How to Revive Auto and Telecom Sectors

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