A Navratri (Nine-Point) Economic Re-Boot for a ‘Puritan’ Modi

[00:00:00] Rise Above the Dinn, Unbox the News with me, Raghav Behal Prime Minister Modi surprised everybody with an unexpected, a very stirring commendation of wealth creators in his Independence Day speech A Navratri Nine-Point Economic Re-Boot for a Puritan Modi, Raghav Behal

[00:00:25] Most tellingly by using popular English terminology, mark that, English terminology, he said wealth creators. He did not say punji utpadak or sampati utpadak which is what he's wanted to do. Therefore, he was clearly signaling a reach out to new gen entrepreneurs and to elite business

[00:00:44] people who have gotten estranged from him. And by obliquely acknowledging that his regime may have treated them with contempt or with suspicion. Now mark that phrase, he said heen bhavna. He was therefore being as contrite as the Prime

[00:01:18] Minister can ever be on a public platform. He then issued a clarion call for disruptive, not incremental, disruptive change. So I'm going to give our Prime Minister the benefit of all doubt. Perhaps he is ready to shed the

[00:01:51] statist mindset that has bedeviled his economic policies until now. And since I know how fiercely, how almost devoutly he believes in the biannual Navratra tradition of fasting and he does that to reinforce his what he calls his sankalp that is his determination.

[00:02:16] I shall give our Puritan Prime Minister nine ideas to rethink, reboot and turn around India's economy. One, save assets, inflict losses on equity and bond holders. The Modi government has made a crippling error by killing assets along with prosecuting errant owners and managers. Now

[00:02:40] ILFS and Jet Airways and now possibly a DHFL which is also seemingly on death row are two of the most graphic examples where healthy assets should have been saved even as the lawbreakers were hounded to justice. Now that would have allowed thousands of innocent workers to keep their

[00:02:59] jobs and that would have inflicted the entire loss on owners of risk capital. After all, aeroplanes or roads and dwellings are not criminals. It's the people who are the risk capital owners who are the criminals if they are. Point number two, use deep discount rights issues to

[00:03:20] multiply every public rupee infused in banks. Now the Modi regime has virtually wasted time and money by putting driblets of capital in public sector banks over several years. It now needs to repair each balance sheet in one go. And it now needs to think of innovations

[00:03:41] like a deep discount equity issue with attached warrants on a rights basis and that would multiply the impact of every single public rupee. Third, they should now shed their diffidence, shed their doubt and actually throw a lifeline to non-banking finance companies

[00:04:01] along with the real estate and automobile sectors. You know what? A stitch in time does save nine. And again this is Navratri and nine. In fact I would argue and I've been

[00:04:13] arguing for a long time for a bold, tarp TARP like window to solve the liquidity crisis of several troubled operations. As an article of faith, we should never allow a liquidity crimp

[00:04:26] to become a solvency crisis which is what we are in danger of doing right now and I just want to remind you what TARP is. TARP was the famous troubled assets reconstruction program authored by Ben Bernanke to save the American economy during the post-Lehmann recession

[00:04:42] and there were spectacular results to show for that program. Now idea number four, let's create a trillion dollar sovereign fund by pooling all public sector companies under it. Now this professionally managed company should be floated on an overseas stock exchange like

[00:05:01] the Chinese have done, like others have done to create a proxy India stock. It should be allowed to sell all unhealthy and non-core units and therefore generate cash for itself. My calculations show that this could release several hundred billion dollars of productive investments in a virtuous

[00:05:20] invest, build and divest invest, build and divest cycle. Idea number five, let's overhaul the insolvency and bankruptcy code. Now that we have the experience of several real life cases the government has in its arsenal, the insolvency and bankruptcy code should be comprehensively

[00:05:40] amended to make it a swift incisive instrument of capital assets which can be made mobile. Idea number six, we should stop the hostile taxation of equity capital you know and the government must make quick amends here. Don't drag the decision. Long-term capital gains

[00:05:57] and dividend distribution taxes should be abolished. All fetters on issuing differential voting rights shares should be removed. Angel and you know the valuation mismatch taxes which are really regressive they should be unhesitatingly killed for all companies not just for a designated

[00:06:16] set of companies but for all companies. Idea number seven, let's curb tax terrorism. The Modi government should acknowledge that it has created a Frankenstein by giving arrest and other intrusive powers of extortion to tax officers all of which should be rolled back.

[00:06:35] Idea number eight, let's just stop fudging the real fiscal deficit. The government could wipe the slate clean by converting all off balance sheet borrowings into a one-time perpetual bond. Once it has done that it should become completely transparent from here on in

[00:06:53] future. And finally, idea number nine, Navratri idea number nine, stop appointing retired bureaucrats in key regulatory assignments. Instead Prime Minister Modi should co-opt you know very credible admired domain experts who have a modern outlook they've got great credentials. They

[00:07:12] should be called into oversee key economic sectors and if the regulators are in conflict with the bureaucracy and the ministries Prime Minister Modi should celebrate such a descent because honest solutions will emerge out of it. So in the end, Prime Minister pardon my colloquialism

[00:07:32] but just do it this Navratri. Thanks for listening tune in next week for another episode of Raghav's take.