An ‘August’ Growth Formula for India's Economy

The Government has received a drubbing by former governors on its plans to raise overseas debt by the issue of sovereign bonds. Yet, it still needs to kickstart infrastructure spending. As stated earlier in this column, here are various ways of achieving the same goal:

Save Rs 1.85 trillion by not buying land

Don’t buy land for infrastructure projects. Instead, provide a stake to the owner with a minimum rental guarantee (that takes care of ongoing sustainability) and an alternate marginal land parcel (for occupation). According to recent estimates, the capex for the land alone for road projects is Rs 1.85 trillion.

Save money allocated for PMAY (affordable housing)

Use government land for BOT affordable housing projects where builders collect rent to offset their investment, akin to a toll offsetting the capex on a road project. (There has been a proposal of this kind of PPP, as announced by the Minister of Housing & Urban Affairs 18 months ago. Even the new rental act can fast forward this.)

But the Government also needs to raise animal spirits in the economy. So what could be the kick-starter for demand? So far, the Government and experts have not suggested a single demand-creating scheme. Here is one that is sure to jumpstart demand:

Raise GST exemption limit to Rs 10 million from Rs 4 million

Raise the minimum levels for GST for taxes but keep compliance mandatory within an easier time framework. This will soothe the informal economy, which is gasping for oxygen.

Release Rs 3.75 trillion from the dispute table

Amnesty scheme for erstwhile VAT and service tax debottlenecking to receive top priority with a Joint Secretary-level person responsible for running the campaign and target.

Raise the levels of income-tax returns exempted from scrutiny

Fast-forward PSU divestment

The PSUs will, in turn, begin using their funds and resources more efficiently and dynamically. PSUs will invest in capex and encourage the private sector to follow suit.

Clear stalled projects with a deadline

Auction the projects stuck for want of funds with clear title transfers and immunity to buyers from past deeds. (So far, JSW Group is treading cautiously in the Bhushan Power case as it has not been clearly provided immunity.)

But where to invest the funds?

First, incomplete projects must receive full attention where investments have taken place but returns are stuck owing to red tape. Change the contractor, transfer the administrator, and use the power of the law where small patches of yet-to-be acquired land are stalling completion. (Take, for instance, incomplete dam projects in Maharashtra where farmer suicides are still a flaming issue.)

Then, improve sentiments

No appeals should be filed by government departments against judgements awarded by official arbitrators. This defeats justice and clogs up the legal system.

Accountability of officers issuing the refund of taxes needs to be stepped up. (Exporters are a harried lot, among others.)

Water and waste management projects seek the lowest capex and yet are the least among all infrastructure projects, even within the smart cities mission. They require a special thrust and deserve tax incentives.

City municipalities must relax entertainment taxes on restaurants and hotels that can spur job growth as well; increased spending will boost revenues and bring smiles to cities.

If the campaign to penalise black money was carried out nationally with such aplomb, why not a campaign to incentivise honest taxpayers and honest business houses? Why not offer a bonus to honesty? Currently, it appears that the honest taxpayer is always burdened with loads of compliances and subject to harassment. Introduce a loyalty point credit system for those who comply. Let those points accumulate to gain certain advantages that offer prestige and esteem. Let them be treated with a level of dignity by government organisations and bureaucracy just as first-class passengers are treated by an airline. It is time to bring back the class system where the divider will be honesty, not wealth.