Reinventing the Indian Economy Post-COVID-19 | UPSC

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Reinventing the Indian Economy

Reinventing the Indian Economy

      HEADLINES:

Reimagining and reinventing the Indian economy

      WHY IN NEWS:

‘India needs to minimise the damage caused by the pandemic while rebooting the country by exploiting new opportunities unleashed by evolving business scenarios’

SYLLABUS COVERED: GS 3: Economy

      LEARNING: 

For MAINS can you prepare an socio-economic action plan or a chart of a district as a DM for post COVID management scenario . This article will drench you with hope and solutions . Let us dive in !

      ISSUE: 

The COVID-19 pandemic has disrupted the global economy and India is no different.

REINVENTING THE INDIAN ECONOMY

  • CONTRACTION : The significant reduction in domestic demand caused by the nationwide lockdown has pushed the economy towards contraction in the first quarter of 2020-21.
  • CREDIT AVAILABILITY : The stimulus package can help revive businesses, which are finding it difficult to operate without adequate availability of credit.
  • LIQUIDITY CRUNCH : This is especially true for India’s 60,000-odd start-ups, which are facing an acute liquidity crunch.
  • JOBLESS MARKETS : The situation presents an opportunity to take bold action to promote investments, protect existing jobs and create new jobs.

A lot more needs to be done, however, to resuscitate the country’s growth engine.

STRATEGY

India needs is a two-pronged strategy to successfully navigate the current crisis.

  • First, minimise the damage caused by the COVID-19 and clear a path to recovery.
  • Second, rebooting and reimagining India by promptly exploiting new opportunities unleashed by evolving business scenarios.

The three mantras should be bigger, bolder and faster execution of this strategy.

KEY STRATEGIES

The strategy should address four major economic cylinders:

a) Big Business Houses which are a major contributor to GDP and large employment generators.

b) MSMEs which are the lifeline of the country, generating wealth for the middle class.

c) Start-ups, which bring innovation and transformation to our country’s economy.

d) Our Indian brothers and sisters living abroad.

The NRIs and OCIs — they not only serve as unofficial ambassadors of India, but their heart beats for India and through their contacts, can bring huge investments into India.

ACTION PLAN

1. KICK START : Big business houses should be supported by the government to reopen their operations by way of tax incentives.

2. MONETARY POLICY : The RBI should consider single one-time window for restructuring business loans, as required, by all banks.

3. MANUFACTURING KIT : The Centre can prepare a five-year plan on getting at least 60% of those companies, desiring to move manufacturing out of China to India.

4. BEST TRADING PRACTISES : Making India a global trading hub — devise an incentive regime for companies setting up global trading operations from India.

5. INDUSTRIAL HUBS : The States should think of establishing self-contained “industrial cities” that earmark space for manufacturing, commercial, educational, residential and social infrastructure.

6. CORE SECTOR REFORMS : The 10 sectors identified by the government fit into the Make in India campaign — electrical, pharmaceuticals, medical devices, automotive, mining, electronics, heavy engineering, renewable energy, food processing, chemicals and textiles.

SUNRISE SECTORS

7. LEVERAGING TECHNOLOGY : The government can also consider giving impetus to “Deep Tech”-leveraged businesses — blockchain, robotics, AI, machine learning, augmented reality, big data analytics, cyber security, etc.

8. DRIVING INNOVATION : Several of them are in pre-Angel or Angel-Funding stages and are under significant pressure to stay afloat in view of a lack of adequate liquidity.

9. SPECIAL CARE : The auto industry which contributes significantly to GDP (nearly 9%) deserves special treatment.

10. PLUG-AND-PLAY MODEL: Maharashtra has created a turn key ‘plug-and-play’ model for foreign investors.

11.LAND REFORMS : Land should be made available for projects with all necessary pre-clearances — at Centre’s level (including Environmental), State’s and Municipal dispensations.

11. LABOUR REFORMS : Reforms in labour laws do not only mean permission to hire and fire. Strictly enforcement of discipline within the factory premises and demand higher productivity is important.

12. FDI : Investments of NRIs and OCIs in India should be treated on par with those of Resident Indians as regards interest and dividend repatriation and management control of Indian companies.

      IASbhai WINDUP: 

TAX EXEMPTIONS

  • TAX HEAVEN : The government may also consider providing tax exemption on passive income like dividends, interest , mutual funds etc.
  • CAPITAL GAINS : Also, capital gains should be taxed at 50% of applicable rates for next 3 years.
  • ROYALTIES : We need to reconsider the approach to taxing interest, dividends and royalty paid to overseas investors.
  • CAPITALIZATION NORMS : The government could consider a 3 to 5-year moratorium on the applicability of thin capitalization norms .
  • OFF SHORE INVESTMENT : An off-shore investment centre like Singapore can be opened in Mumbai, where Indian domestic laws and taxation will not be applicable.
     SOURCES:THE HINDU 

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