Bullets do not make an appetising meal, but it is well past the time when this government must take tough decisions and bite several of them. This is necessary for its re-election and imperative for India’s growth. Will the Prime Minister have the political courage to do so?

Financial discipline

Indian banks have piled on ₹3,41,000 crore of gross non-performing assets (NPAs). The alarming growth in NPAs came between September 2009 and May 2014 — the last term of the UPA Government — when they increased from ₹66,000 crore to ₹2,40,000 crore. Banks trying to collect this debt are hampered by several factors such as the accommodative stance of our judicial system and law enforcement agencies towards fraudsters. How else can one explain the ease with which Vijay Mallya, whose failed Kingfisher Airlines owes some ₹9,000 crore to banks, flew the coop? Nirmal Bangoo, the founder of another ponzi scheme company, PACL, a ₹55,000 crore scam, has escaped to Australia. As per recent news, he has gifted his daughter a $2.5-million home in Melbourne.

Contrast this with the way China deals with scamsters. Just last week, it jailed 24 persons who swindled thousands of individuals in a ponzi scheme. The founder was jailed for life!

Unless this Government, along with the law enforcement agencies and the judiciary, takes a firm stand on financial crime, and on defaulters, India cannot have 8 per cent GDP growth. This leniency towards criminals and defaulters must stop and strict punishment be imposed.

Inflexible labour laws

The biggest challenge faced by the world is lack of jobs. Even in the IT/ITES sector, which has thrown up a lot of skilled jobs for India, the big 5 firms added 24 per cent fewer jobs in 2015, because of greater automation.

This is linked to the attempt in the recent Budget to ensure that farmers get a better deal; currently half the people are employed in agriculture but get 14 per cent of national income. So, to double the share of farmers, either food prices/productivity rises or the number of people dependent on agriculture falls. For this to happen, they must get jobs. One of the largest providers of manufacturing jobs is the garment industry. The government recently announced an amended technology upgradation fund scheme (A-TUFS), hoping to provide 3 million new jobs in the textile industry.

However, largely due to inflexible labour laws, the garment manufacturing units are of small size, incapable of producing the kind of volumes demanded by large foreign buyers. A typical garment factory in India employs 150 people, a quarter of that in Bangladesh. Garment exports to the US from India in 2015 were $3.4 billion, up 8 per cent; from Bangladesh it was $5.4 billion, up 12 per cent.

The inflexible laws protect those having jobs, but deprive those who don’t from getting one as entrepreneurs need the flexibility to meet changing consumer tastes and a choice of destinations to invest in.

Agri tax for rich farmers

Completely exempting agricultural tax is not only iniquitous but provides the biggest laundry to convert black money into white. If the government is serious about eradicating black money, it ought to consider taxing the richer farmers (say, those with an income of 10 times the minimum exempt income of non-farmers). There are other bullets as well. Biting them can become an appetising meal if washed down with the wine of the consequent economic success and hence renewed electoral confidence. The government should take tough decisions. Investors, both foreign and domestic, will swamp the market with funds and ensure a boom that would make our disinvestment targets easy to achieve. If it does not, India will chug along at its natural rate of growth. It’s crunch time for Modi.

The writer is India Head, EuroMoney Conferences

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