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5 Things Modi 2.0 Can Do To Boost The Economy Research Team | Posted On Thursday, May 30,2019, 05:45 PM

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5 Things Modi 2.0 Can Do To Boost The Economy



Prime Minister Narendra Modi is all set for the second term, with the swearing-in ceremony today. The Prime Minister paid tribute at the National War Memorial ahead of the swearing-in ceremony on May 30th, where he met the three service chiefs. More than 8,000 guests are expected to attend the swearing-in ceremony.

Top opposition leaders like Congress President Rahul Gandhi and Sonia Gandhi, corporate big shots, bollywood filmstars, chief ministers and many great world leaders would attend PM Modi’s swearing-in ceremony at the Rashtrapati Bhavan.

Let’s take a look at the prominent personalities who will attend PM Modi’s swearing-in ceremony. Foreign guests like the President of Bangladesh Abdul Hamid, Sri Lankan President Maithripala Sirisena, Nepal Prime Minister K P Sharma Oli, Mauritius PM Pravind Kumar Jugnauth, Kyrgyzstan President Sooronbay Jeenbekov and Thailand's Special Envoy Grisada Boonrach would attend the swearing-in ceremony.

You would see famous sports personalities like Rahul Dravid, Saina Nehwal, Anil Kumble, Javagal Srinath, Harbhajan Singh and Pullela Gopichand at the swearing-in ceremony. Celebrities like Shah Rukh Khan, Kangana Ranaut, Sanjay Bhansali, Karan Johar, Tamil superstar Rajinikanth would be attending the ceremony. Corporate biggies Mukesh Ambani, Gautham Adani, Ratan Tata, Ajay Piramal, Bill Gates and John Chambers would be present.

As BIMSTEC leaders, the IMF chief, opposition leaders, industrialists and other celebrities attend the swearing-in ceremony, the big question. What are the 5 things Modi 2.0 can do to boost the economy?

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5 Things Modi 2.0 Can Do To Boost The Economy

1. Raise Cash from Public Assets

The Government can easily monetize the railways, roads, ports and power units and generate funds for public investment. The telecom spectrum auctions can be a bonanza for the Government. The Government can exit all PSUs which are non-strategic and give employees of these firms, a voluntary retirement.

2. Liquidity for NBFCs

The Government has to rescue NBFCs from the liquidity crunch. NBFCs are looking to the RBI to bail them out. The RBI would implement the LCR or the Liquidity Coverage Ratio. Around 60% of NBFCs cash outflow would have to be set aside in high quality liquid assets like Government Securities and cash. NBFCs would not be able to use these funds for lending.

LCR for NBFCs would have to be increased to 100% by April 2024. This will save NBFCs from liquidity stress. There could be a consolidation in the NBFC space where NBFCs with low liquid assets and high liabilities would have to consolidate to meet the RBI regulatory requirements. The Government can buy assets of NBFCs using Government Bonds and help them raise resources.

3. Make in India

The Government can focus on World Trade Organization-compliant export promotion schemes to boost Make in India under the 100-day action plan. The Government must focus on high growth sectors like electronics, telecom, hi-tech engineering products, textiles, medical devices and pharmaceuticals among others. There could be production-based government assistance under Make in India.

Sydney’s fully-automated driverless metro trains which consist of modern features like CCTV cameras, LED lighting, emergency intercoms, real-time travel information and double-doors are powered by Make in India. Sydney’s driverless metro trains are assembled in Andhra Pradesh under Make in India.

4. Modi 2.0 Must Fix the Job Problem

Narendra Modi has the tough task of fixing India’s job problem. He must ensure India has the capacity to generate jobs, to cater to the swelling youth in India. This is a big job for Modi 2.0. The first thing he must do is fix the quality of education to make the youth in India, employable.

India adds 1.23 Crore youth to the workforce each year. Giving 10 Lakh people jobs each month is a herculean task. Then there’s the skill mismatch which results in unemployability.

India needs a highly skilled workforce and a flexible labor market. Tomorrow’s workforce needs contemporary education which is sophisticated and future-ready. Modi 2.0 has to overhaul the education system right from the grassroots level. Modi 1.0 introduced Make in India, Skill India and Startup India. Modi 2.0 must introduce Re-educate and Recalibrate India.

5. Modi 2.0 Must Focus on the Salaried Class

Prime Minister Narendra Modi must focus on the salaried class in India. He has done a commendable job by dragging the salaried, earning not more than Rs 5 Lakh, out of the income tax net. Modi 2.0 needs to do more for the salaried, especially those in the Rs 5 Lakh to Rs 10 Lakh tax bracket.

Take a look at the tax liability. On the first Rs 5 Lakh the tax liability is Rs 12,500. On the next Rs 5 Lakh, the tax liability jumps to Rs 1 Lakh. This is a very steep jump in tax. The standard deduction of Rs 50,000 a year adds insult to injury. The first job for the new Finance Minister is to reduce the tax rate for those in the Rs 5 Lakh – Rs 10 Lakh income tax bracket, from 20% to 10%.

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