March , 2021
14:01 pm

Dr. H. P. Kanoria

Dear Readers,

India’s economy: Indian entrepreneurs, with their indomitable spirit, are success stories at the global stage and figure among the leading richest persons. Although they started with little capital, the support of major stakeholders (i.e. financial institutions) extended to them during the crisis periods has helped them survive difficult periods. Soul-searching is needed about why the wealth creators and generators are not investing more in India. This is because many of them are facing hardships and are paying off debts even by selling units.

The Prime Minister has promised India Inc. to do away with as many as 6000 compliance requirements, improve the ease of doing business, and create multi-modal infrastructure to trim logistic cost.

The PM highlighted the need for a giant leap in the speed and scale of manufacturing to boost employment and GDP. India Inc. requested the PM to build policy to compete with the countries globally, allow flexibility in the scheme, ensure predictability, practicality and stability, ensure stable tax structure and the ease in the continuing of business. The PM expects that the PLI scheme will increase the country’s production by USD 520 billion in the next five years. The PLI schemes need to be extended to all.

India’s exports dipped by 0.25% to USD 27.67 billion in February while imports grew by 6.98%

to USD 40.55 billion. The trade deficit widened to USD 12.88 billion.

Moody’s Investors Service reported that India’s GDP may contract 7% in FY 2020-21, but it may be at 13.7% in FY 2021-22. The Economic Survey had projected Indian economy to contract 7.7% in the current fiscal year and 11% in next fiscal. ICRA projected FY22’s GDP growth at 10.5% after a 7% contraction in FY21.

The FM announced `1.75 lakh crore disinvest-ment target for FY22. Economists are of the opinion that it will take several years to sell, as domestic private wealth creators are domiciled. It depends on the appetite of the overseas investors. Instead of selling stakes at cheap valuations, a better way would be to derive more efficiency and productivity from many of these public sector undertakings. One way to achieve that is to provide more freedom to their working. Many heads of PSUs have been successful in the private sector.

MSMEs as per NITI Aayog: The MSMEs should also play an important role under the PLI

scheme. However, government officials have to facilitate them for setting up factories by ensuring timely clearances, providing institutional funding support, and improving the ease of doing and continuing business. Both domestic and foreign companies are enthusiastic about PLI schemes. China has 101 greenfield manufacturing projects worth USD 20.7 billion, while India has 51 projects valued at USD 11.9 billion.

To be Atmanirbhar in defence and other sectors, the government has to ease the regulations and approval process.

Corporate India: According to the RBI, only private investment is missing in action. This is a time when the aggregate demand is slowly picking up. Credit off-take is very low despite the RBI’s measures to facilitate credit flow to various sectors, especially to the MSMEs and NBFCs. Regulators and the government have to realise that due to stressed assets, bankers are not lending. Bankers and financial institutions prefer to stop the business operations. Assets are more than the liabilities. Assets are lying idle. Fund is lying in current account without earning interest while the enterprise is compelled to pay interest on their debt. Executives are leaving jobs out of fear. Cloud of suspicion looms large on the authorities.

World: The USA’s debts grew to a record USD29 trillion, despite it being the world’s largest economy. It owes India USD 216 billion. The US economy has a size is of more than USD 20 trillion. It has to service its debts. It has the advantage as globally all countries have been keeping their forex reserves in term of US dollars. European countries are keeping some reserves in Euro. China has set for itself a GDP growth target of over 6% in 2021 despite being affected by the Covid-19 epidemic first.

Cover Story: On April 02, 2014, India became the first country to make corporate social responsibility compulsory. The CSR Act requires a company, which has a minimum net worth of ` 500 crore, turnover of `1000 crore or net profit of ` 5 crore, to spend at least 2% of its average net profit during the three immediately preceding financial years.

The expenditures under CSR are not allowed as business / professional expenditure under Income Tax. No specific exemption for CSR expenditure is allowed under the IT Act. Even expenditure under 80G is not allowed. Expenditure on this score has to be made for net profit after tax. This is a huge fallacy. If not spent, a firm stands to get penalised. The criminal provision is also incorporated. The unspent money is transferred to specific account of government.

We are endowed with compassion. Wealth creators and generators, inspired by holy texts and enlightened saints, have been serving humanity and protecting the environment since centuries. We find inns (Dharamshala), schools, colleges, universities, hospitals, gosala (cow shelter homes), old age care homes, water serving booths, ponds, etc. built by these people. Such acts of benevolence have been voluntary and more spontaneous. Government has made it compulsory, complex, and complicated by institutionalising

CSR with high administrative cost.

Most of the research and reports till July 2019 show that total CSR spending had reached ` 50,000 crore by FY2018-19 against the reported data of the government of ` 1,00,000 crore.

Any unspent amount will be seized by the government and the chief financial officer will be legally liable for any lapse in undertaking the mandated CSR expenditure. The new rules and regulations have complicated the CSR spending. Capital assets created under CSR shall no longer remain under the ownership of the foundation. A company under Section 8 of the Companies Act can hold the capital assets if it has three years track record.

The government should allow expenditure of 2% CSR out of gross profit and more social activities need to be brought under the coverage of CSR. Stringent rules and regulations need to be either relaxed or done away with.

International Women’s Day: The world is celebrating International Women’s Day with an intent to awake women of their infinite power to achieve their full potential. Swami Vivekananda said, “Educate women, allow them to be the architect of their own future. The best thermometer to the progress of a nation is its treatment of its women. There is no chance for the welfare of the world unless the condition of women is improved. It is not possible for a bird to fly on only one wing.”

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