Modi’s speech on 12th May checks a lot of right boxes. Will details please us?
Modi’s speech on 12th May, a few days before the 3rd Lockdown comes to an end, was refreshingly different. Other than usual verbiage, it held out promise of reform. Anchored on a central theme of self-reliance, he spoke of “quantum change”, tech driven systems and of course, reform. To quote him, “These reforms will be for, rational tax system, simple and clear rules of law” has been promised. Thankfully unlike the socialist past, this self-reliance is not to be interpreted as shutting doors to the world.
But as many said, the devil is in the details. What do we want from Modi? Let us set aside the immediate need for relief from COVID related stress to the economy. We focus entirely on reform in this article. As IMHO reforms have long term benefits unlike dole. And our economy badly needs them.
Reforms we need
The question of why Indian businesses, even ones that have all the skills and technology, dont do well in India? Even if they succeed (like Flipkart etc), have to incorporate in Singapore or elsewhere to grow and fund themselves? Why are we not an export powerhouse like Vietnam, even Bangladesh for textiles, let alone compare to China?
The answers can be many but these are at the top of the list. We are ignoring land and labour here, as enough has been said on that.
- Indian industrialists spend lot of their time chasing babus for this or that approval.
- Filing this or that return, compliance form. Hiring an army of clerks & accountants just to do that.
- Finding which babu to please or bribe so they dont get nasty notices & huge bills.
- Pay bribes to get bills passed by Govt even when job is done.
- Get arbitrary disallowances and notices from ITOs which have to be litigated or settled under the table. Often after paying or having refunds blocked!
- Vastly complicated GST system that keeps them on tenterhooks, locks up their Working capital and endless paperwork.
The extortion adds anywhere from 10-40% or more to their costs. Cost their overseas competitors dont pay.
If we can fix this, despite costly land, higher electricity prices and other problems, our business can flourish on other strengths. And pay our labour better, give them better facilities and comforts.
Hence we would expect FM to announce
- An end to at least 60-70% of the forms and returns that businesses need to file. Some estimate say there are about 3000 of them, not even counting state and provincial ones! We dont know. We do know just MCA itself has dozen plus forms to be filed each year, most of which are not there in any other country! Each one involves a CA/CS signature, many weeks of chasing and follow-up and waste of time. It is just useless paperwork that can be safely removed. At least for 99% of MSMEs.
- Just giving more time to file is NOT the answer. It is not a concession at all.
- Simplification of the GST regime and some sort of pay upon collection scheme. Given lengthly payment cycles in India, how can businesses pay their GST first and then wait for customer to pay them? Or several months for refund? This ties up working capital.
- Simplified IT regime of vastly fewer mandatory audits and other forms of harassment.
- End of Angel tax an Tax terror.
- Severe punishment to babus for harassing notices that dont bring revenue. Perhaps only bribes. Stats show 65% of IT claims dont survive appeals. Who pays for this enormous waste of time and resources? The babu that started it should. Then he will never do it again. Now there is no punishement at all, so it is a “ALL GAIN NO PAIN” game.
- A transparent body to go into red tape, suggest ways to hack it away. Time bound and fast.
Will she deliver? Or it will be another opportunity wasted?
Let us wait!