Despite loud talk for decades by successive governments for increasing domestic production of oil and gas to make India self-sufficient in energy, we are producing less than 20% of our requirement – balance over 80% continues to be imported. This heightens our vulnerability to a point whereby a slight disruption in any of major source of our imports [be it imposition of sanctions by USA against Iran or attack on oil installations in Saudi Arabia] creates ripples and causes a major destabilizing effect on the Indian economy. The problem is not with lack of resources [India has 26 Sedimentary Basins covering an area of 3.14 million sq. km.] but lack of a conducive policy environment besides cumbersome regulatory processes which...
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Boost renewable but not at the cost of existing non-renewable assets
During an interactive session at Bloomberg Global Business Forum [GBF] on September 25, 2019 coinciding with the United Nations General Assembly [UNGA], Prime Minister, N Modi faced a dilemma on the issue of clean energy versus coal based power. Even as Modi reiterated his commitment to rapidly promote use of renewable energy viz. solar, wind, bio-mass, small hydro [India has more than doubled its original goal of having 175,000 mega watt (MW) of power capacity on renewable to 450,000 MW; it is also the founder of International Solar Alliance (ISA) jointly with France with 121 countries having already joined the ISA], he was confronted by CEO, Bloomberg on what plans he has with regard to use of coal [India has...
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FM’s booster dose for corporate India
In a flurry of announcements made on September 20, 2019 [also described in media circles as a third budget in less than three months], the finance minister, Nirmala Sitharaman handed out a bonanza to the Indian corporate sector. The most pleasing announcement pertains to steep reduction in the rate of corporate tax for new entities incorporated from October 1, 2019 in manufacturing sector and start production by March 31, 2023 from existing 25% to 15%. After subsuming surcharge and cess, the effective incidence of tax will be lowered from existing 29.15% to 17.01% – a drop of 12%. Such companies won’t have to pay minimum alternate tax [MAT] [levied on book profit of firms which have no taxable profit courtesy,...
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Agri-credit not going where it should
Successive governments have show-cased loans from scheduled commercial banks [SCBs], state cooperative banks [SCBs], district cooperative banks [DCBs] and regional rural banks [RRBs] [also referred to as institutional loans] to farmers at concessional rate of interest as demonstration of their commitment to help them increase their income from agricultural and allied operations. Modi – government has often proclaimed this as one of the potent instrument of doubling farmers’ income by 2022. The total amount of agricultural credit increased from about Rs 915,000 crore during 2015-16 to Rs 1065,000 crore during 2016-17 and further to Rs 1170,000 crore during 2017-18. As per directives of the Reserve Bank of India [RBI], farmers get short-term crop loans up to Rs 300,000 at subsidized...
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GST math goes haywire
One of the reasons for inordinate delay in taking up the constitutional amendment bill for enactment of the Goods and Services Tax [GST] was the reluctance of the then UPA – government at the centre to agree to the demand of the states for compensation of the loss of revenue that would arise with its launch vis-à-vis the revenue they would get under the subsisting dispensation of excise duty, sales tax or value added tax [VAT] plus a host of other local taxes. Modi – government by agreeing to this demand achieved a fair degree of success in building consensus among all the states. Within two years of taking charge in 2014, it was able to steer through the constitutional...
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Fertilizers – disjointed policies, contrary signals
Modi – government is running in its sixth year [five years of the first term and first of Modi 2.0]; we are yet to see a coherent announcement on reforms in the fertilizer sector forget giving a ‘stable’ and ‘predictable’ policy badly needed to give a clear-cut signal to various stakeholders for taking decisions with regard to investment, innovation, imports, logistics and use etc. All that we see is exhortation from the Prime Minister himself made in bits and pieces from the public platform. Let us pick up some of most crucial ones. First, in the 38th edition of “Mann ki Baat” delivered on November 26, 2017, Modi exhorted farmers to take a pledge for reducing consumption of urea [the...
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Reforming agri-markets – a hoax
An inter-ministerial panel for rural and agriculture sectors has identified trade barriers within the mandi system [mandi is state-run market yards known as agricultural produce marketing committees (APMCs)] that continue to hurt traders dealing in food commodities, which, in turn, affects farmers. The panel cites this as a major factor responsible for lower farm income. Arguing that farmers need freer access to markets for selling their produce , it has recommended removal of the inter-state mandi tax [levy collected from traders when agri-products are sold from one state to another] and replacing it by a single pan-India mandi tax. It has also mooted a pan-India licence valid across all mandis [a total of 585 in 16 states and two union territories]. The panel...
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Growth pangs in auto – avoid GST rate cut
The deceleration in GDP [gross domestic product] which started in the second quarter of financial year [FY] 2018-19 and has continued till the first quarter of current year with the rate of growth plunging to 5 year low of 5% has led to consternation in industry and trade circles leaving a sizeable section of the fraternity worried that this trend might continue till the end of the year. This will mean further aggravation of the income and employment concerns. The government has rightly gone into introspection mode and has demonstrated its willingness to respond to the situation. The finance minister, Nirmala Sitharaman has held a series of consultations with industry and trade and come up with a number of measures...
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Rate cut transmission – benchmarking alone won’t help
On September 4, 2019, the Reserve Bank of India [RBI] has made it mandatory for all banks to link new floating-rate loans – to retail customers and micro, small and medium enterprises [MSMEs] – to an external benchmark. The external benchmark could be the repo rate [rate of interest that the apex bank charges on money lent to banks – also known as ‘policy rate’], yields on 3-6 month treasury bills as published by the Financial Benchmarks India Private Ltd [FBIL] or any other benchmark rate published by FBIL. The decision will be applicable to all fresh loans under ‘floating rate’ given from October 1, 2019. Borrowers with a floating rate loan who are eligible to pre-pay without pre-payment charges...
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PSBs – capital erosion continues unabated
During her second interactive session with the media on the state of the Indian economy and measures to give a boost, finance minister, Nirmala Sitharaman announced a number of bold reforms in the banking sector with major focus on consolidation of 10 public sector banks [PSBs] into 4 big entities – an overarching objective being to make them globally competitive and act as a foundation for achieving US$ 5 trillion milestone. Sitharaman informed about a substantial reduction in their gross non-performing assets [GNPAs] from 11.6% of total loans as on March 31, 2018 to 10.3% on March 31, 2019 [courtesy, huge recovery of over Rs 300,000 crore made possible largely by concerted action under the Insolvency and Bankruptcy Code (IBC)...
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