The South Asian Association for Regional Cooperation (SAARC) was established in the 1980s as the South Asian region’s inter-governmental organisation. Its members were India, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka. In 2007, Afghanistan joined as a full member of the SAARC. The SAARC Charter has explained the rationale of SAARC as follows: “In an increasingly interdependent world, the objectives of peace, freedom, social justice and economic prosperity are best achieved in the South Asian region by fostering mutual understanding, good neighbourly relations and meaningful cooperation among the Member States.” Basically, the objective behind formation of SAARC was to draw inspiration from the success of other similar regional bodies such as the European Union in Europe and the ASEAN in South East Asia.
20% of the global population is residing in South Asia . This region is required to be pushed for growth and increase its share in global GDP, from roughly 6.5% in 2014. India counts for about 80% of GDP and population of South Asia. India has shown keen interest in harnessing the natural and human resources for economic development of the regions by taking international initiatives in establishing the BRICS Bank, concept of trans-Himalayan growth axis, road, rail and in the formation of networks to strengthen SAARC regional economic cooperation. It has pro-vided vision and leadership for growth. India can contribute to create atmosphere for structural changes and development of economic and social institutions required for such growth throughout the region. The actions for liberalization and economic reforms have been discussed and expected to be implemented in near future.
Prime Minister Narendra Modi and his team’s reforms and efforts have taken India’s ranking on
the Ease of Doing Business (EODB) parameter from 142 in 2014, to 130 in 2016 and now to 100 this. Modi ji has one mission, one mantra - “To Reform, Perform, Transform.”
A good ranking in the EODB would attract foreign investors. Generally, the World Bank’s focus is on ease of doing business for foreign investors. For the Nation’s benefit, the ease of doing business for domestic investors is very important. The share of foreign investment is hardly 6.4% of gross capital formation and only 2.6% of GDP. Immediate steps need to be taken to improve the EODB for start-ups and medium and small entrepreneurs. It might seem easy, but in reality, doing business is like climbing Mt. Everest. India needs to compel political leaders, officials and all who are concerned to discharge their duties in time with devotion and do so fearlessly. There are vague regulations and obsolete acts. Rules and regulations are changing often, ignoring the loss of capital investment and earnings. There is a wide gap between implementation and reforms on paper. A single window clearance has many pitfalls and is often under the grip of red tapism and dishonesty. However, India’s performance has been impressive. It is worth noting that the World Bank’s EODB survey is based on the ground reality in two chosen cities of India. It therefore does not cover the economic condition in the rest of the country. The reality of EODB might be quite different than what is being projected in the ranking. On enforcing contracts, India ranks 164. Similarly, on starting a business India ranks 156, on registration of a property India ranks 154, on construction permission it ranks 181.
The central government will soon carry out
public perception surveys to evaluate reforms related to the ease of doing business in each state. The Nation must have one rule and regulation. States are having different rates of registration of
property, power, water, property charges, thus creating regional imbalance.
Measures like Jan Dhan Yojna and Mudra scheme have helped the poor, especially in rural areas.
Jan Dhan Yojna has now mobilised more than `65,000 crore for the poor, particularly in the villages. The Mudra scheme is providing loans
to women entrepreneurs.
The recapitalisation plan of banks is aimed at providing adequate capital so that the banks can resume lending. Some economists feel that it may cause some stress to economy. It should have been done much earlier.
World is overflowing with liquidity. Bulls are driving stock markets globally. Major markets have reported higher earnings per share. The situation is not much different in India too. There is abundant liquidity, which is chasing the stock market and fuelling the prices of stocks even when fundamentals of all stocks may not match their valuations. IPOs are being oversubscribed. Government could have enlarged the equity capital base of banks, which would have reduced the government’s ownership in the banks.
Over 1200 products and services are under ambit of GST having tax slabs of 5, 12, 18, 28. People say that the GST should have been introduced with 300 to 400 items with two slabs 5% and 28%. 28% is sin tax. It should have been on pan masala, alcohol, tobacco, cigars, cigarettes, imported dresses, etc. Now government is considering to give relief to the woes of people. GST on oil cakes has hiked the prices, unable to feed milch cows who are considered as cow mother. Apparent conviction of government admit that design of GST is not perfect. It has not facilitated business in order to secure revenue and willing compliance. Sweet potatoes, food for poor in rural areas was having 5% GST, now nil. Diabetic food which was not only for rich also having GST, compliance are also going to be made easy. 28% GST is now on 50 items instead of 230 items. Items like detergents, razor blades, many more are for common people. But these were having sin tax of 28%, now 18% which should be 5%.
History tells us that revolution starts from the poor middle class people when too much burden is put on them. The GST rates have caused a lot of discontentment. The government has realised the pain of the public and has pro-actively slashed rates across the board including for a range of daily items of consumption, relaxed penalties and tweaked rules to make it easier for businesses, especially small and medium enterprises, to comply. The biggest rationalisation was the decision to cut the tax rate on 178 items from 28% to 18%, leaving only 50 items in the highest tax slab and offering major relief to consumers and businesses.
Bharat Mata’s children have a democratic government. Let us hope that a healthy process of debate and discussion between government, public, business and all stakeholders will pave the way for a vibrant GST regime, which will yield long-term benefits for
Dr. H.P. Kanoria
Editor in chief
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