According to report in a leading economic daily [citing an official involved in policy making], “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 – fixed on per hectare – will not be universal for farmers across the country and will be based on soil health and size of the landholding. Tenant farmers would also be eligible to get the subsidy on production of valid tenancy documents. To assess the implications, let us first take a look at the existing dispensation of subsidy on urea and non-urea or phosphate [P] and potash [K] fertilizers and how the two differ. How will...
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Where has demand disappeared?
The growth in gross domestic product [GDP] during the first and second quarter of current financial year was 5% and 4.5% respectively. Given the trend during the remaining two quarters, the year is expected to end with growth of no more than 5%. This is a significant drop from an average of about 7.5% recorded over a 5 year period 2014-15 to 2018-19. The drop during the current year is being blamed on ‘lack of demand’ with some commentators even arguing that demonetization and hasty implementation of the Goods and Services Tax [GST] led to demand destruction triggered by large-scale unemployment and erosion of income and purchasing power. While, there can be no disagreement on ‘lack of demand’ argument, to say...
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Discoms – a 4th bail-out package in the offing
Even as there is incessant talk from top echelons in 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 and which must run smoothly at the desired pace has got stuck. 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 undertakings [PSUs] viz. National Thermal Power Corporation [NTPC], Damodar Valley Corporation [DVC] etc besides their own...
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Poll promises mock at fiscal discipline
Delivering a lecture at the Foundation for Democratic Reforms, Bharat Institute of Public Policy and Hyderabad University on January 9, 2020,Vice President and Rajya Sabha Chairman Venkaiah Naidu stressed the need for a law to check “reckless and unsustainable populist” promises of political parties – on the lines of the Fiscal Responsibility and Budget Management Act [FRBM]. The FRBM Act was passed by the Parliament in 2003 for institutionalizing financial discipline and reducing the fiscal deficit [FD] to a manageable limit to improve the overall financial health. Under the Act – as amended vide the Finance Bill [2018-19], union government has set for itself fiscal deficit [FD] target of 3% of gross domestic product [GDP] for 2020-21 and debt limit...
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Impending fiscal catastrophe – act before it is too late
Having achieved the fiscal deficit target for three years in a row viz. 2014-15/2015-16/2016-17, Modi – government missed it in the following two years 2017-18 and 2018-19. During 2017-18, the actual FD expressed as percentage of gross domestic product [GDP] was 3.5% against the target of 3.2%. For 2018-19, the then finance minister, Arun Jaitely Jaitely had set a target of 3.3% as against 3% sought by a committee under Mr NK Singh, former expenditure secretary and currently, Chairman, 15th Finance Commission. The committee was set up in 2016 to review Fiscal Responsibility and Budget Management [FRBM] Act [2003] with a mandate to revamp the Act and recommend a glide path for the next six years. It recommended fiscal deficit [FD]...
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GST – unabsorbed input tax credit dilemma
In the backdrop of tax collection under Goods and Services Tax [GST] not coming up to the expected level and 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 5 years i.e. till 2021-22 to be calculated as the difference between actual collection and the revenue they would have got with growth @14% over 2015-16 level], the GST Council has undertaken a comprehensive review of existing rate structure and the implementation mechanism. Meanwhile, a contentious issue that mandarins in the Council will need to urgently look at relates to the treatment of the accumulated input tax credit which does not get...
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Boosting tax revenue, tapping new avenues
Modi – government deserves accolades for making relentless efforts to increase tax revenue – even in the face of slowdown in economic growth [during the first two quarters of the current year, nominal growth in GDP was 8% and 6.1% respectively] – and ensure that it comes close to the target set for the year. The monthly collections under GST [Goods and Services Tax] which had slipped below Rs 100,000 crore mark for three consecutive months viz. August/September/October recovered to over Rs 103,000 crore in November and December each. This is mainly due to reining in evasion, increasing compliance and making businesses pay up [entities filing return increased from 7 million in April, 2019 to 8.1 million in December, 2019]....
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Loot in farmers’ name continues unabated
A high level committee on ‘road-map for agriculture and rural sector in the next five years’ has recommended corrective steps to reduce agricultural subsidies and use the money thus saved [it has estimated the savings to be Rs 10,000 – 15,000 crore annually] for investment in rural areas for creating livelihood opportunities by empowering Farmers- Producer Organizations [FPOs], Joint Liability Groups [JLGs] and making small and marginal farmers diversified producers. It has also suggested providing FPOs and other forms of collectives a proper eco-system to grow and diversify operations. The government spends close Rs 450,000 crore on agricultural and food subsidy every year. This includes food: Rs 175,000 crore; fertilizers: Rs 100,000 crore; PM-KISAN: Rs 90,000 crore; power [centre plus...
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IBC framework – springboard to 5 trillion dollar economy
In the midst of raging controversy over the Citizenship Amendment Act [CAA] [2019] and fear over the impending National Register of Citizens [NRC] capturing headlines in the media, a positive news for the economy went unnoticed. This relates to improvement in the health of the banking system. According to the annual report on ‘trends and progress of banking in 2018-19’ released by the Reserve Bank of India [RBI], the gross non-performing assets [GNPA] – a euphemism for loans turning dud – expressed as percentage of total loans declined from a high of 11.2% during the financial year [FY] 2017-18 to 9.1% during FY 2018-19. During the current year, this has remained stable at 9.1 per cent as of September-end, 2019. Correspondingly,...
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Data protection bill – balances privacy with growth
During the first two decades of this century, there has been a revolutionary change in the way 1.3 billion people of India conduct themselves be it communications and interaction with each other; executing sale and purchase transactions and carry out business and trading activity. The governments – both in the centre and states – too have brought about structural change in the manner they provide essential services viz. electricity, water, education, health etc and run schemes for the welfare of poor and disadvantaged including disbursement of a variety of subsidies. The driving force behind these changes is ‘digital mode’ of collecting, storing, processing and dissemination of information which has been made possible by adoption and proliferation of digital-computers and digital...
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