By Surojit Mahalanobis
NEW DELHI: Removal of the multi-level taxing systems and inter-state checkpoints for movement of vehicles laden with goods for states, is essential today. These would effectively halve the transit time and losses due to the logistics at transits.
The World Bank’s India Development Update’s observation, released last week, coming just ahead of the government’s tabling the 115th amendment of the statute, aims to advise introduction of a VAT-like Goods and Services Taxes (GST) on goods for bolstering manufacturing sector in particular, and India’s national income in general. As a bold step towards reforms in manufacturing sector in India, the GST would ensure quality manufacturing environment, it is hoped.
The amendment should exclude the export, better should be zero-rated, and accommodate imports at a tax regime uniform to the central and state levels, say quality experts.
In its Update the World Bank mentions “High variability and unpredictability in shipments add to total logistics costs in the form of higher than optimal buffer stocks and lost sales, pushing logistics costs in India to 2-3 times international benchmarks.” As 60% of goods in India are transported through vehicles on roads, the GST expectedly is the major concern about how to boost the national economy. It is also felt by majority of economists that the GST regime would settle the trend of political economy in the country in near times.
The GST regime, as indirect tax, is not an unknown experience in world economies. According to a study made in 2010 by many scholars (J.K. Jindal for example), over 150 countries have introduced GST in some form or other. Entire Europe has mapped a tax landscape for over 50 years which has made their economies thriving. In the Asia-Pacific too, GST is a constant debate for renovated analyses in Australia and New Zealand. Australian prime Minister Tony Abbott feels there should be a national debate on reforming their current GST further for reducing tax burdens on families. In China, though lack of transparency blocks specific visions, transporting goods in states has been made easy and unencumbered.
With the new statute amendment (115th) issue in the winter session of Parliament destined to rouse controversy, it is high time the department of micro, small and medium enterprises (MSMEs) concentrate to implement the former prime minister’s Task Force recommendations.
The recommendations were made during the tenure of prime minister Dr Manmohan Singh. And the Modi government does not have any reason to differ from it, as the new prime minister has widely accepted many of the recommendations of the earlier regime. At least in this case, the political economy in the country is not likely to take a divergent route of differences.
The point that dogs India is the issue of skills development at the micro, mini, small and medium enterprises which employed over 60 million people till the Eleventh Plan years. This figure will certainly go up every year, and new jobs would have to be created for the new workforce.
Boosters for the enterprising youths by National Small Industries Corporation (NSIC), which indeed is a youth development agency to bolster small industries in the country, need to be more grassroots-oriented, so that majority of the population is covered for employment. The loans from the banks and the NSIC have to be more and more liberal, with the least collateral obligations and infused with intensive skills education. Our processing systems have to be made more rational and fool-proof. And it is this processing skills we seriously lack in.
The Task Force had classified six thematic areas for reform, which were : (i) credit, (ii) marketing, (iii) labour, (iv) rehabilitation and exit policy, (v) infrastructure, technology and skill development and (vi) taxation. In fact it had touched upon all the core areas of the MSMEs’ economy, which incumbent prime minister Narendra Modi did not disagree with. It is because all these areas have one thing in common, and that is, skills training. That means the credit vision has to be liberalised and the personnel handling credits should be skilled enough to see that the money released on loans is not lost due to lackadaisicalism or inefficiencies at work.
Similarly, in five other core areas also, the Task Force expressed concern about the skills at delivery, that means skills at handling. Evidently, the task force found it a determining factor to make the reform successful. Prime Minister Modi advocated for such skills training probably form his day one in office.
Nation today needs to institute mistake-free training mechanism to ensure “zero defect” skills education regime at manufacturing. That means the value chain should be linked to basic level manufacturing (MSME) education, professionalism through developing expertise in specific jobworks, and the technical schools, as the cradle for manufacturing education, should be included in the scheme. If these are accomplished, that alone would realize Prime Minister’s “zero defect” approach to manufacturing and justify the “Make in India” vision.
The MSMEs should also be able to ideate quality skills training on floors as is done in advanced countries, including today’s post-Mao China and globalised Russia. There is no political ideology inhibiting the necessity in advanced economies. A globalised India should be able to embrace this opportunity through the 115th Constitution amendment this winter. (IPA Service)
