Overall Solutions to achieve a New India by 2022 - INSIGHTSIAS (2024)

Tax Cuts and Tax Rebates

Tax cuts and tax rebates are designed to put more money back into the pockets of consumers. Ideally, these consumers spend a portion of that money at various businesses, which increases the businesses’ revenues,cash flows, and profits. Having more cash means companies have the resources to procure capital, improve technology, grow, and expand. All of these actions increase productivity, which grows the economy. Tax cuts and rebates, proponents argue, allow consumers to stimulate the economy themselves by imbuing it with more money.

For instance, The government announced a reduction in corporation tax rates in September last year. It slashed corporate tax rates for domestic manufacturers from30% to 22%, while for new manufacturing companies; the rate was reduced from 25% to 15% provided they do not claim any exemptions, this policy is designed to increase economic growth for the next ten years.

Stimulating the Economy With Deregulation

Deregulation is the relaxing of rules and regulations imposed on an industry or business. It became a centre piece of economics in the India in 1991,when the Union government deregulated several industries, most notablyfinancial institutions, industries and foreign investments, that promoted spurt of economic development, it must be done regularly.

For example, through disinvestments of loss making PSUs.

Using Infrastructure to Spur Economic Growth

• Infrastructure spending occurs when a local, state, or federal government spends money to build or repair the physical structures and facilities needed for commerce and society as a whole to thrive. Infrastructure includes roads, bridges, ports, and sewer systems. Economists who favor infrastructure spending as an economic catalyst argue that having top-notch infrastructure increases productivity by enabling businesses to operate as efficiently as possible. For example, when roads and bridges are abundant and in working order, trucks spend less time sitting in traffic,and they don’t have to take circuitous routes to traverse waterways.
• Additionally, infrastructure spending creates jobs as workers must be hired to complete the green-lighted projects. It is also capable of spawning new economic growth. For example, the construction of a new highway might lead to other investments such as gas stations and retail stores opening to cater to motorists.

Using the above analysis of various dimensions of Indian economy, we can come to the conclusion that while India has great economic prospects there are also many challenges which need to be overcome to harness the true potential of the economy. We have already seen the steps government had taken and few micro-level solutions to address these challenges. Now, we shall look at few broader measures which can make our country a “Major Economic Powerhouse”.

• Growth:
  • Raise investment rates to 36% of GDP
  • Increase tax-GDP ratio to 22% of GDP
  • Work with states to improve ease of business and rationalize land & labour regulations
• Employment and Labour Reforms:
  • The necessary condition for employment generation is economic growth.
  • Fully codify central labour laws and enhance Female Labour Force Participation to 30%
  • The employability of labour needs to be enhanced by improving health, education and skilling outcomes and a massive expansion of the apprenticeship scheme.
• Technology & Innovation:
  • Establish an empowered body to holistically steer the management of science
  • Create a non-lapsable District Innovation Fund
• Industry:
  • Develop self-sufficient clusters of manufacturing competence, with plug & play parks for MSMEs
  • Impetus to Labour Intensive Export firms
  • Launch a major initiative to push industry to adopt Industry 4.0
  • Introduce a “single window” in states providing a single point of contact between investor & government
• Doubling Farmers Income:
  • Modernize technology, increase productivity & agroprocessing and diversify crops
  • Abolish APMC -Adopt Model APLM Act, Model Contract Farming Act & Model Land Leasing Act
  • Create modern rural infrastructure & an integrated value chain system
  • Link production to processing, set up village-level procurement centres
• Energy:
  • Bring oil, natural gas, electricity & coal under GST to enable input tax credit
  • Promote smart grid & smart meters
  • Ports, Shipping & Inland Waterways:
  • Double the share of freight transported by coastal shipping & inland waterways
  • Complete Sagarmala project. Open up India’s dredging market
• Logistics:
  • Develop an IT enabled platform for integrating different modes of transport
  • Rationalize tariffs & determine prices in an efficient manner across different modes
  • Create an overarching body that maintains a repository of all transport data.

Rationalising GST :

• Rationalization of GST Slabs and Rates as suggested by Kelkar Committee
  • Inclusion of Petroleum Products within the GST Regime
  • Addressing the issue of Inverted Duty Structure under the GST for few imported products
  • Inclusion of all the Real Estate Transactions within the GST Regime
  • Faster processing of GST Refunds for Exporter.

Resolving NPA Problem:

• Mudra Loans: Raghuram Rajan suggests closer scrutiny of the loan applications while granting Mudra Loans.
• Prompt Corrective Action (PCA) guidelines need to be reframed in a balanced manner to address the dual objectives of growth and NPA resolution.
• Economic Survey 2016-2017 suggests the setting up of a centralized Public Sector Asset Rehabilitation Agency (PARA) that could take charge of the largest, most difficult cases, and make politically tough decisions to reduce NPAs
• The 4th R, which is Reform (of the 4R Strategy for NPAs resolution suggested by Dr. Aravind Subramanian) must be given prime importance if we have to prevent the NPAs Ballooning in the future.

Conclusion

• India needs to carry out the crucial internal reforms that will allow it to be a productive international player and to take on the leadership roles that so many people across the world hope that it will.
• Reorganization of the health system with much greater emphasis on primary medical centres or PMCs
• Any improvement in the life of the majority would require a re-alignment of the growth process so that it is less damaging.
• This would very likely require that we have slower growth but the process can be configured to channel more of it towards poorer groups.
• India could and should aspire to double-digit growth. Without sustained growth at that all levels it has little hope of employing the roughly one million young people who join its workforce every month.
• And unless it takes advantage of its current, favourable demographics it is never likely to emerge as an uppermiddle-income economy with a prosperous and thriving middle class.