Speaking on ‘Economic policy and way ahead’ at the fifth edition of Aditya Birla Sunlife Mutual Fund annual event titled Voyage, Subramanian Swamy, senior BJP leader and Rajya Sabha member gave his insights on how India can achieve the economic growth rate of 10%.
Citing World Bank’s prediction, the renowned economist said the World Bank has predicted 7.5% growth rate for India. For a country like India, where unemployment and poverty are still prevalent, this growth is not sufficient. The country needs at least 10% growth rate to prosper.
Here are excerpts of his speech on how India can achieve economic growth rate of 10%
Incentivise savers: India is a country of savers. Currently, we have the largest household savings i.e. 29% of GDP. If we include corporate savings, it could go up to 37%. While China has a household savings rate of 15%, such a rate is negative 2% in US since Americans leveraged themselves to spend. FDI has never been a contributor to GDP. Clearly, we should encourage people to save more to access household capital.
One way to encourage savers is to abolish income tax. The government is already collecting taxes through indirect taxes, then why do we need direct taxes.
In fact, we should make the tax system very simple. Today, we have GST but no one understands what GST is. We should abolish property taxes and taxes on registration and notified papers. How can you grow in a country where you need to fill numerous forms for multiple taxes?
Another way to encourage them is to increase the interest rates on FDs to 9%. Today, FDs fetch an interest rate of 6%.
Cheap credit to SMEs: Small and medium enterprises (SMEs) generate nearly two-thirds of employment in India. However, these SMEs do not have access to cheap credit.
In fact, people make money due to interest rate arbitrage i.e. bringing cheap money from abroad and lending it on high rates. We have to check these practices.
In my view, SMEs need capital to grow business and generate employment. Hence, I believe no loan should cost more than 9%.
Raising capital by auctioning natural resources: We are handing over all kinds of natural resources at practically zero cost. Take the example of 2G spectrum.
Currently, we are getting Rs.4 lakh crore through personal income tax. However, through an efficient auction of coals, the government could easily raise Rs.12 lakh crore in one go.
In addition, the government can nationalise unaccounted black money stashed abroad to raise Rs.120 lakh crore. Many countries such as Libya and the Philippines have done it through United Nations. If they can, why can’t we? There is no shortage of such resources in India. In fact, it is a myth that taxation is the only source of raising capital.
Encouraging innovations: Economics teaches us that 35% of economic growth comes from labour and capital while the rest all are by innovation. Locomotives and steel plant furnace changed the British economy. Similarly, Americans produced telephone and internet that helped them grow. However, in India, we are fighting for water. Why can’t we desalinate sea water to resolve this issue? Israel and Dubai have resolved their water problem through desalination of sea water. Reliance in Jamnagar and Kalpakkam project in Tamil Nadu are the perfect examples. They produce so much of water that today Jamnagar Municipality is buying water from Reliance to supply Jamnagar city.
Why can’t we have a river grid? This will generate employment and solve the very problem of water.
India is a nation of innovation. We invented mathematics and astrophysics. However, we have forgotten innovation. Unfortunately, people recognise a Bollywood hero more than a scientist who brings innovation.
