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R.P. Gupta, Author, Jan Andolan (For Turning Around India)

India: Here are my views:

1. Macro Picture
Real GDP for FY-2021-22 might land at the same level of FY-2019-20. While comparing current macro parameters of the economy such as investment rate (GFCF), savings rate, bank credits (excluding SLR lending), inflation, trade deficit, etc., the GDP growth projection for FY-2022-23 by various agencies in the range of 7.0 to 8.5% is somewhat not convincing. More because the growth rate during FY-2019-20 was barely 4%. At the same time, for resolving the job crisis, it is the compulsion for India to grow @7% plus in FY-2022-23 and about 8.5% in FY-2023-24.

So as to achieve the aforesaid target, the forthcoming Budget should be used as an opportunity for announcing several structural reforms and the budget allocation should set the motion in that direction. Government should refrain from the populist budget considering State elections. Yes, a pro-active policy for supporting the unorganized sector and MSME sector will be a prudent choice that will generate jobs and serve populism as well.

A road map may be announced for boosting the private investment through an easement of bank credits and the easement business and taxation laws. Simultaneously, India must boost exports by reducing the cost of capital, energy, logistics, and minerals. During the interim period, export incentives may be liberally given to a few specific sectors.

2. Unorganized Sector
As per old studies by National Commission for Enterprises in the Unorganized Sector (NCEUS), there are about 5 Crores of Micro and Small Enterprises, mostly engaged in Trade, Transportation, Construction, Restaurant, and other services besides tiny Manufacturing. These are managed by large numbers of self-employed Entrepreneurs. They employ about 84% of the workforce. Most of them are not registered with the Tax Authority. They need the following fiscal reliefs for survival and revival:

  • To raise GST exemption limit to Rs. 50.0 lakhs and GST Composition limits in two slabs of Rs. 150.0 and Rs. 300.0 lakhs with differential Tax Rate. Also to provide notional credit of input tax to registered buyers @5-10% while buying from the composite tax category suppliers.
  • To extend credit guarantee on the working capital facility with a cap on the total loan.
  • To facilitate cheap housing to the persons engaged in this sector in cities and metros.

3. SME Sector
In the developing phase of any Nation, Small and Medium Enterprises (SME) play a vital role in generating public income (GDP) and employment. They don’t have access to the capital market. In the past decade bank credit to this sector is quite discouraging. The compliance burden of business and Tax laws has substantially increased. The provisions of criminal prosecution have demotivated. Inconsistent growth of the economy and the rising cost of basic inputs have enlarged the business risks. In the sequel, many potential entrepreneurs have become “job seekers” in lieu of “job providers”. So as to restore the entrepreneurial spirit, the policy and fiscal stimulus are needed as under:

  • The “Credit Guarantee Scheme”, which was introduced in FY-2020-21, needs modification. Instead of restricting this to existing borrowers, this must be extended to new borrowers and should include medium-scale enterprises. The guarantee should be limited to 50% of the loan to SSI and 30% loan to medium scale instead of 100%. Balance risk is to be shared by banks.
  • In the corporate tax, the income slabs of Rs. 5.0 crores and Rs. 10.0 crores with a tax rate of 15% and 20% plus surcharge. A normal tax rate of 22% may be applicable for income above Rs. 10.0 crores as usual.
  • Compliance burden related to business and tax laws may be drastically reduced. The provisions of criminal prosecution may be substantially diluted and it should be invoked in rare cases after the next stage approval from higher authorities.

R.P. Gupta was born on 23rd January 1949. He is a graduate engineer from NIIT, Rourkela (Odisha). He was managing SME corporate from 1972 till 2017. Currently, his business is managed by his two sons and he is in an advisory role only as Non-Executive Director of Shiva Cement Ltd and Advisor of Shivom Minerals Ltd.

He had entered into a business career in 1972. He started with electrical turn-key contracts. Subsequently, diversified into Cement manufacturing in 1985. Also added Iron ore beneficiation plant since 2006.

His first book was launched by Prime Minister Narendra Modi in April 2013 and now, another book has been authored. In both books, he has suggested many viable solutions for achieving higher growth of public income (GDP).

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