Friday, August 14, 2015

INDIAN ECONOMY THE SHOW MUST GO ON GROWTH PADDLE

The monsoon session of parliament was over without transacting any meaningful business.In this
process, the government could not get the constitutional amendment passed by Rajya Sabha (Lok Sabha has already passed the bill) to bring Goods and Service Tax (GST) to replace Excise, VAT and few other indirect taxes. Even the Land Acquisition Bill to facilitate Industrial Development and other public purposes was deffered on the recommendation of the joint parliamentary committees.

Need for consensus: The Modi government needs to pursue pending legislations after considering opposition views with an open mind to enable consensus on major economic reforms. Patience, persuasion, reconciliation and moving further on discussion informally as well as formally with all political levels will be very important. The ruling party needs to give adequate respect to opposition in the real spirit and approach the issues with statesmanship, on the lines of Sh. Atal Bihari Vajpayee.
This political diplomacy with genuine efforts can bring very good results in medium term.

Economic Issues: The government has taken significant positive policy measures very effectively and these will surely bring positive results in long run. The government is required to address several important issues on the agenda diplomatically, efficiently and effectively. There are large number of areas where subordinate legislation (Rule making), administrative guidelines and procedures and policy level changes can bring comprehensive growth and movement in the Indian Economy. Some of the suggested important areas include:-

Company Law: The government needs to exempt all private limited companies below ` 100 Crore net worth or ` 1,000 crores turnover from most of the procedural and compliance sections.A detailed review need to be done by various committees. The overburdened compliances and its costs with the fear of prosecution on a simple non-compliance is not making it easy for the entrepreneurs to contribute to the growth of the nation. The governments tag ‘Ease of doing business’ is non-
starter due to such over compliance.

Taxation: The Income Tax officials need to work upon non-tax payers instead of having a pre-notioned mind- set that ‘higher the tax payer, higher is the evasion’. Officials have now created fear of prosecutions in minds of the assesses who have deposited TDS late. Prosecutions is not the only way to force assesses to comply, a friendly approach need to be developed. The entire approach of rule making, procedures, assessment, appeals and imposition of tax needs to be people friendly. The assessees need to be treated with faith and respect with a positive approach. Tax terrorism has to give way to tax friendly approach. The survey, searches and raids are to be highly restricted. The exemplary powers and discretion of the tax officials needs to be curtailed. Scrutiny cases need to be resolved without any personal contact but on an electronic platform.

Black Money: The government needs to bring down the tax rates and seek voluntary compliance by education. The restrictive and deeming provision including Section 50C, 56, 14A, 43CA, 269SS/T and many such sections need to be relooked into. Immediate amendment in rules can give the major
relief. The various legislative attempts by the government has not been able to bring back black
money but has only closed the channel of circulation and productive use of the money thereby negatively impacting economic activity, capital creation and growth of real estate, trading, manufacturing and service sector. The government need not question each transation and provide leeway and flexibility to genuine business transactions. It is imperative that Black Money generation must be stopped and all that, which has been created in the past must come out and put to productive use.

Sector Specific Issues: The sector specific issues need to be directly addressed by providing:-

  • Fiscal Adjustment- Custom Duty, Excise and Duty Drawback within WTO Framework
  • Vat and Service tax rates reduction
  • Interest Subvention
  • Infrastructure Support
  • Policy Support
  • Reschedulement of loans
  • Infusion of Risk Capital

The seriously ailing sector like Sugar, Real Estate, Cement and SME Industries and service sector
require immediate government support and action. The industry, services and agriculture all have
suffered during UPA regime and Modi government now needs to act smartly and swiftly.

PSUs: There is immediate need to objectively assess the functioning of all PSUs, their relevance, feasibility and accountability of its management. Governance in PSUs must be much more transparent. It is understood that substantial number of PSUs need to revamp their Boards including appointment of Independent Directors.

Financial Institutions: Availability of low cost debt and risk capital is crucial to growth and development. State level and All India Financial Institutions need to be strengthened and beefed up with policy changes to channelize low cost resources to the businesses. The message has to be loud and clear that finance needs to be provided to all small and mid-sized entrepreneurs without insisting on collaterals. No credit exercise can be risk free and NPAs should not desist the government or financial institutions and banks for expansion of credit.
The lending need not be seen with suspicion and free hand at policy level as well as operational level needs to be given to bankers and lenders. SARFESAI and DRT are enough structures to recover genuine dues. Government has become a major stake holder besides financial institutions and investors. Exemptions from Corporate Governance measures may be given subject to safeguard of
these stake holders.

Rules should be made to make the Substantive Law implementable and to prescribe procedures.
However, government should resist dilution of substantive law through rules and notifications, like
in the case of CSR. Any Law should be principle based instead of rule based. It is important that the
lender's lending behaviour must give way to Development Banker's mind set. The government
need not worry about it's criticism inside or outside the parliament. All genuine efforts to promote
businesses and growth resulting into higher employment, health, education, housing, level of earning and living of common man will answer all criticism politically as well as on the ground. Chartered Accountants are committed to support this exercise by fine tuning the suggestions in a practical
manner in the national interest. There is also a need to communicate to the masses, the steps being taken in their long term interest and that results shall be visible in near future.

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