SEZ

As the budget draws closer we delved on some aspects which according to us should be looked into while preparing the budget.

The idea revolves around the use of funds effectively to percolate them in the system and develop the economy.

Disinvestment

The fiscal deficit of 6.8% of GDP has caused a situation where in the government bonds themselves (hailed as one of the safest investment options) were unable to get creditworthy ratings from top rating agencies. This burden on our exchequer can be reduced considerably by means of IPOs.

What we propose is selective disinvestment which should not include sectors of national interest, where the state is present to prevent monopolies or where no alternate means are available by the state as it is formed under a mandate. Disinvestment should be taking place in sectors where there is no  for the government to be present.

National Hydroelectric Power Corporation Ltd and Oil India Ltd. took that route in 2009 while National Thermal Power Corporation too has adopted that option very recently with Rural Electrification Corporation in the wings. Moreover the Follow on Public Offer of SAIL is being anxiously awaited. We are not against these disinvestments, but suggest that these have to be coupled with disinvestment from noncore sectors as well.

The budget should thus give, in no uncertain terms, the funds channelized through the FPO’s so that the public is aware about the benefits accrued to them through the policy measures.

The Special Economic Zones or SEZ policy

We are against the notion of having SEZ’s in every nook and corner of the country. It can hardly provide for economies of scale while strategic infrastructure will definitely be lacking. Such SEZs just form tax havens for companies who would like to relocate while for the developer it is duty exempted cheap land. Development through such SEZs, thus, is a myopic view and if India has to progress this needs correction over a period of time.

A better approach would be to follow the Shenzhen model in China and promote Mega Multi-product or Specialized SEZs using Public Private Partnership model in suitable locations. The focus then can be to market these locations as profitable avenues for global investment. This model will ensure development of industries which require the boost and also that the national interest be served.

Results emanating from our policy measures

• Quality improvement in non-core sectors as well as core sectors

As private players get more control of non-core sectors like the hospitality sector with little or no bureaucratic approach the outputs then to increase. Moreover direct profit linkages on performance serves as a boost to motivating the private sector.

Moreover we advocate that the private sector should take control of the education sector which has not shown signs of improvement with our literacy level at around 65%. A fillip would be given by adopting scientific practices in education to develop it from the grass-root level.

• Judicious allocation of funds

The fund situation would improve considerably as a result of the disinvestment and diverting those to the newly found SEZ’s would boost both the core manufacturing sector and give a boost to IT and ITES by giving a boost to exports.

• Going green

With the recently held meet at Copenhagen, it is evident that reducing the carbon footprint is going to be an integral part of the discussion. Hence in our budget idea we propose that SEZ’s also include sunrise sector activities like development of hydrogen fuel production where it is difficult for private players to sustain without getting boosts from the Centre. Sectoral limit caps on carbon emission can encourage collective meets from business tycoons to come up with concerted efforts in order to mitigate the damage caused through industrial activities.

Submitted by:

Monil Sheth

Sanghita Chakraborty

Shruti Shetty