Sunday, 26 November 2017

GDP or our patience, which is declining? .. more out of box ideas ..

At the outset some loud noises are heard in India these days that there is a lesser growth of GDP (gross domestic product) in the last few quarters.  We still achieve impressive GDP growth rates over other parts of the world. 

We have to understand one thing...
When the floods are moving at a rapid pace to the sea, we can create barriers in the form of dams,  reduce the speed, divert and store water for irrigation for future. 

Do we leave a rapid moving flood to reach the sea without use or do we arrest the speed, create course correction and use it for future irrigation and growth?

Yes we need to arrest the speculative flood pace of our economy, arrest the speed in the form of reforms, in order to have greater sustainable growth of GDP in future. This is what the current government is doing now.

Due to the structural reforms taking place now,  Momentary drops of GDP growth over previous quarter will be inevitable for another few quarters so that a faster sustainable growth can be achieved in future. 

Otherwise we will have only speculative jobless paper growth without real economic growth. 

Out of box ideas-
Instead of crying about falling growth rates which are inevitable during the period of structural reforms , why don’t we think out of box solutions and keep tossing up such suggestions in social media debates?

What is GDP?

The components of GDP are:
Personal Consumption Expenditures plus Business Investment plus Government Spending plus (Exports minus Imports).

We need to increase each of these components more than the previous quarters considerably high to reach higher rates of growth.

But when one goes down, the other has to go up more to compensate so that the GDP growth is sustainable. Due to the reforms, personal consumption may grow at reasonable level  only for some time. Export growth is based on global growth scenario and we cannot quickly grow that beyond certain levels , as it is relatively inelastic. Business investments also during the period of structural reforms will not grow appreciably for some time. 

Then we need to look at government spending to accelerate growth. No wonder, massive roads and infrastructure outlays are planned

Some out of box ideas here- 
One has to note these are brain storming ideas to be debated further and accept with or without amendments. Creativity will have to flow without applying rationality first in a brainstorming, hence the pundits may factor this before shooting down these thoughts. Let us debate, deliberate and move on... 

What are these thoughts tossed up for government?

-offload some government scheme expenditure to pvt sector. For example mgnrega subsidy schemes are a must for uplifting our poor masses. But the government may offload some of mgnrega outlays- how? Why don't we allow pvt sector to take over these subsidy outlays region wise by allowing them to brand itself?

For example we can allow say" Reliance mgnrega west region.." the government can auction these branding rights to pvt sector brands and in return pvt sector has to take over these mgnrega outlays upon themselves against their branding permission. Govt should only monitor mgnrega  scheme's reach and delivery and should stop funding from its budget. Like spectrum auction such branding rights of subsidies offloaded by govt will give them substantial revenue, keep the subsidy outlay out of government budgets. Can't we look at this thought? 

It is a brain storming idea to be pruned further. 

-One more thought for Railways

There are various railway platforms not named in every city.  For example, They call it Chennai central platform 1,2,3 etc. Why don't we allow branding of platforms by pvt sectors say Tata platform, reliance platform etc. Railways can auction these platform branding rights and create a fee based income for Railways. 

-Similar analogies can be extended to unbranded spaces and generate  more revenue.

Auctioning of preferential car number plates, naming of new roads - the possibilities are endless.
These pvt sector spend on CSR initiatives, they can look at funding subsidies by the above schemes. They also spend huge amounts for branding. By allowing them to brand this way the pvt sector will directly pay auctioning revenue to govt that will enable government to spend  better on health care and other priority sectors.

More such out of box ideas should become the focus of discussions than just criticizing the government. 

To sum up- we just do not simply criticize but say what out of box alternatives can be looked at. That will be more productive. Is it not?

Thursday, 16 November 2017

Reform, the only way to perform.

India gearing up towards g3/g4 nation status need to have structural reforms. We cannot become a developed nation without these reforms.

Demonetization documented the money not in circulation. The black money holders are in the radars. Also the digital economy has been given a big push.

Demonetization arrested the jobless growth. The short cycle of black money turning to gold and then to real estate to stocks ended. The speculative dealings got reduced and hence this itself will shave off some GDP points. This is an inevitable transitionary phase.  But it arrests jobless growth and parallel markets.

 GST, real estate reforms and benami act etc will not be brought in by anyone without the firm will of shri. Narendra Modi, today looked upon by the world leaders as a man of action. In my opinion no other person would bring these reforms with a firm will, courage and conviction.

These reforms were taken in quick succession that made black money transaction guys off the market. Now there is calm after all storms of reforms. But the spring will restart with genuine growth. This growth path will necessarily follow post reforms that took place in quick succession.

The mad real estate escalation is not there but some people look at this as no growth. It depends upon what lens we wear when we interpret the happenings around us. I only wear the lens of reaching G3 status quickly, when I look at the happenings around me. Infact it checks speculation driven jobless growth. Inflation is down we need to see that.

Jobs will happen but lot of self employment opportunities arose with SME focussed finance schemes. A number of welfare schemes reached the poor strata of society. The poor, the low middle and those who want an orderly society are all with shri. Narendra Modi. 

No need for panic.

There is now a fear to abide by the law which is important in ensuring discipline in the country. People who never bothered to file income tax return in the past in India, but are always appreciative of the American way of law enforcement are now realising the need to file tax returns in India. This is a great change.

Those criticizing may suggest ways to shore up the economy after these reforms, which in the first place no one wanted to implement. The discussions should focus on how we assist the country in moving towards G3 and not on why reforms or on generating doomsday predictions. Let us be an agent to spread positivity, air of optimism around us. Too much negative noises can only pollute the environment.

In the earlier days,  it was a soft law and weak enforcement in the past.  I have seen air passengers holding the waste choclate paper in their pockets when they cannot access dust bins in Singapore airport. But first thing he does when he reaches Indian airport is  to throw it away on the Indian airport floor with no hesitation. They do not look for waste bins and also do not hesitate to throw away on the floor as soon as landing in India. We need to apply the same legal sense that we follow in those law abiding countries.

Instead of being critics, it is better to strengthen the govenment with positive suggestions.

May god bless our Prime Minister with more will power to face these critics who are always waiting for slippages in the economy. When reforms happen quickly, some slippages will happen. A calm sea never produces a skilful mariner. We cannot discover G3 status if we navigate on shallow waters near the shore fearing for slippages. I want to see G3 status atleast during my life time. I see the winds of change in that direction.

A normal election winning political leader waits for the wave and rides in it. But when the waves turn around, he gets panicky. But a visionary leader like shri Narendra Modi builds the wave and then rides on it. He does not believe in waiting too long for the waves to ride. This kind of wave building may give us some jerks but we are sure to march towards our destination of G3 in the near future.

We think of out of box solutions and suggest ways to government via their interactive websites. The govt made public participate in the governance of the country. Let us look for new ways of building the nation.

Do not ask what the country does for you but ask what we do for our country. Even a baby step taken by us in the march towards G3 can consolidate our nation. We can be a critic but we should also suggest the alternatives to overcome those criticisms generated by us by participating in the public governance platforms created for our suggestions.

We can avoid "I can only do?" theories but support "I can also lend support to government" theory. – Drdd.

Wednesday, 15 November 2017

Gst polls - Is it a new cottage industry?

Many polls are held whether GST is badly executed? Frequent tweaking is happening? Any economic landscape that can be visualised and forecasted clearly can have precise measures/ planning.. While GST is a path breaking change but no radar can capture the post scenario with precision. When confusion is the path towards clarity, the wisdom asks us to be more cautious in every step as each step may pull down suddenly. In this unclear unpredictable post GST regime, Arun Jailtely has to evolve the tax and procedure structures. It is difficult to increase tax rates once we introduce but we can reduce as per the psychology of the citizens. Hence he adopted a safe five slab structure with an intention to tweak it once we move into post GST regime and arrive at the right combination. He will move towards a single structure over few years some items of consumption started with more tax rates as otherwise you cannot increase but you can only reduce as per tax payer psyche. If the overall GST collection is poor the states will start crying and there will be chaos. Therefore adopt a safe approach of having five slabs slightly at elevated levels and start reducing once we are sure of tax volume as we see in live situation.. It is like a corporate adapting to new erp or when we migrate to a new place for the first time. Have a base model and tweak it to perfection.. Anyone would face similar situation if they face such situation. When we move into new landscape with no precise inputs for prediction (as it is the first time and it is path breaking in terms of changes) here confusion is the path towards clarity. Arun Jaitely should not be blamed. This is an evolution which is a scenario any one will face when they introduce.. Arun Jaitely and Narendra Modi' strong will has to be appreciated. They should not break midway.. They have to show the will and determination. They are rightfully showing that.. Hence reforms will take the right shape.. One has to wait and give some more time to see the benefits of these reforms.