In the follow up to BJP’s defeat in the three major states in central India viz. Madhya Pradesh, Rajasthan and Chhattisgarh last year, there was a widespread perception that a major factor behind this was resentment among farmers [besides the unemployed youth] with the alleged anti-farmer policies of incumbent governments in these states as also those pursued by the union government. Under Modi – dispensation, the prices of farm products had increased at a slower pace than those of the non-farm products or the ‘terms of trade’ moved against agriculture [a jargon used by economists to describe the phenomenon]. As a consequence, farmers’ income grew slower than non-farm income which – analysts argued – prompted them to vote against BJP....
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Overseas sovereign borrowing – a double-edged sword
In the Union Budget presented on July 5, 2019, the government has come up with ‘overseas sovereign borrowing plan’ to meet the funding requirements of an ambitious investment program that involves a spend of Rs 100,00,000 crore [US$ 1.4 trillion] over the next 5 years to make India US$ 5 trillion economy by the year 2024-25. During the current year, it is aiming to raise US$ 10 billion from this source. For now, its intent is to go for US$ 3 – 4 billion the contours for which are expected to be finalized by September, 2019. Currently, there is surplus liquidity and benign interest rate environment in the international market [courtesy, the Federal Reserve of the USA keeping interest rate...
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Boosting tax revenue – FM’s novel ways
During 2018-19, the government had faced a shortfall of about Rs 95,000 crore in tax revenue [Rs 60,000 crore in GST and Rs 35,000 crore in direct tax] vis-à-vis the revised estimate which itself was Rs 100,000 crore lower than the target fixed while presenting the budget on February 1, 2018. This forced it to compromise on development expenditure, postpone payments such as subsidies to the next year even as it didn’t want to miss the fiscal target. During the current year also, tax collections are not showing the required buoyancy [in June, 2019, the monthly GST collection was even less than Rs 100,000 crore as against over Rs 110,000 crore needed to reach the yearly target]. The government is...
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Taxing the super-rich – is it justified?
In the Union Budget for 2019-20 presented by the finance minister, Nirmala Sitharaman on July 5, 2019, the government announced increase in the surcharge on individuals [or association of persons (AOP) or trusts)] with annual income in the Rs 2 crore to 5 crore range from existing 15% to 25% and on individuals with income > Rs 5 crore from existing 15% to 37%. This will result in an effective tax incidence of 39% on earners in Rs 2 crore to 5 crore range and 42.7% on those earning > Rs 5 crore. There is much hue and cry more so because this will affect foreign portfolio investors [FPIs] who are registered in India as AOP or trusts. The plunge...
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Relinquishing control over PSUs, really!
In her maiden budget presented on July 5, 2019, the union finance minister, Nirmala Sitharaman has set an ambitious target of Rs 105,000 crore as proceeds of disinvestment of government shares in public sector undertakings [PSUs] [this is even higher than about Rs 100,000 crore it had garnered during 2017-18]. She has also hinted at aggressive pursuit of ‘strategic’ disinvestment and even consider reducing governments’ shareholding in PSUs to below 51% on a case-by-case basis. A target of realizing 1/3rd of the proceeds from this route has been set. Over Rs 35,000 crore, the government is contemplating to garner from the ‘strategic’ disinvestment includes proceeds from divestment of Air India which according to the secretary, department of investment and public asset management...
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Modi 2.0 fails to kick off fertilizer reforms
Having been returned to power, we were looking forward to Modi kick off reforms in the fertilizer sector which were ignored by successive governments in the past. The expectation was legitimate as any reform measure is bound to affect stakeholders in the immediate short-run but that is unlikely to pose any threat to the government which has a mandate to run for full five years and it does not have to face the electorate before this. So, now was the golden moment to go for the big bang. But, the union budget presented by finance minister, Nirmala Sitharaman on July 5, 2019 has belied the expectation. There is no reference to fertilizers even as the allocation for fertilizer subsidy at...
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Ailing BSNL/MTNL – privatization is the way forward
The Bharat Sanchar Nigam Limited [BSNL] – a jewel among the most profitable public sector undertakings [PSUs] of the union government and an entity that virtually monopolized the telecommunication sector over two decades ago – is reported to have sent an SOS to the department of telecommunication [DoT] – its nodal ministry – seeking immediate release of funds to enable it pay salaries to its employees for the month of June, 2019. This has led to consternation in industry circles with many commentators even questioning the very need to continue operations of this highest loss making PSUs [during 2018-19, it posted loss of Rs 13,804 crore] besides Mahanagar Telephone Nigam Limited [MTNL] – another one time jewel in the portfolio...
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Can KUSUM salvage farmers and discoms?
In a freewheeling interview given to a leading national daily, Minister of state for power and renewable energy RK Singh, informed about a scheme for rural areas viz. Kisan Urja Suraksha evam Utthaan Mahabhiyan [KUSUM] already approved by the cabinet and will be launched within a time frame of 2-3 weeks – to be implemented over a period of three years. Intended to promote the use of solar energy in rural areas, the scheme allows a farmer to use his barren land – currently lying fallow – to set up a solar plant on it for 1 MW or so [in case, the land is cultivable then he can set it up on stilts and grow crop below]. Whereas, during...
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FDI in e-commerce – the logjam
In a meeting with stakeholders in the e-commerce segment – including multinational companies [MNCs] such as Amazon, Flipkart etc – the minister for commerce and industry, Piyush Goyal categorically ruled out any change in the extant policy on foreign direct investment [FDI] in ‘market-place’ model of e-commerce. This has led to huge disappointment among foreign majors who were hurt by the amendments/clarifications to the 2016-17 policy [Press Note (PN) 3] made vide circular dated December 26, 2018 and were looking for necessary correction to remove the anomalies – as they perceived. The U. S. – India Business Council [USIBC] – a US-based lobby group – even termed the amendments as ‘retrospective’ which created uncertainty of the policy environment. What was...
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Fertilizers movement via waterways – policy hurdle
The government has approved transportation of fertilizers through coastal shipping and inland waterways. This is a welcome move as it offers the possibility of significant reduction in freight cost besides taking less time in reaching the material to consumption points and being environment friendly as well. It has also approved freight subsidy on the cost incurred on movement of fertilizers through this mode. In case of single mode or multi-modal transportation which includes coastal shipping, ‘the freight subsidy will be restricted to railway charges or the actual freight incurred, whichever is less’. Further, ‘only movement of subsidized indigenous fertilizers viz. urea and phosphate and potash fertilizers – through coastal shipping/inland waterways will be eligible for payment of freight subsidy at...
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