FM's central invoice repository will transform economy

FM's central invoice repository will revolutionise Indian economy

By Debasish Roy

Any operations manager or CEO will tell you that size does not matter. Size, in fact is hype. Prime Minister Narendra Modi knows that very well. However, the country’s chief financial officer, Madam Nirmala Sitharaman has her job cut out for her so much so that she must follow through with this matter of size of the economy. FM clearly mentioned the strategy. Her government has stressed on the last mile delivery of governance. No doubt, they have succeeded but the fact remains that this success on the last mile is more notable than the size of the economy. Less government and more governance should be and is the goal; size will follow.

True, a large-sized economy earns India respect from global companies which want to invest but PM Modi may be the only Prime Minister India has had who recognizes that the Budget is more about ensuring that the benefits reach the citizen in their unadulterated form rather than the economy ballooning to a mammoth size. To achieve this, Budget 2019 has proposed a revolutionary step; viz centralized invoice repository for businesses dealing with GST transactions. This may have gone unnoticed but promises to totally eradicate false invoicing and siphoning of funds from companies. This is what will bring employment and revenue generation through the legal route.

Coupled with the provision to tax the highest taxable incomes at a higher rate, Budget 2019 has delivered a sound blow to black money – the little that still exists in India’s taxation processes.

FM underlined how we need to invest heavily (she heaved when she said that) in infrastructure to provide asha, vishwas and akansha, in five years, the economy added one trillion dollars. Today, the FM said that we are reaching the three trillion-dollar level. The target, she said was eminently achievable if dedicated leadership and involvement of the private sector exists.

Once, the Indian private sector had appreciated India Inc but now they understand Make in India. She pointed out that collectiveness and connectivity being the life blood of economic growth Make in India has to be achieved on unison. For this to happen, the Bharat Mala and Sagar Mela projects are being rolled out along with dedicated freight corridors. This is working along with the Jal Marg project for domestic transport for passengers and freight on water lines. This is to bridge the rural and urban divide for a more powerful India. The common Indian will find India as an opportunity.

During Congress rule, the parameters of the economy were so structured that financial transactions boomed owing to lower interest rates and people with connections in the right places benefited with 90 per cent of the cream. The common citizen was forced to follow a certain path in such an economy which was unpalatable and undesirable. Bank interest rates were lowered to less than five per cent and private builders received agricultural land to promise miles and miles of apartment complexes, which never materialised. Fraud at various levels was the order of the day.

To add to its business savvy, Government is also adopting laws to make India an MRO hub; a maintenance, repair and overhaul hub for the global airline industry. This is a smart move because this will ensure that more revenue comes in before our airports become global travel hubs, which is a section of the industry pressed for revenue and works on thin margins. MRO is a profitable business. India can easily benefit from this owing to its large pool of mechanical engineers.

Earlier, money could be made by people who lubricated tight corners arising from minor hitches in government processes. For instance, changing your address on a driver’s license was a cumbersome process with three forms and three visits to the road transport authority. Shri Narendra Modi’s government brought in transparency through Digital India. Now, logging into https://www.parivahan.nic.in/ gives you the same service in less than three minutes. I know as I tried it. Some naysayers still question as to how this results in a better economy. Well, if it has not struck you even now, an economy functions like a large household and a large company rolled into one. The more efficient it is in delivering benefits with respect to time and ground realities the better it is for people who can utilize their time for rewarding activities. That is why Indigo is the most profitable airline. Turnaround time is key.

For decades, the Indian population has been stuck trying to put together a daily lifestyle. Running around for cooking gas, booking railway tickets, haggling with the auto rickshaw, travelling miles to take your children to school, quietly paying inflated electricity bills have been our raison détre. Today, after the first Budget during the second term of the Modi government the middle class clearly look forward to better things than just a sorry existence.

SMALL COGS IN THE LARGE WHEEL: GOOD PROCESSES LEAD TO A GREAT NATION

Is this the first government under which the Economic Survey has pointed out inability of companies or other contracting parties to use lower judiciary to enforce contracts at the small town and village level as a hindrance to growth? Most probably yes.

This is a big move. Earlier, the lower judiciary was never questioned in government documents and was treated as the elephant in the room. Legal reform is urgently needed but the government is still not touching this sensitive issue as the judiciary is an independent pillar of our democracy.

However, this can be eradicated through arbitration initiated by industry experts or business chambers such as FICCI’s Indian Council of Arbitration and other such bodies.

Rs 50 LAKH CRORES FOR RAILWAYS BETWEEN 2018 to 2030 THROUGH PPP

Connectivity infrastructure through railways will be aligned with one-nation-one-grid (power) one-nation-one-card (citizen mobility across nation) and the PPP model. Till now, the Railways suffered from policy paralysis and the Railway budget was always about matching revenue with subsidy. They were expectantly a large mismatch every year. Suresh Prabhu was the first one to point out the gap and wanted to raise revenue. However, he was unable to do so.

Now, we see a lot of technology infusion and innovation in Indian Railways. The Vande Bharat express with Indian technology with copyright with the Integral Coach Factory, Chennai is a landmark in the history of the railways. Tomorrow, we may have Rajdhani Expresses around the country with a similar chassis and bogie.

The Railways is still largely unexploited. We have many short journey trains but very few long journey fast trains with straight line routes. For instance, the journey from Visakhapatnam to Delhi takes 34 hours and the route includes railway stations to the south of Visakhapatnam.

The government is slowly converting the Railways’ mindset from travel for all with subsidized tickets to fast and effective travel for anybody who is willing to pay for it.

RENTAL HOUSING THROUGH MODERN TENANCY LAW

Housing is a major issue in Indian life. Everyone wants to own a house. Taking this interest in mind, numerous real estate agents with no education, no industry experience and no capital launched builder businesses and profited from false promises and sub-standard construction. Today, FM Sitharaman spoke about a model tenancy law that the centre will introduce, and the state will be free to ratify it. Good move but not a smart one. The housing problem is also linked to a lot of bad politics which presides over ownership of land and exemptions to builders who fund political rallies.

On the other hand, large public infrastructure can be built through union state government partnership such as the Andhra Pradesh Medi-Tech Zone model, which has been built with both Central government funds and Andhra government cooperation. This also extends to business holdings by MSMEs which will be aided by the government for payment related issues. This kind of initiative will aid easy living and housing will follow owing to supply and demand.

PRADHAN MANTRI KARAMYOGI MAN-DAND SCHEME AND LOCAL INVESTMENT

Support for shop keepers and low revenue businesses is another milestone for last mile delivery of governance. This will aid local area investment in low corpus resulting in major employment avenues for youth and experienced people. As every shopkeeper becomes party to the benefits of nation building, every corner of society will be transformed. Let us face it, shopkeepers are everywhere. Small shopkeepers are the best vehicle for last mile delivery and consumption of the same. FM has also promoted local investment in public infrastructure and also supply chains through this route. Couple this with infusion of Rs 80,520 crores for Pradhan Mantri Gram Sadak Yojana and you have a winner in rural and suburban markets.

NRIs TO HAVE EASY ACCESS TO INDIAN EQUITIES

NRI portfolio route to be merged with FPI route. So, the FM has found another route for raising revenue. She has provided easy access to NRIs to purchase equities in the Indian market. So, the FII in stock markets will come a great deal from NRIs who wish to align themselves with a growing Indian economy.

CLUSTER BASED DEVELOPMENT FOR TRADITIONAL INDUSTRIES; FARMER EMPOWERMENT

The FM has stressed growth for traditional industries. She wants bamboo, honey and khadi clusters. 100 new clusters will be set up for 50,000 artisans to join the economic juggernaut. This scheme will promote rural entrepreneurship along with 80 livelihood business incubators and 20 other incubators in rural areas. This will ensure value addition in farmers activity. She wants these programmes to convert anna data (farmers) into urja data (energy creators) as they will be encouraged to convert their bio-waste into local gas plants.

She thanked the farmer community for the pulses (dalhan) revolution that happened in the last 18 months. FM hopes a similar revolution in tilhan. She declared that Zero budget farming will be promoted in every state by the central government and that some states have tried in certain areas. This is notable as this Budget has many mentions of the Central government touching on state subjects such as agriculture. The impetus will happen along with the efforts of the Jal Shakti Mantralaya looking at management of water resources for all farmers and urban citizen under the Jal Jeevan Mission. The Department that decides on demand and supply of water will coordinate with the Jal Shakti Ministry at the local level. All other related central government schemes will converge to provide potable water to each and every house through pipelines. Only 11 countries in the world can do that.

BRIDGING RURAL URBAN DIGITAL DIVIDE

We need to go digital. Till now, India has succeeded in doing so. FM pointed out that Bharat Net is rolling out new fibre optic lines. Two crore rural citizens have been made digitally literate under Pradhan Mantri Grameen Digital Shaksharta Mission. We need to prepare our youth for skill sets needed abroad including language training, 3D printing, big data etc through union government schemes. Four labour codes are being put into place, including process of registration and filing of returns by business and standardisation of labour process to industry in suburban towns to achieve a labour friendly atmosphere. A Door Darshan channel for start-ups in rural areas will be set up to involve match making with venture capitalists all over the country. This will be aligned with a Rs 70,000 crore of capital infusion for public sector banks so that small businesses in small towns get easy credit and easy working capital.

MORE TEETH TO RBI TO REGULATE NBFCs; LOWERING STAKE IN PSUs BELOW 51%

Two wonderful things that Madam Sitharaman has done on a regulatory level are that a special reserve as required by RBI has to be maintained by NBFCs. A DRR debenture reserve will be done away with for NBFCs. All NBFC will be able to directly participate in the government trading platform and finally the Reserve Bank of India will have more powers to regulate NBFCs. At the same time, a jurisprudence anomaly has been resolved as the National Housing Bank regulatory authority powers have gone to the RBI to do away with conflict of interest as the NHB is both a player, competitor and also a regulator. This ought to have been done long ago. It is surprising that nobody thought about it. It needed a lady of the house (Parliament) to achieve this level of finesse.

HONEST TAXPAYERS THANKED BY FM

Tax proposals aim to simplify tax administration, ignite entrepreneurship, said Nirmala Sitharaman. In effect, she did not alter the income tax rates for individuals at all. For companies, the government has extended the lower rate of 25% to companies with an upper ceiling of Rs 400 crores revenue. This was earlier up to turnover of Rs 250 crore. This covers 99.3 per cent of all companies. So, the government is encouraging the formation of companies and asking citizens to earn through business creation rather than through jobs. Will it work? It may take time.

Now this sentiment has been extended by allowing competitive bidding for high level technology parks / areas for setting up factories, investment linked income tax exemption under 35AD of the income tax act. Again, the push for institutional income rather than individual income. She also wants India to become a global hub of manufacturing of electric vehicles. She moved the GST Council to lower the GST rate from 12 to 5 per cent and an additional income tax deduction of 2.5 lakh rupees for the duration of a loan for purchasing electric vehicles. Angel tax issue had heated up. Therefore, FM declared that the valuation of share premiums will not be scrutinized. E-verification will happen for validation of promoters. Funds raised by start-ups will not require scrutiny by income tax department.

CONCLUSION FOR A NEW INDIA: A BEGINNING

India is definitely on a scientific trajectory towards growth. Scientific because it is about inclusiveness and not growth for a oligarchic caucus as it happened with the Rockefellers and the Rothschilds in the USA and with the large chaebols of Korea, which were supposedly too large to fail until Daewoo sunk

The author is Director General and CEO, Smart Cities Next