INDIAN ECONOMY LOOKING FOR DIRECTION FOR INDIA TO SHINE AGAIN
The Indian economy is in the threshold of a big leap towards India shining once again, but the main stumbling block being a sense of confusion about government policies, scarcity of low cost adequate money for funding further investments and most importantly India Inc. awaiting for specific policy decisions and creative actions in the areas which has been adversely impacted due to lack of policy initiative.
It has been observed that economy of Brazil is growing leaps and bounds in last 2 years and the growth rates have moved up substantially in the year 2011 and further in the current year. Even China has regained its momentum of growth. If Brazil and China can grow, there is no reason why India cannot grow that fast. It may be very important for the Government of India to confidently move and take policy initiatives in respect of the following :
- Income Tax Department should be advised by the Government to not to play their aggressive role of collection of taxes. As a ruling government, it is the responsibility of the government to ensure that the tax collection is done in a manner that does not create apprehension in the mind of tax payers. The spree of over enthusiastic tax proposals have to be shelved once for all. The Government of India needs to restrain from a spree to collect too much taxes, thereby impacting the growth itself. In the words of legendry statesman, Chanakaya "A king has no right to collect more than 1/6th of the income as tax and the people (subject) are free not to pay taxes in case the state try to levy taxes beyond this limit."
- Availability of low cost adequate fund for real estate sector, infrastructure sector, power sector as well as all other businesses and service sector is a must. The policy rates are needed to be reduced by at least 3% to 4% over a period of 6 months to a year in a pre announced structured plan, to provide confidence to the investors about the intentions of the government. The recent initiative of 0.5% reduction in Repo rate is only a good beginning.
- The Power Sector is suffering from the absence of coal linkages, a proper and transparent power purchase policy and empowerment of creation of a large private sector set up for distribution and trading of power, in addition to existing State Government framework.
- The issues in respect of Foreign Direct Investment are not very crucial at this stage as the government has already substantially liberalized this area. FDI in real estate, even by NRIs need to be regulated more strictly.
- It is important to give confidence to foreign investor of a fair play by the government. Our government is actually fair but the messages get transmitted internationally is in the wrong direction, in the absence of appropriate structured communication from the government.
- The government need to give confidence to the business community that it means business and is committed to provide all necessary support and facilities to the businesses to grow including micro and small businesses as well as mid size and large corporate. The businesses are in fact looking for an appropriate commitment in this regard which should be seen to be getting converted into action with appropriate communication.
- It is important to improve the investment climate, so that the entrepreneurial initiatives can attract adequate investment and the lack of investors' confidence currently prevailing in the stock market is to be addressed effectively by bringing in regulatory changes.
- It is important for the government to consider mandatory valuation of IPO or FPO, independent monitoring of application fund raised from the market and to impose mandatory dilution of the promoters holding, in case the share prices goes down by more than 25% in the 1st year itself, by making compulsory additional allotment in favour of public investors so as to compensate them for wrong pricing determined by the management, on the basis of 52 weeks average prices.
There are several other areas which may require action and the aforesaid list is only an indicative of major thrust areas. Mr. Prime Minister we look forward for a concrete action initiative at your end. It is already very late but not too late.