Dr. Subramaniam Swamy's prescription for the ailing Indian economy

by rawemotions Sat Sep 21, 2013 9:01 am

http://www.rediff.com/business/report/bjps-suggestions-on-how-to-save-indias-economy/20130921.htm

One disadvantage here is that, a sharp upturn in exchange rate will affect exports. However, it will make capital goods and raw material imports competitive for import dependent industries. There will be a short term pressure on foreign exchange reserves which will attempt to push the exchange rate in the opposite direction, . Ordinance route (if countries co-operate) is a novel way to raise foreign exchange reserves.

This announcement will put the election spotlight on black money. BJP had demanded steps on black money even in 2009 (given the conducive international climate created in 2008) but nothing happened. There were some news reports, that Congress is allegedly planning some spectacular steps on black money close to elections. Swamy has preempted them.

Excerpts

Foreign exchange reserves divided by short-term foreign debt is at a very low (1990) level.

Balance of payments' current account deficit as a ratio of GDP is highest since 1990, at 4.0%.

Total fiscal deficit in the Central and State Budgets now exceeds the danger mark of 12% of GDP, thereby committing a crime under the Fiscal Management Act passed by Parliament in 2005.

Reverse short-term capital outflow by panic cashing of Participatory Notes, hawala operations, and rigged short-selling of the rupee in Dubai and Singapore, has accelerated destabilizing the rupee/$ rate, which as a consequence has fallen by record amount.

India’s household savings rate, which was the highest in the world in 2004 has fallen, and is also shifting to hoarded non-financial assets, which is causing a huge fall in the growth rate of GDP, due to decline in investment and in employment.

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suggestions for this would be as follows:

(a) Make income tax-deductible all recognisable forms of financial savings such as bank term deposits, share certificates etc.

This will boost the rate of savings (If direct income tax is abolished, it will mean minimal paper work for the people).

(b) Issue Ordinance nationalization of all bank accounts of Indian citizens in 70 countries that permit secret banking. This will net Rs 100,000 lakh crores or $ 1.6 trillion for government revenue.

(c) Confiscate and Abolish Participatory Notes, arrest under PMLA the prominent hawala operators, require special passport clearance of Indian citizens for travel to UAE, Singapore and Macao.

This will bring the rupee/$ rate down to Rs.40 within two weeks. NDA’s goal should be to make Rs 10.00 =$ 1.00.