Prior to the 4th bi-monthly monetary policy review on September 29, 2015, RBI governor, Raghuram Rajan had come under unprecedented pressure to cut the policy repo rate [interest rate at which the apex bank lends money to commercial banks] to help government’s efforts in giving a fillip to the economy and putting it on a higher growth trajectory. Almost all stakeholders viz., industry and commerce, investors, experts/economists were unanimous in demanding a cut. While, refraining from taking any position [lest this be misconstrued as interference in RBI’s autonomy], the government had nonetheless given a ‘subtle’ signal that this brooks no further delay. This was evident when finance minister, Arun Jaitely recently said “common sense requires a rate cut”. That the...
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MUDRA Yojna – boost to ‘inclusive’ growth
About 16 months ago, people of India gave a massive mandate to prime minister N Modi on two major planks viz., (i) eliminating the scourge of corruption and (ii) fulfilling the aspirations of a mammoth 800 million people below 35 years. From the day one of taking charge, he has been working relentlessly to deliver on both the promises. For the first, he is cleaning up the governance systems whereas for second, he has fired all cylinders to propel “inclusive” development. The flagship “Make in India” mission started by Modi last year seeks to transform India in to a manufacturing hub of the world and increase the share of manufacturing in GDP [gross domestic product] from present around15% to 25%...
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Where are the big bang reforms?
Modi deserves accolades for unlocking stalled projects, expediting approvals, making the state policy driven, bringing-in transparency and accountability in governance and increasing ease of doing business. All of this is yielding good dividends by way of spurt in investment [including foreign], boost to growth and a drastic improvement in India’s image globally earning it the distinction of being the only ‘bright spot’ amongst emerging economies. Alas! action is missing in some of the vital areas which were long crying for big bang reforms. Normally, the first 2 years of any new government are considered to be a golden period and that is the time when, it can really risk some unpalatable steps. Unfortunately, Modi – dispensation has wasted both these...
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E-tailers and retailers – Allow 100% FDI for both
In 2012, the erstwhile UPA dispensation had permitted 51% FDI [foreign direct investment] in multi-brand retail [MBR] with riders. The riders include sourcing 30% of requirements from small enterprises, a minimum investment of US$ 100 million besides giving full leeway to states on whether to grant permission or not. The policy was as bad as saying ‘No’ to FDI in MBR. Modi – government which took charge in May, 2014 has continued with that policy decision. Finding that the direct route of entering MBR was choked, foreign investors have been looking for opportunities to make in-roads. And, they found one in e-commerce where business was growing leaps and bounds. So, how did they manage to grab this opportunity? Under the...
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Rajan should partner in unleashing growth
On the eve of next bi-monthly monetary policy review [September 29, 2015], RBI governor, Raghuram Rajan is under unprecedented pressure to cut the policy repo rate [interest rate at which the apex bank lends money to commercial banks] to help government’s efforts in giving a fillip to the economy and putting it on a higher growth trajectory. Almost all stakeholders viz., industry and commerce, investors, experts/economists are unanimous in demanding a cut. The government has thus far, restrained from taking any position and has left it to the governor to take an appropriate view [giving full respect to RBI’s autonomy]. But, in a recent statement, finance minister, Arun Jaitely made his intent very clear when he opined “common sense requires...
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Plummeting gas price – golden opportunity for urea decontrol
Until last year, ballooning subsidy on fertilizers and its inevitable effect on fiscal deficit was haunting the government. The prime cause for this was control on selling price of urea on one hand increase in prices of feedstock and fuel on the other. The latter in turn was due to increase in international price of crude oil and imported LNG [liquefied natural gas]. During the current year, the scenario has turned for the better. Thanks to a constellation of forces leading to emergence of excess global supply, the international price of crude has plummeted from a high of around US$ 105 per barrel in June 2014 to below US$ 50 per barrel currently. And, there is nothing stopping the downward movement....
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Modi must rein in power theft and freebies
On September 12, 2015, chief secretaries of states whose power distribution companies [PDCs] are making losses had a meeting with union power minister, Piyush Goyal. This was followed by a meeting of PDCs officials with prime minister on September 14. They were demanding support from central government in dealing with their accumulated losses of over Rs 300,000 crores. To be precise, they wanted these liabilities to be extinguished so that they start on a clean slate. Contrary to expectations, Team Modi has categorically rejected any bail out. This is a bold stance. Since 2002, PDCs got two bail out packages [Rs 40,000 crores in 2002 and around Rs 200,000 crores in 2013]. These were granted on the promise that they...
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Fertilizer reforms – time to walk the talk
Successive governments have blatantly glossed over reforms in the fertilizer sector for generations. Modi who was catapulted to power on the promise of pushing reforms and development had generated hope. Yet, during last 15 months in office, one only hears loud talk but no action on ground. In this regard, four major pronouncements of Modi – dispensation need close scrutiny. First, the prime minister promised that every farmer has a soil health card [SHC] so that he knows how much nutrient he will need to apply for getting good crop yield and keep soil healthy and robust. This by itself is a herculean task requiring cooperation of all state governments and authorities right up to the village level to ensure...
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Stemming rot in power sector – Kejriwal shows way
During his first shot as Chief Minister, Delhi, Arvind Kejriwal had promised 50% cut in power tariff. He did so primarily on his conviction that the power distribution companies [PDCs] had indulged in financial irregularities leading to inflated cost of procurement and distribution. These were approved by DERC [Delhi Electricity Regulatory Commission] acting under diktat of then political dispensation [a clear indication of how regulator was forced to play to his masters tune can be gauged from the fact that the then chairman who had approved 23% reduction in tariff in 2010 was removed and his successor affected hike of 22% in 2011 and a further 32% in 2012]. Kejriwal’s plan was to nail these irregularities and recover excess sums...
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MAT on FPIs – government must not override judicial process
While, presenting the budget for 2015-16, finance minister, Arun Jaitely had announced government’s decision not to levy minimum alternate tax [MAT] on capital gains made by foreign portfolio investors [FPIs] from investment in securities from April 1, 2015. In his speech, Jaitley had proposed to rationalize MAT provisions for FPIs whereby profits corresponding to their income from capital gains on transactions in securities, which are taxed at a lower rate, would not be subject to MAT. Since, the exemption was intended to be applicable only prospectively from financial year 2015-16, the Income Tax [I-T] department served show cause notices on FPIs for the ‘untaxed gains’ made for previous years. This led to flutter amongst foreign investors who felt this was...
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