You all know that today the S&P had downgraded the USA's credit rating to AA+ from highest AAA. Definitely it will create a great shake up in the world financial market. The Swiss had reduced the bank rate to near zero. The investors world over lost nearly US$ 3 trillion in value during the last two days. Gold price zoomed. Is the situation really a worry?? How India can increase its economic development in the above context because there are a lot of side effects on this down grading.
No. Don't worry--and don't panic
The situation is manageable. Worldwide, the countries must now act together. It is not just putting iron curtain but should be real monetary and fiscal measures.
First, the Govt. should withdraw the zero tax concessions (direct taxes) given for the income from investments in stock markets for foreign funds whether by NRIs or by FIIs. This will also reduce a lot of flow of black and terror money into India.
Second, Govt., should spend more on welfare measures for the poor like food for work, health care for poor, etc. This will reduce the unemployment.
Thirdly, distribute the food grains to the BPL families free of cost. Anyhow a lot of these grains are going to be rotten. Instead keep our people happy.
Fourth, strengthen the public distribution system, eliminate the duplicate ration cards-see the benefit reached the concerned intended beneficiary.
Fifth, encourage more savings - give the higher saving incentives - increase the present saving limit from Rs. one lakh to two lakh. Higher tax slabs to be introduced for income above Rs. 10 lakh to curb inflation as well as increase the tax revenue and allow the first tax bracket from the present level to at least Rs. 3 lakh. Tax more on lavish items of high cost consumer goods.
Sixth, tax the dividends paid by companies if it exceed Rs. 10,000/- at least 10 per cent from each company. This should be done by introducing the TDS on dividend. By the way reduce the dividend tax to 10 per cent. So smaller investors would be benefited and would encourage more investments.
Seventh, ban the investments in futures and options in stock markets by the FIIs. Their income to be taxed as they are only playing with stock indices and poor retail investors are losing their value on investments. Instead give tax concessions to promote foreign direct investments in projects. Futures trading in commodities and metal exchanges are to be banned.
Eighth, Govt. should frame a clear cut policy on environment and development. One side giving permission to set up industries and subsequently withdrawing on the plea of environment should be avoided. A clear rehabilitation and resettlement policy and mitigation policy should be evolved to rehabilitate the displaced people. This will reduce more law and order problem-saving on avoiding lockouts, bandhs et al.
Ninth, Govt. should encourage more NGOs in their welfare program to reduce Govt spending on establishment as we all know the establishment cost overtakes the real benefits reached to the concerned.
Tenth, RBI should reduce the borrowing rates-no doubt interest rates for deposits are less than inflation-but the interest spread to be reduced to two percent only. For this they should reduce the Cash Reserve Ratio by three to five per cent.
Eleventh, Govt. should reduce the stamp duty and registration charges to the barest minimum percent to reduce the generation of black money in the real estate sector as well as corruption. The housing areas to be revalued every three years based on demand/supply position in a particular area. Govt. should evolve a clear housing and land utilisation policy for housing projects.
Twelfth, at the same time they can increase the excise duty on liqueur, cigarettes and Pan Masaala-which are more injurious to health. This will increase the Govt. revenue at the same time reduce their demand and health hazards.
Thirteenth, Govt. should levy the congestion tax in urban areas for all motor vehicles depending upon their length, breath and engin capacity. This would desist people using high space SUVs which run on diesel for travelling just two three people. Moreover, the more affordable enjoy the lower fuel price (as diesel is highly subsidized) and lesser affordable using two wheelers have to pay more for petrol though the cost of both Petrol and Diesel are same at refinery point. In fact, the diesel emanates more carbon than petrol. So Govt. should take more appropriate steps in this area. By the way this will encourage more public transport. Reduce the taxes for buses to nil and give concessional fuel to these public carriers.
Fourteenth, Govt. should encourage more eco-friendly projects. Give solar lamps to homes where it is giving free electricity especially in the schemes like one home one lamp. This will avoid power theft. Encourage more solar power schemes and other non-conventional energy schemes by giving subsidies upto 80 per cent.
Fifteenth, Govt. should encourage more local power producing projects with urban waste etc. to enable to reduce more transmission losses.
Last but not the least, introduce the GST immediately to gain more tax revenue.
The Govt. should leave more money in the hands of poor and middle class people. They alone can increase the demand for consumption to promote the economic development. The 10 per cent rich are actually enjoying more than 90 per cent in this country. A capital formation is just bringing money alone. It includes human resources which in plenty available in India. Nearly five lakh students are qualifying as engineers every year in south India alone. If you take the entire India, we are producing nearly 8 to 10 lakh engineers every year. Apart from this, another one or two million graduates in various segments are also produced every year. So India is having such a huge knowledgeable human capital with her. These graduates are to be effectively utilised in projects for the economic development.
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