TV Mohandas Pai, Chairman of Manipal Global Education and Aarin Capital
Shri TV Mohandas Pai is the Chairman of Manipal Global Education and Chairman at Aarin Capital and Co-founder of Akshaya Patra Foundation.He was the CFO of Infosys from 1994 to 2006 and was instrumental in transforming Infosys into one of the world’s most respected software service companies. He was awarded the ‘Best CFO in India’ by Finance Asia in 2002. He has worked extensively in the education sector. In this exclusive interview, Shri Mohandas Pai speaks to Organiser Bureau Chief Prashanth Vaidyaraj on reviving economy, creating synergy between states, local manufacturing, reforms in education sector and removing hindrances in manufacturing so that India becomes truly ‘Atmanirbhar’. Excerpts:
For Atmanirbhar Bharat becoming a reality, we need a strong economy. But the World Bank Global Economic Outlook predicts that 90 per cent of the countries in the world will go into recession. In such a scenario, how can India revive its economy given the challenges faced due to COVID19 lockdown?
Covid is a once in a lifetime or once in 100 years Pandemic. It is not a ordinary event and all economies will suffer. The world GDP will come down by 8-9%. Covid will have a severe impact like nothing else in the last 10 years. To come out of this, there are a number of things India needs to do.
One, we have to increase spending on infrastructure. We are currently spending about 3 & 1/2 lakh crores but we need to take it upto 5-6 lakh crores. Unless we spend on infrastructure where we build roads, railways, airports, etc, people buy cement, steel, it will create jobs and will have a fantastic impact. This is very important to revive the economy.
Second, we have to revive the real estate industry. Real estate has been hit by demonetization, then RERA and later the Banking crisis, due to which they ran out of money. Real estate is in a deep hole now but real estate and construction industry employs the 2nd largest number of people. To revive them, credit has to be given to people to complete projects. Government has a 25,000 crore fund which has to go to 1 lakh crore. Their loans from the banks have to restructured as there has been no work for the last 4 months and they had to mobilise funds. Next, all the state government have to reduce registration charges from 5-6% to 1% for atleast 6 months so that they sell off their unsold properties. Then, the Income Tax Act has to be amended to reduce circle rates for about 1 year so that they can go for a clearance sale and will be able to sell off the properties.
Third, the GST on finished products have to be brought down from 5% to 2% for 6 months, so that people can sell. Once people sell, they will get money to pay off their liabilities and can start new projects.
Fourth important measure is that we have to ensure that farmers get better prices. We need to understand that 45% of agricultural output is non-grain products which are in animal husbandry products, poultry, fisheries, milk, fruits and vegetables which do not have MSPs unlike grain based products. India needs to incentivise big companies to export agricultural surplus. India should become a big agricultural exporter. We are exporting about $40 billion which has to be increased to $100 billion a year. Sugar, wheat and even rice which are in surplus can be exported and make sure that given the good monsoon and a bumper crop, the farmers get a good price.
Finally, India must create an export brand for agricultural products and create a 5000 crore ‘fund of funds’ to be invested in agri-tech start-ups. India has 500 agri-tech start-ups which have given 20-30% more money because they connect farmers to markets. This fund has to be created by NABARD as it is already lending lakhs of crores of rupees for agriculture and unless farmers get a better price, they will not be able to repay. Today subsidies for farmers is close to 4 lakh crores. Farmers are getting input credit but they must get a better price and when they get a better price, they will not depend on subsidy. Hence they must be connected to the market as the market prices are much higher. Now young people are getting into agri-tech companies and they must ensure that this happens.
There is a huge difference in economy and growth between the northern and eastern states and the more developed states in south and west. What should the Atmanirbhar Campaign do to bridge this gap and ensure equitable growth for all states?
For this to happen, India must create labor incentives for labor-intensive Industries. This is needed as we have a labor surplus in North India and labor deficit in South India. This is because, South India has lower fertility rates, people are better educated and is much more developed. North India has higher fertility rate and education levels are much lower. There are not enough jobs too. The per capita income of South India is around 2 lakh forty thousand rupees, whereas per capita income of UP is Rs. 69,000 and Bihar is Rs.39,000.
Hence, in at least 200 districts, governments must allow tax incentives for labor-intensive Industries. For example, UP is making the express way. There are small towns along the expressway where any labor intensive industries must be set up and these industries must have tax-free income for 10 years. Government should pay ESI and Provident fund for each new employee for the first three years. Then the government should pay at least 2,000 Rupees a month for up to 1 crore new employees in the companies which gives jobs. This is because if we are able to create 1 crore new jobs and each one of them are able to earn 10,000 each month, that will change the whole of UP, Bihar and parts of North India. This will also avoid migration.
Agri-tech start-ups, Labor Intensive Industries and Real estate, key to economic revival
The next task for the government, is to increase urbanization as it creates concentration of human activity. Concentration of human activity creates specialization and specialization increases productivity and this in turn increases income. This can only happen in small towns. India is only 34 percent Urban today while the world average is 52 percent whereas China is 59 percent Urban today. India has got 7,000 small towns. Government of India must pick up at least Thousand Towns and invest 50 crores in them every year for five years and create roads, power, sewage, etc there so that labor intensive industries can come up. Villagers staying nearby can travel 4-5 kms can come and work and return to their homes. This will also ensure that a large number of women can get employment in North India because most such districts are here.
Becoming Atmanirbhar is not possible without increase in local manufacturing and investment. What are the immediate reforms needed to make India a reliable manufacturing hub and also increase investment?
Today we are not able to manufacture and export garments because we are not competitive as labour costs are too high. This is because they are all near big cities. We import some 65-70 billion worth of goods from China. Among this, 50 billion worth of products are those which we were manufacturing but are cheaper in China. Hence, we must create incentive programs like it has been done for mobile phones and for API (Active Pharmaceutical Ingredients) for drugs. For products like AC and other household items, we need to identify those that we import from China and substitute that within India. Most of these are made in India but we are expensive. We need to have a special program and give a little bit of incentive and it will work.
We must reduce the number of compliance’s that are there. Teamlease says that there are 60,000 compliances. We have to reduce this by 50% immediately. Due to this people will spend more time learning the business than doing compliance. Most of these compliances are due to old laws which are unnecessary and nobody monitors.
One other important that that must be done is to abolish Capital Gains Tax (CGT) to incentivise investment. For example in assessment year 2018-19, the total total income declared was 45 lakh crores on which tax of 9 lakh crores were paid. But the total income declared under long-term capital gains by individuals was only 67 thousand crores. CGT has to be abolished so that people will be happy. Today, stock market value has come down by 30 lakh crores and many people are feeling poorer. If CGT is abolished, people will be able to sell property without paying capital gains and there will be no black money. Avoiding CGT is one of the biggest source of black money and this will go away and people will become honest.
Very importantly India has 30,000 tons of gold, which is at an all-time high. So if anybody has declared gold in the income tax at least three years ago, they should not pay CGT because then the gold will come into the market and India will not have to import gold. In a normal year, India imports 50 billion dollars of gold. We have enough gold and we must allow them to sell that gold. They’re not selling the gold as they want to avoid CGT and get a better price. If people have undeclared god, tell them to pay 35%, sell the gold and take the money. If the % of tax is very high like 60-70%, nobody will come out as they will continue to evade tax for many more years. We must incentivise people so that they do not hoard black money.
Lastly, each state government in India must come out with its own plan for development. India is very diverse. Karnataka is very different from Bihar. Kerala is very different from Rajasthan. Each state has to come up with its own plan to become Atmanirbhar like Yogi Adityanath is doing in UP. This cannot be done from Delhi.
All these tasks can be taken up in one year but we cannot become ‘Atmanirbhar’ in 1 year. It would take atleast 4-5 years minimum for us to become ‘Atmanirbhar’ after we take up all these tasks.
Two of the biggest hindrances in manufacturing and development within India apart from funding, are finding skilled people and technology? How can we overcome these two hindrances?
As far technology is concerned, it can be secured from anywhere in the world. Leave it to the private sector as they know how to get it. As far as training and skilling is concerned, the industry will take care of it themselves. For example, the IT industry has trained all its’ people. The IT industry spends 20 thousand crores a year training its people and they didn’t depend on government and they trained everybody.
The government has to incentivise them so that they grow and export. It is difficult to get skilled people but they will train them and they know how to do it as they have been doing it for a long time. All they need is a free hand and lesser regulations with little incentives so that the market grows. For example, the government can tell all these companies that if they hire a new employee, it will pay them Rs. 2,000 a month for the next three years.
How do you see the education sector emerging post-COVID19? How do we use this as an opportunity to become a global education hub like we once were?
To become a global education hub, we should be attractive and we should have very good universities. For that, we must give full autonomy to the top 200 universities, both public and private. They should have full financial, administrative, academic autonomy. Government should not control.
They should be allowed to double their capacity in 3 years. This is because, today 7 lakh fifty thousand Indians are studying overseas, spending about 20 billion dollars on their education. 1/3rd of them are going because they are not getting seats in good universities. If seats in top 200 universities are expanded, atleast half of them will find seats there. Nobody wants to go to a poorly graded university and they rather go overseas for education. Let those who want to and live there go.
Next, the top 200 universities must be incentivised to open branches abroad and get foreign students. Students will come if there is good infrastructure and good teaching. The Higher Education Financial Corporation, a company set up by MHRD, must be tasked with giving 15-20 year loans to these universities to build good infrastructure. They should be able to build good hostels, classrooms, labs, technology, etc to attract students. They must also have access to research grants so that those interested in research are attracted to conduct research.
Then of course, we must implement the new education policy. Another important thing is the 5,000 crore National research fund, through which research grants have to be given to universities to do research in science, technology and humanities on a competitive basis. There should be no discrimination between public and private universities.
There are views that ₹20.97 lakh crore-economic package for the Atmanirbhar Bharat Abhiyan is largely addressing supply side and doing little to increase demand. Your views on it?
More needs to be spent on infrastructure to increase demand. India cannot give grants to people as we don’t have money. So, on the demand side, we have to improve infrastructure and also abolish capital gains tax. People will start investing again.
Government also has to encourage more people to declare full income and come into the tax bracket and not force them to evade tax. For this, CGT has to be abolished. Surcharge on people earning higher incomes was a mistake and it has to be done away with.
Despite people paying taxes, citizens suffer poor infrastructure, improper policing, delayed justice system, poor public transport, public health-care, schools and colleges. Government has to improve all these.
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