During 2018-19, the government had faced a shortfall of about Rs 95,000 crore in tax revenue [Rs 60,000 crore in GST and Rs 35,000 crore in direct tax] vis-à-vis the revised estimate which itself was Rs 100,000 crore lower than the target fixed while presenting the budget on February 1, 2018. This forced it to compromise on development expenditure, postpone payments such as subsidies to the next year even as it didn’t want to miss the fiscal target. During the current year also, tax collections are not showing the required buoyancy [in June, 2019, the monthly GST collection was even less than Rs 100,000 crore as against over Rs 110,000 crore needed to reach the yearly target]. The government is...
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Category: Fiscal deficit/subsidies
Subsidies – the roll-over syndrome
Modi – government has improved substantially over previous dispensations in terms of increasing administrative efficiency, transparency, accountability, reducing bureaucratic red-tape, expediting approvals, enhanced/effective delivery of public services and reaching out subsidies to the needy and poor without leakage. It has also brought about reforms in many areas such as foreign direct investment, infrastructure, defense etc. However, one area where even Modi has not acted differently is the unsustainable high subsidies on fertilizers, fuel and food and roll-over of a big slice of these subsidies year-after-year. During 2019-20, the pay-out on fertilizer subsidy is estimated to be Rs 80,000 crore plus Rs 32,000 crore as roll-over from the previous year taking the total to Rs 112,000 crore. In the interim budget...
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Imperatives for a new India
Now that the BJP Government has received mandate for another term, will it will play hard ball and bring the much-needed reforms in crucial sectors? During his first term (2014-19), Prime Minister Modi focussed on governance reforms, cutting bureaucratic red tape, simplifying procedures, expediting approvals and ease of doing business. The Government also spent its energy on effective implementation of welfare schemes, thus ensuring that assistance reaches the beneficiaries in full vide the Direct Benefit transfer (DBT). Now that the public has given him a resounding mandate to rule for another term, he should crack the whip on long-pending reforms. The key sectors crying for immediate attention include food and fertilisers, oil, gas, power, irrigation, credit to name a few. At present,...
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Economic reforms – will Modi play the hard ball now?
During his first term [2014-19], Modi had focused on governance reforms, cutting bureaucratic red tape, simplifying procedures, expediting approvals and improving the ease of doing business. The government also spent its energy on effective implementation of welfare schemes ensuring that the assistance reaches the beneficiaries in full vide the direct benefit transfer [DBT] to their bank accounts using the JAM [Jan Dhan – Aadhaar – Mobile] platform. Now, that the public has given him a resounding mandate to rule for another term in the just concluded general elections, he should use the opportunity to crack the whip on long pending reforms. The key sectors crying for immediate attention including food, fertilizers, oil, gas, power, irrigation, credit etc. At present, all...
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Bridging fiscal deficit – real or fudged!
In the Union Budget for 2018-19, the finance minister had made an allocation of Rs 170,000 crore towards food subsidy – the amount needed to make subsidized food available to 2/3rd of the population @Rs 1/2/3 per kg for coarse cereals, wheat and rice respectively under the National Food Security Act [NFSA]. The amount is given by way of reimbursement to the Food Corporation of India [FCI] and other state agencies for the excess of the cost of procurement, handling and distribution over the sale price to the beneficiaries under the NFSA. Out of Rs 170,000 crore, Rs 140,000 crore was meant to be given to the FCI whereas, the balance Rs 30,000 crore allocated for other agencies. Of the...
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Where are the funds?
The Congress has assured regular income for the poor but how will it identify the beneficiaries? And won’t the NYAY scheme burden the economy? During its over five decades of rule, the Congress institutionalised the culture of doles in the name of its much trumpeted garibi hatao (poverty alleviation) programme even as majority of the people continued to remain poor. Even Prime Minister Modi continued with doles but changed the narrative with a pledge to empower the poor, create jobs and increase their income to ensure that these benefits reached the beneficiaries in full. Besides, under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme, his Government is giving Rs 6,000 per year to 120 million small and marginal farmers. With general elections...
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Congress’ NYAY scheme – recipe for fiscal disaster
Prior to Modi taking charge in 2014, the grand old party viz. Congress which ruled the country for over five decades, had institutionalized the culture of giving subsidies/doles, loan waivers, free power, job guarantee [in rural areas] and so on. It had also achieved the dubious distinction of institutionalizing corruption and leakages from the budget earmarked for welfare schemes. With a major slice of funds pilfered on the way and not reaching the intended beneficiaries, majority of the poor remained in a state of poverty and deprivation. This also left little money for undertaking development projects by the state. So, the economy was caught in a vicious trap of doles-corruption-slow growth with no space whatsoever for increasing job opportunities and...
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‘Dole-deal’ versus ‘fair deal’
Addressing the India Today Conclave on March 3, 2019, prime minister, N Modi lambasted the erstwhile UPA – dispensation as a regime that believed in ‘doles’ and ‘deals’ whereas his government believes in ‘empowerment’ and ‘fair deal’. Elaborating on the charge, he opined that under Congress – led/supported governments in the past, even as little was done to empower the poor and augment their incomes, there was proliferation of doles – an acronym for subsidy or any other form of state support – financial or non-financial. A major slice of these doles never reached the intended beneficiaries [as the then, prime minister, Rajiv Gandhi opined ‘of the Rupee 1 that leaves Delhi, 85 paise disappears on the way’]. Moreover, the...
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CESS – misuse must stop
In its report on the financial audit of accounts for 2017-18, the Comptroller and Auditor General of India [CAG] has pointed out deficiencies/irregularities in collecting cess and utilizing it for its intended purposes. A cess is a tax on a tax and usually levied for a specific purpose. The funds raised in this manner are to be kept in the Consolidated Fund of India [CFI], before being transferred to dedicated accounts. Prior to Goods and Services Tax [GST], over a dozen cess were levied. From July 1, 2017, major cess viz. Krishi Kalyan Cess [KKC], Swachh Bharat Cess [SBC], Clean Energy Cess [CEC] and Cess on Tea, Sugar and Jute etc were subsumed under GST. However, six other cess viz. Primary...
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Union Budget: The way forward
Three important highlights of the Interim Budget presented by Piyush Goyal at the beginning of this month are: (i) Under PM Kisan Samman Nidhi, the Centre will give Rs 6,000 per year to small and marginal farmers (land holding up to two hectares) to be deposited directly in their account to benefit a total of 120 million. The support is with effect from December 1, 2018, and the first installment of Rs 2,000 was transferred to beneficiaries last Sunday; (ii) Under PM Shram Yogi Mandhan, persons working in the unorganised sector and earning less than Rs 15,000 per month will get a pension of Rs 3,000 per month on attaining 60 years. For this, a worker joining at the age...
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