Don’t discourage thinking out of the box!

Some 47 IAS officers thought about different options for the Government to raise much needed revenue; due to the lockdown, tax collections are dramatically low, besides, the Centre has to spend a lot of money on trying to save/revive the economy. They brought out a paper acronymed FORCE, containing suggestions, some good, some bad. Alas, they were publicly castigated by the Government, because the bad suggestions included some ideas that had been discarded, such as a re-introduction of wealth tax and estate duty.

That was like throwing the baby out with the bathwater, for the good ideas were discarded with it. Such as settling the ₹9 9-lakh crore of direct tax demand, caught in litigation. This was also suggested by this columnist, in his column of April 11 this year, titled ‘Five Ways to Raise Government Resources’.

Other suggestions made by this columnist included a scheme for religious institutions to donate, and get a higher tax exemption for donations it receives; a tax amnesty scheme; NRI bonds; settlement of disputes such as the telecom dispute and more pragmatic approaches by State Governments.

Out-of-the-box thinking should be encouraged, not publicly castigated. Else you kill such thinking. The Government is not the sole repository of ideas and ought to welcome good ideas wherever they come from. Another good suggestion made in FORCE was to give corporate tax exemption for WFH (work from home), which will become a norm, thus saving office space as well as expense on commute, and bespoiling the environment.

One of India’s largest source of funds is inward remittances from those working abroad. The World Bank estimates that inward remittances to South Asia are likely to drop 22 per cent. Not only that, but several NRIs may lose their jobs, which would lead to their return to India, putting pressure on states like Kerala.

One such out-of-the-box idea is presented below.

Movement of trucks: After the fall in crude oil prices (negative for WTI in America, due to lack of storage), the GOI had raised excise duties on petro products. We now have a piquant situation. On the one hand, demand for petro products is low, due to the lockdown; thus the higher excise duty is not helping GOI get more revenue. Not enough trucks are plying, for a variety of reasons, including shortage of drivers/ cleaners/ helpers, who have gone to their villages. More trucks will be needed if the lockdown is eased, as expected, after May 3.

At the same time, we have a storage problem too, both for crude oil (which is cheap and India can use a part of its FX reserves to buy if it could store) as well as for petro products.

So here’s the idea. Why not offer truck owners a, say, 50 per cent discount on diesel, incentivising them to start moving trucks. This should be linked to them sharing the benefit with drivers/ cleaners/ helpers by paying them more, attracting them to come out of their villages and promising masks/ sanitisers/ soap. Without more trucks, how, even if MSMEs start operating, will they be able to get raw materials, load and unload stuff, and despatch their finished goods?

What is the use of higher excise rates if there is no revenue collection?

Is it not time to swing the pendulum towards livelihood now? Covid presents global leaders with the Life v/s Livelihood dilemma. It is not an easy decision by far. Lockdown is essential to slow the spread but extending it beyond a point threatens livelihood. A recent study by Standford University indicates that the fatality rate of Covid is 0.1-0.2 per cent %, lower than previous WHO estimates. Protecting senior citizens, who are more vulnerable, would reduce the strain on the hospital system.

In encouraging news, there are several attempts being made to develop a vaccine for Covid, a process that normally takes years. The most promising is one developed by Oxford University, which is so confident of getting FDA approval for it by September that it has already outsourced its manufacture to seven 7 global plants, including Serum Institute in Pune. This is so that when approval is obtained, the vaccine is ready for distribution.

The Indian economy, like all countries, will take a long time to recover from the enormous disruption it has gone through. Moody’s pegs India’s GDP growth at 0.2 per cent. The kharif crop is, luckily, good and the Government is taking measures to harvest it. If India lays the welcome mat for FDI, India can benefit from a shift in manufacturing base away from China. So far, a lot of it is going to Vietnam and Malaysia. We should be more pro-active. For that we need to encourage, not discourage, the bureaucracy.

The writer is India Head — Finance, Asia/Haymarket. The views are personal.

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