Vocal for local initiative is not xenophobic
Great leaders are almost always great simplifiers, who can cut through argument, debate, and doubt, to offer a solution everybody can understand—colin Powell
This quote in many ways exemplifies the leadership of Prime Minister Narendra Modi, who chose to bring in the biggest indirect tax reform in post-independent India by implementing the goods and services tax (GST) in his first term. Consumers got an annual benefit of ~1 trillion due to GST in 2018-19. With a compliance rate of over 70 per cent, with over 13 million GST filings, suffice to say that GST has succeeded in its endeavour towards replicating the “one nation, one tax” model.
Be it launching Rupay cards in Abu Dhabi and Bhutan, spearheading the international solar alliance, or powering the India story at BRICS—THE association of emerging economies of Brazil, Russia, India and China— and the Eastern Economic Forum in Vladivostok, Modinomics, the Modi government’s first term in office laid the groundwork for change. The second term has thereafter been implementing those changes. The notable ones are the health care scheme, Ayushman Bharat, that has to date benefited over 10 million people; the ~6,000 per annum income support under the Pm-kisan Yojana that benefits over 145 million small and marginal farmers; and the direct benefit transfer scheme, which has so far transferred a cumulative sum of ~8.91 trillion, or approximately 4.5 per cent of India’s gross domestic product (GDP).
In the first year of its second term, the government’s landmark steps include the decision to implement ~102 trillion worth of infrastructure projects via the national infrastructure pipeline, lowering Employees’ State Insurance Act contribution from 6.5 per cent to 4 per cent, which benefits 36 million employees and 1.28 million employers, a monthly pension of ~3,000 to small traders and shopkeepers in the unorganised sector, after they attain 60 years of age under the PM Shram Yogi Maandhanyojana, Bill to repeal 58 archaic laws, including the outdated labour laws and passing the Code on Wages Bill, 2019, which will benefit over 500 million workers across the country, raising foreign portfolio investor (FPI) limits in corporate bonds from 9 per cent of outstanding stock to 15 per cent, and opening up of specific government bond limits for nonresident investors, with the aim of carving out a road map for India’s inclusion in the emerging market bond index.
Those quick to dismiss demonetisation would do well to know that the number of people paying an individual income tax of greater than ~1.5 lakh has increased from 1.38 million in AY13 to 3.4 million in AY19, reflecting how demonetisation dramatically improved tax compliance. According to data from the National Payments Corporation of India, February saw 1.32 billion UPI transactions totalling ~2.2 trillion, showing that demonetisation has also dramatically enhanced India’s digital foot print.
Big bang reforms have been the norm. Underpinning them are the reduction in corporation tax rate from 30 per cent to 22 per cent for old companies and for new ones to 15 per cent; 100 per cent foreign direct investment (FDI) in coal mining and contract manufacturing; allowing private sector in commercial coal mining on a revenue sharing basis with no end-use restrictions; 100 per cent FDI via the automatic route in defence manufacturing, single-brand retail and real estate broking services, corporatisation of Ordnance Factory board; and strengthening the insolvency and bankruptcy code (IBC) framework by ring fencing new owners of bankrupt companies from criminal liabilities of erstwhile promoters.
The Bank Nationalisation Act of 1969 has been a millstone for public sector banks (PSBS). By merging State Bank of India, with its five associates and the Bharatiya Mahila Bank in 2017, the government created a banking behemoth with an asset size of over ~41 trillion and over 370 million customers. The decision to thereafter consolidate 10 PSBS into four, starting April 2020, and allowing the private sector to enter into non strategic areas, with not more than four PSUS in any given strategic sector are all steps toward “minimum government, maximum governance”.
More recently, “One nation, one ration card”, free food grain supply to migrants, creation of affordable rental housing complexes in urban areas for migrants, ~90,000 crore support for cash starved power distribution companies, ~30,000 crore special liquidity scheme for non banking financial companies, housing finance companies and micro finance institutions, ~3 trillion of collateral free loans to micro, small and medium enterprises (MSMES) and liquidity support of ~6,750 crore by bringing provident fund rate down from 12 to 10 per cent, efforts to make India a global maintenance, research and overhaul hub for aviation, throwing open six new airports via the public-private partnership route to the private sector, changing the definition of MSMES by including both investment and turnover related criteria, atomic energy reforms, allowing private sector in space exploration and decriminalising certain offences under the Companies Act have been part of the Modi government’s ~20.97-trillion, mega stimulus package to combat the economic challenges arising from the coronavirus pandemic.
That Modinomics is not xenophobic is evident from the ~43,574 crore investment by Facebook, in Reliance Jio. Equally, the clarion call of “Vocal for local” by the prime minister is best amplified by the decision to amend the Essential Commodities Act of 1955, to ensure deregulation of prices for food items including cereals, edible oils, oilseeds, pulses, onions, and potatoes.
Also, allowing farmers in contract farming and defanging the agricultural produce marketing committee structure, will give options to farmers to sell their produce at attractive prices, either via barrier free, inter-state trade, or via e-trading, besides ending trade cartelisation by middlemen and ensuring assured returns.
In the movie, The Curious Case of Benjamin Button, there is a quote that says, “Our lives are defined by opportunities, even the ones that we miss”. The last one year for the government has been extraordinary for the sheer number of opportunities that were seized to create new milestones. India trumped France in 2019 and then surpassed the United Kingdom in early 2020 to become the world’s fifth largest economy.