Is India headed for a disastrous situation as far as its economy is concerned? Why does its markets get rattled when US raises tariffs against China? Why are the Western countries starting to question the promises made by India and shrug them away as sweet nothings? Is the point of no return approaching whereby if no drastic measures are put in place, India would go the Argentina way? No, this is not an exaggeration.
Dr. Subramanian Swamy, the indefatigable economist has suggested 5 steps that the Indian government should take to reverse course. Modi can take all the credit provided the steps are implemented in toto (and not a hashed-up disaster like the one done during the demonetisation saga). So what are the 5 steps? Here is my interpretation of each of these.
Five steps torescue economy: 1. Abolish personal income tax 2. Reduce prime lending rate to 9% 3. Raise bank term deposit rate to 9% 4. Make corporate R&D & employees children education expenditure tax deductible 5. Print notes liberally for infrastructure construction
— Subramanian Swamy (@Swamy39) August 2, 2019
- Abolish Personal Income Tax – The approximate revenue earned from Personal Income Tax is around Rs.5 lakh crores ($72 billion at today’s exchange rate). According to the 2018 budget numbers, India’s revenue was about Rs.25 lakh crores ($360 billion) and expenditure Rs.29 lakh crores ($440 billion)[1]. So the government needs to forego approximately 20% of its revenue. What does it gain in return? It can save on the salaries of about 80,000 officers employed in the Finance Ministry. At least half can be asked to go. This is not as bad as it sounds – Income Tax officers are among the most corrupt and the honest ones are usually weeded out[2].
- Reduce Prime Lending Rate to 9% – This may not be too difficult to achieve. It is currently at 9.45% and it will not make break the backs of banks[3].
- Raise Bank term deposits to 9% – The current fixed deposit rates vary from 6.8% (State Bank of India) to Bajaj Finserv (8.6%)[4]. This has to be done in lockstep with 1 and 2 above because it would encourage the consumers to save the dividend from 1 rather than spend it.
- Tax deductions for Corporate R & D and Employees children education expenditure – India does not excel at fundamental, ground-breaking research at least at this point of time. This exemption, if given for a period of 10 years would spur many companies to invest in this. India’s Diaspora can be tapped to pitch in with their time and expertise. 1 above will incentivize them to come work in India.
- Print notes for infrastructure construction – Think of it as India’s Quantitative Easing. When money is printed for infra, it will show itself in the form of new roads/ metro lines/ irrigation projects/ Smart City projects etc. And this will spur a lot of employment and in turn will lead to remonetizing the banks from savings. If there is one thing an average Indian does, it is to save. The savings rate needs to climb back to mid-30% of GDP.
References:
[1] 2018 Union Budget of India – Wikipedia
[2] Who are behind the termination of IT Commissioner S K Srivastava who exposed NDTV and Chidambaram frauds? Jun 12, 2019, PGurus.com
[3] India Prime Lending Rate – TradingEconomics.com
[4] Fixed Deposit Rates – MyLoanCare.in
His first book NDTV Frauds has been published and is an Amazon Bestseller.It ranked second among all eBooks that were self-published in 2017.
His second book, The Gist of GSTN which too is available on Amazon as an e-Book and as a paperback.
His third book, The Rise and Fall of AAP is also available in print version or as an e-Book on Amazon.
His fourth book, C-Company just released to rave reviews and can be bought as a print version or as an e-Book on Amazon.
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While Dr.Swamy an excellent economist,a true indian certainly is too much of an intellect for me to talk about his ideas on reviving the economy ,my thoughts are as follows:
#1.Modi has totally failed in his promise to catch UPA1&UPA2 regime thieves, inspite of De.Swamy”s repeated assertions that the existing laws,if implemented properly could have caught the likes of sonia,robert vadra,PC chidambaram,maran brothers,raja ,kanimozhi etc.
Now for the economy to revive and achieve it’s due status,modiji must give Dr.Swamy, the task of catching the thieves,with some could be BJP big wigs.If Modiji fails to undertake this task,which will turn the politics of the country upside down to a correct position with hundreds of economic offenders both in politics and business,he will have done an irrepaireably damage to this nation.Hope he understands the need and acts,enough if empty rhetoric of non achievable 5 trillion economy ever.
#2.Catch all the 85 Hawala traders.
#3.Make a law to jail all money laundering cases and FLIGHT OF OUR CAPITAL,a non bailable offence and jail without bail.
#4.Systematically catch all the benami property holders and jail with out bail.
#5.ABOLISH PN route of money movement back and forth.
#6.At this point,ie..after achieving the above,REMOVE INCOME TAX and give 9% interest to small money holders and elders who survive on their savings with proper limits assigned to individual family units.
#7.invest on PRECISION AGRICULTURE,ADDED VALUE PRODUCTS MANUFACTURING AT SITE TO ENHANCE TRULY THE REVENUE OF OUR FARMING COMMUNITY AND PROVIDING MILLIONS OF JOBS TO OUR RYRAL FARMING COMMUNITY.
HOPE MODI UNDERSTANDS THUS NEED OF EMEEGENCY KIND OF ACT
Swamy’s age is catching up. He advocates abolition of personal income-tax just for the sake of it. Increasing exemption limit to Rs. 10 lakhs is practical subject to condition that returns need to be filed even if income is less than Rs. 10 lakhs but more than Rs. 5 lakhs. His alternative idea of transaction tax will be disastrous for the economy. It’ll not work and can cause havoc.
LEave these radical steps. If Modi and Nirmala leave their ego and revrt the CSR blunder itself, it is a big deal.
Surest way to India’s doom….?
Printing notes is a bad idea. Zimbabwe is an example.
Good Article.
But what about 5 lack crore that is forfieted?Nothing in detail about how to compensate for it.
taking out 80,000 officers will save how much?
where should those 80,000 go?
9% lending rate and 9% deposit rate? Where is the spread?
One is to SME and one is to savers.
Sir, It is an excellent piece of advice by Dr. Swamiji. But alas even the Modi Govt. is not willing to accept it. Why? I have a feeling that if personal IT is abolished the FM or PM fears that they will loose control over the politics / politicians. Hence, they may not accept it. With the complex rules/ regulations and some corrupt tax officers the govt. may coerce the businessman to dance to their tunes. People fear to invest in India because they have to grease the palms of local politicans/ state level politicians . Sir, We need genuine / knowledgeable politico-economists like Dr. Swamyji to run the Finance Ministry
deposit rate should between 7.5 to 9 is also effective not as same as lending rate
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All the five recommendation would result in sure shot revenue loss to the government and the returns or the benefits are left for imagination! If the returns fail, what will happen? Excuses could be invented from now on!
How is Step 5 Revenue loss?