The present crisis has shaken the confidence everywhere and knee-jerk reactions are attempted perhaps only to survive the situation without ,however, bothering about the damages these measures can afflict the economy in the long run. The only way to tackle the crisis is to go in for massive development of infrastructure which is abysmally poor in India and needs to be drastically augmented to ensure continuous growth of the economy. The question is how to find resources?
If there is a will, there is a way is the answer to find the resources. This is not the time to bother about deficit in the budget. This is the time to meticulously avoid extravaganza and unproductive expenditures by all including the government, public and private sectors and high net worth individuals. Resources need to be mobilized by attracting savings, borrowings, funds from both domestic and international markets. This is the time to sacrifice by those who amass wealth and are crying for reliefs and concessions. Definitely this is not the time to exploit the situation and make merry. This is also not the time to sacrifice employees to reduce the cost; but this is the time to reduce profit margin and show consideration for poorer sections of the society . This is the time to come to the rescue of the economy which has high potential to insulate itself from the global crisis and exhibit the world that we can be the world leaders and real performers. This is the time to revive the values and ethics which our forefathers practiced for centuries and have been given a go- by for the sake of money by the present generation. While liberalization of the economy for growth, comfort and welfare of the people needs to be encouraged, liberalization of values, ethics and our cultural heritage and civilization which can only bring harm to the society in various forms has to be carefully avoided. Corruption, black money, antisocial activities, terrorism and evasion of taxes legitimately due to the government have been rampant involving even the high and mighty and this is the time to have some introspection to give up unethical practices and inculcate morals, values, principles for better and peaceful living. This is also the time to firmly establish (in fact already proved that greed will only lead to ruin)that money can bring only doom and not the boom of sustainable nature. There should be a balanced approach and a clear cut line of demarcation in imitating some of the measures adopted by developed countries in the name of management and distribution of risk. Now Risk is well distributed and nobody knows how to survive.
Some of the following measures if implemented with sincerity and integrity both in thought and action can surely benefit the economy to maintain the growth, improve the infrastructure for continued growth of the economy and come out of the present rut. The measures will stand the test of ethics and values in creating and distribution of wealth. No statements or statistics have been discussed as volumes have appeared or have been appearing everywhere since the meltdown have begun.
Infrastructure viz: Social, Physical and Financial infrastructureIs the need of the hour and the position requires to be meticulously reviewed from the scratch and steps need to be urgently initiated systematically develop the infrastructure on a sustainable basis. It has to be managed by professionals who are committed and result oriented. Co-operation from all without looking for exploitation and illegitimate benefits have to be solicited if required by force. There should be time bound approach to complete all physical infrastructure like bridges, roads, canals, ports, power generation and distribution, airports, markets, hospitals where comparatively massive employment is possible and demand for consumption of capital goods is relatively high. Funds have to be found if necessary by incurring deficit exclusively for this purpose and mobilization of resources from cash rich companies, high net worth individuals, attracting the black money either by force or by offering incentives. The distinction between black money and white money is getting blurred as there is no fool- proof system to track at least high value transactions in the economy. This is the most opportune time to introduce some solid measures using IT strength to plug the loop holes in the generation of black money.
Social Infrastructure should start from basic education to specialized skills in different areas like science, IT, Technology, humanities, finance, legal, management, tourism and other services. Social reforms rather than economic reforms in the present context of degeneration of values and ethics, ignorance of morals which every religion propagates for the welfare of humanity assumes greater importance and calls for revival with utmost priority. Money spent on social infrastructure will turn out to be a good investment and strong foundation for the society to look forward to.
Financial infrastructure as it is, seems to be okay, but improvements can be thought of to bring the unorganized sector under some form of regulation and supervision. There are organized and unorganised money lenders, varieties of chits and kuries, indigenous bankers, volumes of transactions in Rs lakhs and crores taking place in gold and bullion markets, wholesale markets of different commodities including scraps, film industry, professionals like chartered Accountants, consultants, doctors, advocates, highly specialised and skilled contractors, real estate agents, traders of different classes etc. If all these can be brought under proper accounting and reporting, tax compliance will improve, black money deals will decline, deposits of commercial banks will increase and some sort of discipline, order and control can be established in society. More over, the general feeling that only salaried classes and a few honest citizens are paying taxes can be dispensed with and over all the confidence level in society particularly with reference to treatment of everybody equally can be improved. In the long run, the benefits will start accruing perhaps paving way for a general reduction of taxes and levies.
Capital Formation: Capital market is generally active and vibrant only in respect of secondary market(Of course not these days) and that too involving a few companies, traders, brokers etc. Share holding pattern also seems to be concentrating with a few institutions and high net worth individuals. It is doubtful whether 5% of the population have share holdings at all. Unless and until the shares of companies are widely held, the market cannot gain strength, depth and liquidity, will always be a problem particularly during crisis period. At least 50% and more of the public issues should be held by individual share holders and for this measures have to be urgently initiated. Some steps can be in the form of offering fiscal incentives to attract to capital market investments, more dividend to share holders holding less than some specified no of shares, loyalty incentives to those who hold shares for more than a specified period etc. Even the levy of STT can be waived for small shareholders to attract and retain them in the market.
A separate stock exchange can be thought of for companies having less than a specified amount of business turn over or a prescribed limit of capital. This will bring all round efficiency in regulation, supervision and market operations both for the companies and investors. Fiscal incentives should be different for small companies compared to multinational and very large companies. Rules and regulations also can be at variance in respect of small operators.
Companies having huge reserves when compared to the capital and have not been liberal in the issue of bonus shares or dividends should be identified and subjected to special scrutiny with reference to the share holding pattern, the reasons if any for not declaring bonuses or dividends , method of arriving at net profit, pattern of distribution of profit etc. The existence of such companies is neither good for the economy nor good for the share holders. This can affect the liquidity trend and can affect the sentiments in the market and cannot be encouraged. The reliefs and benefits to such companies should be kept low. In general, there should be a separate rating for companies by the Govt, based on the contribution of the companies for the socio-economic well being of the people, economy of the country in terms of production, employment, sharing of profit, forex earnings, corporate governance standards etc.
Reforms can be attempted in the operations with in the stock exchange from the angle of actively traded group of shares, the operators, domestic companies, multinational companies, turn over of shares, market capitalization and other classifications enabling for audit trials if necessary. Inter corporate pattern of share holding needs to be constantly watched as investments and disinvestments by the corporate can tilt the price movements at the cost of small operators.
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