Domestic savings and not foreign investment can take Indian economy on a 10% growth path, for which Income Tax must be abolished and interest rates on Fixed Deposits be raised to 9% along with the reduction in the banks' Prime Lending Rates (PLR), senior BJP leader and Member of Parliament (MP), Dr Subramanian Swamy said at an ASSOCHAM function in New Delhi today.
He also came down heavy on the Goods and Services Tax (GST), describing it as a “disaster.”
Delivering the 98th ASSOCHAM Foundation Day lecture, Dr Swamy said one of the important ways to put the economy on a double digit expansion mode would be to “raise savings and abolish the Income Tax.”
In his frank address, the renowned economist who has also brought several social issues in the public domain, said the Income Tax should be abolished “right now” and once it is done, people would “celebrate” not because they are fed up paying taxes but they are fed up with the inspectors. Also the inspectors have become “instruments of political oppression.”
The alternates to income tax can be found in avenues like coal block and spectrum auctions, the big revenue grosser for the exchequer, he said.
Dr Swamy said it is the domestic saving by Indian households which holds the key to reviving investment and not the foreign investment. Till about three years ago, the domestic saving was about 35% of India’s GDP and this figure has dropped down to 29%, as interest rates on fixed deposits have come down. The foreign investments contribute only 2% of India’s investment. Unless the foreign investment is accompanied by technological transformation, it is not of much use for the economy.
Criticising the previous RBI Governor for raising the lending rates to the industry, Dr Swamy said the banks must also bring down the PLR to 9%. He said high lending rates have particularly hit the small and medium enterprises, which are the biggest source of employment, the need of the hour.
Speaking on GST, he said it was because of his efforts that the GSTN , which runs the IT backbone for GST, would now come under the ambit of the CAG audit. Otherwise, a case had been made out to keep GSTN out of the CAG ambit since the government equity in the GSTN entity was restricted to 49% and the rest was with the private sector, mostly with the foreign banks.
Low priority to agriculture and very low investment in the sector were also responsible for holding up the economic growth, Dr Swamy, known for his straight talk, said.
“Unfortunately, there is no Lutyens in agriculture,” he remarked.
Giving a historical perspective, the senior BJP leader said, till 1991 from the 1950s, the growth rate was less than 3.5% and it was dubbed as the “Hindu rate of growth.” In fact, it should have been called as the “Communist rate of growth,” as it was the Soviet model of economic development followed by Jawahar Lal Nehru which let down the Indian economy, he said.
Dr Swamy said, Dr Manmohan Singh did a good job as he went about implementing economic reforms in an executive role as Finance Minister under the then Prime Minister PV Narasimha Rao, who had shown a “political courage” to usher in the reforms.
Dr Swamy was quite critical of the way the demonetisation was implemented and adequate preparations by enough cash availability were not done and the Prime Minister was not told about it.