The jokes & memes on coronavirus are now getting stale. The
opening of liquor shops and hike in duty on transportation fuel has provided
some new fodder to the meme and joke writers. But the new jokes are more
ironical than funny. This clearly indicates that the people are now tired &
frustrated to the extent that they are now willing to risk their life to get
back to their pre lockdown status.
The government however appears to be caught in a quagmire. It is
finding it extremely challenging to strike a balance between (a) the urgent
need to augment resources to compensate for the poor revenue collection in past
5 weeks; (b) to provide meaningful stimulus to the businesses facing
unprecedented liquidity, solvency and viability crisis; (c) support consumers who have lost
income; (d) make concessions for the businesses to attract new investment; (e)
restore confidence of people who psyche has been damaged; and (f) continue
pursuing its agenda of nationalistic and cultural renaissance.
Three recent events are noteworthy in this context. These events
amply highlight the predicament of the government and materially dampen the
confidence of investors and entrepreneurs.
(a) A group of senior
Indian Revenue Service (IRS) Officers released a report suggesting ways and
means to augment resources to compensate for the revenue shortfall and stimulus
needs. The government not only contemptuously rejected the suggestions but also
initiated punitive action on the concerned IRS officers. However, within a
week, the government has decided to steeply hike duties on transportation fuel
denying the consumers the benefit of fall in global crude prices. BJP led
Haryana government has also raised fees, duties and taxes sale of liquor,
petroleum products, and fruits and vegetables.
It is clear that the government is in favor of higher taxation,
but is afraid of antagonizing big businesses by imposing higher direct taxes.
They have chosen the easier route of indirect taxation, which incidentally will
hurt the poor most.
(b) As per some media
reports, the government has apparently identified a land pool of 461,589
hectares across the country in a bid to attract Multi-national Companies (MNCs)
that will be looking for new sites once they shift their operations out of
China. Almost everyone relevant in the central government as well as the
governments of BJP ruled states has gone to media, claiming this to be a
massive opportunity which the government is determined to seize.
Attracting new investments, aiming for deeper and wider
integration into the global supply chain, accelerating industrialization of
Indian economy are all noble intentions.
However, it would have been more comforting and believable, if
before counting the chickens, the government had clearly specified the
learnings from the POSCO, Niyamgiri (Odisha), Hasdeo-Arand (Chhattisgarh),
Amravati (Andhra Pradesh), Tata Nano (West Bengal), Bhatta Parsol and Dadri
(UP), Mumbai Coastal Road (Maharashtra), Tuticorin (Tamil Nadu), Sardar Sarovar
(Gujarat), Tehri (Uttrakhand), Giri Barrage & Spiti Solar project (Himachal
Pradesh), several SEZs approved and de-notified since 2000 etc.
People would also like to know how (and if) the government plans
to address sustainability concerns before allowing any new major industrial
activity. Remember, at this point in time there is absolutely zero margin for
error. Any mistake will prove extremely costly, as India will not only miss the
massive opportunity, but also lose credibility for future investments.
(c) The decision to allow
the states to open of liquor shops to ease the fiscal pressures, despite poor
experience of handling the issue of migrant laborers' return to their native
place, and consequent chaos at liquor shops across the country, highlights two
things: (a) there is little coordination and/or willingness to cooperate
between the center and non BJP ruled state governments.
Besides, the management of lockdown is popularly believed to be lacking.
Besides economists, many scientists and medical experts have raised question
marks on the necessity and desirability of total lockdown in Indian context.
The unpredictability of the current regime, as demonstrated by
decisions like Demonetization, strikes on Pakistan, and total lockdown, has
perturbed the both the investors and the entrepreneurs.
(I will continue with Investment Strategy series tomorrow)
No comments:
Post a Comment