In the budget for 2016-17, finance minister, Arun Jaitely had announced 100% foreign direct investment [FDI] in food retail. However, this is subject to the condition that the retailer will sell only food procured from farmers in India and processed locally. Even as the guidelines in this regard are yet to be notified, meanwhile as per reports, the government is considering a proposal to allow 100% FDI in all goods ‘manufactured domestically’. The policy will be applicable to both offline [brick-and-mortar retailers] and online [e-commerce companies]. The idea is seriously flawed. To put things in perspective, let us capture the broad contours of existing policy dispensation in regard to FDI in retail. For this purpose, retail is classified in two...
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Competitive populism can derail growth
Last year, Congress Vice President, Rahul Gandhi took an extensive tour of Uttar Pradesh [UP] visiting tens of thousands farmers households in the run up to assembly elections in February/March 2017 [currently underway]. During the visits, he issued a certificate [call it ‘promissory note’] to every farmer promising waiver of his/her farm loan if voted to power in the state. As the election process got kicked off early this month, he reiterated the commitment in all his speeches ad infinitum. Additionally, he has promised cut in electricity tariff by 50% and increase in price offered to farmers for their agricultural produce. In this, he is joined by Akhilesh Yadav, National President, Samajwadi Party [SP] contesting election in alliance with Congress....
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Policy rate – Patel should stop worrying about inflation
In the first monetary policy review under MPC [Monetary Policy Committee] dispensation announced on October 4, 2016, the RBI governor, Dr Urjit Patel took an accommodative stance [euphemism for ease of money supply and low interest rate] and demonstrated this by reducing policy rate [interest rate at which apex bank lends to banks] by 0.25% from extant 6.5% to 6.25%. In the second review announced on December 7, 2016, Dr Patel maintained the accommodative stance but did not translate the intent in to action as the policy rate was kept unchanged at 6.25%. This was despite inflation as measured by consumer price index [CPI] continuing its downward trajectory to 4.2% in October, 2016 and 3.63% in November, 2016. Now, in...
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11th WTO ministerial – India must insist on permanent solution to food security
Roberto Azevedo who was recently in Delhi to explore and understand India’s perspective on issues for taking up in the 11th WTO [World Trade Organization] ministerial scheduled for December 11-14, 2017 stated “one has to be patient for a permanent solution and asked not to undermine the efficacy of the peace clause”. Azevedo exhortation is unmindful of the vulnerabilities of developing countries inherent in the ‘peace clause’. When, the provision itself stands on a slippery foundation, there is every reason for them to be impatient and hence, their search for permanent solution. Let us look at some basic facts. At the 9th ministerial in Bali [December, 2013], developed countries had agreed to a ‘peace clause’ under which, if a developing...
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Universal basic income – why Jaitely didn’t take it on board?
In the Economic Survey [2016-17] presented in the parliament on January 31, 2017, chief economic advisor [CEA], Dr Arvind Subramanian advocated universal basic income [UBI] instead of a plethora of subsidies given under extant dispensation. But, the idea found no mention in finance minister [FM], Arun Jaitely’s budget speech for 2017-18 presented on February 1, 2017. Meanwhile, in an interview given to a group of economic editors on February 1, 2017, Jaitely opined that “UBI is an idea whose time should come but, politics of this country is not mature yet for its implementation”. He could have taken the idea on board at least on a trial basis but avoided. So, what are the constraints and what will be the...
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GST architecture is only getting worse
Union finance minister, Arun Jaitely and chairman, GST [Goods and Services Tax] Council must be credited with spearheading requisite efforts viz. draft of all related laws viz. central–GST [CGST], state-GST [SGST], integrated-GST [IGST], legislation on compensation to states for loss of revenue, delineation/apportionment of powers for administering the tax, determination of rate structure etc in a time bound manner to ensure that this revolutionary tax reform is kicked off from April 1, 2017. The pace at which GST Council was progressing, it was almost certain that the government would meet the deadline. But, the announcement by prime minister, Modi on November 8, 2016 to demonetize the 1000/500 currency notes [a bold move to decimate the scourge of black money and...
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Was Modi’s demonetization a flop show?
When, demonetization [scrapping of 1000/500 notes] was announced by prime minister, Modi on November 8, 2016, the expectation was that about Rs 350,000 – 400,000 crores out of a total Rs 1544,000 crores [embedded in these notes] would not come to the banks. This was taken to mean tremendous success of this policy decision. Apart from meting out sternest punishment to the hoarders of black money [all of their illegal wealth accumulated over the years would be reduced to a worthless piece of paper], this would give a bonanza to Reserve Bank of India [RBI] by way of extinguishment of its liabilities to the extent of amount not returned. Being owner of RBI, the money will eventually flow to coffers...
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Shun populism to spur development
Nearly 30 months ago, prime minister, Modi was catapulted to lead India primarily on the plank of promoting ‘development’ and eliminate ‘corruption’. He has utilized every bit of this period to over-zealously pursue these objectives; those efforts and achievements are very much visible on the ground to everybody except those [opposition parties and his die-hard critics in media and intellectual fraternity] who have a vested interest in not taking note of these. Bringing development agenda on to the center-stage is something unique to Modi – dispensation since 2014. Prior to that, for decades, successive governments [barring 6 years stint of NDA (National Democratic Alliance) – government 1998-2004 then under Vajpayee] had only harped on giving doles to the poor. Even...
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Modi’s New Year gift to under-privileged/marginalized
It is a matter of deep satisfaction that after generations, India has got a prime minister who has risen from the ranks and hails from among majority of the poor. The other redeeming thing is that he leads a party that has absolute majority in Lok Sabha [lower house of parliament]. This makes a deadly combination. It ensures that every policy decision coming from Modi is guided by the overriding concerns of the poor and the common man and seeks to benefit him. At the same time, absolute majority of BJP ensured that several people-friendly bills [for instance, bill giving statutory backing to Aadhaar card] had a smooth passage Demonetization [announced on November 8, 2016] was meant to help poor...
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Demonetization – myths versus reality
In the aftermath of demonetization announced by prime minister, Modi on November 8, 2016, the air resonates with a tsunami of charges/allegations regarding its alleged ill-effects. It is time to assess the credibility of these charges. The government has plundered resources of poor The resources with the poor include (i) money held by him/her in cash [notes of various denominations] or (ii) savings in bank/post office if he/she has an account. As regards (i), he got 50 days time to exchange cash held in 1000/500 denominations for new notes at banks and another 3 months at RBI. As for (ii), this money is owned by him/her and shall remain so; all that the government did was to put restriction on...
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