Amid all the cry of wrong policies of the current NDA government, during my interaction with industry participants across the spectrum of automotive, plastics, paints etc, following came out :
BJP's policies were well intentioned, but the implementation has been botched. Let's look at each of main actions :
A. GST - while the aim was to get everyone on. Board and with that they cleared off on multiple rates and complex structures, the rules made have had serious repercussions by faulty drafting of initial laws. This has happened largely as they wanted to ensure law has to be iron tight and should not leave room for businesses for any wrongdoing. In this quest, they forgot to differentiate between bona fide and mala fide acts. This created such wrong rules that its opened a pandora box of legal cases going forward. While they have reacted now, it's late and has already caused huge loss.
B. I was surprised to understand from some companies which import paints from other countries, that they get full input credit for all goods that they import and sell and hence they dont need to setup a manufacturing plant at all !
C. Safety regulations, environmental regulations are all being done together and too fast. This has pushed up acquisition cost. But bigger issue is the hard stop mandated by the SC which has created the current gloom and doom in the industry. If the supreme court can be petitioned to review this rule, and allow for registration of stock available at dealerships on 31 march 2020, then the current situation will suddenly turn towards a virtuous cycle like earlier times of BS changes as customers would like to take benefit of price difference. But currently they are only waiting for the bloothbath which they feel is expected in Q4.
D. Now look at the decision on single use plastics. Thousands of plastic units manufacturing such goods across the country are suddenly in a spot as they dont know what to do. Few years back the government allowed plastic bags (Leno bags/woven sacks) for all FVI requirements removing jute. Food packaging etc also got huge investments in plastics. Now suddenly the government wants to get rid of same. What are these manufacturers going to do ? They stop all investments and start saving for the bad times to come !
Imagine 100,000 units stopping all investments !!
E. Quest for transparency and tax collections has increased harassment hugely on businessmen. Most businesses I know have decided not to open any more companies given the compliance required ( they have increased 100 times from before ) and also they have decided try and reduce the work they were planning earlier. I hardly hear people talk about growing beyond the current planned and auctioned investments. The jewellery sector has been hardest hit in this regard.
F. Closure of large companies like Jet airways, persecution of people like Vijay mallya inspite of his repeated public offer of full settlements, have caused a huge lack of confidence and distrust between industry and government.
To my mind government can still correct the situation at this time to save a large number of remaining jobs, if it genuinely acknowledges the real issues in the economy.
Some suggested actions are :
1. GST refund RTGS in next 7 days
2. FEAR from businesses needs to be removed
3. Compliance relief so that people can focus on increasing business
4. Cash movement relief - bank withdrawals, no TDS.
5. TCS bracket to be increased to 20 lacs and above.
6. Consumption/modernization capex breaks to be given to corporates
7. Stopping all coercive measures on businesses for gst, IT, old cases.
8. Booster consumption package with incentives for companies
9. Bank loans rejig, RBI relaxation on questioning of banks for end use.
While some actions seem excessive, but given current state of economy, drastic measures are needed to kickstart the economy once.
When things stabilise, government can think of changing things one at a time.
