For the current fiscal 2018-19, the union government is facing a shortfall of about Rs 90,000 crore in indirect tax collection vis-à-vis the target. This includes the deficit in GST [Goods and Services Tax] collection plus basic excise duties. A further shortfall of Rs 10,500 crore is expected in revenue from excise duty on petrol and diesel [these are not under GST for now]. This adds to Rs 100,500 crore. Against this, the direct tax revenue is expected to be Rs 20,000 crore higher than the target. Another Rs 20,000 crore will accrue from anti-evasion measures. The extra collection from customs duty would be about Rs 14,000 crore. All put together, the government will be able to garner an additional...
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RBI applying brakes when banks need push
A major contentious issue amidst stand-off between the Reserve Bank of India [RBI] and the union government [this had reached a brink prior to the meeting of RBI board on November 19, 2018 but a showdown was averted due to some flexibility shown by both the sides at the last minute] was in regard to the Prompt Corrective Action [PCA] framework for the weak public sector banks [PSBs]. In the wake of the steep increase in the NPAs [non-performing assets] of the PSBs resulting in their capital erosion, the apex bank has brought 11 PSBs – out of a total of 21 – under the PCA framework which it made stiffer than even the global standards. Thus, it uses three...
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Farm loan waivers – the road to disaster
The waiver of farm loans worth Rs 70,000 crore about a decade back by the then UPA – dispensation with an eye on the impending general elections in 2009, had a debilitating effect on the finances of the union government [the fiscal deficit during 2008-09 was in excess of 6%] While, this should have raised an alarm bell but, political parties of all hues do not seem to have learnt any lesson. Early last year, the BJP ruled government in Uttar Pradesh [UP] granted a mammoth loan waiver for small and marginal farmers costing the exchequer Rs 36,000 crores. This was followed by the by JD [Secular] led coalition in Karnataka granting an equally massive about Rs 40,000 crore waiver...
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RCEP – India can’t afford to miss
At the recently concluded ASEAN [Association of South East Asian Nations] Summit in Singapore [November 11-15, 2018], prime minister, N Modi called for early conclusion of the Regional Comprehensive Economic Partnership [RCEP] agreement to facilitate signing of the deal by early 2019. The RCEP is a conglomeration of the 10 members of ASEAN [Malaysia, Indonesia, Thailand, Vietnam, Singapore, Philippines, Myanmar, Brunei, Laos and Cambodia] plus 6 countries outside the group viz. Australia, New Zealand, Japan, South Korea, China and India. This will be a giant grouping covering a population of 3.6 billion or 50% of the world and GDP at US$ 25 trillion or nearly one-third of the global. Under Modi’s Act East policy with focus on promoting economic cooperation...
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Amazon/Flipkart flouting FDI norms – really!
During hearing on a public interest litigation [PIL] in Delhi High Court [DHC], on October 31, 2018, the Enforcement Directorate [ED] informed that it is investigating alleged violation of the Foreign Exchange Management Act [FEMA] against foreign majors such as Amazon and Flipkart. The specific charge is that these companies have violated the extant norms for foreign direct investment [FDI] guidelines as contained in Press Note [PN] 3 [2016-17]. The PN 3 allows 100% FDI in the ‘market-place’ model for e-commerce. An entity working on this model offers a platform to sellers and buyers to conduct transactions. It acts as a facilitator by offering them services such as booking order, raising invoice, arranging delivery, collecting payments, handling rejections etc. It...
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Demonetization – the poor backs Modi
On the second anniversary of demonetization [on November 8, 2016, the prime minister, Modi had declared the old 1000/500 rupee notes invalid], the opposition parties led by grand old Congress continue to demonize this far reaching policy reform alleging that it has led to precipitous decline in economic growth, caused unprecedented miseries to the poor even as the rich continue to add to their wealth and have even got away scot free converting their black money/unaccounted cash into white. There was some short-term disruptive effective [Modi himself had anticipated at the time of announcement and even requested the citizens to bear this pain for the sake of long-term gains] which was manifest in decline in GDP [gross domestic product] during...
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Rs 3.6 trillion demand – should RBI accept?
The malicious propaganda campaign launched by the grand old party [read: Congress] to discredit prime minister, Modi and tarnish his image has reached a crescendo with its President, Rahul Gandhi now alleging that the former is hell bent on plundering the Reserve Bank of India [RBI] to the tune of Rs 360,000 crore to deal with the mess created by his policies and actions. Rahul Gandhi’s indictment is two-fold. First, he holds Modi – dispensation squarely responsible for the mess. Second, he questions the logic of the center asking RBI to give a mammoth sum. On both counts, his diatribe is untenable and preposterous. As for the mess, he is essentially referring to the banks’ non-performing assets [NPAs] – a...
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Power battles – the consumer loses, yet again
In a bid to give a boost to power generation in India and make it available at ‘affordable’ and ‘stable’ rate to the consumers, in the first decade of 2000s, the then government had mooted the idea of ultra mega power projects [UMPP]. Two such plants were bagged by Tata Power Ltd [TPL] and Adani Power Ltd [APL] under tariff-based competitive bidding [TBCB] each with installed capacity of 4000 MW and 4620 MW respectively. While, TPL is based entirely on imported coal, APL uses 70% domestic and 30% imported coal. The projects were committed to supply power to state electricity boards [SEBs]/power distribution companies [PDCs] at fixed tariff all through project’s operational life. The tariff in case of TPL was...
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Ballooning food subsidy, looming debt trap
Even as the union finance minister, Arun Jaitely exudes confidence that the government will be able to stick to the fiscal deficit target for the current year, it is battling the consequences of ballooning food subsidy. In particular, it is making all possible efforts to shield the former from the negative effects of the latter. The food subsidy arises because of the overarching commitment of the government under the National Food Security Act [NFSA] to provide food to over 2/3rd of the population at heavily subsidized price of Rs 1/2/3 per kg for coarse cereals, wheat and rice. The cost of procurement, storage and distribution being much higher, the differential amount represents the subsidy. The Food Corporation of India [FCI]...
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Fertilizer tantrums, farmers’ woes
The woes of farmers refuse to go away. This time around, the steep increase in price of fertilizers – key input used in crop production – during the current year has increased their miseries. During Kharif [April-September] 2018, the price of di-ammonium phosphate [DAP] – a major source of ‘phosphate’ or ‘P’ nutrient supply – increased by 30% over Kharif [April-September] 2017. Likewise, the price of complexes and muriate of potash [MoP] – main source of ‘phosphate’ and ‘potash’ or ‘K’ nutrient – increased by 15-60% during Kharif 2018 over Kharif 2017. The escalating trend has continued during Rabi [October 2018-March 2019] season as well. The price of DAP has increased by a further 12-13% during Rabi [Oct 18-March 19]...
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