With slowing global growth and intensification of the trade war and constraints on budget, private sector investment along with the weak financial sector, Prime Minister Narendra Modi met about 40 economists and industrialists on June 22 in a meeting held by NITI Aayog. The aim was to present actionable ideas on the macroeconomy, employment, agriculture, water resources, health and education sectors from the experts to the Prime Minister.
In the daylong meeting with the sector experts discussed the ways of achieving $5 trillion economy by 2024 by doubling per capita income like how China and Korea have achieved in the past. The group on macroeconomy suggested that there’s an urgent need to fix the financial sector, boost investments, get India integrated into the global supply chain and push for higher job creation. It suggested to bring merit-based recapitalisation, corporatise and consolidate public sector banks and also look at bringing down the government’s share to 51 percent in PSBs if the government cannot privatise it. Financing infrastructure should be deepened with insurance, pension and there’s a need to develop a corporate bond market. There’s also a demand to increase Foreign Direct Investment in the Insurance sector.
To boost investment, the suggestion was given to achieve lower lending rates through better credit availability, recapitalisation of public sector banks through excess RBI capital (if any) and also by bringing flexibility in the lending rates from the benchmark. Big thrust was also given on the idea of allowing 1 percent of GDP as additional fiscal spending beyond the FRBM target for specific infrastructure priorities. Asset recycling should be used to raise capital for e.g. $100 billion in 3-5 years should be targeted for the assets like roads, major ports, airports, oil & gas pipelines, transmission lines, and electricity licenses.
There was an elaborate discussion on job creation where it was suggested to digitise records of SME/MSME sector so that it can be connected to GSTIN to encourage credit flow, bring in a system to provide interest-free loan on incremental tax payment by SME.
Similarly, the idea was given to encourage formalisation of jobs by reducing the cost of formal jobs by reducing employee contribution to EPFO. ESI and corporate tax concessions should be based on a number of employees. The experts also suggested expanding the PM Kaushal scheme to increase the training of people for skill development and have job fairs to provide access to jobs. Some region specific suggestions were also given to incentivise labour-intensive industries like garment, light engineering, etc. in north India and connect those with infrastructure towards the coast for an increase in exports.
Group of invited experts also suggested to automatically allow non-irrigated farmland for industrial purposes and the need to bring a dedicated bankruptcy code for the real estate sector and increase in floor space index to encourage constructions.
Some prominent faces that were part of the meeting included N Chandrasekaran, chairman, Tata Sons; TV Narendran, CEO and MD, Tata Steel; Anil Agarwal, chairman, Vedanta; Sanjiv Puri, chairman, ITC; Nilesh Shah, Kotak Mahindra AMC; Sanjay Nayyar, KKR India; Neelkanth Mishra, Credit Suisse; Sajid Chinoy, JP Morgan; Samiran Chakraborty, Citibank; Soumya Kanti Ghosh, SBI.
Prime Minister has told the invitees that the government will try to incorporate some of the ideas in the Budget, but it can always implement actionable suggestions beyond budget as well.