During a visit to Rashtrapati Bhavan with a TiE delegation several years ago I was surprized to hear President Pranab Mukherjea wax poetic about entrepreneurial revolution underway in India. A lifelong socialist, he was finance minsiter several times and had a reputation for being very anti-business. As a matter of fact, he was the man behind the bank nationalization in the early days of Mrs. Gandhi.
I was present at the National Press Club meeting in Washington DC in 2004/2005 when he was asked about the retroactive change of tax laws to go after Vodafone after Supreme Court of India had ruled against the Government. He was asked why would anybody invest in India if the rules of the games can be changed retroactively, especially after the investment has been made? He got visibily upset, his face turned red, his voice quivered and he said that India would rather do without FDI. We would eat lizards before we bowed to international investors. We are not a colony any more, he added. It was strange coming from the Finance Minister who was in Washington looking for FDI.
At the meeting at Rashtrapati Bhavan, I asked him about it. Why was it necessary to change laws retroactively? He told us that he was told by his beurocrats that it was a 75,000 Crore decision if the law was not amended. So how much was collected in additional taxes? Zilch, he said. Was he sorry? Yes, he was very sorry. He went on to say that now he understands more about the entrepreneurs and wealth and job creation.
This is the tragedy of India. All the socialist politicians talk about being pro-people while enacting anti-people laws. After the Vodaphone decision, FDI dropped almost 90%. It was a decade before it started to recover.