The Govt should shed its current protectionism. Instead, it should go for an open trade policy by slashing import duties and eliminating non-tariff barriers While presenting the Union Budget for 2020-21, Finance Minister Nirmala Sitharaman had renewed the commitment of the Modi Government to “Make in India.” She saw this as the most crucial component of the strategy to make India a $5 trillion economy by 2024-25. To achieve this, she targetted doubling of exports from the current over $500 billion to $1 trillion (that includes an increase in farm exports from $40 billion to $100 billion). Faced with a whopping contraction in the Gross Domestic Product (GDP) by close to 25 per cent during the first quarter, a continuing...
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Articles
The GST quagmire
The Centre and States must try to fix all void in GST implementation to achieve buoyancy in tax revenue, thereby obviating the need for continuing with the compensation mechanism Faced with a dwindling tax revenue since the last financial year of 2019-20, the issue of “full” and “timely” compensation for the shortfall in States’ tax revenue (their own collection plus the amount received as their share in indirect tax collected by the Centre as per the Finance Commission’s devolution formula) vis-à-vis a given benchmark, has been a bone of contention between the Centre and the States. It has acquired gargantuan dimensions during the current year with the Coronavirus pandemic forcing a collapse of businesses, cutting across almost all sectors (barring...
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Bite the BIC bullet
The ailments afflicting PSBs won’t go away so long as majority ownership and control remain with the Government. There is a dire need to unshackle them and grant autonomy to the management The Reserve Bank of India (RBI) has recommended to the Centre a reduction in shareholding of the latter in six top Public Sector Banks (PSBs), namely the State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, Union Bank of India (UBI) and Bank of India (BOI) to 51 per cent in the next 12-18 months. At a recent meeting with the Ministry of Finance (MOF), the RBI had argued for reduction in stake to 26 per cent. But, observing that this might...
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Crushing the competition
The regulator itself refuses to see that competition is being crushed, and even when it sees, its ruling is stayed by appellate authorities—thus, the increasing dominance of digital giants is inevitable. Amazon, some allege, uses the data of products on its e-commerce platform to decide what to sell under its own brand. Big Tech firms such as Google, Facebook, Amazon, and Apple have come under the radar of many governments, including that of the US, Australia, and France, for trying to steamroll competition by either buying competitors out or pushing other vendors to avoid working with them. Here is a glimpse of how they allegedly misuse use their dominant position. Google’s search engine is accused of stealing content with the goal...
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Snap the stranglehold
The only way to avoid delay and expedite the process of privatisation of Central PSUs is to unshackle them from bureaucratic red tape Finance Minister Nirmala Sitharaman has announced the broad contours of the Narendra Modi Government’s plans on privatisation of Central Public Sector Undertakings (CPSUs). A CPSU is defined as an undertaking in which the Union Government has shareholding of more than 50 per cent and by virtue of this, exercises majority ownership and control (there were 249 operating CPSUs as on March 31, 2019). Its privatisation means the shareholding of the Centre will be brought down to below 50 per cent. Before we look at the plan and how the Government goes about implementing it, it may be worthwhile to...
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Time to be honest
Modi has done everything to make life easier for the taxpayer. Now, it is for the latter — especially those who have not been paying taxes as currently only 1.5 crore of 130 crore Indians comply — to reciprocate Dubbed as a transformative tax reform, on August 13 Prime Minister Narendra Modi launched a ‘Transparent Taxation: Honouring The Honest’ platform via video-conferencing. The main aim of this reform was best captured in the following statement by Modi, “Honest taxpayers play a crucial role in national development. When the life of an honest taxpayer is simplified, he progresses, which leads to the progress of the nation too.” The resources garnered by collecting cess from the people, who regularly pay their taxes, are the...
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Bailout or blowout?
When the wheels of the economy on ground zero are stuck and there is little demand for credit, lowering of interest rates will not help in any way Following marathon deliberations of the Monetary Policy Committee (MPC) over three days, the Reserve Bank of India’s (RBI’s) Governor, Shaktikanta Das, made four important announcements under the central bank’s bi-monthly monetary policy review on August 6. First, Das warned that India’s real Gross Domestic Product (GDP) growth is set to contract in 2020-21 but did not give a specific forecast. He also cautioned that “while an early containment of the Covid-19 pandemic may impart an upside to the outlook, a more protracted spread of the pandemic, deviations from the forecast of a normal monsoon...
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Uniform transport tariff for gas – a flawed idea
Speaking at the launch of the nation’s maiden online gas trading platform by Indian Gas Exchange (IGX), petroleum minister Dharmendra Pradhan alluded to “a new pipeline tariff policy that will replace existing practice of seven different pipeline operators charging separate rates and customers away from gas source paying more than those nearer to source.” Petroleum and Natural Gas Regulatory Board (PNGRB) Chairman DK Saraf was even more specific when he spoke of a “single rate across pipelines so as to make the price of fuel uniform for customers across the country.” According to the minister, “the new policy will help bring down the cost of natural gas, make it affordable in every part of the country and facilitate development of...
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Powerless power sector
The much-touted power reforms have not taken off as netas remain in election mode. As a result, industries continue to pay high tariff and discoms continue to report losses Under the Atmanirbhar Bharat Abhiyan scheme unveiled in May, Finance Minister Nirmala Sitharaman had promised a special loan of Rs 90,000 crore to fledgling power distribution companies (discoms) to enable them to clear their dues to independent power producers (IPPs) and generators in the public sector viz. National Thermal Power Corporation (NTPC) and so on, subject to their implementing certain reforms. The Government is now keen on hiking the loan amount to Rs 1,25,000 crore and relaxing reform conditions. This is not the first time that discoms are in dire financial...
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A ‘bad bank’ is a bad idea
With the Govt having recapitalised PSBs with Rs 2,65,000 crore in the last three financial years alone, it makes no sense to pump in more of the taxpayers’ money into NPAs Even as the efforts made by the Narendra Modi Government — including an asset quality review (AQR) by the Reserve Bank of India (RBI), enactment of the Insolvency and Bankruptcy Code (IBC), amendment of the Banking Regulation Act (BRA) and massive capital infusion in public sector banks (PSBs) — were beginning to yield results in terms of reduction in non-performing assets (NPAs), the crisis triggered by Covid-19 has turned the clock back. According to a report by India Ratings and Research (Ind-Ra), the impact of the pandemic and the associated policy...
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