Union finance minister, Arun Jaitely during press conference held on October 24, 2017 announced a massive recapitalization of public sector banks [PSBs] to the tune of Rs 211,000 crores in two years viz. 2017-18 and 2018-19. Of this, Rs 135,000 crores will come from so called ‘recapitalization bonds’, Rs 58,000 crores via raising capital from the market and Rs 18,000 crores as budgetary support. Under the project ‘Indradhanush’ launched in 2015, Jaitely had provided for Rs 70,000 crore over a 4 year period viz. Rs 25,000 crores each during 2015-16/ 2016-17 and Rs 10,000 crores each during 2017-18/2018-19 . As per that road-map, the provision for third and fourth year being Rs 20,000 crores – already factored in budget calculations...
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Simplicity goes for a toss in Modi’s GST
An overarching rationale behind the Goods and Services Tax [GST] – introduced on July 1, 2017 – was two-fold. (i) give boost to tax revenue and (ii) relief to consumers by way of lower prices. The initial indications do not seem to be encouraging. First, there are about 65 million businesses in so called ‘informal’ sector. They transact mostly in cash and do not maintain records, hence were able to escape payment of tax. Even in the ‘formal’ sector, retailers doing their purchases and sales in cash were avoiding payment of sales tax/value added tax [VAT]. All of this would add up to billions of transactions remaining outside tax net. Further, since apart from excise duty [paid by manufacturer at...
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Has Modi kept his pledge on jobs?
Modi – government has come under flak for not redeeming its pledge made in the election manifesto to provide 20 million jobs every year. On the face of it, the charge may stick as the actual job creation during the last three years of its stint is a few hundred thousand. But, on a closure look, it turns out that during the last 7 decades since independence, if there is any political dispensation that has worked sincerely and with full dedication for solving problems facing the people including unemployment, it is the present government. All those watching the actions of Team Modi ‘objectively’ and ‘dispassionately’ will not reach any other conclusion. On jobs, which depend on expansion of economic activity...
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Corporate governance – challenges and way-forward
In June 2017, the Securities and Exchange Board of India [SEBI] had set up a committee under the chairmanship of Uday Kotak, Kotak Mahindra Bank to advise it on issues relating to corporate governance in Indian companies. In its report submitted on October 5, 2017, the committee has recommended (i) more active ‘role’ and greater ‘autonomy’ for independent directors; (ii) at least half of the board of a listed entity be constituted of independent directors and increase in their number in the board to a minimum of six in every listed entity, with at least one woman independent director; (iii) promote ‘transparency’ in their functioning via listing ‘competencies’ of every independent director and disclosure of the detailed ‘reasons’ for their resignation; (iv)...
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KYC norms – soft on jewelers, harsh on economy
The 22nd meeting of the GST [Goods and Services Tax] Council on October 6, 2017 was held in the backdrop of decline in the GDP [gross domestic product] during the first quarter of current fiscal to 5.7%, several glitches in the implementation of GST and subdued business sentiment across various industries especially the small and medium enterprises [SMEs] and exporters. Even as the Council has sought to address the concerns of SMEs and exporters by substantially easing the compliance burden on the former and lessening the liquidity problems facing the latter under the GST dispensation, it has dropped a bombshell by doing a volte face on a path breaking decision it had taken only two months back in regard to...
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Demonetization – could banks have failed Modi?
Dwelling on the success of demonetization [announced on November 8, 2016], Prime Minister Modi informed the nation from the ramparts of historic Red Fort on August 15, 2017 that the government had cancelled the registration of over 200,000 shell companies [nick name for entities which are engaged in laundering black money]. He reiterated this on October 5, 2017 in his speech at the annual function of the Institute of Company Secretaries of India [ICSI] alluding to the axe falling on another about 100,000 such companies. The government has followed it up by freezing all their bank accounts [use of the accounts is permitted only for discharge of their liabilities] and initiating action against their directors by disqualifying them from being...
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RBI obsession with inflation – refuses to go!
In its 4th bi-monthly monetary policy review for current year [announced on October 4, 2017], the Reserve Bank of India [RBI] has kept the policy rate [rate at which apex bank lends money to commercial banks] unchanged at 6.0%. 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 much needed fillip to growth. The SMEs are at the core of Prime Minister, Modi’s agenda for promoting growth, creating jobs and increasing income. Under MUDRA [Micro Units Development Refinance Agency] Yojna, the banks have so far disbursed loans worth Rs 320,000 crores to about 75 million persons. Lower interest rate could have...
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Excise duty bonanza – government may keep it for now
Modi – government has shown enormous fiscal rectitude by meticulously managing both its receipts and expenditure thereby sticking to the fiscal consolidation road-map during its tenure. Its efforts are all the more praiseworthy when one recognizes that it has achieved these results without compromising on much needed boost to capital expenditure and funding social welfare schemes. However, hidden behind this is the oil bonanza made available since mid – 2014 [a wonderful coincidence as Modi took charge around this time i.e. on May 26, 2014] which it has leveraged to its full advantage. India imports about 80% of its oil requirements and therefore, the international price of crude hugely impacts the pricing and resource mobilization from oil products. The price...
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India’s growth story is intact, under Modi
The deceleration in economic growth from an already low of 6.1% during the last quarter of financial year 2016-17 to 5.7% during the first quarter of current year 2017-18 has prompted critics [this time, including Yashwant Sinha, former union finance minister in erstwhile NDA government under Vajpayee] to say Modi’s economic policies are responsible for what they allege ‘as loss of 2% in the GDP [gross domestic product] growth. The growth during January-March 2017 at 6.1% was 1.8% lower than during January-March 2016 at 7.9%. Likewise, the growth during April-June, 2017 at 5.7% was 1.4% lower than during April-June 2016 at 7.1%. Thus, even on quarterly basis, the decline is lower than 2% mentioned by critics. Even so, to formulate...
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Telecomm – incumbent operators assaulted yet again
Ever since Reliance Jio entered the fray about an year ago, telecommunication industry has plunged into a state of turbulence that shows no sign of receding. The turmoil has been aggravated by a recent decision of the Telecom Regulatory Authority of India [TRAI] to reduce interconnect usage charges [IUC] – termination charge paid to the network operator on whose network calls terminate by the network from which the call originates – from the current 14 paise per minute to 6 paise per minute. From January 2020, the IUC will be zero. Even as the decision is in sync with the demand of Reliance Jio [RJ] for bill and keep [BAK] model – a jargon for zero IUC – this has...
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