Republic Day 2020 – A turning point?

RDAY 2020

The faux London clouds and cold plaguing Delhi over the past two months lifted and bright sunlight came tumbling through today with the arrival of the Brazilian President– lifting spirits around.

Part of the lift was triggered by the enervating sight of the young men and this time loads of young women in uniform, who keep India and all Indians, safe. 

Military might

One can’t help but feel bursting pride at the sight of the marching contingents. The oddballs were the Para troops doubling through on Rajpath possibly inserted as numero uno to resonate with President Bolsonaro – a para officer himself.  

The Bombay Grenadiers looked resplendent in their spiffy, severe, somber colors and traditional black turbans though – and a personal bias must be admitted here – the Kesar coloured turbans (denoting sacrifice) of the Sikh Light and the jagged energy of these notoriously difficult to discipline but immensely courageous, Khalsa troops warmed the soul.

Woman power in plenty

No one brands events as well as the Modi outreach team. This was much in evidence in the deliberate and very visible surge of female grunt power on display this Republic day. 

mobike women RDAY 2020

The subtle message behind this show of female power? India has the skills and a vast reservoir of untapped woman power. Over three-fourths of India’s working-age women (16 to 65 years of age) choose not to join the workforce outside the home because traditional gender roles require the wife to make space for the professional life of the husband. 

The good news is these gender roles are breaking down as women become better educated and men lose the embedded social boosters pushing them to take the lead outside the home.

President Bolsonaro seemed amused at Lutyens Delhi – a deep frozen  ode to Colonization

Jair Bolsonaro – President of Brazil must have been amused to be part of this antiquated annual ritual – almost as quaint as the rituals the British insist on around the Queen and the Royal Family. One hopes he would also have noted how much better our “floats” need to be to become world-class – a ready entry point for technical assistance from those who design the marvelous floats for the Rio Festival.

So, are things going to change for the better with the Sun coming back into our lives? 

Keeping the Sun shinning post Feb 1 -Budget Day

Much will depend on the events of February 1 when the budget is presented. We must pray that the government ticks the right boxes and even more importantly desists from ticking any wrong ones. 

First, the tone of the budget must resonate with the crisis we are caught in. We are in a demand deficient hole. To climb out of it a massive reallocation of domestic public resources is needed away from clunky stuff like defence, security or long gestation projects and towards quick impact public expenditure (like MGNREGA on demand) which will put money in people’s pockets. 

End surcharge and cess on direct tax

Second, any attempt at raising tax revenue by gouging the rich is counterproductive and ineffective. Much better to follow up the corporate tax reductions of July 2019 by ending the cess and surcharge imposed on direct tax for all except the highest individual earners. 

This tactic leaves state government finances unimpaired – possibly softening them up in the upcoming battle to rationalize GST rates – and will affect Union government finances to the extent of around Rs 500 billion. But consider that leaving Rs 0.5 trillion with the spending public is a huge demand kicker particularly for low-value daily needs and low-end consumption goods – many of which are manufactured in India, enjoy regional customer loyalty and generate downstream employment from services.

Bring the repo rate below 5 per cent.

Third, the withering away of jobs in realty and small business has dampened demand. The government must get RBI to persevere on the repo rate trajectory to below between 4.5 to 5 per cent even at the cost of incurring mild inflation hovering around the upper end of 6 per cent. 

Let inflation hit the glass ceiling

Shakti skywards

There is nothing like controlled inflation to ignite investor appetite in realty – think middle-class investors with secure government jobs- who find it appealing to take a loan because its nominal value decreases every year because of inflation relative to their inflation-indexed earnings. 

This is also the right time to distinguish between those who need subsidies and others who don’t like inefficient businesses, Kulaks- large farmers and low-efficiency public sector enterprises. 

Slash subsidies

The budget should offer a grand bargain taking away subsidies worth Rs 3 trillion (1.5 per cent of GDP) on food, fertilizer and cooking gas and redirect the allocation to a more generous direct income transfer for the 100 million families – the bottom two quintiles (40 per cent) who do not own specified assets like a motorized vehicle; a built-up house, a family member employed by government or those who own more than 2 hectare of unirrigated land. 

Liberalize the agri-sector – India’s first private business

agri

To placate large farmers, scrap the ceilings on agricultural land; scrap controls on the food trade and let markets operate in rural areas. Also, scrap the power of the Union government to ban or impose minimum price levels on food exports. 

The government will have to gear up to new hands-off intervention methods to stabilize food prices rather than rely on an antiquated Food Corporation of India which sells almost the same amount as it wastes due to losses from poor procurement and storage practices.

Consolidate allocations around melded themes

Stagnate all prestige and long gestation projects for two years till FY 2023. Begin the process of consolidating 700 “pork barrel” central sector schemes to below 200 with the avoided overheads being surrendered. 

Fast track digitization of government functioning. Prime Minister Modi showed the way today by using an IPad to do his work as the parade trundled by. All meetings should be via AV hookups- very important for having an audit trail of who decided what. 

Finally cut expenditure on Parliament. Honourable members should be part of the belt-tightening.

None of this will push us back to 7 per cent growth. But it can stop us from falling to 4 per cent next fiscal. Beware the false but comforting lullaby of compromised IMF growth projections.

Also available at TOI Blogs January 27, 2020 https://timesofindia.indiatimes.com/blogs/opinion-india/republic-day-2020-a-turning-point/

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