Introduction
2. India is doing better than the other large economies. However, issues which will be impacting our ‘Gen Next’ who are going to be tomorrow’s workforceneed to be addressed. These are:-
(a) Structural unemployment
(b) Poor state of education
(c) Health care
(d) Nutrition deficits
3. Recommendations of the Think Tank are given in the succeeding paras.
RECOMMENDATIONS
Rationalisation of Expenditure
4. There is an imperative need to identify and cut non priority spending to meet the fiscal deficit target of 6.4% of Gross Domestic Product (GDP) and remove inefficiencies in expenditure. Need to reduce leaks especially in flagship schemes like MGNREGA. The usage of Single Nodal Agency (SNA) dashboard is an effective usage of technology to monitor & reduce avoidable expenditures. Through the SNA dashboard, officials can track usage of funds from the Central treasury to Ministries, State treasuries and departments and down to vendors, contractors or implementing agencies. It is expected that SNA dashboard could save as much as Rs. 40000 – 50000 crore.
Fiscal Deficit
5. The plan for the fiscal deficit is to bring it below 4.5%. of GDP by 2025-26 from the target of 6.4% for 2022-23. To achieve the target of 2025-26 as part of fiscal discipline, budget should target it to less than 6% of GDP. The govt. should rationalize subsidies on food, fertilizer and fuel.
Inflation Management
6. The inflation target till March 31, 2026 has been kept at 4% with a margin of 2% on either side. Monetary Policy should not be synchronised with developed world counterparts. Government must put in place a mechanism where Centre and States work in synergy to tackle price rise.
Global Recession
Small Savings Rates and Inflation
8. Negative returns have serious consequences for the economy if households, which are the highest lenders, stop parking their savings in such fixed income instruments. Returns on Small Savings should be positive. Savings rate should be high enough to incentivise savings and low enough for higher credit off take and consequent higher growth.
Job Creation
10. Govt must create jobs through MGNREGA in Urban areas through a dedicated scheme involving private sector and in Rural areas through theme-based schemes. A mechanism needs to be devised to share expenditure between Centre and States in the ratio of say 60:40. Social security mechanism may be considered for Gig economy.
Monitoring of Capital Projects
11. Progress of on going 1500 infrastructure projects worth Rs 26 Lac crore require a constant monitoring. States need to be incentivise to invest on infrastructure projects including clean infrastructure. Front loading of infrastructure projects should continue.
Institutionalized Think Tank Concept
12. States should be encouraged to institutionalise concept of Think Tanks. It will supplement the State cabinet’s work as ministers are usually too occupied with their daily work. This will enhance the success rate of projects.
Private Investment
14. Creative non fiscal instruments must be introduced to increase private investment into infrastructure on annuity/hybrid basis in sectors other than highways namely for construction and maintenance of worker’s dormitories; sewage treatment, providing running and maintenance of public transport. Use Govt procurement to get private investment with higher domestic value addition in key areas such as solar panel production etc.
Reinvent the Working of Economic Division
15. Due to Digital India, lot of data is available which at presently is not being used effectively. Behavioral economics aspect is neglected at present regarding how the potential consumers will respond. An illustration is that the Government continues to tax individuals only on the basis of income but without reference to how the expenditure patterns of those individuals have changed. Today around 80 per cent of income is spent on various fixed expenses vis-à-vis 55 per cent in the past leading to drop in household savings rate. Hence ideas of “old economists” still continue to impact growth, which needs to be relooked at.
Indo Pacific Economic Forum
16. India has not joined the trade pillar of the U.S.A.-led Indo-Pacific Economic Forum. The move not to join the trade pillar mirrors India’s decision to walk out from the Regional Comprehensive Economic Partnership (RCEP) which was China-led. If India has to achieve the goal of USD 5 trillion economy and subsequently an advanced economy by 2047, it has to be Globally competitive from which it cannot fully isolate itself from Global economy.
MGNREGA – Finetuning
17. To make it more effective and relevant the following is required:
(a) Diversification : There should be greater diversification of permissible works.
(b) Fund Management : In the past few years, Fund Management has been centralised instead of paying the Gram Sabhas. The Gram Sabhas can take into account the local conditions and Community’s requirement.
(c) Revolving Fund : Need to have the Concept of a Revolving Fund that can be utilised.
(d) Low Wages : Wages are far below the market rate in many states, defeating the purpose of acting as a safety net.
Production Linked Incentive (PLI) Scheme
18. The PLI scheme should be extended to different sectors namely Leather, Bicycle, Vaccine materials, Telecom products, Toys, Chemicals and Shipping containers.
19. The Concept of PLI should be extended to services sectors in the form of Employment Linked Incentives (ELI) schemes. To start with, ELIs should be introduced in 4 Employment Intensive Services sector with high growth potential in Tourism, Logistics, Retail and Film Animation and Gaming. Also PLI for Electrolysers may be considered to help India’s vision of producing 5 million tonnes of Green Hydrogen by 2030. Need to integrate PLI with Foreign Trade Policy and FTAs.
Exports
20. The govt. must make a road map to achieve exports in Global trade to 3% by 2027 and 10% by 2047 from the current 2.1%.To promote 100 Indian brands as Global champions we need to follow steps as enumerated below:-
(a) Have a system to provide Import Export Clearances within one hour of arrival at entry points and custom ports.
(b) Set up the Economic Zones outside India as an extension of the Atma Nirbhar Bharat initiative.
(c) Focus sectors could be interalia, Pharmaceuticals, Gems & Jewellery, Marine & Agriculture, Textiles & Leather, Engineering Goods, Electronics and Telecom products, Chemicals, Tourism, IT & ITes, Business services, Financial services, Healthcare & Wellness, Education and Services,
(d) Enhance participation of MSMEs
(e) 200% tax deduction on the expenditure made by exporters for overseas marketing.
(f) Reduce customs duties on raw silk, silk yarn, raw cotton and copper ores.
(g) Promote export based imports at a lower rate of customs duty.
(h) Involve embassies abroad to identify new products & markets.
(j) Single Window Export Clearance. To reduce logistics costs, there is a need to integrate Customs Network with various regulatory agencies for expeditious clearances of export consignments on the same lines as imports.
(k) Services Exports. It is much easier to increase services exports than manufacturing in the current Global environment. Further Service sector jobs are more labour intensive, which would help create more jobs. Promote branding of services exports on the lines of manufacturing sector like “SERVICES FROM INDIA”, “SERVICES IN INDIA”.
(l) Developing Districts as Export Hubs. States need to be engaged actively in Export Promotion activities; Convert each district into an Export Hub. Also, States should be made partners in monetary benefits arising out of exports.
Autonomous Trade Body / DESH / SEZ Act
21. Set up a Trade Body as an autonomous organisation under Commerce Ministry on lines of Investment India. Further, the upcoming Foreign Trade Policy, to be announced in April 2023, should cover E-commerce exports. Also, the new SEZ Act titled as Development of Enterprises and Services Hub (DESH) which will replace the existing SEZ Act 2005 should be futuristic, liberal and exports-friendly.
Internationalise Rupee
22. There is a need to further promote the possibilities to settle International Trade in the local currency beyond Russia & Iran. This will push the RBI’s move to Internationalise the rupee.
Rupee Depreciation
23. The Rupee has depreciated more than 8% against the Dollar so far in 2022. Rupee’s Real Effective Exchange Rate (REER) signals that the Indian currency is still overvalued. However, it needs to be ensured that REER does not appreciate, since it will have a negative impact on domestic value addition and job creation.
Free Trade Agreement (FTA)
Climate Action Plan
25. COP-27
(a) India is among the top 7 emitters of global greenhouse gases (GHG). The 7 emitters are: China; EU27; India; Indonesia; Brazil; Russia and USA.
(b) India has set a target of net zero emissions by 2070. Need to have a road map for net zero and its funding agenda.
(c) Developing countries need to ensure that under Loss and Damage fund, developed Countries are held morally responsible and financially liable for their contribution.
G-20 – AGENDA
(a) Global Supply Chains. Countries need to work together to develop policies relating to supply chains.
(b) Economic Sanctions. Countries are using economic sanctions as a tool of modern war. Frame rules that should govern the use of “economic sanctions” as weapons henceforth.
(c) Green Energy. Developed countries must come forward to finance the transition needs of the developing countries.
(d) Other Issues
(i) Expedite the extradition of fugitives to enable them to face criminal justice system of India
(ii) Locate wanted persons (Red Alert)
(iii) Enhancement of criminal intelligence sharing, terror financing and online radicalisation
(iv) Financial sector regulation
(v) Infrastructure investment
State Finances
27. Some states are taking loans secured against assets like municipal parks, collector’s office, taluk office, courts, hospitals, etc. These are entities which do not have revenue streams to service loans they are getting based on State Government guarantee and/or security of land or escrow of state revenue. States need to stop this practice and plug revenue deficit by increasing Property Tax, Excise duty on Liquor, fee for Govt services in line with inflation and growth. Reduce/replace inefficient subsidies and freebies. Rationalise autonomous bodies and schemes.
28. Central government should merge the cesses and surcharges into the basic rates tax of GST so that States receive higher share in the divisible pool of taxes.
Freebies Economy
29. There is an immediate need to put a brake on reckless promises that cannot be fulfilled without any thought to fiscal prudence. Disinvestment
30. Government has set a target to raise Rs 65000/- crores from disinvestment during the financial year 2022-23. So far, it has been able to raise around Rs 24500/- crore due to a combination of reasons. Need to involve consultancy organisations to achieve the stipulated goal.
31. Govt should consider various models of disinvestment especially in the case of Hospitality industry. The property can be leased on operation, management and development basis without transferring the ownership of the same.
32. The Ministries of Power; Civil Aviation; Railways; Oil and Gas are likely to miss the target. To incentivize the Ministries to meet the target, link the budgetary Support to ministries’ to monetization, also ministries may be asked to identify additional asset classes. Also States should identify assets to monetize namely State highways and expressways transmission network, urban terminals, State Warehouses and others.
MSP Panel
33. GST Council model may be replicated for firming up MSP. Farm groups need to shed their uncompromising attitude and come together to urgently discuss, deliberate and negotiate with the government with an open mind. This is the only way forward to resolve differences and avoid disruptions.
34. There is a need to focus on the agriculture and farm sector with enhanced budget and also to focus on rural infrastructure, investment’s in Supply Chain, technology, crop diversification and matters concerning climate crisis.
Krishi Gati Shakti
35. Secondary agriculture is of primary importance. Need to promote secondary agriculture to reduce wastage; generate employment and enhance farmers’ income. Hubs for secondary agriculture in cottage and village industry sector should be encouraged. Involve Gram Panchayat; establish facilitation centres; have comprehensive ecosystem from origin to conclusion i.e. production to marketing.
36. National policy for rainfed farming needs to be announced to have optimum utilization of scare water resources. Also micro-irrigation system should be encouraged in a systematic manner by incentivising the usage of the same.
Farmers Producer Organisation
37. Promoting women-led FPOs is crucial for the rural economy and ensuring inclusive growth and empowering women. Policy support in terms of easy availability of finance; increasing digital literacy; CSR funding by corporate; customize technologies for women farmers and others.
38. Income Tax exemption to FPOs should be extended by 5 years which will be ending on 31st March 2023.
Labour Codes
39. All the 4 Codes – the Code on Wages; on Industrial Relations; on Occupational Safety, Health and Working conditions and on Social Security need to be introduced in one go. Central government has to impress upon the remaining States/UTs to frame the rules fast. Central trade unions should be consulted & taken on board for firming up the rules for the Labour Codes.
40. Railway Reforms
(a) Corporatize Railways and outsource its support services.
(b) Digitisation of Railway records to enhance efficiency.
(c) Revisit the Model Concession Agreement terms to attract private sector participation;
(d) Reduce the dependence on gross budgetary support or borrowings from the Central govt.
(e) Advance the target of moving towards achieving Net zero carbon Emission by 2030.
(f) Expedite the replacement target of steel rake with Aluminium freight rake.
(g) Encourage corporates to use railways instead of road transport. Introduce the system of rail green points.
(h) Explore the possibility of clubbing real estate monetization with redevelopment of railway stations.
(j) Consider merger of six existing companies to ensure efficiency for development projects viz:-
(i) Railways Vikas Nigam LTD.
(ii) Indian Railways Construction LTD.
(iii) RailTel Corporation.
(iv) Indian Railways Catering and Tourism Corporation.
(v) Braithwaite and Co Ltd.
(vi) Rail India Technical and Economic Services.
Education Policy
Health Sector
42. India’s public expenditure on healthcare is only 2.1% of GDP while Japan, Canada and France spend about 10% of their GDP on public healthcare. Even neighbouring countries like Bangladesh and Pakistan have over 3% of their GDP going towards Public Healthcare systems. Government should encourage private hospitals as they make a significant contribution to our Healthcare programmes. Target should be to make available small hospitals within a radius of 10 km.
43. Also need to focus on Tele-Medicine facility, manufacturing of “off-patent” medicines, Pharma Park.
Malnutrition – Year of Millets (2023)
44. As per the latest report, 35.5% of our children below the age of 5 years, were stunted, 19.3% showed wasting and 32:1% were underweight. Food rations through PDS and special supplements are essential. Greater involvement of local government and local community groups in the design and delivery of tailored nutrition interventions is a must. On the initiative of India, the UN will celebrate 2023 as the International year of Millets. It is an economical & nutritious food which will help us to overcome malnutrition issue. There is a need to promote its production and consumption.
Bio Fuel
45. At present 10% of our Petrol has an ethanol mix. The aim is to achieve a 20% mix by 2025.
46. The current edition of the National Policy on Biofuels – 2018 needs to promote setting up of Second – Generation (2G) bio refineries. Also Ethanol technologies must be developed and commercialised. Need for a viability gap funding scheme for 2G Ethanol Bio refineries. Our current ethanol production capacity is around 800 crore litres & this would need to grow to 1016 crores litres by 2025.
GST on Petrol and Diesel
48. GST Refunds. A GST Appellate Tribunal National Authority & Advance Ruling be set up to mitigate problems taxpayers are facing in filing appeals with High Courts especially for rejection of refunds.
Ease of Doing Business
49. (a) Decriminalise Taxation Laws. As part of Ease ofDoing Business, steps should be taken to decriminalise taxation laws, remove provisions in the Income tax, Goods and Services Tax and Customs Laws that are similar to sections that can be invoked under the Indian Penal Code (IPC). Increase the thresholds for declaring a particular act as a crime. Further various sections under income tax act should have time limit to complete the transaction.
(b) Allow smooth exit for loss making companies and have faster dispute resolution mechanism.
(c) Concept of Digital certification should be introduced through digital locker say for environment certificate etc.
Ease of Filing I.T. Return
50. At present, taxpayers are required to furnish their income tax returns in ITR1 to ITR7 depending upon the category of person and nature of income. Have a common ITR by merging all the existing returns of income to the extent it is feasible.
Capital Gains Tax-Rationalisation
51. To make Capital gains tax structure simple and tax-payer friendly and reduce compliance burden bring parity between similar asset clauses and revise the base year for computing indexation benefit to make it more relevant.
Corporate Tax Rates
52. The status quo of corporate tax rates should be maintained. However, concessions, incentives and benefits could be phased out in a calibrated manner.
Personal Income Tax
Legal Reforms
54. One of the Panchpran (five pledges) pertains to removal of any traces of a colonial mindset. However, we still have on our books British era laws that contain regressive and unadulteratedly colonial statements. As of today, over 250 Central Acts enacted in pre independence India continue to remain on record. This must change.
CONCLUSION
55. India is likely to become the third biggest economy after US and China by Fiscal Year 28, two years earlier than initially expected, overtaking Germany and Japan.
56. India’s biggest challenge now is to strike a balance between inflation and growth. Though the external conditions are rough at the moment, India is relatively well placed to keep growing at a fast rate. India needs to not only grow significantly faster than its faltering pre pandemic trajectory but also deliver better quality growth that is inclusive and meets the aspirations of millions of its youth who constitute its demographic dividend.
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