What do the election results mean for Indian economy?

A strong BJP led government provides the buoyancy that the markets need to step up reform

What do the election results in five states mean for India Inc and the economy as a whole? Will it usher as in the words of the Prime Minister Modi a new India? It may be too soon to say in the affirmative but the triumph in UP is definitely going to ‘UP’ the ante on reforms, including the roll out of GST.

All fears of a backlash due to demonetisation have now been laid to rest and BJP making inroads into Manipur, a Congress bastion for decades has shown that the Modi wave is indeed sweeping across the country. A strong majority brings in confidence and investments for Asia’s third largest economy.

Markets and politics connect in more ways than one. A majority government always provides buoyancy to the economy and investors show confidence.  If the recent election results are any indication, it was what the doctor ordered. There are going to be decisive reforms, concerted efforts and a positive sentiment.

A good majority drives the economy and the kind of sentiment that is prevailing in the nation; this sentiment could extend till the next decade.

What this means for the economy is a new found confidence, a stable government, easy movement of policies and effective long-term plans. All concerns on the political front are now dissipated and the new mantra that Modi speaks about is poor to be given opportunities and not dole. This will have a far reaching impact as dishing out dole would only make people lazy but by giving them opportunities would mean to nurture entrepreneurs.

The pangs of demonetisation now a thing of the past, the Modi government is likely to widen reforms. The possibility of retaining power even after 2019 imminent as of now, the economy is bound to grow. Efforts to transform India from a soft state would now get a fillip. Political stability lends confidence and markets thrive on it.

There are still two more years to go before a complete assessment of his impact on the Indian economy could be made but for now, he seems to delivering.

During the 2014 elections, Indian economist Arvind Subramanian said that Modi’s intentions involved a Thatcher-like ‘Big Bang’ of policy moves but was not sure if Modi could  pull it off. It seems as if he is in all earnest if not pulled it off, is on his way.

How demonetisation is helping transform railway stations

The economy’s biggest gain from demonetisation is the speed at which e-transactions are increasing. They say that the biggest innovations take place during times of adversity and the Indian Railway is a fine example by using a situation to its advantage

The ‘demon of demonetisation’ or ‘demonetisation blues’ has become the nomenclature post demonetisation and reams have been written on its effect and also how it affected millions across and beyond the country. However, the rail behemoth is looking at the brighter side and a trickledown effect if one may call it to transform how passengers use the facility and is in the process of changing the way railway stations function in the country.

In what can be termed as a first time endeavour, Kacheguda Railway station in Hyderabad was transformed into a completely digitally enable station where a passenger right from parking his vehicle, buying a bottle of water, tickets, using the cloak and waiting rooms and making transactions could do with digitally.

All vendors from teas stall owners, fruit sellers, catering units, book stalls have been given PoS

This experiment is hardly 20 days old and the people are already warming up to the idea and 20 per cent of the transactions are digital. Buoyed by the success, the Indian Railway has decided to make all stations digitally accessible and has included the digitisation of railway stations across the country.

Tea Stalls, Fruit and Juice Centres, Catering Units, Book Stall, Dairy Parlour have been enabled with Point of Sale (PoS) machines.

In 2017-18, Indian Railways plans to make 25 important stations as ‘Digi-Pay’ stations. The Indian Railways has included the idea of ‘Digi-Pay stations in its business plan for the financial year which was released last week by the Minister of Railways.

The economy’s biggest gain from demonetisation is the speed at which e-transactions are increasing. They say that the biggest innovations take place during times of adversity and the Indian Railway is a fine example by using a situation to its advantage.

While pundits debate whether the data released by the Central Statistics Office (CSO) showing India’s third quarter GDP growth logged at 7% in December quarter could be taken seriously or whether other methodologies need to be assessed, there is no difference on issue that there is a spike in digital transactions.

The Indian railway runs 21,000 trains every day to transport 23 million passengers. If even 70 per cent of these passengers turn to cashless transactions, the benefits are huge. By next year, 25 stations in the country would be digital. The revenue from ticket booked through cashless means in reserved and unreserved segment has increased from 58% to 68% and 6% to 8% respectively post demonitisation.

The number of debit cards rose from 739 million to 818 million since October. The number of credit cards from 27 million to 29 million. The value of card transactions on PoS machines shot up more than 41 per cent from October till December.

Demonetisation blues have had their part to play and still does but what the Modi government has done in one single stroke is to open up a wide array of opportunities to do business. The Indian Railways has taken the opportunity. Will young entrepreneurs come up with ideas, there is a lot of opportunity for the willing.

Union Budget 2017: A push and a shove for Start-ups, Technology and Innovation could have done wonders

Overall I would give a thumbs up for the budget, however, due consideration towards the few ‘missing’ links could have made me happier.

Overall I would give a thumbs up for the budget, however, due consideration towards the few ‘missing’ links could have made me happier.

One page tax form, bringing down personal income tax by 5 per cent for a section of salaried class, trimming the corporate tax slab to 25 per cent for Micro, Small and Medium Enterprises (MSMEs) has caught the imagination of a segment of the population in the Union Budget 2017-18 but for the startup and Tech Innovation world it has next to nothing.

Science & Technology, Innovation and Startups are the one who build the ‘future’ of the society. The investment in the mighty three is high and yield slow results, but once the results starts coming the impact is huge. Take an example of investment in space technology program few decades back, now India is among leaders in the world.

If there was a time ever for the startups to be given a push it is now, for one has witnessed a drop in startups, money drying up in venture capital and a few going back to taking up jobs. A clear policy on issues besieging the startup world would have given a spring it its feet as the verve that one witnessed in the startup sphere a few years ago has weaned a bit.

Clarity on three fronts namely; innovation, Science & Technology and startups is lacking in the budget. The trio can create a platform and leapfrog in the future. There is nothing much for the entrepreneurial eco-system in the budget.

What was expected in the budget was a fillip to the start-ups by way of clarity in rules and most importantly how to handle losses. Few start-ups are making profit and the tax holiday is valid to only those start-ups who are recognised by Department of Industrial Policy & Promotion (DIPP).

That there is a world of talent out there waiting in the wings to fly with ideas is a foregone conclusion. Youngsters in their teens to 25-somethings are raring to go. If only the budget had something on the Angel tax, it could have done a world of good for the start-ups.

The innovation and startup ecosystem needs a push, handholding and direction. The small businesses will become competitive in the global market ie the MSME sector. Similarly, if there was a rethinking on issues plaguing the startup community such as taxes on early stage investment, ease of doing business and a more comprehensive long term plan for the community to grow, the 2017 budget would have boosted the morale.

The entrepreneurial ecosystem badly needs a push and that should precede with a robust long-term policy on innovation, Science & Technology and Startups. It is never too late; a meeting with all the stake holders on envisaging a plan is all that is needed. Anyone ready? I am.

(The article has been written by Nikhil Agarwal, Chief Executive Officer, AP Innovation Society, Government of Andhra Pradesh. All the views expressed are personal)

GST

Moving inch by inch towards GST

The 9th GST council meeting between the centre and the states on January 16 passed off with a broad consensus on several fronts. The roll out of GST would begin by July 1. The centre conceded in leaving 90 per cent dealers in under Rs 1.5 crore annual turnover category within the State government purview.

 Another contentious area of levying tax on economic activity within 12 nautical miles of territorial waters was given to states though such rights vest with the centre.  The initial roll out of GST by April 1 may not happen now and has been deferred to July 1, 2016. Nevertheless, the movement towards a new GST regime is happening inch-by-inch.

 In the next council meeting scheduled on February 18, the officials would sit together to categorize goods under the slabs of 6 per cent, 12 per cent, 18 per cent and 28 per cent. Finance ministers of different states have been making efforts to see that there would be no tax on agriculture products and minimum possible tax on goods used by the common man.

On the issue of differences between states over GST, the centre would intervene and resolve.

 Overall there has been a consensus among all the states barring West Bengal which insists a 100 per cent control over the traders with a turnover below Rs 1.5 crore.

The power to levy and collect Integrated-GST, a tax on inter-state movement of goods and services, would lie with centre but by special provisions, states will also be cross-empowered.  While there are issues such as dual control over assesses, the fact that with each council meeting some headway is being made augurs well for GST.

The coming days are exciting as several questions on sharing of administration, how is it going to be for large tax players, whether it would be on the basis of revenue or type of supply is to be seen.

The publication of GST laws would be keenly observed as all stake holders prepare for what can be termed as a new regime. Watch this space for more on GST.