On February 15, 2024, a five-judge Constitution bench of the Supreme Court (SC), headed by the CJI declared the Modi government’s 2018 Electoral Bond Scheme (EBS) as unconstitutional. The four major considerations behind this order are:- The scheme legitimizes the use of black money in political funding; it lacks transparency and keeps identity of the donor anonymous thereby violating the constitutional right to freedom of speech and right to information (Article 19(1)(a)); it gives rise to ‘quid pro quo’ – a legal jargon for a person in the position of power granting favor in exchange for bribe; it denies equality of opportunity to the voters to exercise their freedom to vote in an effective manner (Article 14). The EBS was...
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Category: Economic outlook
Income inequalities hamper sustainable growth
While the nation’s GDP is poised to surge by 7.6 per cent in the current financial year, concerns loom large over the sluggish pace of private consumption During the current financial year, the Indian economy is expected to register a growth of 7.6 per cent in real gross domestic product or GDP. Coming on top of growth of 9.1 per cent during 2021-22 and 7.2 per cent during 2022-23, India’s performance is spectacular. Emboldened by this trend and Modi’s commitment to pursue economic reforms with greater vigour during its third term, analysts are hoping for growth of above 7 per cent on a sustainable basis. But, there is a catch. Private consumption which accounts for as much as 55 per...
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RBI maintains status quo despite inflation optimism
RBI’s commitment to ‘last-mile disinflation’ has prompted a continued tight monetary policy stance, raising questions about its impact on economic growth On April 5, 2024, announcing the decisions taken by the six-member Monetary Policy Committee (MPC) in its first bi-monthly meeting of the current financial year (FY), Governor Shaktikanta Das observed “The elephant has now gone out for a walk and appears to be returning to the forest. We would like the elephant to return to the forest and remain there on a durable basis,” Das was using the elephant analogy to characterise the trajectory of retail inflation as represented by the Consumer Price Index (CPI). Having scaled to a high of 7.8 per cent in April 2022, CPI has...
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Debunking claims of fiscal discrimination
Opposition-ruled States, especially southern States, have raised concerns about discriminatory treatment in the current system of fiscal resource sharing between the Centre and the States Various Opposition-ruled States especially from south India have complained of ‘discrimination’ and ‘unfair’ treatment under the present scheme of sharing financial resources between the Union Government and the States. Article 270 of the Constitution provides for the sharing of net tax proceeds collected by the Union government with the States. The taxes that are shared include corporation tax, personal income tax, Central GST (Goods and Services Tax) of CGST, the Centre’s share of the Integrated Goods and Services Tax (IGST), CED on petroleum products excluding the cess and surcharge levied by the Centre etc. All...
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Rationalise and simplify GST
The GST Council has to make crucial decisions regarding inclusion of petroleum products and streamlining tax slabs to fortify the robustness of the GST system A Group of Ministers (GoM) set up by the GST (Goods and Services Tax) Council is currently reviewing the new tax regime with a focus on ‘simplification’ and ‘rationalisation’ as key objectives. GST is a single nationwide tax that subsumes within it more than a dozen taxes of the pre-GST era. Applied all over India, it has a provision of set-off for tax paid on inputs also known in common parlance as input tax credit (ITC). This makes the system free from the cascading effect of tax on tax besides encouraging businesses to report all...
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Detach PSU share sale from budget
If the government’s intent was not to view it as an exercise in balancing the budget, as stated by the finance secretary, then it made no sense to fix a target. Yet, setting a target for boosting non-tax revenue receipts means that it hasn’t shed its age-old stance of linking this exercise with the budget. At a briefing following the presentation of the interim budget for the financial year 2024-25 by Finance Minister Nirmala Sitharaman on February 1, Finance Secretary TV Somanathan stated that the “government no longer views disinvestment — fancy nomenclature for sale of Union government shareholding in central public sector undertakings (CPSUs) — from the perspective of balancing the budget”. The statement is out of sync with...
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The practice of offering freebies must stop
Not too long ago, poll freebies used to be an exception. But now it has become a norm with almost every other party promising it Barely a week before the Election Commission of India (ECI) is set to announce the schedule for the polls for Lok Sabha elections when the Code of Conduct will come into force, the Aam Aadmi Party (AAP) has given yet another dose of mesmerizing voters in Delhi with freebies – an acronym for “something given free of charge” – a bizarre practice it started in the February 2020 elections.In the budget for the financial year (FY) 2024-25 presented by the Delhi finance minister Atishi in the assembly on March 4, 2024, she announced the Mukhyamantri...
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Synchronise fund release with need
Efficient fund utilisation is crucial, and the government must judiciously identify the beneficiaries, ensuring the removal of fictitious claimants The Union government implements numerous welfare programmes to achieve various socioeconomic goals and national priorities. This is primarily done through central schemes (CS) fully funded and executed by the government and through centrally sponsored schemes (CSS) funded both by the Centre and states in varying proportions, such as 90:10, 60:40, and so on. These schemes are implemented by the states. The total expenditure of the Centre in FY 2022–23 on these schemes was Rs 1,620,000 crore (Rs 1,208,000 crore on 740 CSs; Rs 412,000 crore on 50 CSSs), constituting 41% of the total budget spending of Rs 3,940,000 crore. Efficient fund...
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Balancing welfare and fiscal responsibility
The Centre should go for a complete overhaul of its food subsidy programme. It should exclude from the beneficiaries’ list those who are better off Seen in the backdrop of 250 million persons coming out of poverty during the last nine-and-a-half years of incumbent government (as per a recent report released by Niti Aayog), Prime Minister Narendra Modi has faced flak from the opposition parties for his decision to continue with supply of free ration under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme for five years (it was announced by Modi during a poll rally in Chhattisgarh late last year). They question the logic of supplying free food even to those who have crossed the poverty line. Modi...
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Delink disinvestment from the Budget
There is a need for a paradigm shift in the approach to disinvestment; the Government must detach it from budgetary constraints and tackle legacy issues In a briefing following the presentation of the interim Budget for the financial year (FY) 2024-25 by the Finance Minister, Nirmala Sitharaman on February 1, 2024, Finance Secretary TV Somanathan stated that the “government no longer views disinvestment – fancy nomenclature for sale of Union government shareholding in central public sector undertakings (CPSUs) – from the perspective of balancing the budget”. The statement is out of sync with Sitharaman setting a target of Rs 50,000 crore as proceeds from disinvestment for the FY 2024-25 though it wasn’t mentioned in her speech. If, the government’s intent...
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