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Dear Readers,

Bharat: Prime Minister Modi-ji, along with his ministerial team and bureaucrats, have been taking all possible steps to boost the sharp decline in economic growth aggravated by various factors and much more by impact of Covid-19. He is taking views of wealth creators and generators – chiefs of large, medium and small enterprises and people at large. All sectors have been in distress. RBI has extended 6-month for stressed assets, but various stakeholders have approached RBI with the request for allowing a one-time restructuring with moratorium for one to three years. In tranches, several schemes for release of funds to various sectors have been announced. However, with most schemes routed through banks and the banks themselves becoming extremely averse to lending, the release of funds has not quite materialised.

PM Modiji’s ‘Atmanirbhar Bharat Abhiyan’ is a grand vision to lead Bharat out of the grim economic scenario. He has outlined a ‘4L’ strategy – land, labour, liquidity and laws. Despite Covid-19’s impact on Bharat, several MNCs are interested to relocate their manufacturing units from China to India. Archaic legislations which don’t meet the nation’s changing requirements need to be changed to make India a favoured investment destination.

Land: Land use conversion is very complicated, involves lengthy procedures due to delays and is expensive because of high charges of conversion. Being subject of the State List, state must take positive steps benefitting farmers and investors. Centre should give suitable incentives. Just like the Aadhar database comprehensively captures the consolidated details of national human resources, India needs a proper digital documentation of its land records so that each parcel of land can be mapped to its rightful owner.

Cost of registration of land is very high. It is over 10-12% along with hurdles. It needs to be brought under GST with rate of 5%. This will simplify taxation implications in case of sale of land. It should be VAT-able to enable to tax on value added portion of land increasing the government’s revenue. There will be greater transparency and proper maintenance of records.

Labour: Labour laws and rules are also complicated. There are several instances in India where labour problems have led to assets becoming stressed. The reasons range from militancy of unions and multi unions in a unit, high wages, less productivity, etc. Labour laws must be reviewed and simplified. Centre has already tried to compile 44 such laws into 4 draft labour codes. Labour reforms need to be embraced by all states. Uniformity in laws and rules is required. Hire and fire policy need to be linked to changing scenario and survival of the unit.

Proper compensation is to be incorporated. An ecosystem of skill up gradation for workers should be an integral part of the labour reforms.

Liquidity: Stringent debt norms like high rate of interest, penal interest, compounding interest, banks’ reluctance to lend, NBFCs’ inability to lend because of lack of access to funds and many other external factors like delays in payments from customers (both government agencies and private sector) have led to stressed assets increasing in the corporate accounts. One-time restructuring and simple rate of interest of 8% to 9% along with working fund is urgently required. The 6-month moratorium that RBI has allowed the financial institutions to extend to stressed borrowers can only provide some temporary relief. Due to the impact of Covid-19 and RBI’s direction to NBFCs to extend three month moratorium on term loans repayment by their borrowers without allowing their lenders to do the same has created greatly assets and liabilities mismatch. In the continuing abnormal situation, RBI should withdraw its directives to make provisions for stressed loans as a pragmatic approach to stop an avalanche of non-performing assets (NPAs).

Laws: Cumbersome laws, rules and regulations with criminalisation over sector, so enforced since last a decade have almost killed the spirit of entrepreneurship. Criminal aspect of laws, which were enacted in company laws, taxation, has withdrawn partly.

NBFCs: Some NBFCs have been engaged in financing of equipment required for infrastructure, realty sectors, Greenfield and brownfield projects and mining. Government has announced to open coal mining to private sector. Infrastructure creation and mining are labour intensive activities. As NBFCs play a critical role in providing finance to the players in these activities, they need access to funds from banks/ financial institutions. NBFCs being borrowers from banks, they too need a one-time restructuring window. If delayed or not allowed, stressed assets will increase. Growth of mining and infrastructure will be affected immensely.

All outstanding payments by central and state governments and PSU undertakings should be cleared at the earliest. Tax refunds too need to be done expeditiously.

Reforms: The World Bank has ranked India for ‘Ease of Doing Business’ at 63. In order to move further up in the rankings:

i)Government should decriminalise all the criminal laws enacted in few years in Corporate Law, Taxation laws, etc.

ii)Government should create a ‘stressed/recession/emergency reserve’ to which 10 to 20% of the profit is transferred from the net profit without tax element by companies. The fund can be invested suitably in Government bonds which can be encashed in times of recession and stress due to external factors.

iii)GST – One Nation and One Tax principle should be adopted by removing CGST and SGST. At present, consuming states are benefitted and not manufacturing states. Tax collection can be shared like Income Tax.

iv)Bharat needs investments to the tune of 38-40% of GDP to maintain an annual growth rate of 7%-8%. Focus on social sectors like healthcare and education and revamping rural infrastructure to support agriculture and allied activities like horticulture, pisciculture and animal husbandry can create a solid foundation for the economy.

v)PSU banks could have easily mobilised capital from market by issue of rights shares or issue fresh equity in large quantity at discounted price. Reliance could mobilise approximately ` 53000 crore from the market. There is enough liquidity in market chasing few shares, which are overvalued.

vi)Due to high multiple tax rates, wealth creators have little incentive to reinvest and/or use to revive business and/or modernise their existing plants.

vii)The government need not be excessively worried about the inflation and fiscal deficit in the current situation. Bharat has large stock of foodgrains. By selling more than 50,000 tonne of grains at lower prices, it can raise substantial funds and also keep food inflation under control. Giving free 5 kg grains and 1 kg pulse to a poor individual per month and extending the scheme to end of November has been a good move and is expected to benefit 80 crore Indians. The government has current account surplus and comfortable forex reserves. It can even go for printing currency. Even the nobel Laureate Abhijit Binayak Banerjee, had asked the Modi Government to print more and more currency notes to solve the present economic crisis. 

Since decades, China has been indulging in territorial expansion. Despite friendly talks, China has been indulging in attacks on border areas. Recently, China tried to grab land in Ladakh by killing Bharat’s brave sons- our soldiers. Prime Minister Modi has warned China in stern language. Citing security reasons, the government has banned 59 Chinese apps such as TikTok, Shareit, UC Browser, WeChat and others. TikTok is one of the most downloaded apps with over 100 million users. Among the top 20 apps used in India, the share of Chinese apps was 38% in 2019 marginally behind 41% local developed apps. In 2018, Chinese apps enjoyed a greater market share of 43%. It is high time that the government and financial institutions give all support, including financial, to start-ups and developers who have the ability to perform as they have been doing successfully in other countries, but unfortunately not in own motherland. It will boost GDP of the country. The step of the government to ban Chinese apps unfolds great opportunities to Indian app makers.

India must remain stern when it comes to China. India’s manufacturing sectors have been sustaining heavy losses and many units have become stressed assets due to cheap imports from China. The country needs to protect its manufacturing sector. Bharat’s export is at USD 16.6 billion. There is wide trade deficit of USD 48.7 billion in the last financial year with China. As Chinese businesses have a substantial exposure to the Indian market, the economic compulsion will ensure that China cannot take an aggressive stance against India. If India starts cutting down on from China, Chinese businesses will have to bear the brunt, whereas this will force India to become more Atmanirbhar.

To conclude: Bharat has to take measures for reviving the economy which is expected to contract by 4.5% in 2020, a ‘historic low’ as said by Gita Gopinath, Chief Economist of the International Monetary Fund. The country is expected to have 6% growth rate in 2021. We need to move into the region of 7-8% growth soon thereafter. Survival and development of healthcare sector will be the key to the economy’s future. Bharatwasi wealth creators should march on fearlessly with righteousness, informed by Vedanta to the goal of making Bharat Atmanirbhar and to create employment to feed millions of hungry children. Lord Krishna will help as he had done for Dharmraj Yudhisthir, if their actions are done with honest intention for the welfare of the people.