The credibility of the fiscal consolidation glide path has been dented which is also reflected in the Sensex falling by over 1,000 points after the Budget announcements The Union Budget for 2020-21 presented to the Parliament by Finance Minister (FM) Nirmala Sitharaman on February 1 confirms apprehensions that the actual fiscal deficit (FD) for 2019-20 would exceed the Budget Estimate (BE) by a significant margin. Sitharaman puts it at 3.8 per cent of the GDP against the target of 3.3 per cent. However, she has justified this deviation in terms of the recommendation of the NK Singh Committee on review of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which permits breach of the target in case of “far-reaching structural reforms...
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News & Media
Can invisible hand work?
Seen from an economist’s perspective, the Economic Survey looks eloquent. But execution could run into a logjam as politicians are prone to controlling the consumer The Economic Survey for 2019-20 has been prepared by the Chief Economic Advisor, Dr K Subramanian, keeping the ambitious target of achieving the $ 5 trillion economy status by 2024-25, set by Prime Minister Narendra Modi, at its centre. The rigorous analysis (a lot of it involves running of “regression equations” — a euphemism in econometric analysis to bring out correlation between various economic parameters) done by the CEA has to be seen in the backdrop of deceleration in the GDP (gross domestic product) growth to its 11-year-low of five per cent during the current year (first...
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Why half-baked fertilizer reforms won’t deliver
If the government wants to restrict subsidised supply only to small and marginal farmers having landholding size <2 hectares, this will require two streams of supplies in the distribution channels viz. The Union government controls the maximum retail price (MRP) of urea at a low level, unrelated to the cost of production and distribution, which is much higher. —————————————————————————————————— Reportedly, the government is likely to fix nutrient-based subsidy (NBS) rate for urea before rolling out the direct cash transfer (DCT) of urea subsidy to farmers’ accounts. The subsidy, expressed as rupees per hectare, will be based on soil health, and size of landholding. The idea of NBS for urea is not new. It was recommended, in 2012, by a...
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Powerless discoms
The house must be set in order, else this will have catastrophic consequences for power producers, banks, States and Modi’s plans to supply electricity to every household Even as there are incessant promises from the ruling establishment of electrifying all villages in the country and making power available to each and every household for maximum duration in a day, the most crucial wheel required for making this happen has got stuck. And the irony is that the political brass is only paying lip service to the urgent need for extricating it. The reference here is to the power distribution companies (discoms) — mostly owned and controlled by State Governments which procure electricity from the independent power producers (IPPs), Public Sector...
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Will SC uphold minority shareholders’ rights in Tata Sons case at Bombay House?
In a landmark judgment last month, the National Company Law Appellate Tribunal [NCLAT] held as illegal the decision of Tata Sons Limited [TSL] in its board meeting on October 24, 2016 to remove Cyrus Mistry from his position as chairman of TSL as also from the boards of three group companies — Tata Consultancy Services [TCS], Tata Motors Ltd [TML], Tata Steel Ltd [TSL]. The NCLAT directed immediate reinstatement of Mistry. The tribunal also held illegal the decision of TSL shareholders at the AGM in September 2017 to convert TSL from extant ‘public limited company’ status to a ‘private limited company’ and change its name from TSL to Tata Sons Private Limited [TSPL] by amending the Articles of Association [AoA]. On January...
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Act, before it is too late
Taking a ‘fair’ and ‘realistic’ view of all receipts and expenditure of the Govt, its fiscal deficit is turning out to be almost double the three per cent target sought by the NK Singh panel Having achieved the fiscal deficit (FD) target for three years in a row, the Narendra Modi Government missed it in 2017-18 and 2018-19. During 2017-18, the actual FD expressed as a percentage of the Gross Domestic Product (GDP) was 3.5 per cent against the target of 3.2 per cent. For 2018-19, the then Finance Minister, Arun Jaitley had set a target of 3.3 per cent as against three per cent sought by a committee under NK Singh, former Expenditure Secretary and current Chairman of the 15th Finance...
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Solve a contentious issue
The unabsorbed input tax credit dilemma in the Goods and Services Tax is something that the Council needs to address urgently In the backdrop of the collection under the Goods and Services Tax (GST) not coming up to the expected level and the consequential inability of the Central Government to meet its obligations towards compensation to the States as committed under the GST Compensation Act, 2017 (it provides for compensation for five years i.e. till 2021-22 to be calculated as the difference between actual collection and the revenue it would have got with growth at four per cent over the 2015-16 level), the GST Council is undertaking a comprehensive review of the existing rate structure and the implementation mechanism. Meanwhile, a contentious...
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Why PM Modi must not give up on fertiliser DBT
DBT will save the government quite a lot on the subsidy by eliminating misuse and ensuring better targeting through Aadhaar linkage The manufacturers of non-urea fertilisers are given ‘uniform’ subsidy (on per nutrient basis) under the nutrient based scheme (NBS). —————————————————————————————————– According to a survey by NITI Aayog, nearly two-thirds of the farmers don’t favour direct benefit transfer (DBT) of fertiliser subsidy. If this is also the thinking of our policymakers, then it would leave one shell shocked as it would be tantamount to a complete reversal of the process set in motion a couple of years ago. In FY17, the government launched pilot projects for linking subsidy payments to producers, for the sale of fertilisers to farmers by retailers...
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Allow 100% FDI in online, offline retail in all sectors
The Confederation of All India Traders (an umbrella organisation of small traders and businesses), has complained to the government that global e-commerce majors – Amazon and Flipkart – are giving huge discounts, selling exclusive brands and controlling inventory of sellers etc. All these are prohibited under the extant policy on foreign direct investment (FDI). Promising action, Minister for Commerce and Industry Piyush Goyal has ordered collection of data on their financials, business model and operating practices. This is not a new development. Ever since the guidelines permitting 100% FDI in the ‘market-place’ model of e-commerce were issued in early 2016 (Press Note 3), complaints of violations had been pouring in even as the then minister Suresh Prabhu promised action. The...
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The dawn of a new era
Slowly but surely, India has manoeuvred its way through digital transformation. It must build on this success and the communication revolution to a new level for the creation of a vibrant economy Having missed the first and second industrial revolution of the 19th and early 20th century (courtesy the subjugation of India to colonial rulers of those times) and even the third technology-driven revolution (this one was primarily due to the “protectionist” and “inward-looking” Government policies, which were not conducive to embracing technology), India is at the forefront of leading the fourth industrial revolution — a digitally driven one —with speed and scale. The digital revolution calls for a shift from mechanical and analogue electronic technology to digital electronics, which...
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