Anything unique, anything creative that you have as a suggestion for the finance minister today?
Well it is not creative, it is often repeated but I think it is time to raise resources without raising taxes and the gold amnesty scheme or gold disclosure scheme could be a big move. There is more than 25,000 tonnes of gold held by Indians but most of it is in tijori, black economy. If we can bring a disclosure scheme whereby gold can move from tijori to white economy, government gets taxes and businessman gets equity capital in their balance sheet. The savings of $2 trillion which remains frozen in the tijoris can be part of the formal economy, can be part of the white economy. This can change India’s growth orbit.
From a market messaging point of view as well, what is it that you are hoping to hear? Would taxing the super rich would mean for the market?
Since this year income growth will be lower, probably there will be temptation to raise taxes on the wealth side. However, my feeling is that the budget should focus on creating a growth foundation beyond FY22. Because of FY21’s negative and lower base, FY22 will be a double-digit growth year. But we need to extend it beyond FY23 and for that we have to raise resources without raising taxes.
We have to spend money to stimulate that sector of economy which is impacted by Covid-19 so that this recovery truly becomes broad-based and V-shaped and we have to maintain path of fiscal prudence so that we can become oasis in the desert of the world where every other peer group countries splurging on fiscal deficit and we will maintain path of fiscal prudence. So our focus should be to create growth, growth and growth.
Do you feel that there are ways in which the government can possibly look at doing this considering that they are otherwise quite stretched on the fisc?
There are multiple ways to raise resources. In the world full of liquidity and low interest rates India can pursue aggressive monetisation of assets. There are land parcels available within the defence and railways departments. There are fixed assets available in the form of roads, ports, transmission towers. There are more than 9000 real estate available and they are custodian of enemy property. Both India and Pakistan came out with custodian of enemy property way back in the 60s. They divested their real estate and other assets in 1971.
We are full five decades behind them and it is time to monetise those assets. India has been pursuing a path of market divestment where on a regular basis we have been selling shares in PSU companies to meet annual target. This regular supply has resulted in PSU stocks trading below book value. The market trades at three times price to book, PSU portfolio trades at 66% discount to that history teaches us that strategic divestment and public private partnership results into far better realisation and value creation for PSUs.
By divesting a little, lots of resources can be raised. Ethical hacking is a way of life for giant software companies where they invite exports to plug loopholes in their programmes. Why not invite the best and brightest of India to plug loopholes in the taxation side? For example in the capital market, there is a cottage industry to convert interest income taxable at 43% to long term capital gain at 10% by issue of zero coupon listed debentures. Invite the best and brightest of India to plug the tax loopholes in our policies and I am sure our tax compliance will improve.
Other than the gold amnesty scheme, bring about underground activities which fund criminals to the mainline economy, activities like betting. Legalise betting and gambling and they will create growth. , they will pay taxes and they will behave responsibly rather than like criminals. So there are multiple ways to raise resources and stimulate the economy without compromising on fiscal prudence.