A series of measures to Boost Indian Economy, with suggestions that include core changes from Taxation to Transactions and Exports to Domestic Investments, all in all, to involve the common man in Indian Economy's Growth Story, in post Covid 19 times.
Covid-19 is a global health crisis, that is shaking the economies of even developed countries, for they are pouring in trillions of dollars as Economy boosters to Businesses, to spring back in post Covid times. While Indian Government under the leadership of Shri Narendra Modi, did all in preventive measures like 21 day nation lockdown, in collaboration with it's people, to curb the spread of Covid-19, it's time they do the right things for accelerating it's economy once again.
As Dr.Subramanian Swamy reiterated the importance of integral humanism in his book RESET, wherein he shared about the path to development, by presenting the views of Deendayalji, who advocated incentives and realistic taxation, to simultaneously encourage savings and discourage conspicuous consumption.
- Announce Transaction Tax, as a replacement of Income Tax, GST, Property Tax, and Collect 3% from Individuals, 6% from Companies (with opportunity to receive Input Tax Credit/Refund, post IT Returns), 6% from Other Organizations (while refunding collected tax post IT Returns to NGOs, Spiritual Organizations, Political Parties, Relief Funds etc) of this Country. This automatically disincentivizes Black Money, as people can see the difference, in terms of Tax Rate, Tax Compliance etc, overall removing Tax Discrimination in the country.
- Fresh Term Loans to be provided at 6% diminishing interest rate to Businesses, based on previous working capital requirement range and without extra clauses, while having a moratorium on monthly installments for 3 to 6 months time, on new & existing Term Loans, strictly followed by all banks. This has to be provided to Businesses in Organized Sector (Startups, SME, MSME etc) and Small Businesses in Un-Organized Sector.
- Make Farming Profitable for a Service fee, in different acts and Stop Loan Waivers & Minimum Support Price Concept. We need serious commitment from Government, if they wish Rural Economy to be back on track, along with lakhs of jobs and spike in Consumer Demand.
- Recognise & Reward R&D Activity, that leads to a movement of successful entrepreneurs in the country
- Assign Tax Deduction & Deposit responsibility to Banks in real-time Non-Cascading Transaction Tax Regime, while Government paying them a wholesale Transaction Fee, that works as a win-win to both, in the Pro-Digitization initiative
- RBI and Banks to Setup National Payments Grid, with capacity of minimum 2 Lakh Transactions per second.
- Guarantee Depositors money in Savings Account to the fullest, for receiving more Savings Account Deposits again
- RBI to accumulate more Gold Reserves, even by paying Premium price in notes, to have better control on Rupee valuation
- Government to protect Indian Companies from hostile takeover from restricted foreign country companies, and their subsidiaries from several other countries, to be dealt on case by case basis, during and post Covid time
- India to invite Companies from other countries like Japan, while ensuring Green & eco friendly norms are fully followed by manufacturing companies
- Encourage Indians to invest in Indian Companies, in both retail & VC Funds perspectives
- India to Export more in different sectors, like in the case of Pharma, Software, at affordable cost and with better quality, when compared to peers like China.
When gone in detail, I foresee a series of measures, that India has to take to gain Consumer Confidence and spur Demand across the nation, some of them include,
I) Welfare Schemes leading to Skill Enhancement
While nobody intends to stay poor, to possibly gain free lunch from government schemes, it will be an expected move, for government taking initiatives to
- Survive Economically backward sections with basic amenities for a limited period of time
- Impart knowledge and train them, contemporarily in their field of choice
- Make them self-reliant and a tax paying citizen, at the earliest
- Contemporary Education, with respect towards Culture and Scientific temper
- Prioritize/Recognize/Reward R&D Activity, that leads to a movement of successful entrepreneurs in the country
II) Encourage Entrepreneurship with Policy & Financial Support
Indians are entrepreneurial in nature, that is known when we see who the backers of Indian Freedom Movement are, Farmers at large. While the backs of Farmers are broken for almost 90 years with 3x taxation and their lands seized for incapability of payments (at times of famines and alike situations), We did not have realistic farmer friendly policies post 1947 till now.
Think, how many jobs both government and private can create, if Farmers are supported with every stage of their activity like,
- Soil Testing
- Soil Tilling
- Crop Loans
- Crop Insurance
- Quality Seeds Supply
- Farming Guidance
- Organic Fertilizers & Pesticides
- Reaping produce
- Warehouses support, to Hold Farm Produce
- Packaging Material
- Marketing Farm Produce (through direct & retail chains)
Once Farming becomes Safe & Profitable, won't Farmers pay a service fee for received services and tax on their earnings?, they surely will.
Lakhs of Jobs will be Created Every Month, in sync with Growth in Agro Exports and increase in Consumer Demand, as India focuses on Agriculture as Industry
Similar is the case with anyone, who are entrepreneurial and whose spirits long for future growth, and they will happily pay tax, when they know that they have better opportunity to Save, Invest and Spend.
Government to invest in:
- Security & Privacy
- Pro Digitization initiatives
- Simple & Holistic Policy making.
- Term Loans with 6% diminishing interest rate that can be used for paying salaries and for building Demand Oriented Supply. This has to be provided to Businesses in Organized Sector (Startups, SME, MSME etc) and Small Businesses in Un-Organized Sector.
- Easier Bankruptcy Process, while assuring legitimate failures are gracefully allowed to shutdown, while properties of fraudsters are entirely confiscated and they punished in a finite time of 6 months to 1 year.
- Periodic change in the areas of focus, to address potential issues, while consistent action plan is planned for different industries.
- India becoming a Product Nation.
III) End Tax Discrimination
While taxation is primary income source for many countries, that includes India, Tax Discrimination is clearly visible when we see tax slabs in Direct Tax Regime, some of the causes include
- single/multiple tax slabs, and higher tax slab, along with many complimentary taxes are applied as tax payer's income grows
- a book of exemption clauses, that are making lives of tax payers harder, as they can be invoked in tax return, only with knowledge of different scenarios, they were introduced to address.
- complexity in tax compliance, as experienced when filing tax returns and taking support of a Chartered Accountant, became basic need, for most of the entrepreneurs/employees across.
and since most of the exemptions are indirect business boosters for companies in different sectors, like Insurance, Banking, Stocks, Real Estate etc, upto specific value limits, people are not in full comfort, when making their choices to Save/Invest/Spend, thus, they tend to
a) Circumvent the tax processes to save money
b) Do invest in potentially risky operations
c) Spend it extravagantly in due course
leaving themselves in a not so desirable situation personally, in times of need and at times as an ill-intended person before law.
India, for that matter, any other country, that aspires to become a Developed Country, need to scrap the 19th century's war support intended Progressive Taxation Regime and move towards discrimination free 21st century's Proportional Taxation Regime.
In this context, Transaction Tax has to be introduced, as a replacement for Income Tax, GST and Property Tax, in a way that Tax Collection is done in a non-cascading way, non-discriminating way, at a marginal tax rate on all Citizens/Residents of the Country. While RBI and Banks can establish a National Payments Grid, to support the Pro Digitization initiatives of the Government, authorizing Banks to deduct and deposit tax amount in to the Government Account, in exchange for payment of Transaction Fee, by Government to the Banks, achieving Pro Digitization and Real-time Taxation goals both, while not laying P2P & P2M transaction costs upon Individuals/Merchants.
A detailed proposal about Non-Cascading Transaction Tax (NCT) can be found at:
A series of questions are attempted to be answered in the following FAQ:
When Government stands by and for the People, the latter will, with full rigour, revert when doing their duty to the nation.
- Real-time Tax Collection
- IT Returns submission requirement, to be scraped off, for Individuals
- Commercial Organizations, to continue submitting IT Returns, while being allowed to Claim Input Tax Credit(ITC)/Refund in due course.
- Non-Profit Organizations, Spiritual Organizations, Political Parties, Central/State Government Relief Funds etc, all has to submit IT Returns w.r.t. received donations, with 100% Refund receiving opportunity
- Accountability to the Core
- Establishment of a Very Scalable National Payments Grid, that can process a minimum of 2,00,000 transaction per second.
- Elimination of Black Money/Dark Economy from India, by disincentivizing sloppy channels, that prevailed earlier.
IV) Savings & Loans
In times of global crisis as Covid-19, many countries are unable to initiate early lockdown as India, and the simple reason is the way their economy runs.
Countries like US, chose to run on No Savings and conspicuous consumption habit post 1930 depression, and due to this reason, US Government is not in a position to afford lockdown, despite them pouring in trillions of dollars, to retain the pace of the economy and it's GDP.
On other hand, countries like India, whose people have the habit of savings in different forms like Gold, and who believe caring elders, homeless is their responsibility and not that of the state, allowed the Government to take a daring step of 21 day lockdown, right at the early stage, thereby, India is able to contain Covid-19 in a reasonable way.
The other important thing is availability of Liquidity and Banks & NBFCs to play pivotal role in facilitating loans to both individuals and businesses both. While creation of Bad Bank, banking Consortium and other possibilities exist for Businesses, Individuals are to be protected from high interest rate grabbing vultures, who will destroy lives of economically backward sections, in these tough times.
- Government & RBI to ensure, Saving Account Deposits are protected to the fullest, without any upper limit clause of Rs.5 lakhs, as shared in 2020-2021 Budget, if not, and if people lose trust on banks, how come they transact through them, banks being the Core intersection point of Digital Payments Industry.
- While RBI has it's own Gold Reserves, since, controlling a big part of the Gold helps control rise/fall of the Currency, RBI has to accumulate a better Gold Reserve, even if it has to pay a premium value in notes, to retain their control on Indian Rupee, in Forex Markets.
- Loans are an important dependent factor for both individuals and businesses, and Banks to serve that space without discount, in the interest of people, and provide loans at 6% diminishing interest rate.
V) Domestic Investments
In times of pandemic like Covid-19, Businesses and entire country economy goes down, when foreign funds take precedence in taking over profitable companies, that are nation pride, and it's the duty of Governments and Controllers like SEBI and others to take this into consideration, and ensure Domestic Investors in both Retail & Corporate scopes, do support by investing in such companies, thereby, protecting them from the swirling effect of liquidity problems.
- While risk levels are reasonably higher when investing in Stock Market and Funds, SEBI has to ensure hostile takeovers of companies are prevented and likewise, insider trading donot happen, ensuring both retail & corporate investors do not lose money.
- Indian Companies stay Indian, Serve India and other countries, across the globe.
VI) India as a Eco-friendly Manufacturing Hub
Extreme dependence on any country, makes others learn in situations as this, and developed countries like Japan and many others are considering relocating to own land, as well as to spread the risk, by working with other nations in the region.
Time for India to
- Welcome them with policies to establish manufacturing facilities
- Support them comply to Green Fuel, Clean Effluent & other Eco-friendly norms
- Supportive Taxation norms, to prevent double taxation scenario, while enabling them to invest & expand in India, and to take some returns back home.
- More Opportunities for Auxilliary Units
- More Jobs
- Livable Place across India, due to strict Environment friendly norms
Excelling in Pharma, Software and many other industries, India does Exports to other countries, leading to growing opportunity of forex reserves. Even in current crisis of Covid-19, many countries across the globe are applauding India, for not only controlling Covid-19, but also for producing and exporting HydroxyChloroQuine (HCQ), at a very affordable price, and in times of need.
India to do this more in other industries, in a qualitative & environment friendly way, for World Countries to choose India as their longterm partner, in respective industries.
- Exports of Cost effective Products/Services/Solutions to customers, who require them, surely helps gain support in foreign policy relationships as well as in terms of revenue and vice versa.
While World came to India in the past, who were surprised to know about knowledge of our Rishis, Kingdoms, in terms of Art, Craft, Metallurgical, Medicine, Maths, Science, Astronomy, Political and others, we lost most, if not all, and it's time India to rise again, and World see India as what it is earlier, the Viswa Guru, once again.
Covid-19 is a potential grounding situation for Indian Economy, that is already slowing down, and while Indian Government did it's best in creating awareness about Covid-19, in collaborating with people, to ensure people stayed at home during preventive lockdown times, it's time to kickstart the Economy, hand in hand with the Covid preventive measures, thus, India has a rare opportunity to spring back it's Economy, GDP and Gross Happiness Index in one go.
This article is first published in https://www.idealnation.net/2020/04/14/what-is-the-best-stimuli-indian-economy-needs-in-post-covid-19-times/, that is re-published here on CA Biznet.Connect