It's the Christmas week and I refuse to talk about terror. One's happy to see the year go. The last month was particularly bad. The terrorists grabbed all the headlines, which is exactly what they set out to do. To scare us so much that we stop living the lives we want to. This was their aim. To force us to look over our shoulders all the time, mistrust each other, become the nation we never wanted to be. And if you look at what's happening today, you will realise they have succeeded, to an extent. The Mumbai we were till a year ago has drastically changed. We are today prisoners of our own fears. And that's where these rascals have won.
So let's give terror a break and address another urgent issue. Warding off the Big R. We have been in denial of it for too long, even though everyone's hurting. The Government insists that growth is on track though its own figures reveal the exact opposite. They say the coming year will be better. But global analysts say it could get much worse. The US economy's still a big mess and, much as we may deny it, that has to recover before we do.
Let's look at the stats. Sales are down. So's industrial production. Factories are shutting down. Foreign exchange reserves have fallen. The current balance of payment is negative and it's likely to stay that way till exports return to past levels. The stock market, a fair indicator of what the world thinks of our future, is not exactly in great shape. Nor is the rupee. The Government has taken some feeble measures to rev things up but none of them have made the slightest difference. Only the banks have more cash with them and the oil companies are making huge profit. But how does that benefit you and me? Even the falling interest rates for home loans is pretty much useless as none of us are likely to buy flats priced below Rs 20 lakh. Like the pterodactyl, they have long ceased to exist.
So maybe we should try smarter ideas. I have three suggestions, none of them terribly original but yes, they could make a difference. Other nations have tried them with success in different contexts. So can we, I am sure, in our present times.
Suggestion 1: Stop our oil companies from making obscene profit. Also, stop taxing fuel at multiple levels. Let local fuel prices reflect current global crude prices which have fallen from $147 a barrel in July to under $37 now, that's 70% down. If we do that, petrol will cost Rs 20 less per litre and diesel, Rs 4. Can you imagine its impact on our economy? Everything will become affordable. Products across the board will flaunt cheaper price tags. Travel and tourism will get a boost. Sales will pick up. People will have more money to spend. This will increase consumer buying, revive economic activity. Above all, it will disperse the miasma of gloom that overhangs the economy, and the constant fear of shutdowns and job loss that comes with industrial slowdown.
Suggestion 2: Since the Government believes reviving the housing sector is the key to fighting recession, why don't they do what Clinton did in 1996—make it easy for people to buy and sell property without paying capital gains tax? This will be a huge incentive and, at the same time, will eliminate black money and reduce property prices. The main reason why people demand cash while selling property is to avoid capital gains. If you make capital gains free of tax, black money transactions will diminish, allowing thousands of people easier access to property. They will pay less and the sellers won't have to chase tax free bonds that are not always available and, even when they are, offer only partial relief.
Suggestion 3: Give a year's income tax holiday to all individuals. Returns must be filed for continuity in tax records but allow people to keep and spend their tax money. Nothing would lubricate the economy better. And the funny thing is this will cost the exchequer much less than the huge expenditure being contemplated to fight recession. Government officers won't recommend this because, as we all know, they benefit when money is collected from the public as well as when money is spent. But this could be a great election year move. And, O yes, the Government will actually save money this way. Increase in public spending, growth in industrial production, and the revival of business activity will generate enough indirect and corporate taxes to more than compensate for a year's loss in personal income tax,
No, this is not rocket science. The Government has already spent vast amounts on bailout packages for the economy, with zero results. They have asked for another Rs 4248 billion last week in Parliament and said that even more may be required to tackle the Big R. Here, in these steps suggested, there's no cash going out. All they have to do is curb spending in the coming year and, instead, let people spend from the money they save. The nation's mood will change overnight. And who knows it could even ensure another term for the UPA!
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