The fertiliser subsidy allocation for FY22 signals there will be no reform this fiscal; deficit targets show this is unlikely in the next five years too The subsidy can be restricted only to farmers having less than two hectares. Under the “Stimulus – III” unveiled on November 12, 2020, the Union finance minister, Nirmala Sitharaman, made an unprecedented announcement to release an additional Rs 65,000 crore towards fertilisers subsidy over and above Rs 71,000 crore allocated in the Budget for FY21. She has followed it up by providing a total of about Rs 134,000 crore in the revised estimate (RE). This should be enough to pay for all subsidy dues, including carry forward from FY20. For FY22, she has allocated...
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Articles
How about reining in food subsidy?
Even as the Govt has mustered courage to give a truthful account of the money it spends on food subsidy, there is nothing on the horizon to indicate that this will be reined in In the Union Budget for 2021-22, Finance Minister (FM) Nirmala Sitharaman has given a pleasant surprise. This has to do with the Government’s decision to discontinue with the decades-old practice of so-called “off-Budget liabilities” this time around. “Off-Budget liabilities” is a fancy nomenclature used by governments to denote transfer of certain expenses incurred by the Union Government to the books of its agencies tasked with the implementation of its welfare schemes. This helps the former show lower expenses on its own books, thereby, helping it bring down fiscal...
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Legalising MSP will prove to be anti-farmer
Out of about 150 million farmers, a mere 8% of them get to sell their produce to the state agencies In the continuing stalemate over the three farm laws, the biggest sore point is the insistence of the agitating farmers that the MSP (minimum support price) should be legally guaranteed. At present, the Centre notifies MSP for 23 farm items. The Food Corporation of India (FCI) and other state agencies buy paddy and wheat, besides a few other items such as coarse cereals and pulses, at the MSP. These are meant for feeding the public distribution system (PDS) and giving food to beneficiaries at heavily subsidised prices under the National Food Security Act (NFSA). Out of about 150 million farmers,...
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Reinvigorating growth: Where is the money?
The FM wants to boost growth, but it will be at the cost of fiscal de-stabilisation. One is not sure whether a sustained, rapid surge will come as a huge resource gap remains Taking a cue from the prescription that the Chief Economic Advisor (CEA), Krishnamurthy Subramanian gave in the Economic Survey: 2020-21 that “the Government should come up with more fiscal measures for short-term support to the economy and businesses”, Finance Minister (FM) Nirmala Sitharaman has gone ahead with some “big bang” measures. She has not just attempted to give a boost to industries and businesses in the short-term but has also given an indication of her intent to put them on a high growth trajectory in the medium to...
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Paratroop reforms on the ground
Of crucial importance is the need to actually execute reforms and make them work on ground zero. Unfortunately, this is not happening Unlike the Economic Survey for 2019-20, which was prepared keeping in mind the ambitious target of achieving a $5 trillion economy by 2024-25, this time around, the overarching theme revolves around demonstrating how brilliantly the Government has managed the Coronavirus pandemic. Through lucid elaboration on the details and modeling with facts and figures — using international as well as inter-State comparison within India, Chief Economic Adviser (CEA) Krishnamurthy Subramanian has given ample justification for the “early” and “stringent” lockdown from March and thereafter calibrated lifting of restrictions from June onward. Tacitly, he has also admitted that this led to compression...
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Tax Talk: Govt must get serious on bringing gas under GST
It will, of course, cause a revenue shortfall for states, but that can be dealt with by hiking the rate of GST compensation cess In these circumstances, it is unlikely that they would let any of these products be taxed at a much lower rate—an inevitability if they are brought under GST. ———————————————— The ministry of petroleum and natural gas (MoPNG) has taken on board a proposal—mooted by the industry during recent pre-budget discussions—to bring natural gas within the ambit of the Goods and Services Tax (GST). This will ensure a uniform tax on gas throughout the country and lower its price for both industrial and domestic use, which may help increase its share in India’s energy mix from the...
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India must stand its ground
All objections raised by the USTR on the DST levied by India on foreign tech firms are baseless. The Govt must not yield to the pressure tactics of the US administration by withdrawing the tax In its findings on the Section 301 probe conducted under the US Trade Act, 1974, the US Trade Representative (USTR) has inter alia concluded that India’s digital services taxes (DST) or the so-called equalisation levy (EL) at the rate of two per cent, unfairly targets US companies. The USTR raised three aspects that, it alleges, are inconsistent with global tax principles: First, the levy on US companies has extra-territorial application; second, DST is a tax on the firm’s revenue, not its income; and third, it subjects US...
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Stop chasing a mirage
The Govt needs to pursue disinvestment, including privatisation, as an objective by itself instead of linking it to revenue receipts and meeting the fiscal target The Department of Investment and Public Asset Management (DIPAM) is in a war of words with the Ministry of Finance (MoF) over the proceeds of disinvestment of the Government’s shareholding in Central Public Sector Undertakings (CPSUs) during 2020-21. The point raised by the DIPAM is that out of the Rs 2,10,000 crore target fixed in the Union Budget, a big slice of Rs 90,000 crore, was thrust upon it by the MoF as being the projected proceeds from the sale of 10 per cent shares in the Life Insurance Corporation (LIC) and its residual stake...
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A taxing problem
India’s sovereign taxation rights on capital gains cannot be held hostage to its bilateral investment treaties with other countries The Permanent Court of Arbitration (PCA) tribunal in The Hague has rejected the back tax demands of Indian tax authorities in both, the Cairn and Vodafone cases. These back taxes relate to capital gains made on transactions in 2006-2007. According to the PCA, the demands have been rejected on two counts. First, they violate India’s obligations under Bilateral Investment Treaties. Second, they are based on a retrospective amendment to a tax law passed in 2012. Both the arguments are untenable. As regards the first, tax is levied on the earnings of the companies from their operations in India. The Government has done nothing...
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Many a slip…
It is natural to expect an economic rebound in FY 2021-22. But it is vital to take a pragmatic view based on an objective assessment of how the situation unfolds on ground zero The green shoots seen in October, in particular the rise in the Index of Industrial Production (IIP) by 3.6 per cent, have prompted agencies to revise their growth assessment for the current financial year (FY) from the minus 9.5-10.5 per cent projected earlier to minus 7.5-8.5 per cent, now. For the FY 2021-22, when the impact of the virus is expected to subside to a large extent due to the availability of the vaccine, it is only natural to expect an economic rebound. However, it is necessary...
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