Category: Fiscal deficit/subsidies

Fiscal slippage real worry, not growth

At this critical juncture when the next general election is just about a year away and in a month from now, Modi – government will be presenting its last full fledged budget, prime minister faces two major challenges viz: deceleration in GDP [gross domestic product] and slippage in fiscal deficit. After registering fairly impressive growth during the first three years of its stint [2014-15: 7.5%/2015-16: 8.0%/2016-17: 7.1%], the current year is expected to end with a significantly lower growth of 6.5%. Though, according to the chief statistician, the figure may be revised a bit upward [on receipt of more data], that may not alter the position drastically. However, the government is not unduly perturbed. In fact, from its perspective, the...
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Fiscal glide path, to change or not – Jaitely’s dilemma

Having stuck to the fiscal consolidation road-map for three consecutive years beginning 2014-15 and put up a brave front in regard to remaining on course during the current year at least until recently, finance minister has now alluded to what he termed as ‘changing the glide path to meet the challenges emerging from structural reforms’. The statement was made at Morgan Stanley investor meet in Singapore. However, in the wake of Moody’s Investors Service revising India’s sovereign rating from Baa3 to Baa2 and outlook from ‘positive’ to ‘stable’, Jaitely has retracted from the above and exuded confidence that the government will stick to fiscal consolidation road-map. Yet, it is necessary to analyze the reasons for his discomfiture and assess whether...
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Subsidy reforms: even Modi won’t take that risk

Recently, Delhi Chief Minister Arvind Kejriwal vehemently opposed the hike in fares for travel by Metro Rail and offered to share the financial burden equally with the Union government to ensure that commuters are not affected. About three years ago, he had decided to give heavily subsidised power to households consuming up to 400 units a month. Then, too, he vowed to bear its financial burden out of the state budget. Kejriwal is not alone in giving subsidies using taxpayers’ money. During the last five decades of governance – be it at the Centre or in the states – successive political establishments have built a super-structure of subsidies, such as on fertilisers, food, kerosene, LPG, irrigation, power, credit, seeds, etc....
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RBI OBSESSION WITH INFLATION HINDERING RECOVERY

The Reserve Bank of India has yet again cautioned the Government against excessive public expenditure as it could lead to fiscal consolidation and prove to be inflationary In its fourth bi-monthly monetary policy review for the current year (announced on October 4), the Reserve Bank of India (RBI) has kept the policy rate (rate at which the central bank lends money to commercial banks) unchanged at 6.0 per cent. This has come as a rude shock to industries and businesses especially the small and medium enterprises (SMEs) which were anxiously looking forward to a cut for giving a much-needed fillip to growth. The SMEs are at the core of Prime Minister Narendra Modi’s agenda for promoting growth, creating jobs and increasing income....
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Want subsidy reforms – hold simultaneous elections

Recently, Arvind Kejriwal, Chief Minister, Delhi vehemently opposed the hike in fare for travel by Metro Rail and even offered to sharing the financial burden equally with union government to ensure that commuters are not penalized. About 3 years back, he had decided to give heavily subsidized power to households consuming up to 400 units a month. Then, also he vowed to bear its financial burden from the state government budget. Kejriwal is not alone in giving freebies using tax payers money. During the last 5 decades of governance – be it at the center or states – successive political establishments have built a super-structure of subsidies such as on fertilizers, food, kerosene, LPG, irrigation, power, credit, seeds etc. When given...
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NPAs – crack the whip on defaulters

Union finance minister, Arun Jaitely during press conference held on October 24, 2017 announced a massive recapitalization of public sector banks [PSBs] to the tune of Rs 211,000 crores in two years viz. 2017-18 and 2018-19. Of this, Rs 135,000 crores will come from  so called ‘recapitalization bonds’, Rs 58,000 crores via raising capital from the market and Rs 18,000 crores as budgetary support. Under the project ‘Indradhanush’ launched in 2015, Jaitely had provided for Rs 70,000 crore over a 4 year period viz. Rs 25,000 crores each during 2015-16/ 2016-17 and Rs 10,000 crores each during 2017-18/2018-19 . As per that road-map, the provision for third and fourth year being Rs 20,000 crores – already factored in budget calculations...
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NPAs: is the axe going to fall on the common man?

Under the erstwhile UPA dispensation, particularly during its second term, 2009-2014, public sector banks [PSBs] gave loans recklessly to corporate houses without assessing the viability of projects and conducting due diligence. Tens of thousands of crores were pumped into power, steel, telecommunications, textiles and infrastructure. In many cases, the ability of the projects or businesses to generate cash to service the loans was in doubt from day one. There was an element of ‘inevitability’ in such loans becoming non-performing assets (NPA). Indeed, these did become NPAs but were not recognised in the balance sheet as such. In 2015, the Reserve Bank of India, under its former governor Raghuram Rajan, ordered an asset quality review (AQR) of all banks to identify...
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Excise duty bonanza – government may keep it for now

Modi – government has shown enormous fiscal rectitude by meticulously managing both its receipts and expenditure thereby sticking to the fiscal consolidation road-map during its tenure. Its efforts are all the more praiseworthy when one recognizes that it has achieved these results without compromising on much needed boost to capital expenditure and funding social welfare schemes. However, hidden behind this is the oil bonanza made available since mid – 2014 [a wonderful coincidence as Modi took charge around this time i.e. on May 26, 2014] which it has leveraged to its full advantage. India imports about 80% of its oil requirements and therefore, the international price of crude hugely impacts the pricing and resource mobilization from oil products. The price...
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NPAs – is the axe falling on common man?

Under the erstwhile UPA – dispensation particularly during its second consecutive tenure 2009-2014 [this is the time when ‘crony capitalism’ had reached its nadir], public sector banks [PSBs] recklessly gave loans to corporate houses/businesses without assessing the viability of the projects and conducting due diligence. Ten of thousands of crores were pumped into power, steel, telecommunications, textiles and infrastructure. The ability of the concerned projects/businesses to generate required cash to service the loans was in doubt from the day one. There was an element of ‘inevitability’ in such loans becoming non-performing assets [NPAs] [if an installment is not paid within 90 days from due date, the account is treated as NPA]. Indeed, these did become NPAs but were not recognized...
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Don’t permit loot in the garb of privacy

The unanimous decision of the 9 judge constitution bench of the Supreme Court [SC] pronouncing right to privacy as a fundamental right as an integral part of the Article 21 [grants the right to ‘life’ and ‘liberty’] of the Constitution has been welcome by all sections – including the union government. Prior to this, the position was vague as the founding fathers of the Constitution did not ‘explicitly’ provide for right to privacy as a fundamental right. An eight-judge bench of SC in M P Sharma’s case [1954] said so and the position was reiterated by a six-judge bench    in Kharak Singh’s case in [1962]. The present decision by 9 judge bench overrules those two verdicts and lays down...
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