two years ago and established instead a national value-added tax on most business activity.

. . .

Next door to Mehta, seven employees of Shakti Industries work beneath a large hook holding a huge roll of aluminum cord. Daily, they thin the cord into wire and flex it around spools to sell to jewelry makers. Before Mr. Modi was elected, the tiny shop was visited by regulators from a dozen government agencies, with many demanding bribes, said Vipul S. Kamani, the owner.

Now, just three agencies are involved, he said. Licenses can be issued mostly online. A government computer generates a random inspection cycle, making it harder for inspectors to demand regular bribes. Mr. Kamani said he was saving money and “saving a lot of time, too.”

Changes seem to have touched most businesses no matter the industry or service. A restaurateur described how, six years ago, he needed 32 regulators to sign off on a new eatery. Even a signboard had to be licensed. Each approval required a bribe, the restaurant owner said. He calculated that he would need to pay $1,200 per seat in bribes, a fortune in a neighborhood where meals usually cost $6.

The restaurateur waited until last year to open and paid far lower bribes — about $450 per seat — because the number of regulators had dropped to 14. Next year, he expects the number of regulators, and bribes, to fall sharply again. He asked for anonymity to avoid retaliation by the authorities.

For the full story, see:

Keith Bradsher. “India’s Voters Mull Reforms.” The New York Times (Wednesday, May 14, 2019): B1 & B5.

(Note: ellipses added.)

(Note: the online version of the story has the date May 14, 2019, and has the title “Modi Cut India’s Red Tape. Now He Hopes to Win Votes for His Work.” The online version says that the New York Edition of the print version had the title “The Reformer’s Big Test.” My National Edition of the print version had the title “India’s Voters Mull Reforms.”)

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