Six steps that can put the economy back on rails

Overseas investors are scared of putting money in India - and this should worry the government.

The most crucial thing that the government needs to do in order to improve the financial environment is to create a positive environment, says T V Mohandas Pai, Chairman, Manipal Global Education and former member of Infosys’s Board of Directors, below, left.

In this interaction with Rediff.com’s Vicky Nanjappa, Pai explains where exactly the government is going wrong.

Taxation

First and foremost the government of India should create a positive environment. The business is extremely unhappy with taxation.

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They feel harassed by the taxation structure. The problem is that the finance ministry has set high targets for the collection of such tax. There is a transfer pricing demand of Rs 150,000 crore. This has led to litigation with nearly 4,500 companies challenging the decision to levy taxes.

The ministry must look into this issue since what I have also noticed that there are frivolous litigations before the court regarding these issues. The first thing that the ministry needs to do is bring about some sanity on this tax issue and once this is done seriously then the environment to do business will also improve.

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Tenders

The other issues are power sector, coal linkages and roads. Tenders take forever to get finalised and this is delaying development. On issues such as roads and its tenders, the atmosphere needs to be more liberal in nature so that work commences and completes sooner.

Even in the telecom sector the government should stop the unnecessary penalising. This acts as a deterrent and can hamper growth. There ought to be a more liberal feel so that the markets look up.

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Environmental issues

The other major issue that is daunting the industry is the environmental approval. I understand that there are rules and regulations and the industry would abide by it. However, what has been noticed is that the environmental approval today largely depends on bribe. Every city has a master plan regarding what should be done and what should not. These are the rules that ought to be abided by.

The environmental officers is given targets and he ends up taking a bribe. This leads to stalling of projects and delay in the implementation which once again acts as a deterrent. The harassment is so high that it has gone up by 40 per cent and the government has to urgently look into it.

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With regard to port clearance matters take too long. Ideally such issues should be resolved and matters completed within 30 days. But the efficiency levels of these officers should be looked into. They cannot hold up material for long periods and raise custom clearance issues unnecessarily. The delay has to be brought down.

Judicial reforms

Judicial reforms is something that is of utmost importance. Government must be serious about judicial reforms. You may recollect that when Veerappa Moily was the law minister, he said that cases should be settled in three years. In fact he had committed regarding the same.

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However that has not happened and cases are taking 10 years to settle and this is too long a period which again is hampering industrial growth. Justice has to be delivered soon so that people know where they stand. Long waits are demoralising the industry.

There are reports by various agencies that have been put up suggesting means and methods to improve the industry and also the economy. I wish and hope that the government looks into all these reports and implements them in the interest of the people.

Stagnation

There is a stagnation of the operation environment in our country today. Implementation takes too long and this delay kills enthusiasm as a result of which the economy suffers. There is an urgent need for the government to improve our operating environment.

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Trust

I had said recently after a trip to Singapore that investors were scared of investing in India. India should be worried about this. The Finance Minister P Chidambaram too had visited these places and was clearly told by the investors that what is scaring them is the tax man in India.

There is a desperate need to abolish short terms capital gains in order to win the trust of the investor. A government order to this effect has to be issued so that the investor will begin investing in India which will help us in the long run and improve our economy.