Recently, Delhi Chief Minister Arvind Kejriwal vehemently opposed the hike in fares for travel by Metro Rail and offered to share the financial burden equally with the Union government to ensure that commuters are not affected. About three years ago, he had decided to give heavily subsidised power to households consuming up to 400 units a month. Then, too, he vowed to bear its financial burden out of the state budget. Kejriwal is not alone in giving subsidies using taxpayers’ money. During the last five decades of governance – be it at the Centre or in the states – successive political establishments have built a super-structure of subsidies, such as on fertilisers, food, kerosene, LPG, irrigation, power, credit, seeds, etc....
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RBI OBSESSION WITH INFLATION HINDERING RECOVERY
The Reserve Bank of India has yet again cautioned the Government against excessive public expenditure as it could lead to fiscal consolidation and prove to be inflationary In its fourth bi-monthly monetary policy review for the current year (announced on October 4), the Reserve Bank of India (RBI) has kept the policy rate (rate at which the central bank lends money to commercial banks) unchanged at 6.0 per cent. This has come as a rude shock to industries and businesses especially the small and medium enterprises (SMEs) which were anxiously looking forward to a cut for giving a much-needed fillip to growth. The SMEs are at the core of Prime Minister Narendra Modi’s agenda for promoting growth, creating jobs and increasing income....
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NPAs: is the axe going to fall on the common man?
Under the erstwhile UPA dispensation, particularly during its second term, 2009-2014, public sector banks [PSBs] gave loans recklessly to corporate houses without assessing the viability of projects and conducting due diligence. Tens of thousands of crores were pumped into power, steel, telecommunications, textiles and infrastructure. In many cases, the ability of the projects or businesses to generate cash to service the loans was in doubt from day one. There was an element of ‘inevitability’ in such loans becoming non-performing assets (NPA). Indeed, these did become NPAs but were not recognised in the balance sheet as such. In 2015, the Reserve Bank of India, under its former governor Raghuram Rajan, ordered an asset quality review (AQR) of all banks to identify...
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GST – cooperative federalism, at what cost?
BRING TRANSPARENCY TO DRUG PRICING
Problems in the pharma sector must be tackled right at the source. Pharma multinational corporations must instill confidence about the veracity of their cost figures — whether low or high According to a recent study published in the Journal of the American Medical Association (JAMA), it costs a company just $648 million on an average in research and development to bring a cancer drug to the market — a small fraction of the $2.7 billion, the pharmaceutical industry claims, is the average cost of drug discovery. The report further shows that within about four years of approval (no drug is allowed to be marketed without taking prior registration from national regulator under relevant jurisdiction), revenue from sale of the drugs studied was, on an average, nine-fold...
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SILENCING CRITICS OF DEMONETISATION
Perhaps critics of the Modi Government are taking a very myopic view of demonetisation. The fact remains that note ban was an extraordinary step that was never attempted before anywhere in the world and has had far reaching socio-economic ramifications The suspense is finally over with the Reserve Bank of India’s (RBI) annual report giving exact details on total value of high-denomination currency circulating in the system. It has given a clear picture about the notes that came back to the banking system and those which did not. As against Rs 1,544,000 crore embodied in these notes as on November 8, 2016, Rs 1,528,000 crore came back, leaving a meager Rs 16,000 crore in the hands of the public. This is just about...
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FDI in food retail: To draw in investors, do away with restrictions
Every year, farmers are forced to sell their produce, especially perishable items such as fruits and vegetables, at throwaway prices, causing loss of income and even suicides. A major bottleneck that forces them to do so is the lack of infrastructure for handling and storage of these items, which results in the loss of output worth Rs 1 lakh crore annually, a fact that Prime Minister Narendra Modi alluded to while addressing a conclave of young CEOs]. The problem has been festering for decades despite both the Union government and states recognising the dire need for setting up the infrastructure and umpteen committees making recommendations in this regard. Even domestic private companies have hardly taken any initiative despite being allowed...
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Is the merger really worth?
OVERCOMING THE REFORM CHALLENGE
If the Government is serious about making a dent on subsidy, it should dismantle controls and give subsidy directly to target beneficiaries (the poor) under direct benefit transfer. This will pave the way for many players, increase supply, offer more choices and foster competition In the Medium Term Expenditure Framework (MTEF) statement (a statutory requirement under the Fiscal Responsibility and Budget Management Act, 2003) presented by the Modi Government, expenditure on fertiliser subsidy during 2018-19 and 2019-20 was kept unchanged at Rs 70,000 crore. The provision was the same in this year’s budget. Allocation for food subsidy has been increased from Rs 145,000 crore during 2017-18 to Rs 175,000 crore during 2018-19 and further to Rs 200,000 crore in 2019-20....
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Don’t switch-on DBT for power without reforms
Recently, during an interaction with a leading economic daily, Union power secretary Ajay Kumar Bhalla gave an indication of the government’s intent to launch direct benefit transfer (DBT) to disburse power subsidy. Alluding to a clutch of pilot projects for DBT-Power to be launched soon, he exuded confidence that this will help curb wasteful electricity consumption, limit subsidies to the really needy, stem losses of state electricity boards (SEBs) and power distribution companies (PDCs) and reduce tariff for industries. The move is prompted by the claimed success of DBT for giving LPG subsidy and similar initiatives in fertilisers and food grains. Has the idea yielded the desired outcome in LPG? What is the current status in other areas? Is it...
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