Controlling the Fiscal and CAD -II 1) There needs to be a balance in the stock market between FIIs (foreign institutional investors), DIIs (Domestic Institutional Investors) and other investors. The FIIs exposure in the stock market has increased too much and hence the volatility in the market. 2) FDI is a much better option than portfolio investment by FIIs. a) FDI needs to be brought in. For this; investor confidence needs to be restored. b) Policy paralysis of this govt. has resulted in loss of faith in the Indian growth story. c) One of the reasons being touted is the passing of law with retrospective effect against an $11 billion tax evasion deal involving Vodafone. This has frightened investors. The govt. must make it clear that it will not pass any retrospective law. d) Pending labor reforms have also kept investors away. e) The international rating agencies have downgraded India primarily due to a weak rupee. These ratings will improve if we can deliver a high growth rate and stable stock markets. f) Increasing FDI caps in insurance or pension will not serve the purpose as there is low demand. Better management is required rather than increase in caps. g) FDI can be allowed in other sectors such as infrastructure etc. 3) RBI needs to loosen its monetary policy to spur growth. EMIs on loans need to go down, so people start spending and growth occurs. 4) Savings have gone down. Indians are spending on non productive assets like gold and land and not in stock markets or bonds. The Govt. and the industry can launch a pension scheme a) It can be subscribed by the entire country. b) A minimum investment of Rs.50 per month is required from the subscribers. There need not be any upper limit to the investment. c) The Govt. will provide a sum equal to the sum being invested by the subscriber. d) It will be in the name of the children of the subscriber. The scheme will apply for only 2 children e) At the time of the marriage of the children, the subscriber can withdraw a sum of 10% of the total corpus at that time f) 5% of the corpus can be released for higher education of children. g) The children will get pension after the age of 60 years h) If it’s a female child, she will start getting pension if she becomes a widow or divorcee. i) The fund would be invested in the share markets so that the exposure of the DIIs would increase and the funds can get higher returns than government securities. j) This would solve the problem of imbalance of FIIs investment; provide social security and women empowerment, growth, get money into productive assets etc. k) A similar scheme can also be started for pensions for self. 5) There is large scale inefficiency in the supply chain management. Onions are being bought for Rs.8 a kilo from the farmer and being sold at Rs.70 a kilo in the retail market. Organized retail needs to be brought in. 6) Short term measures can include; imports of finished goods to be brought down and increase the production of coal, iron ore and fertilizers. 7) If we can expedite coal production, a lot of our infrastructure esp. power that is the biggest problem facing the country today can be resolved. 8) Education: a) Foreign varsities can be allowed to open up shop in India. b) It will improve the quality of education and bring in foreign exchange. c) Students who cannot afford education in the west or do not want to go to west can enroll in Indian and foreign varsities in India bringing foreign exchange with them. d) Students studying in India will act as ambassadors of our country in their native countries.
Posted on: Fri, 23 Aug 2013 08:36:02 +0000
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