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10 ways the new Modi government can kick-start the economy

A plan to kick-start private investment and stimulate demand has already been drawn up.

ET Online|
Updated: May 25, 2019, 08.51 PM IST
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The first challenge Modi faces is to revive demand.
If Prime Minister Modi’s 2014 mandate was India’s biggest in three decades, his 2019 re-election was an even bigger feat. Modi cruised to victory amid agrarian distress, youth unemployment, high income inequality, anemic growth, a broken financial system and the promise of a basic income for 50 million of the country’s poorest families by the Congress, making the win even more momentous.

The new government will hit the ground running as it looks to get economic growth back on track by simplifying taxes, easing compliance and spurring demand. A plan to kick-start private investment and stimulate demand has already been drawn up as the incoming administration gets ready to present a full budget in July.

The finance ministry and other departments have already prepared measures aimed at stimulating the economy that need to be taken by the new government.

The first challenge would be to revive demand, officials said. The budget is likely to be presented in early July and could, as was promised in the interim budget, cut personal taxes to put more money in the hands of the middle class, thus persuading people to spend more and drive up demand.

Here are ten things that can help the Modi government to incite the economy:

Cash from public assets
The govt can look forward to monetize assets including rail tracks, roads, ports and power units to generate funds for public investment. The auction of new spectrum is expected to yield a bonanza for the new government.

Disinvestment
The government needs to quickly plan a big selloff programme. The main priority should be to exit all non-strategic PSUs and shut the loss-making ones. Employees of such organisations should also be given generous voluntary retirement schemes.

Liquidity for NBFCs
The government can come to the rescue of the NBFCs by buying some of the assets owned by them using government bonds, which can be used by other such entities to raise resources.

A Few Big Banks
The idea of a few big banks could finally materialise under Modi 2.0 with the merger of public sector banks to create five big players. The government then needs to capitalise them adequately to strengthen their balance sheets.

Fix IBC Process
The IBC needs amends as in the time taken for the resolution of stressed assets needs to come down. As far as the revision of Feb 12 circular it should be hastened.

GST 2.0
Simplify GST further by doing away with the two top rates of 18% and 28%. GST tax slabs could be merged into two main rates from four at present. BJP's election manifesto talked about simplification of the GST process and lowering time spent for tax compliance to 1 hour per month. It also promised reduced tax rates, higher tax collection and better compliance.

Mining Revival
Address logjam in mining to get coal and iron ore moving. Bottlenecks in coal supply are hurting utilities, aluminum smelters and steel mills. Some 8.7 gigawatts of generation capacity was shut as of the end of June due to coal shortages, according to reports. India has 197 gigawatts of coal-fired capacity.

Cities as Growth Engines
Build new cities, redevelop older ones; address real estate issues. The government's Smart City Mission should also be revamped to take the government’s urban reforms agenda forward.

China Opportunity
Roll out mega industrial zones, labour refoms and land acquisition law to encourage large-scale competitive manufacturing. The government will also need a strategy to gain market access in China for its farm and pharmaceutical exports and attract foreign companies looking to shift out their manufacturing bases from there in the wake of the trade war between the US and China.

Empower the Kisan
Remove all curbs on selling farm produce, green light GM farming for food and cash crops. A continuing emphasis on inclusive social welfare programmes, under the umbrella of “Antodaya” (upliftment of the poor), will run through the plan.
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