Faced with a massive shortfall in resource mobilization from disinvestment of shares in central public sector undertakings [PSUs] [Rs 40,000 crores] and proceeds from direct taxes [Rs 50,000 crores], Modi – government has issued a diktat to all PSUs to help it avoid slippage in fiscal deficit target of 3.9% of GDP set in the budget for the current year. It has directed them to give a minimum dividend of 30% of profit after tax [PAT] or 30% of government equity whichever is higher. PSUs having substantial free reserves and capability to make good profits on a sustained basis are required to give special dividend and issue bonus shares. As regards their capital expenditure needs, it goads them to increase...
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Modi’s economic diplomacy – yields rich dividend
The die-hard critics of Prime Minister, Modi especially his political adversaries have dismissed his incessant foreign visits as mere “pleasure trips” bringing hardly any relief to the common man though some of them reluctantly acknowledge his role in raising India’s stature in the comity of world nations. They cannot see any other benefit as they are just not willing to see. But, for someone who is not wearing colored glasses, the unprecedented economic benefits these have brought to India are pretty evident. One of the major gains of economic diplomacy unique to his style relates to re-negotiation of a long-term gas purchase deal with Qatar that was terribly dis-advantageous to India. To better understand what it means to us, let...
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FDI in retail – policy muddle confounded
The Delhi High Court (DHC) is hearing the plea of Retailers Association of India [RAI] and All India Footwear Manufacturers & Retailers Association [AIFMRA] regarding alleged violation of rules relating to foreign direct investment [FDI] in multi-brand retail by e-commerce companies. The writ petitions were filed by the two associations in May, 2014 and August, 2014 respectively. In its affidavit submitted to DHC, the department of industrial policy and promotion [DIPP] has argued that its job is to formulate policy and has nothing to do with its implementation. It added that it has already laid down a ‘transparent’ and ‘predictable’ policy which permits 100% FDI in B2B [business-to-business] transactions in e-commerce but prohibits in B2C [business-to-customer]. Furthermore, it does not...
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Price control on Bt cotton – a retrograde move
In an unprecedented move, agriculture minister Radha Mohan Singh has passed orders to control the price of cotton seed sales all over the country during the ensuing Kharif season commencing April, 2016. Considering that genetically modified [GM] Bt cotton account for 98% of total cotton seeds used in India, the decision is directed primarily at this segment. The agriculture ministry feels that the price charged by seed companies is ‘exploitative’ besides varying from state to state; hence dire need to put a cap and make it ‘uniform’. It has also ordered a probe by the regulator Competition Commission of India [CCI] in to alleged ‘monopolistic’ practices by Mahyco Monsanto Biotech [India] Private Limited [MMBL] – a 50:50 joint venture between...
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New IPR policy dashes innovator’s hope
Modi’s exhortation on international fora Interacting with America’s top CEOs [including US based multinationals in pharmaceutical and agrochemical space] in September, 2015, Prime Minister Modi assured the global innovative industry that India will do all it can to protect intellectual property. He opined “We are committed to protecting Intellectual Property Rights [IPRs]. That is essential to fostering creativity”. In October, 2015, during his meeting with German Chancellor, Angela Merkel, he reiterated that “the government will soon come out with a comprehensive IPR policy.” Germany too is home to multinationals in pharmaceutical, agro-chemicals sectors spending billions of dollars on research and development [R&D] and like US, has a fundamental interest in protection of IPRs. The commitments made by Modi on international...
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LPG subsidy cut – too little, too late
The government has announced that from January 1, 2016, all those earning more than Rs 1 million per annum will forgo subsidy on LPG [liquefied petroleum gas] on self-declaration basis. This appears to be a grandiose announcement but in terms of reforms, it is a typical case of “too little and too late”. At present, there are a total of 163 million registered LPG customers. Of these, 147 million are availing of subsidy. The difference 16 million is accounted for by about 10 million [bogus/fictitious persons] who were eliminated following government’s drive to credit subsidy directly in to the bank account of customer under PAHAL [Pratyaksha Hastaantarit Laabh] and around 6 million who voluntarily surrendered their subsidy entitlement under Prime...
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Have Indian banks plunged in risk zone?
An increasingly stressed financial system continues to haunt Modi – government. The more it endeavours to address the maladies afflicting the scheduled commercial banks [SCBs] [through a host of initiatives such as “Indradhanush” and recapitalization of public sector banks [PSBs]], the more grievous these become. A semi-annual Financial Stability Report [FSR] recently released by RBI governor, Raghram Rajan makes it official. The gross non-performing assets [NPAs] [bad loans which do not yield any return] of all SCBs increased from 4.6% of gross advances as in March, 2015 to 5.1% in September, 2015 and are projected to increase to 5.4% by September, 2016. The restructured standard advances as percentage of gross advances [these are potentially bad loans but salvaged by relaxing...
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Fuel price – have consumers been taken for a ride?
The international price of crude oil has plummeted from a high of US$ 110 per barrel in June 2014 to a low of US$ 36 per barrel [lowest in 11 years] at present. In the back drop of the decision of OPEC [it accounts for 40% of world supplies and 85% of India’s import] not to take recourse to any output cut [a normal tactics employed by it in the past to prevent price from sliding], substantial pumping of oil by Iran, high production of shale gas in US and continuing slowdown in global demand, the price will continue to slide. Goldman Sachs predicts this to touch US$ 20 per barrel. Considering India’s heavy dependence on import of crude for...
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Doha Development Agenda jinxed
In a brazen display of ‘might is right’ in the just concluded World Trade Organization’s [WTO’s] 10th ministerial meeting at Nairobi [Kenya] on December 15-19, 2015, the developed countries led by US & EU literally junked the Doha Development Agenda [DDA]. On the two issues of critical importance to developing countries viz., (i) public stock holding for food security and (ii) special safeguards mechanism [SSM] in agriculture, they were merely handed out hollow assurances. At the 9th ministerial in Bali [December, 2013], developed countries had agreed to a ‘peace clause’ under which, if a developing country gives agricultural subsidies in excess of 10% of its agricultural GDP, no member will challenge this until 2017 when WTO would look for a...
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Economic policies – NDA versus UPA
Some time back, Arun Shourie a senior minister in the then NDA [National Democratic Alliance] government under Vajpayee [1998-2004] and erstwhile member of BJP observed that the economic policies being followed by Modi – government are just a continuation of UPA [United Progressive Alliance] plus the “cow’ [a euphemistic reference to sacred animal worshiped by majority Hindu community in India]. Shourie’s view is shared by many thinkers. UPA – dispensation II [2009-2014] had pushed the country towards economic paralysis with all key indicators i.e. growth [manufacturing in particular], inflation, fiscal deficit, current account deficit [CAD], foreign exchange reserves and infrastructure etc showing dismal trend. In this backdrop and since, Modi is also following the same policies, they aver that outcomes...
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