Thread by @niravstoons

While every one is fighting #Covid19 and focussing on the immediate situation - this #crisis surely presents an #opportunity.
My favourite quote is - In the Chinese Language - the word for Crisis is - 危机 (WeiJi or Wéijī) which means Danger + Opportunity

This is my wishlist🧵

India has tried to start on the right foot by offering large land parcels to companies wishing to move their supply chain outside China.
But is Land only enough?
economictimes.indiatimes.com/news/economy/p…

Factors of Production are Land, Labor, Capital, Technology, (and environment - physical infrastructure + regulatory environment)

India is lacking a bit on everything ...

Labour laws - made to protect workers, have the unseen effect of companies not hiring, since tough to fire. So net very few jobs created. That too contractors.

Capital is expensive as Banks have to lend to priority sector and keep writing off bad loans to Agriculture

Electricity for business is expensive - since Farmers get free electricity, Freight is expensive as passenger rail is subsidised.

PSU Banks and PSUs lose money and need to be recapitalised regularly.

So step 1:
In the land parcels - make them Special Economic Zones, where Labor Law is lax.

Step 2:
Gradually phase out subsidies. In a stepwise manner - probably 10% a year (e.g. passenger rail fares) and make farmers pay small token amount for power and raise gradually

Step 3:
Identify where our capacity is low.
E.g. We have too few police, judges, doctors.
Aim to close the gap in 10years by increasing recruitment in the steps (~10% a year)

Allow more private hospitals to have Medical colleges to train Drs and Nurses. Reduce the shortage

India has a big misallocation of resources problem.
Only very few cities (2 cities of 20million population, 8 metros more than 5million, and 50 cities more than 1million)

We need to urbanise faster -> and government can push urbanisation by shifting from Metros to Tier 2

Take the Example of Mumbai
1. Remove Capital, Mantralaya, MLA Bungalows, outside another city where new infrastructure can be built

2. Remove Western and Central Railway HQs and the staff quarters to another city (e.g. Baroda and Nasik)

3. Navy Nagar move from Colaba to Uran

4. BPCL has a refinery, RCF has a Fertilizer plant, which can be moved out, and land can be sold.

The money from these asset sales can be used to build infrastructure in other cities and replicate this infra.

Each city was naturally formed due to some reason in history and geography. Hence no point building in a forest (like Tughlaq or how Myanmar, Indonesia and Brazil have done) but instead on the outskirts of existing city build a new one.
Add Schools, Colleges, Hospitals, metro

The whole concept of social distancing doesnt really work in slums and chawls. Thus go on a war footing to breakdown slums and redevelop those giving long term lease to existing guys.

While this has vested interest of politicians, builders, mafia in keeping property prices high

Easing supply and lower property prices is a social good, and also allows people to set up a small home office / study - given that 'Work From Home' or #wfh will be a new normal

As for infrastructure - the dedicated freight corridors, bullet rail, expressways, metro construction should go on a faster pace - with fast track approvals - not just in existing cities, but also in extensions where things move from Metro to other towns

Another issue is the complex tax code:
Too many slabs, too many exemptions, too many classifications in GST.
A simple one - 12% on Services and 18% on Goods should be enough.

Tax guys should focus more on efficiency of implementation - than 'Is #KitKat biscuit or a chocolate'

Flat GST on all goods - you buy a Mercedes - you are already paying higher tax (same % of higher number) than a Maruti 800 owner.

Same way - simple income tax - remove deductions and 'Leave Travel Allowance' 'Housing Rent Allowance' etc
Just progressive tax slabs capped at 33%

Another pet peeve is 'Capital Gains Tax'

Capital gains - is gain on Capital Investment, and this capital was accrued after paying legit taxes.

Just one rate of Capital Gains Tax - subject to indexation.
Applicable on Real Estate, Equities, Debt or FDs

Remove long term, short term, ...
Keep a high level of indexation - but beyond that - keep it simple.

This makes it attractive for foreign companies to put up in India, and Indian companies to invest more.

I dont think there is any single #SilverBullet

A lot of such reforms, each one by one, and gradual phasing out of subsidies - on Kerosene, Fertilizers, Electricity, Rent (Bombay Rent Act) etc

(PS a Silver Bullet does exist - one by @royalenfield)
imgd.aeplcdn.com/1280x720/n/bw/…

Indian Economy is extremely complex.
Any sudden shock (e.g. huge rise in prices due to removal of subsidies) might cause a big problem.

But a phased manner of cleaning up clogs which slow down the system, and removing constraints of complex tax codes will speed up the progress

Think of it as a complex factory - with many bottlenecks.
Or an old Ambassador Car. It has too many old parts which are creaking and slow down the vehicle.

By replacing one part at a time, nothing much happens initially - but as multiple bottlenecks are out, whole thing moves

Human mind thinks in relative terms.
Thus many mini shocks after the HUGE shock due to #Covid19 might just seem palatable.

Can they actually deliver?
Would the vested interests of Babus, Politicians, Builders, Mafia keep it still under check?