The Infrastructure segment has indeed seen a lot of focus from the government but nothing seems to be enough. The black hole phenomenon rears its head again and again every year perhaps because of lack of cohesive planning and execution, maybe because of rampant corruption or maybe because of some other reasons that’s hard to pinpoint. Whatever the reasons, it’s a fact that for all the money gobbled up, India’s infrastructure(a top 5 global economy, Purchasing Power Parity terms), India seems worse than most countries that we can think of. Why not completely change the equation. Make the infrastructure projects more transparent in terms of requirements, have an independent monitoring agency and source allocation from the public. With attractive tax incentives, easy back to back agreements with banks and NBFCs for loans against such holdings, the government will not be burning the midnight oil to source the money. If done well it will provide the common man an option to park middle to long term money with high degree of safety, some degree of liquidity and attractive post tax returns.
2. Income Tax Deduction Limit enhancement
This is a no brainer. The salaried class has been the favourite whipping boy of most finance ministers and every increase in direct and indirect tax affects the salary earner disproportionately higher. The limit currently is a mere Rs. 1, 50,000 and everyone knows the limit is not providing any significant relief to Mr. Taxpayer. Even by the inflation adjusted route from whence it started, the amount should be closer to Rs. 7 lacs. Granted that it will be almost impossible to get, two things could be done. First there could be an uptick to Rs. 3 lacs and secondly, housing loan benefits could be taken out of it and accounted for separately. This will provide us with higher spend on fixed assets as well as investment into long term savings and investment instruments. As a quid pro quo, I suppose a minimum lock in across all schemes of 5 years will not be very taxing.
3. Well defined Pension Plan Products
Post retirement concerns are eating away the well-being of most employees in the private sector and increasingly in the government sector as well. Inspite of the pension fund regulator (PFRDA) being in operation for many years now, there has not been much activity in this segment although a very real gap remains from the consumer point of view. What’s more, PF is a very long term commitment from the investor and so does constitute a relatively cheaper source of funding for the infra sector too. All said, this is a very under used product segment in India so far.
4. LTCG on equity to be removed
No one really knows why the tax was imposed when everything was going so well. Perhaps the Ministry of Finance mandarins had forgotten the simplest management lesson —- if it’s not broken, don’t mend it. Now that it has been in operation for a year with no tangible gains in sight and lots of pain points for the returns filing, it’s high time it’s done away with. It will encourage equity participation from the salaried class, which even the Ministry of Finance will accept, has come down sharply.
5. Unified, Simpler KYC
The current system of having to file KYC separately for every kind of investment is most irritating process. It has driven away the most resolute individual. The ease of investment and saving is a major factor for savings and investment for most of us. We have to make KYC for multiple purposes, leaving mountains of photocopies of PAN, Aadhar Cards, Passports and what not all over the financial landscape. Not only is it irritating but also boggles the mind why is it so. India is technology rich and in recent times very data rich too. Besides it’s the same documents over and over again that is provided as supporting. Madam FM, please dispense away with the multiple KYCs and get it under one roof and part of a central database which the organisation (bank, mutual fund, insurance etc.) can check and allot policies, units etc.
6. Massive Housing Initiative
Housing has developed in the country in an asymmetrical manner to demand and supply. Whereas the focus by builders earlier was on the MIG and HIG segment, obviously with an eye on profits, the dissonance was with the understanding of the demand areas. With rapid urbanization and huge migration from rural to urban, there is a huge gap to plug in the LIG and affordable housing segment. The real estate sector is also a huge employer of unskilled and semi-skilled labour, not to mention the substantial consumption of core industry outputs like energy, cement, iron and steel, paints and chemicals and so many others. With a renewed focus in this area, there is scope to form substantial job creation opportunities, which has a large and positive cascading effect on the rest of the economy. Demand for consumer goods get an immediate fillip leading to creation of more jobs and the remittance economy also gets a significant boost. This can be done by having easier norms for loans and nudge to banks to take up lending in a proactive manner.
7. Huge spend on creating mandis for fair price to farmers and consumers
While food inflation has been moistly benign, but for the last half a year, the prices of agri-products have shot up. The asymmetry here is the money the farmers make and the lopsided product basket that the farmers cater too. While the latter is a structural issue needing time and effort, in the short term large new mandis can be established ensuring fairer and market linked prices to the farmers. A very major part of our population is engaged in agriculture and the government had earlier promised to look very closely at the issue but without much success. A renewed focus on creating an infrastructure to address the anomaly will go a long way in redistribution of income in a more fair and transparent manner, spike to GDP and less strain on the government in supporting incomes and providing subsidies.
8. Fillip to tourism and allied industries
How many times have we gone to other countries and come back with the feeling that this is available in India too yet hardly anyone goes. Although individually states have done some work in promoting tourism, it has not even come close to what collectively India can achieve. Imagine: Bangkok Suvarnabhumi airport has more tourists than the whole of India and that’s a shame. Ancient civilisations, mountains, beaches, forests, deserts, cities, nightlife, food, culture and so many other things. Yet tourism is nothing to talk much about. Not only is tourism a huge forex earner, it also is a huge employer. From transport to hospitality to ancillaries – the ripple spread far and wide and encompasses every segment of the population. From the sweeper in a small hotel to the chairperson of a five star hotel. Many will say easier said than done. Yes. But something needs to done and now. If Vietnam and Cambodia can do it, we too can.
9. Massive focus on primary healthcare centers
On many health metrics India ranks below some countries in sub-Saharan Africa. The government last year did announce a major scheme – Ayushman Bharat – with much fanfare but it’s shallow thought and obvious lift from the existing Rashtriya Swasthya Bima Yojana (RSBY, 75% central funding and 25% state funding) has ensured the old tonic in a new bottle label flop miserably. A healthy nation contributes substantially to nation building is a no brainer. Focus on basic equipment enabled primary health centres with a pyramidal approach to the reference hospital will ensure lesser congestion at the hospitals, speedier treatment, lower costs and happier healthier people.
10. Refocus on school level education and technical training
The budget for 2019 in this area was – Rs. 56,500cr and technical training centres Rs. 38,300 cr. Both these amounts are too paltry. Although the near 13% growth over 2018 might seem big, consider the fact that 7% inflation ensured that in real terms only a 6% real growth was there. Plus most of it is in the working capital sphere and hardly anything for the educational sector equivalent in capital expenditure. Whilst the sector is riddled with lopsided policies and pay structure and too little accountability, both of which are not within the purview of the Finance mandarins, a start needs to be made. A major push on creating good basic infrastructure along with creation of affordable skilled labour for use in every other industry is the need of the hour. Lots of good quality ITIs and private training establishments with very strict guidelines and genuinely employable youths will go a long way in decreasing corporate costs, improve profitability and generate employment.