Category: BoP & Exim policies

FDI in retail – go for ‘holistic’ reforms

In budget for 2016-17, the finance minister had announced 100% foreign direct investment [FDI] in food retail subject to retailer selling only food procured from farmers in India and processed locally. After wait for more than a year, the government has now approved an application of Amazon.in for 100% FDI in food retail chain – both on-line sales [e-commerce] and offline [brick-and-mortar]. While, this may signal big boost to reform and liberalization in regard to FDI in retail, the cobweb of policy maze seems to be getting murkier. At the outset, a few words on how the policy dispensation has unfolded over the last decade or so. For the purpose of FDI, the government has classified retail in two broad...
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Trump’s ‘hire local’ juggernaut – smashes Indian IT

An senior official of the Trump Administration has lambasted three leading Indian IT companies viz. Tata Consultancy Services [TCS], Infosys and Cognizant Technologies for resorting to ‘trickery’ for allegedly grabbing most of H1-B visas issued by the US Citizenship and Immigration Services [USCIS]. HI-B visas are issued to foreigners who have ‘theoretical’ and ‘technical’ expertise in specialized areas to work in local [read American] companies for temporary period. United States issues 85,000 such visas every year — 65,000 hired from abroad and 20,000 from those enrolled in US universities/colleges. Due to the heavy demand, USCIS which runs the program, receives several time more applications than it can grant and uses an electronic lottery to pick the ones that will go...
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Are Indian IT czars shooting in the mouth?

During the last one-and-a-half decade or so, the Indian I-T [information technology] industry has recorded unprecedented growth propelled mostly by exports. Of this, a disproportionately high share has come from increase in exports to USA. The industry has an aggregate revenue of over US$ 150 billion [2016] of which around US$ 100 billion [or 2/3rd] is contributed by export and the balance US$ 50 billion from domestic source. Within exports, USA alone accounts for over US$ 50 billion. This rapid growth helped all leading players viz. Tata Consultancy Services [TCS], Infosys, Wipro, Cognizant Technologies etc reap a financial bonanza. Even after distributing handsome dividends, they have accumulated monuments of cash running in billions of dollars. Of course, India has gained...
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Can Jaitely balance budget sans oil bonanza?

A report by the Comptroller and Auditor General [CAG] tabled in Parliament on March 10, 2017 brings out that in recent years, there has been a sharp increase in the Union excise duty collections, a predominant share of this accounted for by increase in excise revenue on petroleum products. During 2013-14, total excise collection was Rs 169,000 crore of which contribution of petroleum products [POL] was Rs 87,880 crores or 52%. During 2015-16, even as overall excise revenue increased to Rs 287,000 crore, contribution of POL went up to Rs 198,030 crores or 69% of the total [with sin products like tobacco accounting for another 10%, these two categories alone make up 80%]. During this period, there was massive increase...
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Waning exports – go for ‘sustainable’ therapy

If, there is one single area that has given jitters to Modi – government during its 2 years stint, it is exports. Beginning December 2014, exports decreased for 17th consecutive month in April, 2016. This would have taken a serious toll on India’s balance of payments [BoP] but for the oil bonanza [due to slump in crude oil] which led to steep reduction in oil imports more than offsetting its negative impact. To a considerable extent, the slide can be attributed to global economic slow down even as China’s has crash landed from double digits [until 2 years back] to around 6.5-7%; developed countries [other than USA] struggling to sustain their already low growth of well below 3%, US growth...
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PSUs dividend – an order ingrained in archaic mindset

Faced with a massive shortfall in resource mobilization from disinvestment of shares in central public sector undertakings [PSUs] [Rs 40,000 crores] and proceeds from direct taxes [Rs 50,000 crores], Modi – government has issued a diktat to all PSUs to help it avoid slippage in fiscal deficit target of 3.9% of GDP set in the budget for the current year. It has directed them to give a minimum dividend of 30% of profit after tax [PAT] or 30% of government equity whichever is higher. PSUs having substantial free reserves and capability to make good profits on a sustained basis are required to give special dividend and issue bonus shares. As regards their capital expenditure needs, it goads them to increase...
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Modi’s economic diplomacy – yields rich dividend

The die-hard critics of Prime Minister, Modi especially his political adversaries have dismissed his incessant foreign visits as mere “pleasure trips” bringing hardly any relief to the common man though some of them reluctantly acknowledge his role in raising India’s stature in the comity of world nations. They cannot see any other benefit as they are just not willing to see. But, for someone who is not wearing colored glasses, the unprecedented economic benefits these have brought to India are pretty evident. One of the major gains of economic diplomacy unique to his style relates to re-negotiation of a long-term gas purchase deal with Qatar that was terribly dis-advantageous to India. To better understand what it means to us, let...
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Economic policies – NDA versus UPA

Some time back, Arun Shourie a senior minister in the then NDA [National Democratic Alliance] government under Vajpayee [1998-2004] and erstwhile member of BJP observed that the economic policies being followed by Modi – government are just a continuation of UPA [United Progressive Alliance] plus the “cow’ [a euphemistic reference to sacred animal worshiped by majority Hindu community in India]. Shourie’s view is shared by many thinkers. UPA – dispensation II [2009-2014] had pushed the country towards economic paralysis with all key indicators i.e. growth [manufacturing in particular], inflation, fiscal deficit, current account deficit [CAD], foreign exchange reserves and infrastructure etc showing dismal trend. In this backdrop and since, Modi is also following the same policies, they aver that outcomes...
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RBI’s ‘back foot’ play – wholly unwarranted

In 2014, there has been an unprecedented surge in investment by foreign institutional investors (FII) with a total of over US$ 20 billion having already come in during January-June. But, RBI governor Raghuram Rajan has sounded a note of caution advising government to be circumspect in spending money. Rajan’s warning is based on the premise that ‘FIIs who bring in money can also take it back’. He observed that apart from continuing wind down of QE (quantitative easing), US Federal Reserve may also increase interest rates triggering reverse flow of funds. As custodian of balance of payments (BoP), governor’s caution is understandable. However, to aver that there could be flight of capital is bit of an exaggeration! This may even...
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Modi’s prescription for economic resurgence

Critics have derided prime minister N Modi for absence of any major initiative or scheme for nation building in his independence day address on August 15, 2014. Some congress leaders even opined ‘he was giving an election speech’! With a pre-meditated and prejudiced mindset, they won’t be able to see any.  One only needs to make an objective assessment to get to the bottom of what he gave to 1.25 billion country men and even to fellow citizens in our neighbour and beyond. Modi’s extempore speech covering a wide spectrum left no one in doubt that he gave us a recipe for social, cultural, economic and industrial, renaissance. This is eloquently captured in a couple of phrases that he coined...
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