Context:Actions in the key economic areas could help them recover.
General Steps to be taken by government to assist economic recovery:
Policies for citizens to benefit from public resources (land, minerals, spectrum, water)
Systematic, end-to-end design and execution to completion
Cooperation and participation in organisation.
Freeing manufacturing potential:
Manufacturing and service enclaves must be made to work, with stable infrastructure and social conditions, which is essential for local companies to thrive, as well as to attract international investment
Focus on fewer, well-conceived undertakings in the near term, while building for the longer term
Develop Model SEZs:
Selection of location: to be unbiased and thereafter the stakeholders (government, citizens, builders) must be persuaded to have them built with:
Stable infrastructures and governance including competitive tax policies, not getting side-tracked by real estate speculation or assuaging political constituencies.
Replicate the successes: based on experience and results.
An analysis of the automotive sector
Issues:
Decrease in registration: Vehicle registrations in August 2020 were 1,188,087, a reduction of 27 per cent from August 2019 (1,623,218).
Closure of Companies: Harley-Davidson announced the closure of its plant in India
Concerns about high taxes: Toyota expressed concerns about high taxes
Vehicle Scrappage Policy: A vehicle scrappage policy at this time may not be opportune, as it may be ineffective, and can cause undue hardship.
Shift of focus from India to other manufacturing locations.
Importance of Government support to automotive sector
Contribution of automotive sector to manufacturing and to other sectors
To prevent job losses and reduced employment prospects.
Government steps:
Tax cuts: Treating small cars as luxury goods is abandoned; reduced Goods and Services Tax (GST) from 28 % to 12 or 5 %
Analysis of the Telecom Sector:
Requirements of the sector:
National policies on spectrum allocation and assignment: real issues here are stable policies, taxes, and contracts, resulting in investments that succeed
Rights of way and other regulations: Measures such as regulations for spectrum bands of 60GHz, 70-80GHz, and 6GHz, are easier to address for immediate results.
Standardisation
Dispute resolution and penalties:
We need to uphold contracts, avoid retrospective changes, and review and modify laws prospectively.
For this, recent arbitration award for Vodafone against the government’s claim of taxes with interest of over Rs 20,000 crore should be accepted
Supreme Court’s 2019 ruling upholding government claim on adjusted gross revenue (AGR) case is damaging for overall economic prospects
Conclusion: Government should give up their durbar-style of operation, and start applying the principles of cooperative action and shared infrastructure with all stakeholders, to improve collective outcomes.