The central government has set up a committee consisting of the officials of states and power ministry to look into restructuring tariff to reduce burden on industrial units by making large domestic and commercial consumers of electricity pay more [most states categorize households consuming more than 800 units of power a month as large domestic consumers]. The committee will work on classifying consumers in two to three categories and sub-categories to bring transparency in power billing. It will also study the possibility of increasing fixed charges on connected load of domestic consumers to encourage them to surrender un-utilized load. What has triggered thinking along these lines? At the outset, it is important to know as to why industrial consumers are...
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Subsidies – forget targeting, even cash transfer not in sight
In an exclusive interview given to a leading economic daily, Dr Arvind Panagariya, deputy chairperson, NITI Aayog has exalted the virtues of targeted cash transfer [TCT] instead of universal cash transfer [UCT] opining that opting for the former would help in reaching out more of state financial assistance or subsidy to the poor. This is stating the obvious. A given amount of subsidy if distributed among a lesser number of persons say, those living below the poverty line [their number is naturally less than the population universe] will result in each person getting more than the amount he would get if that given subsidy amount were distributed amongt the entire population. Yet, its reiteration by none other than Dr Arvind...
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Stop demonizing demonetization
These days, those who are determined to see flaw in each and every action of the present government – come what may – are now blasting RBI/Modi for policy flip-flop on demonetization of 1000/500 notes. They cite issue of 60 notifications in 43 days after prime minister’s announcement on November 8, 2016. One must take note of the ‘background’ and ‘far reaching’ nature of the decision before jumping the gun. It was taken in the backdrop of mountain of corruption and black money that had taken deep roots in all institutions of governance and at almost every point of their interface with the public. It had spread like cancer in every nook and corner of the human body. Besides, affecting...
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Impending oil shock – expedite subsidy reforms
After protracted battle within the bloc [as also with countries outside], members of the Organization for Petroleum Exporting Countries [OPEC] – a conglomeration of oil exporting nations from the middle east – have agreed to reduce their combined output by about 1.2 million barrels a day. Likewise, 11 non-OPEC countries led by Russia have decided to knock off over 500,000 barrels from their supplies. The agreement is effective from January 1, 2017. The agreement has to be viewed in the backdrop of a steep decline in the international price of crude oil from the peak of US$ 117 per barrel in June 2014 to a low of US$ 27 per barrel in February, 2016. During the current calendar, even though...
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Monetary policy – Patel still under Rajan’s shadow
In the first monetary policy review under the MPC [Monetary Policy Committee] dispensation announced on October 4, 2016, the governor, Urjit Patel had reduced the policy rate [interest rate at which RBI lends money to commercial banks] by 0.25%. He had then, maintained an ‘accommodative’ policy stance thereby alluding to apex bank intent for reducing it further. However, in the second policy review announced on December 7, 2016, Patel has dashed this hope by keeping the repo rate unchanged. Concurrently, he has also revised downwards its earlier estimate of GDP for 2016-17 from 7.6% to 7.1% now factoring in the effect of demonetization of 1000/500 currency notes announced by prime minister on November 8, 2016. Put together, the two statements...
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War on black money – beware of hoarders empathizers
After decades of dilly dallying on countering the menace of black money by successive political establishments, for the first time ever, a daring government under prime minister, Modi announced on November 8, 2016 a revolutionary step of demonetizing Rs 1500,000 crores of money embodied in 1000/500 notes. Black money has been at the root of continued impoverishment of the poor, suffering of common man, high inflation, slow growth and declining credibility of India in the comity of world nations. Demonetization has the potential of annihilating the black cash and attendant problems. Further, to rein in generation of black money, the government has taken a number of steps including a concerted drive towards ‘digitization’ and promoting ‘cash-less’ mode of transactions. This...
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Forget deal, Modi has trapped all black cash
Ever since the proclamation by prime minister, Modi on 1000/500 note ban on November 8, 2016, the opposition parties have unleashed a ‘no-holds-bar’ and virulent campaign against the move – both inside and outside the parliament. There is no theme or objective behind this campaign. Even as virtually none from among the public standing in the long queues in front of the banks is complaining [indeed, majority of them have welcome the move and are prepared to live with some inconvenience], almost every parliamentarian in opposition camp wants the world to believe that they are suffering a lot. Sadly, a section of media is lending credence to what they say. There is an urgent need to look at the dynamics...
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Can India survive Trump’s bombshell?
The republican candidate, Donald Trump has been elected by Americans on the promise of protecting their interests and doing all that is necessary to achieve this goal. All along, USA has been a strong protagonist of free flow of international trade and investment in goods and services and accordingly championed liberal policies to foster this [sans a tinge of protectionism in specific areas such as agriculture]. India has benefited hugely from such open policy stance. Now, if Trump were to act on his electoral pronouncements, this will tantamount to a drastic reversal of extant policy stance. It will herald an era of ‘protectionism’ adversely affecting developing countries like India which derive a good slice of its income by doing business...
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Black money – the ‘kachaa’ connection
Barring some short-term hiccups, the master stroke delivered by prime minister, Modi by way of declaring 1000/500 rupee notes as invalid will have a substantial positive impact on the economy. The precise quantum will of course depend effectiveness of the strategies unleashed by Team Modi [including amendment to I-T Act] to counter the maneuvers of black money holders to convert their black in to white. Modi has many more projects up his sleeves [including a frontal assault on real estate, bullion and foreign currency holdings] which he will execute from the start of next year. This should result in extermination of a lot more of black money and garnering more resources for financing development and helping poor. Having dwelt a...
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Currency scrap – bear short-term pain for long-term gain
For almost seven decades since independence, India has been grappling with the menace of black money [and corruption]. Despite political parties of all hues making lofty promises to stem it, it has only increased leaps and bounds assuming monstrous dimensions. Prime minister, Modi who was catapulted to the seat of power on the promise of rooting out this menace [besides delivering good governance and inclusive development] has taken several credible steps viz., plugging loopholes in existing laws/enacting new laws, streamlining procedures /processes and cutting bureaucratic red tape to curb its generation. These efforts continue unabated. Meanwhile, a huge stock of black money already existing in the economy [courtesy, rampant corruption and mis-governance in the past especially the period 2004-2014, better...
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