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Monday, June 01, 2020

Exiting the red tape zone

Over-communicate; simplify rules to incentivise, not to scare; bring fresh Budget: a three-step way forward.

Written by Sunil K Alagh | Published: May 8, 2020 7:21:17 pm
Migrants queue up for a medical examination at Guru Nanak Dev stadium in Ludhiana Friday before being allowed to board the Shramik Special train. Express Photo by Gurmeet Singh

Sitting at home, questions boggle the mind: Why do people throw stones on our corona warriors? Why don’t our bureaucrats write clear, simple rules which we can understand, why are some rules meant to deter than to incentivise? Why does the government come out with homeopathic doses than allopathic ones for the economy?

There are some of us who would throw stones at corona warriors when they come to our aid. This is because of the stigma attached to being sick or a lack of understanding of instructions. The same reasons why migrant workers want to go home. Many of them lack food, shelter and money. Some would prefer to die at home rather than away.

The only solution is to over-communicate, be transparent about the problem and implement the plans laid out by the Prime Minister. The Govt has the resources, what is lacking is implementation. There are times when people receive conflicting views. The answer is simple: besides testing, please communicate and implement.

Take for example, the current opening of alcohol and paan shops. It is essential for returning to normalcy but people are coming out in hordes to buy. They think the government could withdraw this easing at any time so it’s better to stock up – far from the truth.

On the second question, bureaucrats generally tend to write rules by over-complicating them. Rules which should be objective are made subjective. They tend to instill fear, not hope. For example, the rule that if a factory is allowed to open it must not only follow rules, but (there is always a proverbial ‘but’ added) even if one worker falls ill, not only will the factory be shut but the management will be held liable.

Would they suggest the same when a Ministry is opened i.e. if one employee falls ill, the Minister will be held responsible? Of course, not. The attitude is: rules are ‘made for others not for us’.

A solution could be to write out a draft, put it out for comments and then finalise. We must regulate on the upside, protect the downside. We must encourage and facilitate, not discourage and control. In fact, even state governments should not be eager to send back migrant workers. They will be needed to kickstart the economy. It will take months to get them back. They should instead provide food and shelter for them.

On the final question, it’s about time that the government (both Centre and states) should come out with a fresh Budget which clearly states our position.

We must convey to people that this is a Budget which prepares us for the worst and hopes for the best. Tell the people that we estimate a 1 per cent growth in GDP. Our revenues will fall and we will still spend money on the Health sector and for the poor and needy saving lives and the economy. The priorities have to be laid out. It’s lives and not lifestyle that the government is tackling. Take care of the rural, poor, agriculture and migrant workers first. Increase amounts to be given to them from Rs 500 to at least Rs 4000 per month. The cost will be only around Rs 70,000 crore. Then take care of the MSMEs by providing liquidity to pay wages and survive. The SMEs are the backbone – even in Germany they make up 85 per cent of the economy.

We must underline that we will look after our exports and then gradually incentivise our industry to open up. The Centre, RBI and banks will provide the necessary stimulus to MSME and, subsequently, to large industries by extending credit to pay wages and start production.

Repayments will start from the end of the year. Demand generation will be most important and we must reduce taxes and put money in the hands of consumers to spend. Providing stimulus to industry is short-sighted as they will come back asking for more. Only demand will sustain them and start the virtuous cycle.

Revenues will fall, expenditures will rise and fiscal deficit will go up to 6-7 per cent. We will make up in the coming year or two and the world will understand if we are open about it. Investment will flow in. We must seize the moment by removing all existing red tape and permissions to start industry. Foreign investment is already moving out of China into Vietnam, Indonesia, et al. We cannot sit back and rely only on the world’s sentiment against China but aggressively attract investors to India. We must ask investors what they want and immediately provide these.

I think a complete lockdown is necessary till May-end in the Red Zones and we must carry on testing. But on the economic front, we should put out a plan now and invite discussions on it. Simplifying and implementation should be the mantra.

As someone said, “When the why is clear, the how is easy”. We must carpe diem. The world is getting ready but are we?

Sunil K Alagh is a business consultant

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