An expert explains: Road to India’s economic recovery from the pandemic

Posted by Nilesh Shah |

Updated: December 21, 2020, 6:12:26 am

Finance Minister Nirmala Sitharaman.

Recognized Minister of Finance,

Despite calls for more government spending, total spending was cut by 0.6% as total revenue fell 33% in the first half of FY21. You have optimized spending, borrowing, and tax caution. Covid-19 impacted segments like the hospitality industry and MSMEs that are in need of tax assistance. There is a requirement to reduce excise duties for a period of time to help create demand. I am sure you are inundated with money claims. I am taking the liberty of suggesting ways to raise resources to finance the expenses. They are not easy, but if you don’t try, who will?

Gold Disclosure Scheme

1. How kasturi mrig we roam the world in search of money, but know no money that lies below us. Over the past two decades, we’ve spent $ 373 billion on net imports of gold. Smuggled gold and jewelry worn by travelers will bring that amount over $ 500 billion.

Unfortunately, most of this gold is blocked in the black economy. A Gold Disclosure Scheme will mobilize taxes, free capital in the black economy and improve India’s country rating. Good structuring and execution with precision targeting 10% of the gold holdings has the potential to collect taxes of Rs 3.50,000 and free up capital of Rs 10.50,000.

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Convert gold import duty to GST

2. The imposition of import duties on gold has encouraged smuggling and increased the attractiveness of gold by increasing the rupee value of gold. Shifting taxation on gold from the import duty to the GST will increase tax revenue as smuggled gold gives way to official imports.

Jewelers are not affected by the passage but fall under the tax network. In the import duty regime, the investor regards gold as an investment item, since its cost and market value are the same at Rs 112.50 (12.5% ​​import duty on gold). In the GST regime, the ultimate gold investor has to pay Rs 112.50 to get a gold value of Rs 100. The instant detection of losses reduces the misallocation of our savings and provides domestic capital to finance growth.

Better value for power supplies

3. In January 2008 the BSE PSU index peaked at 11,205 and the Sensex peaked at 20,827. After 12 years, the Sensex is up 2.25 times to 46,960, and the PSU index is down 48% to 5,871. Having underperformed the market by 173% over the past 12 years, the PSU index traded at 0.92 despite a high dividend yield of 2.9%.

The piecemeal and foreseeable sale of the market has led, among other things, to a severe downgrade of the power supplies. A successful strategic sale of a power supply allows all of the power supplies to be re-evaluated. If PSUs trade at the high end of their valuations, the market value of government holdings will increase by more than Rs 7,00,000 crore. 45 percent of the HZL were strategically sold for 769 rupees in 2002/03. The remaining 30% stake in the government is estimated at 30,000 rupees, an increase in value of more than 59 times over 18 years.

Bring black market economy into white economy

4. Indians spend a lot of money in casinos in Macau, Singapore, Las Vegas and Nepal. Big bets take place on IPL, elections and other events. Matka thrives. We need to legalize such activities with the necessary safeguards. This will channel criminal activity to responsible businesses, collect taxes, cut funding for criminals, and support the tourism industry hardest hit by Covid-19. In 2018, Kerala Lottery had a turnover of 12,000 rupees and a profit of 2,500 rupees. Lottery sales contributed 80% of non-tax revenue to the state.

Connect the tax leakage to smuggled / counterfeit cigarettes

5. According to the Tobacco Institute of India, which represents the tobacco industry players, smuggled / counterfeit cigarettes account for 25% of cigarette volume. It is such an attractive business that some of the returnees from Covid-19 smuggled cigarettes for quick profit.

We must use targeted efforts to curb cigarette smuggling / the production of counterfeit cigarettes. This has the potential to generate taxes of Rs 10,000 crore. In the long term, we need to include bidi and other tobacco products, which account for 91% of tobacco consumption, in the tax network.

Monetization of enemy assets

6. Real estate (including encroached and disputed real estate) and financial assets in excess of Rs 1,00,000 crore have been held by the Custodian as hostile property since 1968. A quick mechanism to liquidate them can raise resources and help catch up with Pakistan. which liquidated their hostile properties as early as 1971.

Unlock capital stuck in trade disputes

7. From the 1992 securities fraud to the IL & FS and DHFL cases of 2018, trillion rupees will be stuck if no solution is found. A quick mechanism for quickly resolving trade disputes will unlock stuck capital. China became our equal in the 1980s and has grown to be five times the size of a company due to higher credit creation. Such a decadal blockade of capital restricts credit creation and adversely affects our growth.

Sale and lease back of government real estate

8. The government can sell and lease back their incredible properties. Government rental costs are lower than gilts borrowing costs. Obviously, the government will miss real estate appreciation. Investors are lining up to win the government over as long-term tenants on attractive terms in a low-interest environment. Auction the boastful right to say “the government is my tenant”.

Estate obligation

9. In the United States, inheritance tax is up to 40%, with several exceptions. Many Indians in the US like to pay estate tax on their inherited wealth in India. We should impose inheritance tax on non-productive assets like precious metals and stones, art, and offshore assets. This will encourage investment in financial assets that provide domestic capital to accelerate growth.

Close tax loopholes

10. Ethical hackers are rewarded for finding holes in programming. Ethical tax advisors should be rewarded for closing tax loopholes. For example, there is a home industry that converts interest income taxable at 43% into long-term capital gains taxable at 10% through no coupon bonds. Removing dividends could take away hundreds of millions in taxes on the stock of a tech company that recently decided on a high dividend. You will be surprised at what well-motivated ethical tax advisor will be able to fix leaks in our tax system.

Improve the investment friendliness

11. Over the past two decades, more than Rs.100,000 of investor money has been stuck in collective investment schemes ranging from NBFCs, jewelers, chit funds, Vishi (a system similar to and popular in Gujarat) to agro-technology . Forest / Emu rearing company. Buying a financial product is not as easy as buying gold. Multiple and high costs of KYC limit the penetration of regulated financial products for investors at the end of the pyramid. Simpler and cheaper KYC will secure more flows to financial products and improve the availability of domestic capital to finance growth.

Enable power supplies to manage treasury on a commercial basis

12. Private companies invest in mutual funds to optimize their treasury revenues. Power supplies do not enjoy similar flexibility. Better treasury management will help PSUs pay more dividends and reassess valuations. I need to disclose my dispute as a mutual fund manager. However, our customers will vouch for my suggestion.

There will be many arguments why the above suggestions cannot be implemented. India’s accelerated growth, financed by domestic capital, is the only reason the above proposals need to be implemented.

With best regards,
Nilesh Shah

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