There is a compelling case for disbanding all existing forms of support and replace them by what may be termed as ‘Unconditional Basic Income’ or the UBI system. During an interaction organised by the Confederation of Indian Industry (CII) last month, Chief Economic Advisor V Anantha Nageswaran dismissed the idea of Universal Basic Income (UBI) in India. He expressed concerns that UBI might create create ground for “perverse incentives,” discouraging people from actively seeking income-generating opportunities. As a result, he believes that UBI should not be priority in the near future. Drawing comparisons with developed countries, the current CEA highlights that these nations have limited room for increasing economic growth and creating income generating opportunities. Consequently, their governments have established social...
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Category: Economic outlook
The scourge of freebies is taking a heavy toll
Freebies are denuding the budgets of many states. This practice must go before states’ coffers run dry Delivering his Independence Day address, Delhi Chief Minister Arvind Kejriwal promised 200 units of electricity a month for ‘free’ to the entire 1.4 billion people of India saying this will cost Rs 150,000 crore per annum. He went on to add ‘When Modi – government can waive Rs 150,000 crore worth of loans given to four top industrialists of the country, why can’t it provide free electricity to the people which would cost it the same amount? In Delhi, Kejriwal is already giving free electricity to all households (HHs) consuming 200 units a month and a flat subsidy of Rs 800 to HHs...
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NPAs down but pain points still remain
As per the information given by the Ministry of Finance (MoF) in Parliament, during the last nine years, scheduled commercial banks (SCBs) have undertaken an aggregate recovery of Rs 10,16,617 crore of loans that had gone bad or non-performing assets (NPAs) as these are called in banking parlance. In reply to a question given in the lower house, Minister of state for finance Bhagwat Karad informed that “Comprehensive measures have been taken by the Government and RBI to recover and to reduce NPAs, including those pertaining to corporate companies”. These include the 2016 Insolvency and Bankruptcy Code (IBC), and the establishment of the National Asset Reconstruction Company Limited (NARCL), among other measures. At banks’ level, the efforts involve early recognition...
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Scrap priority sector lending
PSL is a legacy of the socialist era. It creates distortion in credit flows, keeps bank officials busy with target fulfillment and is prone to blatant misuse Lenders, especially foreign banks have decided to undertake a comprehensive analysis of “sustainable finance” under the aegis of the Indian Banks’ Association (IBA) to make out a case for granting priority-sector lending (PSL) status to such financing for consideration by the Reserve Bank of India (RBI). Globally, “sustainable finance” is broadly defined as any form of financial product/service that promotes environmental, social and governance purposes while contributing to the achievement of relevant targets adopted by countries under frameworks, including the Paris Agreement on climate and the Sustainable Development Goals (SDGs) set by the...
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Don’t block sale of fertiliser PSUs
The fertiliser ministry’s concern about securing adequate supplies is unwarranted Pursuant to the government’s approach to privatisation of Central Public Sector undertakings, or CPSUs, as announced in the 2021–22 Budget, the Department of Public Enterprises (DPE) and Niti Aayog have identified 176 CPSUs in the non-strategic sectors. They have recommended that over 60% of them, or 106, be wound up, while the rest, considered “viable units,” should be privatised. Fertilisers are placed in the non-strategic category. Accordingly, the DPE and Niti Aayog have recommended the privatisation of all nine CPSUs, including Madras Fertilizers (MFL) and National Fertilizers Limited (NFL), which are under the administrative control of the Ministry of Chemicals and Fertilisers. However, the latter has opposed it. But why...
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Time for ‘universal basic income’ is now
There is a compelling case for disbanding all forms of support and replacing them by ‘universal basic income’ (UBI) so that people can live with dignity At an interaction organized by the Confederation of Indian Industry (CII) on July 7, 2023, Chief Economic Advisor (CEA) V Anantha Nageswaran ruled out Universal Basic Income (UBI) for India saying this may create ground for “perverse incentives” and dissuade people from seeking income-generating opportunities. So, “UBI is not something that should be on the agenda in the near term”. In contrast, in the Economic Survey (2016-17) presented on January 31, 2017, the then CEA Arvind Subramanian had advocated UBI to substitute a plethora of extant subsidies. He couched the idea in Mahatma Gandhi’s...
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Tax reforms are yielding good results
The Income Tax Department has successfully used technology to reach out to the assesses in non-intrusive ways A major factor that has helped the Modi – government keep up the tempo of investment in building infrastructure and other development activities and continues with welfare schemes in desired measure without causing any slippage in fiscal deficit target has to do with a steep rise in tax collection. The gross tax revenue (GTR) – including total direct tax collection, proceeds from Goods and Services Tax or GST, customs and excise duty – net of refunds – surged from around Rs 21,11,000 crore during the financial year (FY) 2019-20 to Rs 30,50,000 crore during 2022-23 – an increase of about 50 per cent....
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E-commerce policy conundrum
The government must provide a level playing field to all. It should legitimize 100 per cent FDI in retail, online and offline, big and small Referring to the national e-commerce policy, the Secretary Department for the Promotion of Industry and internal trade (DPIIT) in the Ministry of Commerce Rajesh Kumar Singh has said it will “put in place a streamlined regulatory framework for the ease of doing business, adoption of modern technologies and the integration of supply chains”. It will seek to create “a conducive environment for the overall development of the sector and boost exports”. According to the foreign trade policy, the Union government is aiming at an e-commerce export potential of $200 billion to $300 billion annually by...
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The war against NPAs isn’t over yet
The government should strengthen mechanisms to give a fair deal to MSMEs According to a joint report by ASSOCHAM and Crisil Ratings, gross non-performing assets (NPAs) – an acronym for loans that have gone bad – of banks have declined by 0.9 to less than 5 per cent during the financial year ending March 31, 2023, and are expected to decline by another 1 per cent to a decadal low of less than 4 per cent by March 31, 2024. In respect of loans given to the corporate sector, gross NPAs are expected to be less than 2 per cent by March 31, 2024, down from a peak of 16 per cent as on March 31, 2018. The public sector...
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Rs 2k note exchange: Demonetisation 2.0
Rs 2000 note exchange will not have any impact on black money. It will only help hoarders by exchanging Rs 2000 notes without disclosing their identity In its decision to withdraw Rs 2000 currency notes from circulation announced on May 19, 2023, the Reserve Bank of India (RBI) has stated that they will continue to be legal tender. The notification issued in this regard states:- “…in pursuance of the “Clean Note Policy” of the RBI it has been decided to withdraw the Rs 2000 denomination banknotes from circulation. The banknotes in Rs 2000 denomination will continue to be legal tender.” From the above, prima facie one gets a sense that it is not a demonetization exercise as it happened over...
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