Prime Minister (PM) Narendra Modi, at a recent India-United States (US) business summit, invited global investors to invest in India. He told them that India offered a combination of “openness, opportunities and options”; pointed out that India had undertaken deep structural reforms, improved domestic manufacturing and was committed to diversified international trade; and spoke of merging domestic production and consumption with global supply chains.

PM Modi has never shied away from taking tough decisions. The privatisation of the Indian Railways, public sector disinvestments, reducing corporate tax and opening up coal mining to the private sector are measures which may have been unpopular in certain quarters, but are necessary for the long-term health of our economy, particularly in strengthening our manufacturing base.

To achieve the goal of a politically and economically strong India, the Aatmanirbhar Bharat Abhiyan is a 360-degree initiative to make India an economic superpower. The focus is on five pillars of development: Economy, infrastructure, technology, demography and demand. Our targets are the factors of production. These are land, labour, legislation and liquidity, improving their efficiency and reducing the cost to make our industries globally competitive. This is not restricted to the manufacturing, but targeted at direct benefit transfers to the needy. This has also resulted in demand creation in the economy and helping the vulnerable, particularly farmers, migrant workers and daily wagers.

The campaign for self-reliance has little to do with disengagement with China alone. We discerned the designs of Chinese economic imperialism early on. Our delinking from China began much early than many would like to believe. It began with PM opting out of the Regional Comprehensive Economic Partnership (RCEP). The Chinese leadership tried hard to pressure India to join RCEP or face isolation in the grouping’s 16 countries. But the PM stood firm. In 2010, the United Progressive Alliance (UPA) government signed Free Trade Agreements (FTAs) with 10 Association of South East Asian Nations (Asean) countries, the benefits of which were reaped by China as well. Reduced custom duties from these countries were creating an inverted duty structure in our domestic manufacturing sector, destroying local industries and converting manufacturers into traders.

Therefore, in the Union Budget in 2019, the government increased import duties on over 56 items spread across eight classifications. Items such as toys saw an increase of 60% from 20% earlier. All these efforts were to protect domestic industries from the onslaught of dumping and competition. Without first strengthening domestic manufacturing by providing a level-playing field, and reducing costs and increasing the efficiency of factors of production, we cannot open the floodgates for imports.

The Chinese leadership had almost managed to get the UPA government to accept RCEP. There are reports to suggest this. India’s signing of FTAs with Asean countries, without strengthening India’s domestic industries before opening them to regional and global competition, shows that the country’s interests were compromised. One important question must be asked. Why did India, which was a global leader in the pharma sector, gradually concede Active Pharmaceutical Ingredients (API) production to China? The UPA must answer this.

As of now, with the coronavirus pandemic, the world has realised the risks of over-dependence on supply chains from one nation. We rose to the occasion by identifying this as a risk diversion strategy for global manufacturing companies. It provided India an opportunity to deal domestically with the challenges thrown up by the coronavirus. Further, the Chinese aggression at the Line of Actual Control (LAC) at the Galwan Valley forced the government to immediately impose trade curbs and ban 59 apps from China. This is being hailed as a timely move, though certain economists and industrialists have sounded a note of caution on its long-term impact. But their logic seems based on the line propagated by the Chinese media and China’s government officials.

Fortunately, what we import from China is mostly in areas in which India has the domestic technology to leverage for import substitution. Most of these items do not come under the essential consumption requirements category and are generally non-merit goods. Except in pharma, which China dominates through the supply chain of APIs, it has not been able to penetrate strategic sectors.

India’s manufacturers need to seize this golden opportunity in sectors such as toys, electrical equipment, electronics, minerals, chemicals, iron and steel, plastics, furniture, sports goods, musical instruments, fertilisers and apps. Earlier, the ministry of commerce and industry had identified 12 such sectors; these now constitute 20 sectors. And 371 items have been identified for increasing import duties including non-tariff barriers on some of them.

If you look into the comparative advantage theory domestically, we have to focus on areas such as agriculture, particularly food processing, textiles, affordable housing, health care and education, and increase their contribution to India’s Gross Domestic Product. These sectors can generate large-scale employment and are looking up. This will be our path to recovery.

Gopal Krishna Agarwal is the Bharatiya Janata Party’s national spokesperson on economic affairs

The views expressed are personal

By Gopal Krishna Agarwal,

India is doing a commendable job in fighting the Covid-19 pandemic. It took the epidemic seriously unlike some other countries when it emerged on the global horizon and has generally been ahead of the curve. Whether it’s screening of international passengers, quarantine or announcing lockdown, the central government has never been found wavering or hesitant.

The first priority obviously is to save people from this virus. The lockdown was announced when the cases were still very few. It reduced the speed of the spread of the virus and gave the government time to set up the required health infrastructure. Then the focus of the government shifted to mitigating the hardships of the people due to the lockdown. And now, rightly so, the focus is gradually shifting to the health of the economy.

It is an understatement to say that the economy has been severely affected by the lockdown. The global economic engine has come to a sudden stop because of the pandemic, as one country after another declared lockdown. The Indian economy, which was on a recovery path after a slower growth phase, has been brought down to its knees.

Covid-19 is a non-linear and uncertain event. Proper action at the right time alone will ensure that the cost of recovery is not huge. The likelihood of post-Covid-19 recovery being a V-, U-or L-shaped curve will depend on the road map ahead. The gov- ernment intervention will be commensurate with the severity of the global recession. India’s strengths are its demography, democracy and demand and while the first two will remain unaffected by the crisis, demand will diminish due to economic uncertainty, job losses and financial problems. Therefore, post Covid-19, the government will focus on reviving the demand.

The business of SMEs and other small enterprises are disrupted in a major way. In the absence of public social safety measures, compelling the private sector to bear its cost is not justified. There already is a twin risk aversion in the credit market for the SMEs. Credit guarantee schemes have to be made more robust and the government will have to actively consider sharing some part of the credit risk. Though, availability of credit is not the only – issue for the SMEs, going concern and business – continuity plans require a strong balance sheet which is missing among the SMEs.

The trend of de-globalization, which started after the global financial crisis and gained strength after the 2016 US elections, is expected to accelerate. The world will see the reshaping of international relations. Non-economic dimensions will become more important as countries try to become self-sufficient. However, countries will not return to autarky as no country can be fully self-sufficient in the present era. Though India will try to be self-reliant in critical products, that will not be achieved merely by increasing import duties – global competition is an important factor in boosting domestic productivity.

The shutdown in China due to the Covid-19 out- break was a rude shock for countries. It highlighted their vulnerability due to dependence on one country. A number of multinational corporations are working on a risk diversification strategy, but India will not automatically benefit from such a shift out of China: The success of Bangladesh and Vietnam over India is a sobering reminder. Old rulebooks that hamper private initiative will have to be scrapped by the government.

The government can formulate a new National Manufacturing Policy to make manufacturing in India competitive. The cost of doing business is very high compared to other countries. The cost of compliance, logistics, power, land and so on are very high. This is the right time to undertake factor market reforms, particularly land and labor. The crisis has also shown the importance of migrant workers in keeping the wheels of the economy moving. Going forward, we need a large infrastructure set-up for migrant workers so that the events of mass exodus do not reoccur.

The crisis has brought in sharp focus the aspect of state capacity. Our private sector has immense potential and in times of crises such as the present the government will need to have in place a mechanism to rope in the private sector to augment the state capacity. The use of big data and artificial intelligence (AI) for good governance, policies and welfare programmed can bring massive improvement in state capacity. India’s earlier digital story based on Aadhaar is very different from that in the US and China, and has set an example for the world. Using Al to identify critical areas for government intervention and scenario planning have the potential for huge application in better execution of schemes, predicting natural calamities, agricultural output and so on. India has the talent to do it.

The lockdown will be lifted in a staggered manner and after detailed planning and a standard operating procedure. With inflation remaining under control and lower oil prices benefiting India, the Centre may use special provisions under the Fiscal Responsibility and Budget Management (FRBM) Act to go for a one-time off-balance sheet borrowing with a declared timeline. The borrowing limits on states under the FRBM Act may have to be relaxed for the time being.

Reviving demand, increasing liquidity and big- ticket reforms is the road map. India is fighting the current crisis with all its might and we will set the path for other nations to follow.

The author is national spokesperson of the BJP for economic affairs

This is an Epoch-making Budget 2020. Finance Minister Nirmala Sitharaman has kept in mind all the segments of the economy. It enforces Prime Ministers Shri Narendra Modi’s vision of achieving 5 trillion dollar economy by 2024, with Sabka Saath Sabka Vikas.

The Government has not bogged down by the resource constraints and has continued with its spending on infrastructure and asset creation. It has taken care that the social welfare schemes of the government have sufficient funds allocation and can continue on its path of benefit to the last man (Antyodaya). Though the fiscal deficit targets have been relaxed the government gives a fiscal consolidation path and has also, for the first time, annexed a list of off-budget borrowing in the budget document and settled a very significant debate about transparency in government borrowing. All previous governments had been resorting to off-budget borrowing like oil bonds etc. but were not disclosing it. FM has estimated a nominal GDP growth rate of 10 per cent for the coming year, keeping inflation below 4 per cent our real GDP growth will be above 6 per cent.

The budget focuses on wealth creation and pro-business policy talking about minimal government intervention under the Economic development Theme of the Budget. For resource generation, it has desisted from increasing direct or indirect taxes. The government has reiterated its commitment to recognizing and honouring honest taxpayer and is taking care of unwarranted harassment by a tax authority by bringing accountability in the tax administration. Announcement of Taxpayer’s Rights Charter within the statute is an important step in this direction. Provision for statutory taxpayer’s right exists only in three other countries worldwide. 

Direct personal tax slabs have been changed to benefit middle-income segment and taxpayers up to income level of Rs 15 lakh will be benefited if they opt for a new regime of personal tax. FM has also promised that many tax concessions enjoyed currently by individual taxpayers will be incorporated in the new regime also depending upon nature, the option can be revised by the taxpayers on a yearly basis.  Deposit insurance for the scheduled banks has been increased to Rs 5 lakh from the current level of Rs 1 lakh only per depositor, about which there was very little awareness amongst the general public. This will help in building more confidence in the banking industries, bringing transparency. 

Cooperative sector gets the benefit of lowering of tax structure as in the case of reduced taxes for the corporate sector, helping farmers’ producer organisations, milk cooperatives and other charitable institutions operating under a cooperative structure. Even registration for charitable organisations under 80G and 12A has been made online provisionally so that they face less harassment and can start their activities early. 

The agriculture sector has been sufficiently provided for with the 16 new initiatives announced under Aspirational India theme for rural and agriculture sector. Financial market’s long-pending demand for the abolition of dividend distribution tax (DDT) has been accepted. Stressed assets under MSME has been given an extended one year time period for resolution and limit to go to resolution mechanism has been reduced to Rs 100 crore from earlier Rs 500 crore. The tax audit requirement has been increased to a turnover of Rs 5 crore. MSME also meets its demand for invoice financing under TReDS. Startup ecosystem gets several hand-holding supports like payment of taxes for ESOPs only at the point of sale. GIG economy, involving technological development, gets a big push from the government. Education sector seas several reforms for connecting academic to industries, providing them with industrial internship and skilling etc. setting of online educational facilities and new Police and Cybercrime University are an important development. Employment through National Recruitment Agency for non-gazetted posts will smoothen the employment process and make it completely transparent.  

Under the theme of Economic Development, the government provides for all the important sectors like Technological Textile Centres, power, renewable energy, connectivity like airports, seaports and railways. Finance minister works out a mechanism for the ambitious plan of investment of Rs 103 lakh crore under National Infrastructure Pipeline (NIP) identifying 6500 projects through Center, State and foreign direct investments (FDI). Government has also opened up its bond markets for foreign sovereign debt investment in rupee denomination, securing against exchange fluctuations, a concern shown earlier for sovereign debt funds.  The budget also provides for gap funding for new hospitals in the aspirational districts for servicing Ayushman health care scheme and provision for drinking water. Under the GST announcement, the government has provided for its commitment to compensate the states for increased 14 per cent revenue every year through compensation cess.

Government has also taken care of inverted duty structure that has seeped in the domestic industry under the Free Trade Agreement (FTA). It also protects domestic industries from dumping securing domestic industries through clauses like country of origin value addition. Income accruing to NRI in zero-tax countries like UAE will be taxed on income generated in India only, a logical step to fill the gap in taxation. 

Discrimination of civil acts under Company Law and removal fear in the corporate sector has been hailed across every section. Faceless appeal provision and Vivad se Vishwas scheme will help to resolve long-pending tax disputes in tax administration and will also release funds for the government. Disinvestment road map will help reduce government dependence of tax revenue and improvement of the primary and secondary bond market will help reduce the dependence of corporate sector on bank finance alone.

Gopal Krishna Agarwal

He is National Spokesperson BJP and has a keen understanding of economic affairs.

The government is aware of the pain points. It will make required interventions in order to propel our economy to the next level

Global economies have been hit hard by the Covid-19 pandemic, and India is no exception. Post-pandemic economic recovery is a big challenge for all of us. Governments and central banks across the world resorted to fiscal and monetary measures to ward off the negative impact of the crisis. These measures included liquidity infusion, credit enhancement, deficit financing, direct benefit transfers, even the printing of currency and distribution of helicopter money.

These stimulus packages did help in the economic recovery, but disruptions in the global supply chain and the resultant strengthening of commodity prices, and liquidity overhang have led to inflation. Now, when the central banks have started sucking the liquidity out of the system to contain inflation and governments are reversing the stimulus in the interests of fiscal consolidation, a sustainable global economic recovery seems to be a distant goal.

The Indian government also came out with a stimulus package in the form of Atmanirbhar Bharat (self-reliant India), which had several measures but stopped short of printing currency, and did not resort to the distribution of helicopter money. So, post pandemic, the Reserve Bank of India (RBI) is comfortably placed in its fight to contain inflation. It can reverse the excess liquidity from the economy in a phased manner while continuing to extend credit support to the needy segments. The government also has ample space for fiscal consolidation.

Our economy, at present, is in a resilient mode and we are witnessing a sharp post-pandemic recovery, thanks to the farsighted approach of the Narendra Modi government and RBI. This confidence in our economy is not only visible domestically, but also seen within the global investor community. Our macro-economic parameters are strong across segments. The government and RBI. This confidence in our economy is not only visible domestically, but also seen within the global investor community. Our macro-eco-nomic parameters are strong across segments. The government is continuing with its infrastructure spending and schemes such as Production Linked Incentives (PLI) are bringing the desired results in the domestic manufacturing sector.

It is against this background that the budget for 2022-23 will be presented. The first requirement to put economic growth on a sustainable path is to identify current challenges and to come up with a roadmap to address them.

The economic repercussion of the pandemic in India has not been equitable and it has been particularly harsh on the informal sector.

Consequently, there has been a deepening of income and wealth dis- parity in society. The last few years have seen very little growth in aggregate private consumption in the economy. Any support for the informal sector will help in increasing private consumption as well.

Micro, small, and medium enterprises (MSMEs) are the growth engines of the economy, but were severely affected by Covid-19 related disruptions. They require working capital and other credit facilities. It is expected that the government will extend the credit guarantee scheme for MSMEs. There is also a fear that the looming liquidity crisis might transform into a solvency crisis; it would, therefore, be advisable that the Insolvency and Bankruptcy Code (IBC) provide additional relief to small firms. There is a growing con- sensus that this segment requires new instruments for private capital formation.

It is expected that the government will focus on fiscal consolidation from the coming financial year . However, there is considerableuncertainty regarding its pace. A fiscal consolidation road map will help in the orderly working of the financial and capital markets. However, the glide path of fiscal consolidation should not be too steep.

Another important issue is the rapid rise in com commodity prices, affecting businesses because they are not able to pass on the increased costs to consumers due to weak demand. Reducing import duties on such products will tame costs and reduce inflation, particularly the wholesale price index (WPI). This will also help manufacturing industries, which were adversely impacted due to the rising costs of base metal and raw material.

Though Goods and Services Tax (GST) collections are increasing, over the years, the average tax rate under GST has come down to around 11.6%, much below revenue neutral GST rate of 15-15.5% as envisaged at the time of GST implementation. There is space to improve the average tax rate to bring it to around 15.5%. The government must improve the tax to Gross Domestic Product (GDP) ratio.

Corporate tax rate has also been reduced to around 25% on average. However, for the tax-paying middle and upper middle class, the highest marginal rate of taxation is above 40% right now. If the government introduces infrastructure bonds, which provide for additional investment related deduction from taxable income, then not only will it bring down its total tax liability but also generate critical financial resources to invest in infrastructure.

Disinvestment has been one of the focus areas of the Narendra Modi government and the driving principle behind this is the government’s belief that public money locked in such assets should generate higher returns. However, a section of analysts and Opposition parties have tried to portray this as an exclusively revenue generating measure. The government needs to reaffirm the principles of better utilisation of public capital, underlying the disinvestment plan in the budget. Monetisation of assets of public sector undertaking has not been taken up as envisaged earlier and will require renewed efforts.

Our government is well aware of these pain points. The public is confident that it will make required interventions in this budget to propel our economy to the next level and this positive sentiment is quite visible in the business ecosystem. The government will continue on its path of eco- nomic reforms to build on this business confidence.

Gopal Krishna Agarwal is the Bharatiya Janata Party’s national spokesperson on economic affairs

The views expressed are personal