Road for reviving Capex investment in Pvt sector

 Indian think-tank at the top in GOI has brought out the PLI Production Linked Incentive Schemes to

attract investments into India which can push up our Exports and also provide jobs to the locals.This twin objectives of Value add and Job add have remained Work-in-Progress and the full benefits would start flowing into the economy in about 3-5 years time.

Nevertheless the Capex appetitie beyond this ambitious scheme has remained largely muted mainly because of reasons like lack of demand momentum going forward.higher interest rates and large Govt borrowings programme as this is penultimate year before General elections.

In this scenario, one of the important avenues open to the Govt is looking at Investment allowance and Depreciation rates.Earlier it has been demonstrated that whenever the IA and Depreciation rates are increased for a limited period, there has been a pickup in Capex investments inorder to save on Corporate Taxes. But now the Tax rates have already been lowered and so it is a moot point whether any increase in IA and Depreciation rates will work.

However the past experiences are a guide for us to peep into future. Despite lower Tax rates if our India Inc. sees some avenue to save today's tax which can also partially offset raise in cost of funds then there will be appetite to take the bait.

Depreciation and IA rates may be doubled with a sunset clause at the end of two financial years can help many corporates to front load their Capex investments. Govt need not have to forego by way of tax since what Govt may give up by way of higher taxes may in part come back from Capex manufacturing companies. With the overall buoyancy in the economy on an even keel, the tax revenues will get a legup in both Direct and Indirect Tax-GST..

India's GDP growth rate for Fiscal 2024 may dip.

 India's nominal GDP growth for Q2 FY 22-23 is estimated by National Statistical Office (NSO) of MOSPI  at16.2% and the real GDP Growth rate at 6.3%.

From the Govt side we notice that Fiscal deficits are still lose compared to what it was before the pandemic hit us. The combined fiscal deficits of Centre and States is more than 10% in FY 21-22 (RBI report Appendix-Table 1)link ; PIB release on Fiscal Deficit( link)

For the current FY 22-23 it will be slightly less than 10% as per BE.

The RBI repo rate has gone up so far by 2.25%p.a so far since May 22 in five tranches ,pushing up all the lending rates of the Banks.

Combined with the rate hikes RBI has also sucked up excess liquidity in the system through CRR and other monetary policy instruments like VRRR, and other Open Market Operations like Operation Twist etc.

With a slightly higher than FRBM mandated Fiscal Deficit at the Centre and a high FD combined with States crowd out private investments due to excessive Govt borrowings.Added to this is liquidity tightening and increase in Bank rates and this is a heady concoction for the Indian Economy.

The result could be faltering growth rate in the short to medium term upto 1/2 years.

Last year India witnessed greater traction in the economic growth due to pent-up demand in both the domestic economy as well as in global trade.The buoyancy in the economy in the last year was mainly due to this favourable scenario where Domestic sales as well as Exports grew in double digits.The price line of commodities played a spoiler impacting the profits. But current year is witnessing severe contraction in Exports and the support is only from domestic economy so far.However when we peep into the next financial year we see lot of headwinds coming up due to the above tightening of fiscal and monetary policies which may dampen Domestic economic demand also.

Inflation is moderating but all depends on the Crude Oil price scenario going forward in the International market which in turn depends on evolving  Russia-Ukraine war scenario.Inflation expectations and RBI hikes in  tandem have an unintended consequence of hurting personal savings and consumption behaviours which in turn will affect domestic demand in the future with a lag even upto 6/8 months.

Considering all this, India's GDP Growth rate may slightly dip down in FY 23-24 and the likely scenario is 5.5-6% growth.

The bigger point to be looked at is whether Modi Govt can afford a slow down in Indian economic growth rate when it is entering the year of Parliament elections which will be fought in May 2024. Therefore in all likelihood the Fiscal deficit consolidation will be given a short shrift in the Budget this year.

 

Potholes on the Roads and their costs to our Economy.

 

All State govt should have Pot and Man holes maintenance minister. Economic costs and loss of human lives due to road accidents especially that of Breadwinners of the family are humongous. Govts should take-up modern tech of repairing potholes in a jiffy as National Priority.

Maintenance &repair of our roads, often ignored ,lead to huge loss of priceless lives ,&deprive the nation of productivity of youth who fall victim to potholes and otherwise bad roads.

"Road accident victims largely constitute young people in the productive age underscoring major implication on economic cost of road accidents, apart from their emotional and psychological impact.(Page 62 of Report on Road Accidents in India-2021 by Ministry of Road Transport and Highways

Table 4.2: Age profile of Fatal Road Accident victims during 2019 to 2021

 

Age-group	Number of Persons killed			%-age change in 2020 over 2019	%-age change in 2021 over 2020
	2019	2020	2021
Less than 18	11,168	6,998	7,764	-37.3	10.9
% Share in total	7.4	5.3	5.0
18-25	33,206	27,612	31,750	-16.8	15.0
% Share in total	22.0	21.0	20.6
25-35	39,023	34,947	39,646	-10.4	13.4
% Share in total	25.8	26.5	25.7
35-45	32,509	29,379	32,741	-9.6	11.4
% Share in total	21.5	22.3	21.3
45-60	22,612	20,938	26,085	-7.4	24.6
% Share in total	15.0	15.9	16.9
Above 60	9,004	8,380	11,739	-6.9	40.1
% Share in total	6.0	6.4	7.6
Age not known	3,591	3,460	4,247	-3.6	22.7
% Share in total	2.4	2.6	2.8
Total	1,51,113	1,31,714	1,53,972	-12.8	16.9

In this regard, GOI should look at options like including Maintenance & Repair of Roads using Modern Technologies by our Public Limited Companies under Corporate Social Responsibility under Cos Act. and encourage  especially Automotive Companies to involve themselves more in this Road Maintenance and Repair of Potholes

Companies can take up Repair of Roads in and around their Offices, Factories, Warehouses etc. wherever it is possible by entering into suitable PPP Agreements with the respective Govt agencies including Panchayats, Municipalities, Corporations etc.

"Potholes account for nearly 0.8 percent road accidents, 1.4 percent of road accident deaths and 0.6 percent of injuries."as per Report "Road Accidents in India -2021 " published by Ministry of Road Transport and Highways(Page 95)

Continued from previous page in the Report there is a table giving Potholes causing No. of Accidents ,Fatalities and Injuries in 2021 :(page 96)

Road feature	Number of accidents	Persons killed	Persons injured
Potholes	511	213	338
Share in Total	0.8	1.4	0.6
Steep Grade	908	219	725
Share in Total	1.3	1.4	1.2
Ongoing Road Works/ Under Construction	1,886	639	1334
Share in Total	2.8	4.2	2.3
Others	11,482	2,037	10,778
Share in Total	17.1	13.3	18.3
Total Million Plus cities	67,301	15,350	58,758

In the below table you find Accidents due to Potholes in Million Plus cities in India in 2021.

To your utter surprise you will find that Mumbai, Chennai,Coimbatore, Faridabad, Pune, Aurangabad, Kochi etc. have recorded Zero Accidents , Deaths, Injuries due to potholes!!!

What a farce!This data has to be immediately updated by Ministry on war footing pl.

Ministry should also do the maths on Economic costs of Accidents and Fatalities etc and look at reducing them as a % of our GDP.

S. No	State/UT	Pot Holes
		Number of Accidents	Persons Killed	Persons Injured
				Greviously Injured	Minor Injury	Total Injured
1	2	25	26	27	28	29
1	Agra	6	1	4	6	10
2	Ahmedabad	1	1	0	0	0
3	Allahabad(Prayagraj)	149	74	36	47	83
4	Amritsar	0	0	0	0	0
5	Asansol Durgapur	5	5	1	0	1
6	Aurangabad	0	0	0	0	0
7	Bengaluru	15	4	9	3	12
8	Bhopal	0	0	0	0	0
9	Chandigarh	0	0	0	0	0
10	Coimbatore	0	0	0	0	0
11	Chennai	0	0	0	0	0
12	Delhi	56	9	5	63	68
13	Dhanbad	11	9	2	3	5
14	Faridabad	0	0	0	0	0
15	Ghaziabad	0	0	0	0	0
16	Gwalior	0	0	0	0	0
17	Hyderabad	19	1	1	17	18
18	Indore	0	0	0	0	0
19	Jabalpur	90	46	15	13	28
20	Jaipur	1	0	0	0	0
21	Jamshedpur	0	0	0	0	0
22	Jodhpur	0	0	0	0	0
23	Kannur	0	0	0	0	0
24	Kanpur	6	3	3	1	4
25	Khozikode	0	0	0	0	0
26	Kochi	0	0	0	0	0
27	Kolkata	14	2	10	3	13
28	Kollam	0	0	0	0	0
29	Kota	0	0	0	0	0
30	Lucknow	50	15	22	15	37
31	Ludhiana	0	0	0	0	0
32	Madurai	20	4	12	3	15
33	Mallapuram	0	0	0	0	0
34	Meerut	13	5	0	8	8
35	Mumbai	0	0	0	0	0
36	Nagpur	0	0	0	0	0
37	Nashik	0	0	0	0	0
38	Patna	0	0	0	0	0
39	Pune	0	0	0	0	0
40	Raipur	0	0	0	0	0
41	Rajkot	0	0	0	0	0
42	Srinagar	0	0	0	0	0
43	Surat	0	0	0	0	0
44	Thiruvanthapuram	0	0	0	0	0
45	Thrissur	8	1	6	4	10
46	Tiruchirapalli	0	0	0	0	0
47	Vadodra	0	0	0	0	0
48	Varanasi	47	33	11	15	26
49	Vijaywada city	0	0	0	0	0
50	Vizaq	0	0	0	0	0
Total		511	213	137	201	338