Even as the Finance Minister Nirmala Sitharaman prepares for the next budget, it is time to take stock of the fiscal scenario. During 2019-20, the revised estimate (RE) of fiscal deficit (FD) was 3.8 percent of GDP against the budget estimate (BE) of 3.3 percent. In her speech on the Union Budget for 2020-21, she had justified this in terms of the recommendation of the NK Singh Committee on review of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which permits breach of the target in case of “far-reaching structural reforms with unanticipated fiscal implications.” For 2020-21, she had set FD at 3.5 percent as against 3.0 percent as stipulated under the FRBM Act. Here also, she had justified...
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Category: Growth & employment
Asset monetization – will it take off
In her maiden budget presented to Parliament on July 5, 2019, Finance Minister Nirmala Sitharaman laid a roadmap for catapulting the Indian economy to $5 trillion by 2024-25, its most crucial component being investment in infrastructure to the tune of a mammoth Rs 100,00,000 crore (US$1.4 trillion) over a period of five years (read: 2020-21 to 2024-25). As for funding, 39% of this amount was to come from the Union Government and States each and the balance 22% from the private sector. The Centre’s contribution at 39% works out to around Rs 40,00,000 crore over 5 years or Rs 800,000 crore per annum. Against this, the revised estimate (RE) for capital expenditure during 2020-21 was Rs 439,000 crore. Even assuming...
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FDI in retail: Remove the smokescreen
A pragmatic approach would be one wherein the Modi Govt legitimises direct selling by foreign companies in Indian retail in all forms For the last couple of years, the Confederation of All India Traders (CAIT) was complaining about a blatant violation of the Foreign Direct Investment (FDI) policy and the Foreign Exchange Management Act (FEMA) by global e-commerce players like Amazon and Walmart-owned-Flipkart, etc. Addressing their concerns, the Ministry of Commerce and Industries in December 2020 asked the Reserve Bank of India and the Enforcement Directorate to take action against these global giants. Earlier this year, Commerce Minister Piyush Goyal promised to ensure that the e-commerce sector works “in the true spirit of the law”. As a follow-up, the Ministry of Consumer...
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Banning old vehicles is retrograde: Vehicle’s fitness, not age, should be the criteria for scrapping
Instead of a vehicle’s age, let’s use fitness as the criterion for determining whether it’s allowed to ply on the roads or not Whether a vehicle is fit to run or otherwise, a lot depends on how well it is maintained, its timely upkeep; this needs to be tested instead of pronouncing it as unfit merely because it has reached a certain age. (Representative image/ File photo) ———————————————————————– On March 18, 2021, the Union minister for Road Transport and Highways, Nitin Gadkari, announced a ‘voluntary’ vehicle scrappage policy to (1) mitigate vehicular pollution and (2) more than double the turnover of Indian automobile industry from the current Rs 4.5 lakh crore to Rs 10 lakh crore in a few years....
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Banning old vehicles – a retrograde order
On March 18, 2021, Union Minister for road, transport and highways Nitin Gadkari announced a ‘voluntary’ vehicle scrappage policy to (i) mitigate vehicular pollution and (ii) more than double the turnover of Indian automobile industry from the present Rs 450,000 crore to Rs 1000,000 crore in a few years. At present, there are 5100,000 vehicles which are older than 20 years, 3400,000 vehicles more than 15 years old but < 20 years and 1700,000 > 15 years, but without renewed fitness certificate. The policy architecture is founded on two pillars viz. incentivize their scrapping and dis-incentivize hanging on to them. The owner going for scrap will get 4-6% of ex-showroom price of the new vehicle as compensation; 5% discount on...
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India gets poorer, investors richer
Imagine if all of Rs 2100,000 crore under Atmanirbhar package had been distributed among 40 crore workers in the informal sector; it would have boosted demand The Corona pandemic may have brought about sharp deceleration in India’s economic growth – the sharpest ever during the last four decades or so – but has yielded a bonanza for the investors. The wealth of investors in the stock market as represented by the market capitalization of Indian equities (market value of shares multiplied by their number) almost doubled from around Rs 113 trillion (a trillion equals 100,000 crore) as on March 31, 2020 to Rs 226 trillion as on March 31, 2021. In contrast, India’s GDP at current prices declined from Rs...
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India gets poorer, investors richer
The Corona pandemic may have brought about sharp deceleration in India’s economic growth – the sharpest ever during the last 4 decades or so – but has yielded a bonanza for the investors. The wealth of investors in the stock market as represented by the market capitalization of Indian equities (market value of shares multiplied by their number) almost doubled from around Rs 113 trillion (a trillion equals 100,000 crore) as on March 31, 2020 to Rs 226 trillion as on March 31, 2021. In contrast, India’s GDP at current prices declined from Rs 203 trillion during 2019-20 to Rs 197 trillion during 2020-21. As a result, the market capitalization to GDP ratio almost doubled from 56% during 2019-20 to...
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Person in control: New entity in charge
SEBI wants to shift focus from promoters to controlling shareholders or the so-called ‘person in control’ (PIC), but is the new breed willing to take charge? Paving the way for a major change in the way the promoters and over 4,700 listed corporates function in the country, in a consultation paper, the Securities and Exchange Board of India (SEBI) has proposed doing away with the concept of promoters and moving to ‘person in control’ (a three-year transition is recommended for the switch over). It has also suggested doing away with the current definition of promoter group with a view to rationalize the disclosure burden. The other proposals include (i) reducing the minimum lock-in period(the time period an investor can hold on...
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‘Person in control’ in lieu of ‘promoter’
Paving the way for a major change in the way the promoters and over 4,700 listed corporate function in the country, in a consultation paper, the Securities and Exchange Board of India (SEBI) has proposed doing away with the concept of promoters and moving to ‘person in control’ (a three-year transition is recommended for the switch over); It has also suggested doing away with the current definition of promoter group with a view to rationalize the disclosure burden and bring it in line with post-issue disclosure requirement. The other proposals include (i) reducing the minimum lock-in period (the time period an investor can hold on to the shares) post an initial public offer (IPO) for promoters’ share of minimum 20%...
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Nix sovereign guarantee clause for the NaBFID
To bail out an entity majority-owned and controlled by private parties using the taxpayers’ funds is a bad idea In her Budget speech, Finance Minister (FM) Nirmala Sitharaman had proposed setting up of a new Development Financial Institution (DFI) termed the National Bank for Financing Infrastructure and Development (NaBFID). The Government passed a Bill to establish the NaBFID, its objective being “to coordinate with the Centre and States, regulators, financial institutions (FIs), institutional investors and other relevant stakeholders, in India or outside India, to facilitate building and improving the relevant institutions to support the development of long-term non-recourse infrastructure financing in India, including the domestic bonds and derivatives markets.” The NaBFID will also be involved “in lending or investing, directly or indirectly,...
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