With the economy gasping for oxygen, in this column we provided an ‘August’ formula for kickstarting growth in the last issue! Fortunately, the FM has heard the cries of anguish and decided to act, with initiatives aimed at generating sales for the auto industry.
The construction equipment industry, too, can heave a sigh of relief with BSIV vehicles registered before March 31, 2020, being allowed to operate till their registration expires. A directive to government departments to replace old vehicles needs detailed instructions to become effective. Bumping up depreciation rates to 30 per cent would be a great incentive for tax planning, especially for logistics and operators of infrastructure utilities.
This is the first time the government has blinked. So,the FM’s assurance of another two booster doses holds promise. Accelerating GST refunds will improve liquidity with MSMEs – but then this is just undoing the wrong caused by unnecessary delays. Similarly, rollback of surcharge on long and short-term capital gains arising from transfer of equity shares will correct anill-advised move with regard to foreign portfolio investors.
As this column has pointed out time and again, the pipeline of projects has remained lacklustre. Here’s what we said in May 2019:
Given that all initiatives of the government have failed to encourage private capital, it is no surprise to learn that government-owned projects accounted for 53.8 per cent of all completion during 2018-19. Even more worrisome is the fact that new investment proposals have been at the lowest over the past 14 years. The momentum that put India’s economy in a high growth orbit in 2004-05, which led to a pipeline of investment proposals to the tune of Rs.25 trillion a year from 2006-07 to 2011-12, has been elusive. The decline of investment proposals beginning with the deep dive in 2013-14 at Rs.10 trillion provided some hope in doubling to Rs.20 trillion in 2014-15 with the new government – but has since caved in, back to Rs.10 trillion. The public sector has taken a backseat and the private sector has remained shy. With a larger borrowing programme, it is incumbent upon the new government to revive animal spirits to put the country on the road to economic growth.
The PMO recently advised NHAI, “Road infrastructure has become financially unviable; private investors and construction companies are withdrawing from greenfield projects.
The hybrid annuity model has become unsustainable.”
I believe this is again a knee-jerk reaction. If NHAI’s financials are logjammed owing to expansion of the roads programme, a better solution has already been provided in this column before: STOP BUYING LAND FOR ROAD PROJECTS! This will save the government `1.89 trillion. Instead, it should rollout the ‘land-pooling’ scheme that has been experimented with in Andhra Pradesh and the NAINA region in Navi Mumbai.
The scheme has multiple advantages: The landowner becomes a stakeholder and can be guaranteed rent. He does not get a windfall that throws his life off balance. He can be provided a marginal land piece as part of the compensation package so that he can continue tilling.The budget for roads is then deployed only towards their construction. Meanwhile, NHAI must continue to monetise toll-yielding assets by attracting long-term funds from foreign investors and use the money to construct roads.
Indeed, if we have to build infrastructure with limited resources, bold solutions need to be deployed. Sops and booster shots will only help tackle immediate economic pain; for the long-term sustainability of our planned Rs.10 trillion investment in infrastructure, we must go out of the box.
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