Amidst continuing uncertainties of the policy environment for foreign direct investment [FDI] in multi-brand retail [MBR], a flurry of concerns have been raised by stakeholders especially with regard to the role of MNCs such as Amazon/Flipkart which have increased their presence in India particularly in the e-commerce space. The retailers associations [those representing the ‘mom-and-pop’ stores] have complained that they are indulging in predatory pricing – a euphemism for selling at rates substantially below cost of production/purchase and distribution – and funding the resultant loss from the dollars brought in from their global parent. This will not only threaten the survival of the street corner shops but even hit the consumers in the long-run as having captured a major slice of...
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Is Modi laying siege on RBI?
The detractors of prime minister, Modi who leave no stone un-turned in lambasting his government for allegedly infringing on the autonomy of the Reserve Bank of India [RBI] -some even allege that the former is hell bent on destroying the latter – should consider the following:- In the wake of the steep increase in non-performing assets [NPAs] of public sector banks [PSBs] rendering them financially weak, the apex bank has brought – 11 PSBs out of a total of 21 – under the Prompt Corrective Action [PCA] framework. A bank is put under PCA when any of the three parameters viz. capital to risk (weighted) asset ratio [CRAR] [or CAR as it is known in common parlance], net-NPAs and return on...
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Lies – newly found enemy of development
Even as the Congress camp is filled with jubilation over the defeat of BJP in the three heartland states viz. Madhya Pradesh [MP], Rajasthan and Chattisgarh, there is a pall of gloom among all the right thinking citizens of India. They are visibly upset over the consequences of the reins of powers in these three important states going into the hands of those who plundered the scarce national resources – epitomized by a spate of scams during 2004-2014 [when UPA led by Congress was in command at the national level] – and pushed the country into a state of ‘policy paralysis’ and shattered the economy. That it would mend ways and deliver good governance in these states is wishful thinking....
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Fertilizer subsidy – timely payments, a far cry!
The direct benefit transfer [DBT] scheme for fertilizer subsidy was launched at the beginning of Rabi 2017-18 crop season [October 2017 – March 2018] in certain parts of India and progressively extended to cover all the 31 states and union territories [UTs] – starting from April 1, 2018. Its stated objectives were: (i) ensure timely subsidy payments to the manufacturers; (ii) clearing the backlog and (iii) plugging pilferage and leakages in the system. Have these been achieved? To seek an answer to these questions, let us capture a few basics about fertilizer pricing and subsidy. To make fertilizers affordable to farmers, the union government follows a policy of controlling their maximum retail price [MRP] at a low level unrelated to the...
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Urea dilemma – control versus decontrol
On the eve of its Annual Seminar [2018], the Fertiliser Association of India [FAI] – an umbrella organization of all fertilizer manufacturers/importers – has reiterated its demand for removing controls on the fertilizer industry. It has also asked the government to give subsidy directly to the farmers instead of routing it through the manufacturers as at present. In case however, the government continues with control and routing subsidy through the manufacturers then, it demands a fair deal in terms of admissibility of various elements of cost viz. fixed cost, feed/fuel and other costs under the New Pricing Scheme [NPS] for determining the subsidy amount to be reimbursed to them. Further, considering that the maximum retail price [MRP] of urea is...
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Banks have recovered Rs 3 trillion – courtesy, IBC
This is election season. Almost every day, in the rallies, the air resonates with allegations [leveled by the President of the grand old party, Congress] of Modi – government letting a couple of his alleged industrialist friends swindle over Rs 300,000 crore of money belonging to the public sector banks [PSBs]. The purported reference is to the money owed by the industrialists to the PSBs which they did not pay back and turned into non-performing assets [NPAs]. According to Rahul Gandhi, Modi has allowed them to go scot free. This is bizarre! The NPAs are the offshoot of indiscriminate lending during 2008-2014 [when Congress was in command] by PSBs to those patronized by the rulers without conducting due diligence. The...
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A law on MSP – fiscally suicidal
On November 30, 2018, tens of thousands farmers – coming from all parts of the country – congregated on the national capital to register protest over their financial distress arising from un-remunerative price realization from sale of their output and ever increasing burden of indebtedness. Quite unlike protests in the past when their demands were restricted to specific areas such as timely payment of sugarcane arrears, reduction in power tariff, lowering GST etc, this time around, they have raised the pitch. They want a special session of the parliament to be convened to discuss their problems and pass two legislations [a private members’ bill has already been submitted to the chair]. These are: (i) a law to guarantee minimum support...
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Fiscal deficit – an accounting rule that helps fix it
For the current fiscal 2018-19, the union government is facing a shortfall of about Rs 90,000 crore in indirect tax collection vis-à-vis the target. This includes the deficit in GST [Goods and Services Tax] collection plus basic excise duties. A further shortfall of Rs 10,500 crore is expected in revenue from excise duty on petrol and diesel [these are not under GST for now]. This adds to Rs 100,500 crore. Against this, the direct tax revenue is expected to be Rs 20,000 crore higher than the target. Another Rs 20,000 crore will accrue from anti-evasion measures. The extra collection from customs duty would be about Rs 14,000 crore. All put together, the government will be able to garner an additional...
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RBI applying brakes when banks need push
A major contentious issue amidst stand-off between the Reserve Bank of India [RBI] and the union government [this had reached a brink prior to the meeting of RBI board on November 19, 2018 but a showdown was averted due to some flexibility shown by both the sides at the last minute] was in regard to the Prompt Corrective Action [PCA] framework for the weak public sector banks [PSBs]. In the wake of the steep increase in the NPAs [non-performing assets] of the PSBs resulting in their capital erosion, the apex bank has brought 11 PSBs – out of a total of 21 – under the PCA framework which it made stiffer than even the global standards. Thus, it uses three...
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Farm loan waivers – the road to disaster
The waiver of farm loans worth Rs 70,000 crore about a decade back by the then UPA – dispensation with an eye on the impending general elections in 2009, had a debilitating effect on the finances of the union government [the fiscal deficit during 2008-09 was in excess of 6%] While, this should have raised an alarm bell but, political parties of all hues do not seem to have learnt any lesson. Early last year, the BJP ruled government in Uttar Pradesh [UP] granted a mammoth loan waiver for small and marginal farmers costing the exchequer Rs 36,000 crores. This was followed by the by JD [Secular] led coalition in Karnataka granting an equally massive about Rs 40,000 crore waiver...
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