Allocation for welfare schemes have not kept pace with an increase in revenues due to which the Government had to resort to a window dressing of accounts In the interim Budget presented on February 1, the Government reported a minor slippage of 0.1 per cent in fiscal deficit for 2018-19 against the target of 3.3 per cent of the GDP. For 2019-20, the fiscal deficit is pegged at 3.4 per cent. The Finance Ministry has indulged in skullduggery to restrict the deficit to 3.4 per cent, which itself is off the three per cent mark for 2018-19, as per the fiscal consolidation road-map (albeit original). With regard to proceeds from disinvestment of shares in Public Sector Undertakings (PSUs), the Government had set...
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Category: Fiscal deficit/subsidies
Fiscal consolidation – ‘off-balance sheet’ items save the day
In the Interim Budget presented by the finance minister in-charge, Piyush Goyal on February 1, 2019, the government reported a minor slippage of 0.1% in fiscal deficit [FD] for 2018-19 against the target of 3.3% of GDP [gross domestic product]. For 2019-20 also, the FD has been pegged at 3.4%. Going by the fiscal consolidation road-map which required the centre to reach 3% mark by 2018-19, already, it is behind schedule. Even the manner of achieving the mentioned numbers raises doubts about the credibility of the efforts. In regard to proceeds from disinvestment of shares in public sector undertakings [PSUs], the government had set a target of Rs 80,000 crore for 2018-19. A look at the break-up shows heavy...
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If populism can help Modi stay on, so be it
Three important highlights of the Union Budget – 2019-20 [interim] presented by Piyush Goyal, minister for railways and coal and ‘temporary’ in-charge of finance portfolio are: (i) Under PM Kisan Samman Nidhi, the centre will give Rs 6000/- per year to small and marginal farmers [land holding up to 2 hectare] to be deposited directly in their account to benefit a total of 120 million. The support will commence from December 1, 2018 with the first instalment of Rs 2000/- covering 4 months to be given immediately; (ii) Under PM Shram Yogi Mandhan, persons working in the ‘unorganized’ sector and earning less than Rs 15,000/- per month will get pension @Rs 3000/- per month on completion of 60 years age....
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Stopping pilferage, enhancing welfare, boosting growth
Addressing NRIs and Indian-origin people at the inauguration of the 15th Pravasi Bharatiya Divas convention in his parliamentary constituency of Varanasi in Uttar Pradesh on January 22, 2019, Prime Minister Narendra Modi referred to former premier Rajiv Gandhi’s remarks on corruption in the country saying Congress that ruled for years did nothing to stop the “loot”, while his Government put an end to it and transferred about Rs 5,80,000 crore directly to the people under various schemes. Modi recalled what Rajiv Gandhi had stated “of the funds Central Government sends, only 15 per cent of that reaches the people. If one rupee is sent from Delhi, only 15 paise reaches the villages, 85 paise disappear. Even as the country’s middle...
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GST – keep it simple to maximize revenue
An overriding criterion for assessing the impact of the Goods and Services Tax [GST] introduced from July 1, 2017 is the revenue garnered under the new dispensation. The collection during the 8 months of the last financial year [March, 2018 is excluded as revenue on tax levied in that month would accrue only in the following month i.e. April] Rs 89,000 crore per month. Given unavoidable glitches during the initial phase of implementation of any new system and it takes time for it to stabilize, collections during this period may not be a good indicator. However, during 2018-19, one would have expected an unprecedented surge. This is all the more when one takes into account implementation of anti-evasion measures such...
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Fiscal deficit – an accounting rule that helps fix it
For the current fiscal 2018-19, the union government is facing a shortfall of about Rs 90,000 crore in indirect tax collection vis-à-vis the target. This includes the deficit in GST [Goods and Services Tax] collection plus basic excise duties. A further shortfall of Rs 10,500 crore is expected in revenue from excise duty on petrol and diesel [these are not under GST for now]. This adds to Rs 100,500 crore. Against this, the direct tax revenue is expected to be Rs 20,000 crore higher than the target. Another Rs 20,000 crore will accrue from anti-evasion measures. The extra collection from customs duty would be about Rs 14,000 crore. All put together, the government will be able to garner an additional...
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Trim sops, create jobs
For a decent living, a person needs a house [reasonable size], a power connection, supply of clean fuel, access to food at affordable price, medical facilities and basic education. A person who has a good source of income on a sustainable basis is well equipped to make arrangement for all these basics. But, what about those who are not so blessed? Indeed, an overwhelming proportion of our population belong to this category and they are the ones who look to the government for providing help in arranging for these. Prime Minister, N Modi has often said that unlike the previous dispensations who promised these things in bits and pieces – that too keeping an eye on elections – and failed...
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Aadhaar survives court scrutiny
Ever since, prime minister, N Modi – a crusader against corruption, nepotism and black money – took charge in 2014, those who had been in this game for decades having defrauded the country by gargantuan sums have unleashed an orchestrated plan to frustrate his attempts to cleanse the system. An important component of this plan was to kill Aadhaar card which Modi has been using to give subsidy on food, fertilizers and LPG, pay wages under Mahatma Gandhi National Rural Employment Guarantee Act [MGNREGA], release pension and scholarship, file income tax returns and a host of other areas where there is evidence of misuse and misappropriation of funds. First, a few words on how this foundation document [as Modi would...
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Empowering the poor – shun subsidies, build assets
Recently, during launch of a book, union finance minister, Arun Jaitely concurred with the author [an economist] that increase in capital formation in agriculture is a far better way of helping the farmers instead of the extant system of giving subsidies. The increase in investment – be it in soil conservation and improvement in its health, irrigation and water conservation, agricultural implements, infrastructure for storage/handling/quality testing, information technology, marketing infrastructure and use of modern technology for crop production – lays the foundation for sustainable increase in the income of farmers. This is in sharp contrast to subsidies on agricultural inputs viz. fertilizers, seeds, pesticides, power, credit, fuel etc whose positive impact is felt only as long as these are given....
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Subsidy sops must stop
The very bane of public policy has been the Government’s interference in subsidising goods and services. Subsidies must be replaced with direct cash transfers The Modi Government has revolutionised the way subsidies are disbursed to beneficiaries by leveraging technology, especially the use of direct benefit transfer (DBT) on the Jan Dhan-Aadhaar-Mobile platform. This has made a dent on pilferage, and gargantuan resources, thus saved, are being used for development and enhanced funding of welfare schemes for wider and deeper coverage. But large-scale pilferage still continues. This happens in ways that even escape the radar of our ever alert Prime Minister. At the fundamental level, it can be sourced to the very existence of controls in sectors, such as food, fertilisers,...
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