PM Modi, This Navratri, Here Are 9 Ways To Boost India’s Economy

This Navratri, I will give our puritan Prime Minister nine ideas to re-think, re-boot & turn around India’s economy.

(Photo: The Quint/Shruti Mathur)

Video Editor: Mohd Ibrahim
Video Producer: Sonal Gupta
Cameraperson: Abhishek Ranjan

Prime Minister Modi surprised everybody with an unexpected, stirring commendation of “wealth creators” in his Independence Day speech – most tellingly, by using popular English terminology, instead of conjuring up a Hindi equivalent like poonji utpadak (as he is wont to do), he was signalling a reach-out to new-gen entrepreneurs and elite businesspeople who have gotten estranged from him.

And by obliquely acknowledging that his regime may have treated them with contempt/suspicion, he was being as contrite as the PM can ever be on a public platform.

He then issued a clarion call for disruptive, not incremental, change.

So I am going to give our Prime Minister the benefit of all doubt. Perhaps he is ready to shed the statist mindset that has bedeviled his economic policies until now. And since I know how fiercely/devoutly he believes in the bi-annual Navratra tradition of fasting to reinforce his sankalp (determination), I shall give our puritan Prime Minister …

Nine Ideas to Re-think, Re-boot & Turn Around India’s Economy

1. Save assets; inflict losses on equity/bond-holders: The Modi government has made a crippling error by killing assets along with prosecuting errant owners and managers. ILFS and Jet Airways (possibly a DHFL on death row) are two of the most graphic examples, where healthy assets should have been saved, even as the lawbreakers were hounded to justice. That would have allowed thousands of innocent workers to keep their jobs and inflicted the entire loss on owners of risk capital. After all, airplanes, roads, and dwellings are not criminals!
2. Use deep discount rights issues to multiply every public rupee infused in banks: The Modi regime has wasted time and money by putting driblets of capital in public sector banks over several years. It now needs to repair each balance sheet in one go – and think of innovations like a “deep discount equity issue with attached warrants on a rights basis” to multiply the impact
3. Shed diffidence/doubt and throw a lifeline to NBFCs, along with the real estate and automobile sectors: A stitch in time does save nine (again, Navratri!). In fact, I would argue for a bold TARP-like window to solve the liquidity crisis of several troubled operations. As an article of faith, never allow a liquidity crimp to become a solvency crisis. (Note: TARP was the famous Troubled Assets Reconstruction Program authored by Ben Bernanke to save the American economy during the post-Lehman recession, with spectacular results)
4. Create a trillion-dollar sovereign fund by pooling all public sector companies under it: This professionally managed company should be floated on overseas stock exchanges to create a proxy “India stock”. It should be allowed to sell all unhealthy and non-core units. My calculations show that this could release several hundred billion dollars of productive investments in a virtuous invest-build-and-divest cycle
5. Overhaul IBC: With the experience of real-life cases in its arsenal, the Insolvency and Bankruptcy Code (IBC) should be comprehensively amended to make it a swift, incisive instrument of capital assets’ mobility
6. Stop hostile taxation of equity capital: Make quick amends. Long Term Capital Gains and Dividend Distribution Taxes should be abolished. The super-rich surcharge on Foreign Portfolio Investors should be dropped. All fetters on issuing differential voting rights’ shares should be removed. Angel and valuation-mismatch taxes should be unhesitatingly killed for all companies
7. Curb “tax terrorism”: The Modi government should acknowledge that it has created a Frankenstein by giving arrest and other intrusive powers of extortion to tax officers – all of which should be rolled back
8. Stop fudging the real fiscal deficit: It could wipe the slate clean by converting all off-balance sheet borrowings into a one-time perpetual bond; and then become utterly transparent in future
9. Stop appointing retired bureaucrats in key regulatory assignments: Instead, Modi should co-opt admired domain experts, with a modern outlook and credentials, to oversee key economic sectors. And if the regulators are in conflict with the ministries, Modi should celebrate such dissent, because honest solutions will emerge out of it.