Given the volatility in the trade negotiations going on between the United States and India, seeking new markets has become imperative. President Trump has a span of history the foundation of which is the business of the Trump Organisation. Just as he bullied and cajoled his business partners, he is now following the same rulebook as he did then. Long standing agreements do not matter, what does is the immediate need. Above all, it is the others who should pay and not the expanded version of the Trump Organisation, which is how he views the US Executive.
While being polite while remaining firm on national needs and priorities, India has to ride out the storms of the Trump Presidency. However, it must be a New India, an India where domestic manufacturing is given a boost rather than relying on imports, whether finished products or assemblies to be put together in India.
The tax structure, including GST, will need to be altered substantially, so as to ensure domestic production is given a boost. The curse of manufacturing in India is the appetite of many “domestic” entrepreneurs to buy abroad rather than produce locally. The reason is that foreign purchases could as a by-product have secret bank balances abroad. There are those who do not care at all if the rupee is sliding down in value compared to prime foreign currencies, as the lower the rupee falls, the less foreign exchange is needed to transfer into rupees of a particular value.
In Finance Minister Nirmala Sitharaman, India has a Union Finance Minister familiar with domestic and foreign currents. The coming Union Budget is expected by supporters of the NDA led by Prime Minister Narendra Modi to be a break from a conservative past. GST rates need to be reduced, as do slabs. Tax has to be progressively levied, with higher business incomes having rates higher than the smaller businesses. Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman are aware that the 2024 Lok Sabha results were a signal to spark a dramatic change in the mode and mechanics of taxation. Low rates paradoxically fetch higher revenues, with more and more individuals and businesses moving into the taxpayer column. High rates result in a lower taxpayer base, whereas the need for the exchequer is a large taxpayer base. Excessive criminalisation of actions regarded as legitimate business practices is counter-productive. Many may be brought into the dragnet of criminal prosecution, but few are actually successfully prosecuted. The more the decriminalisation of laws, the better will be the atmosphere for domestic manufacturing.
Prime Minister Narendra Modi has been a trendsetter in the decriminalisation of laws and in the removal from the penal codes of several colonial era laws and regulations. Admirers of Prime Minister Narendra Modi and well-wishers are looking to his carefully chosen Finance Minister delivering a welcome complete break from colonial era outlooks, and presenting a budget that puts into clear perspective the formation of a New India better able to handle an increasingly troubled external environment. Only PM Narendra Modi and the team he has assembled within his Council of Ministers are capable of instituting such a dramatic and needed change of course in matters of taxation and in the overall policy structure.
