To: The Rt. Hon. Chief Minister of Tamilnadu Dr.
Jayalalitha Jayaram
From:
Athinarayanan Sanjeevraja
Date:
February 10, 2014
RE:
Tamilnadu State Budget Financial Year 2014-2015
Suggestion: Tamilnadu State budget 2014-2015 should strong focus
on manufacturing and energy sector which is vital to the State’s economic
growth and a major generator of investment, exports and jobs.
The Hon. Chief
Minister, India’s in economic bleeding. It will continue as toxic combination
of rupee depreciation, swollen current account and budget deficit, capital
flows declined and longer term interest rate high, persistently high inflation
and Indian policy makers are professionally incompetence to address these
problems. RBI policy may cause hyperinflation in the future, if RBI continues
the same type of policy. India is in difficult place. It won’t recover. The
United States of America, Europe, UK, other advanced economies and most
emerging economies all got back their economy on track in 2013. Now the global
risk has been vastly shifted to India, if I am not mistaken. China is still
registering approximately 8 percent growth. As an Independent Research Analyst,
I also downgraded Indian economy since January 2008 and said it on my research note
India never achieve 9 percent growth in the future. Your desire is to see
increase in the Manufacturing Sector’s share in GSDP to 23 percent by 2023 to
make Tamilnadu is powerhouse for manufacturing in India. Also your desire is to
make Chennai the world largest auto hub. Your intense effort is not just enough
to achieve your desires as Indian economy never grows in the future as advanced
economies encourage their business leaders invest or expand their businesses in
their own country. This is one of the triumphant policy for advanced economies to
got back their economy on track and reduced their unemployment. You need a
mission-oriented approach to achieve your desires. However, please accept my
heartiest felicitations on your Government Budget presentation on February 13, 2014.
INCREASE IN INDUSTRIAL GROWTH NEEDS INCREASE IN ENERGY
DEMAND
The Hon.
Chief Minister, we keep energy prices low for socio and economic reasons. It is
fine. Keeping the energy price low often reduced level of investment in energy
sector as massive funding is required building energy infrastructure. In
addition, outdated procedures unclear regulations, often changing the policy
frameworks constrain deeper private investment in our state. Thus, the private
sector was not building as much capacity as government necessitated. But we
need to create more sustainable and secure energy system to increase in
industrial growth and production. Our state’s energy supply will be able to
match its our economic growth aspirations. We should not over-reliance on
central government to get more grid power to our state. The central government
is not going to integrate Tamilnadu with northern grid instantaneously as
central government incompetence. Power shortages have crippling regular
operation of Tamilnadu industries. Industries are forced to cut down production
or use captive power generation which is three to four times more expensive
than grid power. As a result, company’s operational expenses go high which
affects company’s profitability. Companies won’t be able to further invest or
expand their businesses. We need to find ways to attract more private investment
in energy sector to save businesses money on fuel bills. For that we have to
offer free land or financing with low interest or some subsidies for energy
companies setting up their businesses in our state. In addition, government should
promote investment in renewable energy through subsidies will further strengthen
our state’s industrial and production for long-term growth. Subsidies to renewable
energy can be provided in several ways. Subsidies should not be in the form of
avoided taxes. Such subsidies lead to loss of government revenue. Subsidies can
support to capital or guaranteed produce price (feed-in tariff scheme), R &
D support is often provided in many countries. In my opinion, our government
should take own initiatives install solar power capacity in wasteland, we can
generate more than 14,000-15,000 MW. Why should we over-reliance on central
government grid power? We are not using our resources effectively despite our
state has around 300 sunny days a year.
MAKE CHENNAI AS A GLOBAL AUTO CITY
The Hon.
Chief Minister, manufacturing sector has contributed Tamilnadu’s overall
economic growth but Tamilnadu manufacturing policy still vain. We are just
producing the goods. We are not producing high technological machinery. We are
number one in automotive market in Asia. Still we need to boost auto related R
& D design, supply, manufacturing and assembly facilities and ensuring that
the Chennai auto industry remains at the forefront of the global competition. We
need to attract more international business leaders to Chennai as a business
location. We need to provide international business leaders can take advantage
of joint research activities with some of the world’s leading automotive
technology research institutes and universities. Science and education in
automotive related areas including mechatronics, micro electronics, mechanical
engineering, manufacturing processes and material sciences and many more
innovation clusters integrate auto industry. No other industry invests as much
in R&D. So we need to revise R & D tax credit to encourage automotive
industry. Moreover, we need to create auto manufacturers and suppliers located
in Chennai are among the world’s leading patent applicants and make Chennai
auto industry the world patent champion. We need to offer a competitive tax
system providing attractive tax rates for manufacturing companies. Our
corporate tax system one of the most competitive tax system among the other
states. Last but not least, any investment projects to setting up production or
service facilities in our state can receive financial assistance through your
government funding programmes or Private Funding Programmes. Yes, we need to do
lot to make Chennai the world’s largest auto hub.
MANUFACTURING TAMILNADU’S MEANS IT IS NOT JUST
PICKING ONE SECTOR OVER ANOTHER, BUT PRIMARILY ABOUT MANUFACTURING
The Hon.
Chief Minister, manufacturing is an important part of Tamilnadu economy and several
challenges that are confronting our state, for instance, lack of bank
financing, transport network, power supply, technological change, global
competition and trading conditions. Your budget has to address these issues and
promotes manufacturing activities, R & D ventures by private enterprises, promotes
the use of new technologies in both public and private sectors. Your budget has
to support the R & D tax credit to boost manufacturing competitiveness. In
addition, we need to create low cost manufacturing base among other states and
tax incentives and various financial supports like cost effective tax-based
financing for export products to make it Chennai export platform. Your budget
has to encourage foreign companies to establish manufacturing plants in
Tamilnadu producing goods specifically for export markets. We concentrate on
FDI in the manufacturing sector, as FDI in manufacturing has its greatest
impact of our state economy like Automotive, as manufacturing sector is capable
of providing enough jobs. Export should be the driving force behind the
investment of foreign–owned firms in Tamilnadu manufacturing because indigenous
firms will be protected from direct competition with local FDI firms on the
home market. In my opinion, manufacturing can develop a meaningful competitive
advantage in attracting FDI.
MAKE TAMILNADU’s MOST ATTRACTIVE INVESTMENT
DESTINATION FOR MNC’s
The Hon.
Chief Minister, we have enough MNC’s in Chennai and Tamilnadu but it is not
enough. We need to attract more FDI to Tamilnadu that generates stable
employment and growth. FDI is trade enhancing and will enhance the production
and export capacity. We also get access to international markets as MNCs help
us to overcome the significant barrier to entry based by quality products, the
provision of capital, the inflow of technology, the inflow of managerial know-how
and more importantly it creates the competitive market. We have to offer various
investment incentives, grants, subsidies and fiscal incentives for MNCs and make
their production cost efficient. We have to assist MNC’s small and medium-sized
enterprises, free industrial land or industrial land at favourable rates, support
research and development, the launching of company start-ups, as well as
investment and technological promotion measures, development and innovation
investment focusing on new products, services or processes, support with
subsidies covering up to 50 percent of all training costs. The type of funding
ranges from cash grants and interest subsidies to loan guarantees. MNC’s have
the same legal obligations as domestic companies that has led to
business-friendly environment. We need to create comparative advantages like
low relative unit labour costs, corporate tax rates, relative endowments and
skilled labour force to the implementation of innovative production
technologies and to the adaptation to a western business culture helps to
attract foreign investors to Tamilnadu. There are some uncertainties linked to
Legal, political and economic environment is an important deterrent to FDI but
uncertainties are not in our hand. I hope that our budget
FY 2014-2015 will play a key role to make Tamilnadu, the most attractive
location for both domestic and global manufacturing companies.
The Hon. Chief
Minister, prosperous and sustainable economy relies on manufacturing sector.
Once
again, please accept my heartiest felicitations on your Government Budget
presentation on February 13, 2014.
Thank you
for your attention.
Respectfully
yours,
Athinarayanan Sanjeevraja.
Athinarayanan Advisory Authority
Athinarayanan Twitter
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