While, presenting the budget for 2015-16, finance minister, Arun Jaitely had taken a conscious decision to deviate from the fiscal consolidation road-map drawn by his predecessor and reiterated by him in budget for 2014-15. Accordingly, he fixed the fiscal deficit target as 3.9% of GDP as against 3.6% as per the road-map. The rationale behind this decision was to give a big boost to public investment in infrastructure viz., roads, highways, rails, power, port, airport etc in the backdrop of sluggish investment by the private sector [groaning under heavy debt and low margins]. The idea was to resurrect growth and push it in to double digit orbit. For 2016-17, in view of industry clamoring for continued boost in public spending...
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Category: Fiscal deficit/subsidies
DEBUNK ‘FAMILY SILVER’ ARGUMENT
In a clear case of judicial overreach, the Supreme Court has stopped the Government from selling its residual shares in Hindustan Zinc Limited even though it had no problems when majority of the shares were sold years ago In recent times, the judiciary has made deep inroads into policy making that lies strictly within the executive domain. The latest manifestation is an order by the Supreme Court to the Government of India, to stop selling the latter’s residual stake in Hindustan Zinc Limited. This order came in response to a public interest litigation filed by the National Confederation of Officers Associations of Central Public Sector Undertakings in 2014, which challenged the proposed sale of the Government’s 29.5 per cent stake...
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PSUs dividend – an order ingrained in archaic mindset
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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Too little too late
PM Modi needs to shed his soft-pedalled approach displayed in the “GiveItUp” campaign and bring the LPG subsidy to a full halt. The government has announced that from January 1, those earning more than Rs 10 lakh per annum will forgo subsidy on LPG on a self-declaration basis. This appears to be a grandiose announcement but in terms of reforms, it is a typical case of “too little too late”. At present, there are a total of 163 million registered LPG customers. Of these, 147 million people are availing subsidy. The remaining 16 million is accounted for by about 10 million–bogus/ fictitious persons–who were eliminated following the government’s drive to credit subsidy directly into the bank account of customers under...
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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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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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PSU share sale – go for ‘strategic’ route
While, presenting the budget for 2015-16, finance minister, Arun Jaitely had fixed an ambitious target of Rs 69,500 crores for proceeds of divestment in public sector undertakings [PSUs] during the current fiscal. Of this, Rs 41,000 crores was to come from divestment of ‘minority’ stakes and balance Rs 28,500 crores from ‘strategic’ sale. The target was pretty ambitious considering that during 2014-15, as against a target of Rs 58,000 crores [including Rs 43,000 crores from sale of minority stake and Rs 15,000 crores strategic sale], the actual realization was only Rs 26,000 crores. Of this, Rs 22,000 crores came from sale of 10% stake in Coal India Limited [CIL] alone. During the first 7 months April-October, the government has so...
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Centrally sponsored schemes – Modi gives better deal
Modi – government’s budget for 2015-16 has been under attack from opposition parties especially Congress for alleged reduction in financial outlays for a variety of social welfare schemes and development programs. The latter also interpret this as a manifestation of former’s anti-poor policies. The allegations are with reference to centrally sponsored schemes viz., Mahatma Gandhi National Rural Employment Guarantee Act [MGNREGA], Mid Day Meal, National Rural Health Mission [NRHM], Integrated Child Development Service [ICDS] etc. These are based on selective focus on lower allocation in Union budget under certain heads or less disbursement under others. To understand this better, let us look at some facts. There are two types of schemes. (i) central sector schemes which are mainly formulated on...
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E-commerce giants using ‘surrogates’ to escape VAT
In a game that resembles kid’s play “cat and mouse chasing each other”, the e-commerce companies have so far succeeded in eluding the state sales tax/VAT [value added tax] authorities not paying thousands of crores that are legitimately due to the latter on transactions done on their portal. In a bid to nab them, the Karnataka commercial taxes department has now come up with an ingenious idea asking the e-commerce company to deduct 1% of the money payable to the merchant towards tax and remit the same to the department. The merchant/dealer in turn, can then claim credit or refund on this amount while discharging his liabilities. What is this 1%? It is certainly not the applicable VAT rate which...
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