An agenda for Modi’s 2nd term — financial, institutional reforms

Election results streaming in as this column is being written on Thursday, indicate that the NDA will form the new Government with a larger mandate than in 2014. Here are some things Prime Minister Narendra Modi can contemplate:

Jobs and skilling: The world has changed but the methodology of counting unemployment hasn’t. Hence the unemployment figures are alarmingly high, because they tend to exclude the unorganised/ self-employed sector. Manufacturing jobs are disappearing, and the pace will increase as the world gets ready for the Fourth Industrial Revolution (IR). Modi needs to set up, and encourage, institutions to impart new skill-sets to prepare for the 4th IR.

The 4th IR will encompass 5G Internet speeds, which will allow things such as like autonomous vehicles (that would reduce wastage in private ownership), the Internet of Things, etc.

Revamp primary education: The Indian system relies more on rote than on understanding and learning. Far too much focus on the when and how than on the why and where. Far too much pressure on getting high marks (pressure that causes suicides) than on reasoning. To prepare for Fourth IR, we would need to seriously revamp that, bringing in an Education Minister who has the vision to look into the future, the courage of conviction to revamp the system completely and the political backing to do so.

Rationalise the GST system: The GST has 5 rate slabs — 0, 5, 12, 18 and 28 per cent, plus two others for gold and precious stones. Perhaps the multicipility was to get all States on board to agree to GST. Now, in its second term, the government can think of simplifying it to two rates, lowering the higher ones, which would encourage (as did a drop in income tax rates) better compliance and higher revenue.

Remove all deductions and reduce tax rates : The biggest laundry for black money is tax-free agricultural income. This is a farce; it does not benefit the ‘small farmers’ but only the ‘corrupt politicians/ businessmen/ professionals’. It would be simple, and necessary, to, for example to give a generous (say, ₹24 lakh a year) tax-free income to farmers (thus doing no injustice to the small farmers for their toil) but taxing those with higher income. This will eliminate the black money laundry.

Revamp the judiciary: It is a complete farce that the longest running case in India is 175 years old. The BJP, together with the judiciary, must stop this nonsense. The easiest remedy is to a) fix the timetable at the start of any trial, asking both sides how many days each need, and allotting them ab initio, and b) permitting each side only one adjournment per case. This is done in all countries. Why is our judiciary so sympathetic to crooks and crooked lawyers, and is insensitive to the plight of the victims.

There must also be a limit on legal expenses a company can bear. One celebrated case has spent some ₹500 crore on legal expenses defending a scamster, more than what the government spent on Swachh Bharat. This is insane.

These are some of the steps Modi could concentrate on, besides many others. The first year would be tough, as funds have been used up in pre-poll largesse, but the remaining four would be stupendous for the economy, jobs and growth (of course, for stock markets too) if he does a few of these things, and then some more.

(The writer is India Head — Finance Asia/Haymarket. The views are personal.)