Printing currency notes, abolishing the Foreign Exchange Management Act (FEMA) and allowing Indian firms to borrow abroad at low interest rates are among the steps that former Solicitor General of India and Supreme Court lawyer Harish Salve said India needed to take right away to help resuscitate the economy.
Addressing the ICAI Leadership Summit last week, Mr. Salve said the economy needed a ventilator immediately. “The first thing you would do [to such a patient] is give a blood transfusion ie cash in the system. The second is the electrolytes; that would be smooth-enough-doing-business in India. Statutory compliances? Tax disputes? Intrusive investigations into small violations? Put them on the back burner; let people spend time in factories rather than run to government offices answering show-causes.”
“Every government is cash strapped. The U.S. has had several million claims for unemployment; they are looking at a huge outflow. The U.K. is paying £2,500 to every person without a job, so at least the groceries can be bought. Where is the money coming from? This is the time to use your mints.
“Don’t worry about inflation. Print money, put it back in the system, fill in the hole created by the NBFC crash; demand will pick up, small-medium enterprises and real estate will pick up. In six months you’ll start seeing the change.”
“Inflation rates the world over are at an all-time low; LIBOR was between less than 1% to 1%; in India, interest rates are still 6%. Why not allow Indian industry to freely borrow from anywhere in the world? Repeal FEMA. Do we really need it?”
Mr. Salve batted for the removal of bank officers from the purview of the Prevention of Corruption Act. “Which bank officer today would risk sanctioning a loan? He would be hounded if the loan is not repaid.”
“Global firms want to move out of China. But India has to stop fantasising that we are the only alternative destination.” He cited Ireland convincing Apple to set up base there by offering low tax rates. “The PM sat with the CEO of Apple and negotiated a deal. This is how people do it. Prime Ministers talk to business folks saying. ‘Invest $20 billion in my country and we will charge one third the tax.’”