Amidst a nationwide lockdown announced on March 24, 2020 to contain the spread of the coronavirus disease, even as an overwhelming share of the economic activity has come to a grinding halt, agriculture too has suffered a major jolt. The crisis has come at a time when Rabi crop (October 2019 – March 2020) mostly winter staple wheat, is ready for harvest. While on one hand-harvesting operation have suffered due to shortage of labour (courtesy, sudden stoppage of all modes of transport and workers getting stuck where they were), on the other, farmers are unable to move harvested crop to the market. According to an estimate, already they have suffered the loss of about Rs 15,000 crore (due to crashing...
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Articles
Don’t expect the moon
The RBI has given a boost to the economy in these testing times. But India Inc. argues that this won’t be of help in the absence of demand. This is flawed thinking On March 27, in a bid to resuscitate the economy devastated by the Coronavirus, the Reserve Bank of India (RBI) Governor, Shaktikanta Das, announced a host of measures to inject liquidity into the country’s financial system; reduce the cost of capital and ease the stress of loan repayments. These included reduction in policy rate by 75 basis points to 4.4 per cent; a three-month moratorium on payment of installments in respect of all term loans outstanding on March 31; relaxation in the norms for cash credit and working capital limits;...
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Adopt fiscal prudence
The Govt must implement much-needed reforms to rein in unproductive spends and prevent revenue leakages to create a sustainable basis for balancing its budget The economic crisis triggered by Covid–19 has forced the Government to take recourse to some extraordinary measures, which include among others 30 per cent cut in the salary of all Members of Parliament (MP) besides the President, Vice-President and the Prime Minister, suspension of the MPLAD (MP Local Area Development) fund and a steep cut in expenditure of Ministries/departments. Reportedly, barring 18 Ministries/departments connected with healthcare, medical infrastructure and other essential services, all others are facing expenditure cuts for the April-June quarter. While 33 Ministries/departments can spend only up to 20 per cent of the budget,...
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An unreliable shield
Since the subsidy given to rice farmers has exceeded 10 per cent, India has violated its WTO commitment and invoked the ‘peace clause.’ But how much immunity will this give to it? In a notification submitted to the World Trade Organisation (WTO) — the multilateral body which binds member countries to a common set of rules with regard to trade in goods and services with “fairness” and “non-discrimination” as its underlying principles — India has informed that the value of its rice production during 2018-19 marketing year was $43.67 billion and for that, it provided subsidies worth $5 billion. This works out to 11.4 per cent of the value of rice production. Under the Agreement on Agriculture (AoA) of the WTO, a...
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Corona pushes discoms to the brink
Given the nature of the crisis, all concerned states should promptly release funds from their budgets to enable discoms to clear all outstanding dues This has meant the destruction of nearly 40% of the total electricity demand. ————————————————————- Even as corona has triggered widespread devastation, a major casualty is the power sector. Following the nation-wide lockdown announced by prime minister Narendra Modi on March 24—this was an absolute must given the hyper-contagious nature of the virus and an overarching need to preempt community transmission—most industries and businesses, including the Railways (passenger segment), have downed their shutters. This has meant the destruction of nearly 40% of the total electricity demand. All consumers, be it industries, shops and establishments, households, farmers, etc, fulfil their...
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Serve up a fresh NFSA
The 80 crore people the Govt currently targets for giving subsidised foodgrain under the Food Security Act includes millions of higher-income beneficiaries who don’t deserve it The Finance Minister, Ms Nirmala Sitharaman, announced a Rs 1,70,000 crore package under the PM-Gareeb Kalyan Scheme (PMGKS) to address the plight of tens of millions of workers in the “informal” sector affected by CoviD-19, on March 26. The most crucial component of this package was giving five kg of rice/wheat per person per month for “free” to around 80 crore people through the public distribution system (PDS), plus one kg of preferred and region-specific choice of pulse per household for three months. To understand the full implications of the relief — estimated to cost...
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Coronavirus scar to haunt economy for long
In a span of less than a week, there have been three sets of official announcements enumerating the measures to alleviate the problems faced by industries, businesses and workers due to the economic disruption caused by COVID-19. The first two were made by Finance Minister Nirmala Sitharaman on March 24 and 26 and the third by the RBI Governor Shaktikanta Das on March 27. On March, the FM announced reliefs for industries and businesses which are largely ‘procedural’. These include extending the date for filing returns [income-tax, GST, customs, excise and statutory filings under Companies Act], reducing interest chargeable on delayed payments, exemption from penalty, increasing threshold of filing under the Insolvency and Bankruptcy Code [IBC] etc. The firms have...
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A mixed bag
While some of the relief measures announced by the FM are just financial jugglery, the remaining items offer some concrete benefits to the poor In his address to the nation on March 19, Prime Minister Narendra Modi announced the setting up of an Economic Response Task Force (ERTF) under the Union Finance Minister (FM), Nirmala Sitharaman to come up with a package of measures to alleviate the problems faced by industries, sectors, businesses and workers due to the economic disruption caused by Covid-19. The most seriously affected sectors, such as aviation, transport, hospitality, tourism, retail, micro, small and medium enterprises (MSMEs), are looking for a host of concessions such as additional interest subvention (for instance, MSMEs are demanding three-five per...
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Stop using fuel taxes as milch cow
High excise duty and VAT on fuel results in high inflation, higher subsidy payments on fertilisers, food, etc, and low international competitiveness of Indian goods. Centre is desperate to grab any opportunity available to garner additional revenue. Therefore, it has hiked the duty. ———————————————————————————————— In the wake of widespread destruction of demand triggered by Covid-19, failure of OPEC and non-OPEC suppliers to agree to a production cut, and the two front-line exporters from the respective groups viz. Saudi Arabia and Russia vying to capture the shrinking market, the price of crude oil has plunged to less than $30 per barrel. Leveraging this, in sync with its past practice of mopping up the oil bonanza, the Modi government has yet again...
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A system failure
The bailout given to Yes Bank, using public money, emboldens banks to continue with their game plan. The Govt and the RBI must do everything to give a body blow to this attitude Much before the crisis at the beleaguered Yes Bank reached a flashpoint [when the Reserve Bank of India (RBI) on March 5, 2020, superseded its Board, appointed ex-Chief Finance Officer (CFO) of the State Bank of India (SBI) as its administrator and imposed a moratorium for a month on critical operations such as sanction of fresh loan, renewal of existing loans, Rs 50,000 ceiling on withdrawal of money per account] some depositors had already sensed it coming. They withdrew about Rs 18,000 crore during the first six...
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