Respected Prime Minister Shri Narendra Modiji,
PROPOSAL AND SUGGESTIONS FOR CREATING BALANCED DEVELOPMENT ACROSS THE NATION AND EMPLOYMENT OPPORTUNITIES USING THE EXTENSIVE HIGHWAY NETWORKS BEING CREATED:
Overcoming the economic slowdown by using the already well done highway infrastructure and creating location based tax benefits to spur development.
Decongestion of cities
Creation of a modified tax administration system based on PIN Codes and tracking growth through PIN code
Spending a balanced amount between new highway construction and local public transportation and creating of more economic hubs along highways.
First of all, I would like to salute you for the remarkable change you and
your team is bringing in India in the past 5 years and I feel that a leader like you and your very able and competent ministers and government officers will surely take this country to greater heights. I am taking the liberty of proposing multiple but closely related issues as listed above that should be possibly considered by the Government for further improvement of our country.
I am a Civil Engineer, 56 years of age from VJTI-University of Mumbai – and also a MBA ( IIFT ) and an entrepreneur, a business coach and now in a senior leadership role in an US based Engineering I.T. KPO/ services which employs a lot of young people with technical skills. I work in Surat. I have 33 years of experience, 10 of which have been in the Middle East. I have earlier worked with engineering consulting companies in Mumbai earlier.
I have travelled to over 25 countries on business and I am also the author of a book “Being more than a B.E.” which has sold many copies.
Sometime back, in 1989, I was invited to apply for a PhD. programme in Developmental Planning with full financial assistance at the University of North Carolina at Chapel Hill, USA.
With my working experience in India and overseas, I have found that the skills of our youth across the nation, including those from our smaller cities, towns and villages are phenomenal , and if trained properly these can be used for the country’s progress. I have always felt that the talent of the youth needs to be harnessed wherever they are and we must ensure that we have enough opportunities created all across India. It is also good that we have also ensured that technical education has reached towns and villages, besides district capitals and there are engineering colleges and technical institutes which have created a huge work force, qualified and competent enough to do a good job- if opportunities are made available to them.
Phenomenal growth in road infrastructure:
On a different but still connected note, I want to stress that as a country, we have built around 50,000 kms of highways in the last 6 years, and installed capacity of power generation has gone up by 85 GW in the last 5 years. The construction of highways reached 9,829 km during 2017-18, with an all-time high average pace of 27 km per day. This represents 20% growth over 2016-17, when 8,231 km of highways were constructed. During 2017-18, 17,055 km road length was awarded as against 15,948 km in the previous year. The construction of national highways entailed an expenditure of $ 18 billion during 2017-18.
The Government of India is planning to expand the national highway network to over 200,000 km. The Government launched the Bharatmala Pariyojana, which aims to build 66,100 km of economic corridors, border and coastal roads, and expressways to boost the highway network. It is envisaged that the programme will provide 4-lane connectivity to 550 districts, increase the vehicular speed by 20-25% and reduce the supply chain costs by 5-6%. The first phase of the programme will bring in $ 82 billion investments by 2022 for the development of 34,800 km of highways.
However, how do we really utilise the highways and other infrastructure incentive for the economic growth of the nation as a whole and get a proper return on investment ( ROI ) on these initiatives? Does creation of an extensive road network drive the economy? Does it create permanent jobs? Does mere presence of an extensive road network assure us of other important infrastructure like hospitals, schools, colleges, court buildings, office space, industrial hubs and associated long term employment in a region?
Boosting economic development through investments in infrastructure and measuring returns
Worldwide, highways are built to connect people and creation of jobs and boost economic development. In India it is the same, but perhaps the last two objectives are not being achieved.
In a research paper presented in the Journal of Advanced Transportation, Vol. 21, Spring 1987, based on work being performed at the University of Minnesota under contract to the Minnesota Department of Transportation; titled HIGHWAY IMPACTS ON REGIONAL EMPLOYMENT, the time-series analysis presented indicated that increases in highway expenditures do not, in general, lead to long term increases in employment levels. During the years of construction, employment levels do increase. However, this effect is only temporary and disappears when the construction ends. In conclusion, generally, changes in highway expenditures do not cause changes in total employment. Hence there have to be other methods of driving economic growth and employment to ensure investments in highways will ensure local development, and not just help move goods betters and faster between two places, which possibly have no connection with the local issues.
India has a very lop sided development, with maximum job generation and investment happening only in major cities and towns. All our cities are now choking with excessive traffic, excessive population, water logging due to rains and pollution. It is time that we move businesses and also progress to the entire country, which is possible with huge investments that we are making on the infrastructure front.
We are collecting all kinds of taxes to fund infrastructure in the country, but the funding is not giving measurable returns in terms of job creation and demand generation. The newly created highways are being used by manufacturers and traders for a faster movement of their own goods from their existing production locations to far off places and to some extent passenger movement- which is just fine and normal.
Many things need to be done, to ensure highways drive the regional / local growth. Unless there is a system to measure income created due to highway development, we are not ensuring proper return on investments. One must ensure investment in lot of other infrastructure development, part of which only the private sector can contribute- schools, colleges, office & factory infrastructure-many of which will create jobs locally. e,g. a logistics park may facilitate transport & storage but where will the cargo be generated from?
Modifying tax filing and measuring returns and giving tax concessions for moving out to newer areas.
However if we link the actual infrastructure created to measurable gains for the inhabitants and the tax payers, by which we can indirectly ‘’refund’’ the tax paid to the investors, then we are doing full justice to the tax collected with further creation of wealth. Example: An industry pays GST and Income tax from which highways are getting funded. In return once infra projects like highways are in place and a little later industrial estates are in place, the industry should have the option to fully or partly move in there / expand with its existing / new employees, at reduced tax rates, and thus recover say the taxes in the first 5 years by getting tax rebates in successive years on the production / sales turnover generated from the new locations( only ) . If not done so, we will have still have industries and commercial service providers in the cities paying huge taxes from wherever they are and funding national development without creating new job opportunities in the country side. The movement into new locations will ensure they get the returns and also ensure development of new areas. With lower real estate costs, rental expenses and lesser taxation, our international service providers / BPOs and KPOs can be also be more cost effective in the international market.
If industry and offices and work places have to move out, we need excellent communication in the form of highways, roads, building infrastructure and telecommunications. And all this seems to be falling in place, but still industry and business is not moving out to the hinterland, and smaller cities and towns. Despite being a well connected nation, our industry, workplace and population seem to be working and residing in the urban areas. Why did we then build all the roads and highways, rail network, and now building potential waterways? To enable proper use of the investments we need to link incentives to areas which are now being made readily accessible. The Bharatmala Project aims at creating 66,000 kms of new highways, but how are we going to be sure that this will attract industry and create jobs and other forms of economic development all across the nation? Medium to large scale industry will never move to new location just because a highway is near- they need tangible benefits.
The issue as of date in front of the government is not as much of possessing monetary resources for development, collecting more and more taxes, and financing projects; but of driving the economy, creating employment and ensuring spend which all will be possible once we have more and more demand generation for new products and services. Creating new demand in semi urban areas and smaller towns and creating job opportunities at all levels of society will drive this scenario. As of now jobs and employment are restricted to major cities, and this has to change. Industry and business will never move to smaller towns unless fiscal incentives drive this investment. That support according can come in only from tax benefits ( GST, Income Tax for employers and employees )
We must reward companies which will set up offices, and staff and factories in lesser known cities and towns. The highways being built or already being built have to be used as a tool for the massive change.
Our Income Tax department, GST department and highly talent government officers are more than competent to work out a detailed plan to implement the same, but I am listing a few key steps as a road map:
Primary Step / Policy Step : (i) Identify National Highways in existence as of now and those locations ( towns ) on the same, which are a minimum 100 kms away from any major cities . These are to be considered as investment hotspots.
Example: When a National Highway project is declared, a declaration of incentives applicable to locations ( using PIN codes ) through which the highway passes must be declared. Example The Mumbai–Vadodara Expressway is an under-construction, 380 km (long, six-lane, controlled-access expressway, connecting the cities of Vadodara, Gujarat and Mumbai, Maharashtra . The cost of the project is expected to be ₹44,000 crore. When we are investing so much, then we may as well fuel job growth and livelihood for people in this sector. So we may give a consideration to tax holidays/ tax incentives for companies investing in this region, but only outside municipal or gram panchayat limit on the proposed highways
(ii) Identify towns and cities on national highways by their PIN codes, which are between 2 major cities and which have a population base under 10 lakh, and publicise the information well in advance of a green field highway or extra laning happening on the existing highways.
Once you have identified these towns and cities, implement steps to promote development to these areas.
Stages for implementation
First stage ( developmental stage ) : Exempt builders and developers from taxes if they set up office complexes for rent/ selling, and industrial parks in designated areas far from cities, and in the earmarked PIN code zones on the highways. This will bring down real estate costs and rents in smaller towns. ( Set a 5 year time frame from date of commencement of road project construction ) Smart cities have to be included in this initiative if they are green field projects and at least 100 km away from existing cities. ( example Dholera near Ahmedabad ). Example: For say every 50 kms. of highways built or planned -the NHAI or SHA must have plans for one hospital, one school, one cultural hub, one market place, one mall, one court building for which concessional taxes will apply. The entire master planning must be driven by the NHAI itself, though local bodies will ensure engineering and architectural compliance. Tax benefits to those investing in greenfield smart cities is also a must.
Second stage: ( Investment stage ) Anyone investing in industry/ infrastructure in these locations will get GST benefit. ( 5 year time frame from date of completion of road project construction )
Third Stage( Delivery/ Output stage ) I.T. benefits will be applicable only for specific investments made / outputs from earmarked locations . ( Set a 5 year time frame from date of commencement of road project construction )
Fourth Stage: ( Employee benefit stage ) Any employee working in these offices and industrial areas/ factories will get 10% reduction in Income Tax. Unless employees / people are motivated to go and and work in these newer location, industry will not succeed. ( 10 year time frame from date of commencement of road project construction )
Fifth Stage: ( Reward Stage ) Extend additional IT benefit for businesses if they generate more than 3000 jobs in these areas in a year’s time for next 3 years. ( 3 year time frame from date of exceeding 3000 jobs )
Sixth Stage ( Penalty stage – 10 years from mow ): Stop permitting new buildings and office space in Metro cities. This comes in after the first 4 to 5 stages are implemented properly.
The above are only ideas, and better ones can be initiated by the government.
How important is tracking real-time development now? Can we attempt to track through PIN codes?
For implementing the above, can we attempt the following ?
a) Link & measure manufacturing output and taxation to PIN code. Keep track of highway growth and PIN of the areas through which the highways pass and the GST/ I.T. returns filed by companies.
b) Link I.T. returns to manufacturing location via PIN code
c) Ensure much lower GST & Income Tax to the new production location. Every manufacturer and service provider will have multiple GST charges and I.T. rates, all linked with their actual production and service locations. This can be ensured by giving a discount or refund on GST from actually billed.
The overall benefits of the proposed changes are many fold:
• Creation of jobs across the country, not just in major metros
• Driving demand for many things including offices, construction, housing, labour employment etc.. which will boost the economy.
• Drive demand for the PMAY ( Pradhan Mantri Awas Yojana ) which has a great success potential from the viewpoint of low cost housing at locations other than major metros.
• Reducing pollution in urban areas
• Reducing further burden on cities
• Restraining people from moving to major metros from towns/ villages
Caution : Balancing investing in highways v/s Investing in ( local ) public transportation
Another major issue is the spending on new highway construction and spending on
local transportation. It is extremely relevant to India, where millions of people do not have their own means of transport and for relieving traffic congestion. The amount of spend on highways is huge and may be we need to divert much of this investment into local bodies to improve local transport. Maybe lesser new highways and bigger investment in local public transportation ( metros, buses, trains ) in demarcated growth centres will create better job opportunities rather than a number of highways going around the country.
In an analysis of stimulus spending done by the public-policy lobbying group Smart Growth America ( SGA ), the Center for Neighbourhood Technology and the U.S. PIRG,( Public Interest Research Group), it was found that every billion dollars spent on public transportation produced 16,419 job-months, while the same amount spent on highway infrastructure projects produced 8,781 job-months.
According to SGA, public transportation spending leads more directly to job growth than highway spending for several reasons. First, less money is spent acquiring land, which means more money is spent actually building something. Second, all those buses, trains and subways need people to operate them and maintain the infrastructure. And third, public transit requires a workforce with more diverse skills than highway construction. Better public transit can create jobs and also help save jobs because it allows people to get to work. In India too, we must spend more money on creating job hubs through economic zones along the highways, perhaps diverting part of the funds for highways. This will create local employment zones which will have better transportation facilities aiding people movement. Possibly we must invest in public transportation from cities / towns to the planned economic zones rather than only build more and more highways. Regional planning has to be integrated more with the planning and development of highways.
If we do not start these above processes now, it is likely that our country will never develop all across the states and the interior. People will keep flocking to the metro cities. In fact better highways will tend to bring in more population to the cities. Instead one needs to shift the development to the interiors. You have already built highways and other infrastructure. One fall out will be that a lot of people will buy new homes around developmental centres. The National Highway Grid is a great idea for moving goods and people and creating development centres all across the country. Now the time has come to actually move employment, industry, jobs and people to the interiors.
Monetary benefit can be the greatest motivator for businesses. The rest will follow. India has adequate talent everywhere. We are now a much educated and connected country. Now the path to success is not through the cities, but through the number of smaller cities, towns and villages of India.
All this can be now done considering that huge development has happened in the roads sector and many places are now accessible which were not earlier. To ensure rapid growth of the country it is now essential to mobilise and promote investment in the new areas. Finally tax rate and incentives would have to be PIN code based and businesses in large towns and cities will have a higher tax rate.
I am not sure how much of my thinking is perfect on this subject. However I am sure your team will review this matter. I do know it will be a very daunting task to link some of the proposed benefits, but nothing is impossible as shown by your government and its able officers in the past 5 years on many fronts.
I thank you once again for taking our country on to the path of great progress. Hopefully, my proposal might add a little bit of value to the great work done by you and your team.
With best regards,
• Dinesh Bandiwadekar, B.E.(Hons) ( Civil ) (VJTI/ 1985 )(Mumbai), PGDM ( IIFT/ 1987)( New Delhi), Certificates in Engineering Leadership, Rice University, Houston, USA
• Founder & Director: The Engineers Forum and Persona Skill Development Institute, Thane
• C.O.O.- ISP Service Partners LLP- USA, ( India Operations ) ( An engineering IT services company working for USA clients )
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September 15, 2019 ( Engineers Day )