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20 quick reform suggestions to PMO, Modi Government

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Tushar Kansal
Tushar Kansalhttp://www.tusharkansal.com
Tushar Kansal has served in senior positions in Corporate Finance at Deloitte Touche Tohmatsu, Brand Capital (ToI), Aircel & was Head (Debt Management) at MTS India where he raised more than USD 2.5 billion complex structured debt from International and Indian Banks. He launched the startup IndusB2C.com in end-2014, prior to which he served as CFO (Chief Financial Officer) of DLI (Distribution Logistics Infrastructure), owned by Guggenheim; a USD 200 billion American Private Equity (PE) Fund. He is a B.Tech (Textiles), MBA (Financial Management) from University of Delhi and Google AdWords/ Analytics Certified. Tushar blogs at tusharkansal.com, tweets @TusharKansal & publishes relevant news on the right-wing Facebook page https://www.facebook.com/induschurning/

Dear PMO,

Here are some ideas you are best placed to take forward:

  1. To unclog courts, since 70% cases currently pending in courts are intra-government, suggest make arbitration compulsory for all intra-government cases. So, each and every case between 2 Government parties will go for arbitration. There would be a maximum 1 month timeline for arbitration to close, failure of which would lead the case to be referred to a committee of respective Secretaries of Ministries involved – if any case fails to get resolved there within a month, then it will finally go to a Committee which would have respective Ministers of departments involved. In case it still doesnt get resolved within a month, it will go to PM who will decide in presence of the respective Ministers and Secretaries involved. There would be penalties on respective parties and Ministries, if the case goes to the final committee with involvement of the PM
  1. Manufacturing is still suffering from huge number of laws – Labor, PF, Excise, VAT, Customs etc. Last counted, there are 34 laws which any Manufacturer has to conform. My manufacturer friends tell me that its suffocating and a huge disincentive to anyone trying to manufacture in India. While GST will resolve some of these problems, but please see how can these laws be further reduced, simplified and clubbed together. It’s crying need of the hour
  1. Railways – Suggest corporatisation of Indian Railways, like was done with BSNL at Vajpayee ji’s time. Instead of a Government department, make it a PSU. Please read Bibek Debroy Committee report of April 2015. The Committee report, if implemented, can be the magic pill http://www.livemint.com/Politics/B9tNoWF2DSKPS0Pj7rHcDL/Debroy-committee-suggests-corporatization-of-Railways.html
  1. Taiwan – Taiwan should be to India, what Pakistan is to China. If Modi ji makes a trip there, our guess is India will get commitment of atleast $50 billion FDI, especially into high-end manufacturinghttp://swarajyamag.com/world/india-taiwan-relations-a-comprehensive-security-perspective – it will be a double whammy, with Japan and US also on our side
  1. Temples – Go to Middle East or Iran, one sees beautiful Mosques, with modern architecture. Ditto with churches in US and Europe. But everyone’s experience of going to Temples is that they are old, antiquated and one faces harassment by Pandit’s. Government control of temples is largely to blame because of committee’s which are overseen by Government nominee’s. But point to deliberate is that why are Hindus not constructing modern Temples on a grand scale? (Hardly few organizations controlled by Western organizations like ISKCON are doing it). The last big movement in constructing modern temples on a grand scale was when Indira Gandhi kept wealth tax at 94% and groups like Birla’s constructed Birla Mandir’s instead of paying their entire wealth to Government.

This issue is a sensitive one for Modi government, but has a huge appeal among BJP’s followers. Suggest bring a law to hand over control of Temples to society. Also, bring new Tax incentives to let companies start constructing new, modern Temples on a grand scale

Western governments do allow tax breaks to religious groups. In the USA over $ 70 billion in tax exemptions yearly is afforded to religious institutions, mainly to Christianity, the majority religion

  1. Privatization – Some noises coming in Media on a committee being formed to consider strategic sale of PSU’s. We fail to understand that why is Government continuing to have such loss making PSU’s in fields like 2 wheelers, watches etc. Hand over smart severance packages and shut loss making one’s – better to spend money in one go, rather than bleeding every year. For others with huge land banks, we are sure they will be successfully sold by strategic sales. Also, privatize Air India, BSNL and other such Govt concerns which are fast loosing market share.

Then there are huge number of PSU Banks which have most NPA’s because of faulty loans granted under pressure from previous Government. Why should 70% of loans in India come from PSU Banks when worldwide figure is opposite (worldwide, 70% loans come from Private Banks!) Privatization of PSU Banks is a tricky issue, because Congress and other parties will make hue and cry that state silver is being sold – in reality, opposition parties are the one who gave such monstrous loans to shady and greedy promoters. So, we feel Government is right in saying current figure of 27 PSU Banks is way too high and they should merge – post merger, incremental privatization can be done

PMO Modi Government
PMO Modi Government
  1. India should consider joining One-belt-One-road (New Silk road) project of China. China is interested in this with India. They are pumping in huge money in laying a network of roads, pipelines and railroads to connect seamlessly between countries. Just the Pakistan CPEC would get $46 billion FDI in Pakistan! Strategically thinking, what does India have to loose? A road travels both ways, so India would also get to export to whole of China.

China’s Deng Xiaoping said “Color of cat doesnt matter, what matters is that it catches mice!”. So, China has huge disputes with its entire neighborhood but at the same time, is involved in massively increasing economic and travel closeness with all of them. There are more China-Taiwan, China-South Korea, China-Japan, China-Asean flights than one can ever imagine between India and any other country. This economic bear hug makes countries closely tied up with China and defuses chances of a clash.

Here is India, with a $2 trillion economy with a $10 trillion economy of China sitting next to it. Why should we not take advantage of it by giving them, say, 3 Silk roads, passing from Tibet and ending up on warm waters of Mumbai, Kolkata and through North-East? Back of envelope calculation says its a $150 billion FDI. India would get direct entry into Tibet and the Chinese would be too enticed not to settle the boundary, because they are very keen on Silk roads through India

  1. Agricultural income tax above 1 crore income – Jaitley ji said in Parliament that people are falsely showing their income as agricultural income and he intends to go after them. So, while tax on agricultural income is a sensitive issue, but why not start by levying Income Tax on agricultural income above Rs. 1 crore per annum? Which political party can oppose tax above 1 crore income? They would only oppose because some politicians from opposition parties are falsely showing their income under agriculture to evade Income Tax. But public will support, so this will sail through. It would also signal financial reform commitment of Government
  1. Swapping part of forex reserves with Government-owned foreign debt – During Vajpayee ji’s time, India started paying back Government debt of western institutions. See what has happened since then:

US, Japan, Europe have been printing record amount of currencies in circulation. Post the East Asian crisis, when a group of investors led by George Soros shorted Asean currencies and led to a crisis, most countries started keeping foreign currency reserves to stave off chances of a currency crisis and country default. Because of legacy of Oil getting transacted in Dollars and with the world keeping their reserves in Dollar, Euro and Yen, even such large printing of currencies by US, Europe and Japan hasnt led to their currencies losing purchasing power.

Concurrently, with US, Europe and Japan keeping their interest rates to near zero and even negative, such forex reserves kept by countries in Treasury bills of these 3 countries earn a pittance. So, out of $375 billion of India’s forex reserves, a huge proportion is parked in US treasury bills earning 0.25% annual interest! On the other hand, Indian Government has such huge foreign debt that most of the budget goes in interest and capital repayments.

Looking at amount of forex reserves India should hold – RBI Governors have been amongst the smartest brains worldwide. Instead of keeping quantum of forex reserves as months of net of imports & exports, they have kept the quantum as a proportion of net foreign debt of the country. Now, that our forex reserves have risen by $100 billion in past more than a year, its time to continue on that formula and instead of accumulating more dollars, use them for repayment and also let INR rise against the Dollar

Gold had a bull run for 10 years, went down for 4 years and has started rising again. It shows impending drop in value of US dollar. China is also diversifying part of its $1.2 trillion reserves away from US Dollar. Further, development of Shale gas and stress on renewable energy with signing of Paris Climate Accord, also means less dollars would be required for Oil trade in the future. Dollar value will ultimately lower down and recent US actions of making the country itself as a Tax haven is to attract any kind of money into US – Be it black money, tax evasion money or any color of money. US just needs dollar inflow to meet its current account deficit because money printing cannot continue ad infinitum. Our suggestion is:

Why not take out dollars parked with US treasuries (earning pittance in interest) and instead start repaying foreign currency loans taken by Government from foreign institutions? Mechanism can be that a Government infrastructure company whose projects have already been completed, will pay back the loan to World Bank or IMF or any other International Finance institution. Instead, a similar loan will be provided by an Indian PSU Bank in INR’s. Keeping this action reserved only for completed projects would mean no additional default risk on Indian PSU Banks, which are already loaded with bad loans

  1. Curb sensationalism by Media – Indian media relies on blatant sensationalism. Need is to curb it. A bill can be brought to curb sensationalism by Media. Also, if Media is found to be distorting Facts or sensationalizing, it would be liable to get its License canceled. No opposition party will oppose it – take our word
  1. Franchising law – this is needed for exponential growth in Franchising industry
  1. Education – The excellent US education system entails entrance to Colleges by weightage given as: 25% communication & stage presence, 25% sports and 50% academic performance. Just why is Indian education system giving 100% weightage to academics? If Indian system were to be changed to US system of 25:25:50; then with time, schools will start making systems for grooming of students in personality, sports, communications and so on. Sure, this small administrative order can be issued by Smriti Irani!

Then India needs to move stress from obtaining degrees/ certificates to getting people to learn skills – While Skill India is welcome, but student’s skills need to be physically tested rather than checking answer sheets, which result in ratta-fication. So, amongst the 50% academic weightage too, practical skill testing has to be done.

  1. Indian architecture – Suggest a small clause in tax laws/ stamp duty on Real Estate that if the building has a facade which reflects Indian civilizational theme – 1% relief in Tax or duties would be provided to buildings meeting this norm – result would be more Indian looking cities. 1% extra rebate can be provided if the building conforms to green norms, uses renewable energy and avoids glass exteriors which trap greenhouse gases
  1. Electoral reforms – A committee has recommended simultaneous state elections to reduce continuous atmosphere of politics – http://timesofindia.indiatimes.com/india/Parl-panel-for-simultaneous-elections-to-Lok-Sabha-assemblies/articleshow/50226681.cms– Modi ji has also said he wants to implement it
  1. Small states – High time UP was divided into 3-4 states, Maharashtra into 3, J&K into 3 – How can UP with 20 crore population be EVER governed? Impossible. Mayawati had already passed a resolution in UP assembly for it. If Modi ji can be persuaded, nothing like it. Probably, Bundelkhand from MP and UP can be merged to form a state. Awadh can be one. Maharashtra can be divided into Vidarbha etc. J&K into Kashmir, Jammu and Ladakh
  1. SUUTI – When UTI problem was resolved, the shares held by UTI were placed in a trust SUUTI. Now, SUUTI has shares of ITC, Axis Bank, L&T etc of the value of Rs. 30,000 cr. Government has been missing its disinvestment targets since many years, so why keep on holding these stakes? What will Government do with holding shares in tobacco company? There is no legal problem in selling these stakes as simple bulk deals on exchanges can be used to divest

Similarly, Government holds minority share in Hindustan Zinc and Balco whereas the value of this holding has increased exponentially and Vedanta wants to buy the remaining share. We understand that the Courts have accused the Government of backdoor privatization and bypassing of nationalization laws (brought by Indira Gandhi) in case of such stake sales (like Hindustan Zinc, Balco) but I am sure Attorney General Mukul Rohtagi and CJI Thakur can work something out

  1. Socialism to go from National Parks – Till when will we charge Rs. 10/- for entry to Indian wildlife reserves and keep them devoid of modern facilities? A poor continent such as Africa provides sophisticated facilities – resorts, Rotor gliders, Hot Air balloons, full security and other amenities and charges a bomb – but Indian national parks are devoid of such facilities – most western tourists who come to India are the poor one’s – who take a dole from their country and come here and spend peanuts. We need to move up the value chain and what better way than the best we have to offer – abundant flora and fauna! Provided strict environmental norms are implemented, a lot of privatization can be done and fares increased manifold at such nature reserves
  1. Dissolve MCD’s – The one constant refrain from anyone who has visited the West, Middle East, China, Japan, Europe or Asean, is stark difference between public infrastructure of their cities and our cities. Even nations such as Indonesia, Vietnam and Combodia have better roads, public amenities and traffic systems! The MCD model of elected representatives governing public infra is dead since it breeds corruption, unnecessary politics and doesnt bring international standards of public infra and management. All such public infra is best imported from corporates led by FDI – this is a must to complement Smart cities project. Look at what Dubai has been able to achieve by bringing in expertise from Western countries in this regard
  1. Death for corruption – Public services, in West, Middle East, China, Japan, Europe, South Korea or Asean, are devoid of corruption. So, while corruption in top echelons is humongous, but not for daily necessities – like Licenses, water, electricity, real estate certificates etc. The only way out now, in India, is to bring death penalty for corruption in any public service. We are not in 2 minds on the issue. High time this was brought about. India is too lenient, democracy as practiced here is too distorted and there is lack of fear of the adverse in minds of those with even small power
  1. Modern Trucks and transportation – Indian trucks are still manufactured with old technology. The worst part is poor conditions for the driver – rickety seats, no AC etc. Till when will Tata Motors and Ashok Leyland keep giving us trucks of 1950’s vintage technology? Government needs to make driver comfort mandatory including power steering, AC cabins and comfortable seats. This would lower down the rate of accidents and also give relief to over-worked drivers on roads

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Tushar Kansal
Tushar Kansalhttp://www.tusharkansal.com
Tushar Kansal has served in senior positions in Corporate Finance at Deloitte Touche Tohmatsu, Brand Capital (ToI), Aircel & was Head (Debt Management) at MTS India where he raised more than USD 2.5 billion complex structured debt from International and Indian Banks. He launched the startup IndusB2C.com in end-2014, prior to which he served as CFO (Chief Financial Officer) of DLI (Distribution Logistics Infrastructure), owned by Guggenheim; a USD 200 billion American Private Equity (PE) Fund. He is a B.Tech (Textiles), MBA (Financial Management) from University of Delhi and Google AdWords/ Analytics Certified. Tushar blogs at tusharkansal.com, tweets @TusharKansal & publishes relevant news on the right-wing Facebook page https://www.facebook.com/induschurning/
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