The Modi Government should be applauded for bringing in key changes, but action is missing in vital areas such as fertilisers, food, power and kerosene. There is a need for reforms in these sectors which are loaded with subsidies Prime Minister Narendra Modi should be applauded for bringing in governance reforms, liberalising foreign direct investment and increasing ease of doing business, but action is missing in vital areas such as fertilisers, food, power and kerosene. These areas are in dire need of big bang reforms. Inefficiency, cost padding/gold plating, pilferage/leakages and corruption are rampant in these sectors, leading to the ballooning of subsidies and associated difficulties, in adhering to fiscal discipline. An expenditure management commission, headed by former Reserve Bank...
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Category: Fiscal deficit/subsidies
Supreme Court renders ‘Aadhaar’ dysfunctional
Believe it or not but it is true. From October 7, 2015 onwards if a person wants to open an account in a bank using Aadhaar card, he cannot do so. If, he wants to buy an insurance policy using this card as proof of identity, he can’t. If, he wants to draw pension on its strength, he can’t. A recent order of the apex court has brought all these and a host of other very basic activities to a grinding halt. Let us look at the facts. Aadhaar card is a bio-metric identification card issued by Unique Identification Authority of India [UIDAI]. So far, over 900 millions cards have been issued which is many times more than any other...
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Continue rate cut
ECONOMIC GROWTH : Having made a good head start (though belated), the RBI must not stop as there is potential for another 50-75 basis points reduction Prior to the fourth bi-monthly monetary policy review on September 29, 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 – 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...
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Rajan ‘finally’ joins growth band wagon
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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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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Unshackle PSBs via shedding majority control
For generations, public sector banks [PSBs] have been used by the political establishment with impunity to appease their constituencies viz., waiving farm loans especially at the time of elections; salvaging state electricity boards [SEBs] who are made to supply power at throw away tariffs or even free in some states; granting loans to favoured industrial houses without carrying out due diligence and allowing wilful default by certain borrowers [involving quid pro quo] which are clear acts of corruption. All such exogenous imposed actions in total disregard of financial prudence have led to proliferating non-performing assets [NPAs] – a sophisticated nomenclature for bad loans or in simple terms, money lent which cannot be recovered. Together with restructured assets [these are also...
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Indian economy – poised for robust growth in 2015-16
During the first year of its tenure, Modi – government focused on filling the pot holes in a dilapidated economy left over by a decade of mis-governance and policy paralysis under erstwhile UPA – regime. More importantly, it laid the foundation for putting India on an accelerated growth trajectory. For details, pl read:- Modi delivers ‘scam-free’ India Continuing its relentless drive to take things forward in every area [not letting even minute things go off the hook and ensuring full synergy with macro thrust on ‘development’ and ‘good governance’], Team Modi has kept up the momentum during the current fiscal. One clearly sees some green shoots particularly in critical areas like core industries, public investment and fiscal deficit [all 3...
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Repo rate cut – transmission can’t be automatic
Last year 2014, RBI governor Raghuram Rajan had conducted 6 monetary policy reviews and each time refrained from any reduction in the repo rate [commonly termed as the policy rate] – interest rate at which the apex bank lends money to commercial banks. Each time, governor argued that the underlying fundamentals primarily retail inflation [represented by consumer price index (CPI)] were not such as would warrant reduction. Pertinently, even in December, 2014 review when CPI was at a low of 4.3% in previous month or almost half of the 8% target set by RBI for January, 2015, he did not budge. In 2015 however, Rajan has given up his stubborn stance having reduced the repo rate three times by 0.25%...
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Modi’s ‘Midas touch’ to PSU divestment
With a proactive and dynamic regime led by a ‘charismatic’ and ‘decisive’ Modiji taking charge about an year ago, divestment of government’s share in central public sector undertakings (CPSUs) has once again caught the imagination of public. When, seen purely from the perspective of garnering resources from this exercise to meet fiscal deficit target and thus, help government’s fiscal consolidation drive, 2014-15 was bit of a disappointment. Against a target of Rs 58,000 crores [Rs 43,000 crores from sale of shares and Rs 15,000 crores from divesting its ‘residual’ stake in Hindustan Zinc Limited (HZL) and BALCO], it could get only Rs 26,000 crores [bulk of it Rs 22,000 crores from 10% in divestment in Coal India Limited (CIL) alone]....
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Sugar industry – barking up the wrong tree
In a bid to tackle the problem of mounting dues to sugarcane farmers – estimated to be Rs 21,000 crores as on date – the Cabinet Committee on Economic Affairs (CCEA) recently approved a loan of Rs 6000 crores to sugar manufacturers the interest cost on which for one year amounting to Rs 600 crores will be met by government [the money will come from Sugar Development Fund (SDF)]. Coming on top of a loan of Rs 6600 crores earlier sanctioned by erstwhile UPA dispensation for 5 years [also to facilitate payment of dues to sugarcane farmers], the sop granted by Modi – government should have come as a further relief to the industry. Alas, the decision has irked it!...
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