During the last leg of UPA-II dispensation, there was a substantial deterioration in business environment leading to erosion of confidence in India. This not only dis-comforted foreign investors but also, prompted Indian companies to pursue their investment plans in foreign destinations. Apart from a virtual policy paralysis and various approvals and clearances – especially environment and land acquisition – getting jammed, the investment sentiment received a big blow due to retrospective amendment in tax laws initiated by then finance minister, Pranab Mukherjee in 2012. The amendment was made to negate a judgement of Supreme Court (SC) in Vodafone case which declared untenable tax demand on a transaction in 2007 involving sale of Hutchison shares to Vodafone. SC held that being...
More
No comments
Category: Fiscal deficit/subsidies
What is holding back direct fertiliser subsidy transfer?
SUMMARY Direct transfer of subsidy to farmers holds the key to countering all ills afflicting the fertiliser sector Direct transfer of subsidy to farmers holds the key to countering all ills afflicting the fertiliser sector in India. Successive governments have talked about it and yet none has ventured to implement this. What has held them back? The idea was first mooted nearly four decades ago when, in March 1976, faced with increasing prices of complex phosphate fertilisers—then, there were no controls and manufacturers were free to fix price—the government introduced a flat subsidy at the rate of R1,250 per tonne phosphate nutrient (P2O5). The initial plan was to give the money directly to farmers so that the effective price (net...
More
No comments
Rajan dashes hopes of a rate cut, yet again
For the fifth time in succession, RBI Governor, Raghuram Rajan has dashed hopes of industry and commerce for a reduction in repo rate (rate at which banks borrow from RBI) which has been maintained at 8%. Likewise, reverse repo (rate at which banks lend to RBI) is kept at 7%. Cash reserve ratio (CRR) (share of deposits that banks need to keep with RBI) is also un-changed at 4%. RBI benchmarks the repo rate – or policy rate as it is customarily called in the mint street – to inflation. If inflation is high, repo rate is kept high and vice versa. Prior to September, 2013 (when Rajan took charge), whole sale price index (WPI) was taken as reference point...
More
No comments
RBI’s ‘back foot’ play – wholly unwarranted
In 2014, there has been an unprecedented surge in investment by foreign institutional investors (FII) with a total of over US$ 20 billion having already come in during January-June. But, RBI governor Raghuram Rajan has sounded a note of caution advising government to be circumspect in spending money. Rajan’s warning is based on the premise that ‘FIIs who bring in money can also take it back’. He observed that apart from continuing wind down of QE (quantitative easing), US Federal Reserve may also increase interest rates triggering reverse flow of funds. As custodian of balance of payments (BoP), governor’s caution is understandable. However, to aver that there could be flight of capital is bit of an exaggeration! This may even...
More
No comments
Empowering poor vide PM Jan Dhan Yojna
In India, tens of thousands of farmers commit suicide every year. An overarching cause in majority of the cases is they are heavily indebted and inability to pay back to money lender forces them to the extreme step as they can’t bear consequential torture and exploitation. The agony is palpating in instances whereby even a small loan taken by farmer or a landless laborer from money lender gets transformed in to mountain of debt as interest charged by latter is exorbitant – 4-5 times higher than what the banks charge. At another level, consider a woman at home who struggles hard to keep her earnings safe even as her die-hard alcoholic husband looks for every possible opportunity to pounce. Eventually,...
More
No comments
SAYING NO TO SUBSIDIES
Weaning the people off food, fertiliser and oil subsidies is needed for fiscal consolidation, writes UTTAM GUPTA One of the planks on which Prime Minister Narendra Modi got mandate to govern was his promise to deliver on fiscal consolidation. In its maiden Budget for 2014-2015, the Government pledged to achieve this by pruning subsidies and increasing tax revenue based on lower rates. Union Minister for Finance Arun Jaitley announced the setting up of an expenditure management commission to recommend a roadmap for rationalising and phasing out major subsidies — food, fertilisers and oil. As a follow up, Mr Modi has recently approved the constitution of the EMC, under the chairmanship of Mr Bimal Jalan, former Governor of the Reserve Bank of...
More
No comments
Time to say ‘good bye’ to subsidies
One of the planks on which Modi got mandate to govern was his promise to deliver on fiscal consolidation. In its maiden budget for 2014-15, government has pledged to achieve this by pruning subsidies and higher tax revenue based on lower rates. Recently, prime minister approved constitution of an expenditure management commission (EMC) under chairmanship of Dr Bimal Jalan former governor RBI to recommend a road-map up for rationalizing and phasing out major subsidies viz., food, fertilizers and oil. The commission has been asked to submit its report within 18 months. However, it will submit an interim report in 6 months. The protracted time frame for the committee should not be taken to mean any dilution of government’s commitment on this crucial reform....
More
No comments
Food, fertilizers and fuel – need ‘overhaul’, not just re-routing of subsidy
In its maiden budget presented on July 10, 2014, NDA-government has announced setting up of an expenditure reforms commission (ERC) that will examine all subsidies viz., food, fuel, fertilizers and come up with a road map for restructuring them. Further castigating existing dispensation as one that does not target beneficiaries (read poor) and leads to ever rising ‘un-quantifiable’ subsidies, it has promised to switch over to a scheme of direct cash transfer (DCT) to poor in a focused and transparent manner. Since then, it is close to a month and ERC has not been constituted as yet. At this pace, we can’t expect its recommendations before end of current year. Therefore, any major restructuring may have to wait at least...
More
No comments
Prune subsidies vide censoring producers
Contrary to expectation, there was no big bang reform in regard to subsidies in Modi-government’s maiden budget presented on July 10, 2014. However, Arun Jaitley announced setting up of an expenditure reforms commission (ERC). While, we may have to wait for ERC recommendations until next budget in February, 2015, meanwhile Jaitley has given some ideas on direction in which government intends to move forward. Thus, he opines that extant dispensation of subsidies which he describes as ‘un-quantifiable’ and beneficiaries ‘un-identifiable’ cannot be allowed to continue. He emphasized need for replacing this by a system of direct subsidy transfer to poor. To countenance menace of subsidies, Jaitely alluded to fundamental need for consumers/users to pay for increase in cost of goods...
More
No comments
Why BJP must cross the ‘272’ milestone?
Poll surveys conducted by various agencies/new channels are unanimous in giving a clear lead to BJP in ensuing Lok Sabha elections during April/May, 2014. The chances are bolstered by a perception that there is a ‘Modi wave’ all over India. ‘Modi wave’ is a euphemism for majority of people expressing a strong feeling that a government led by Modi can fulfil their aspirations in regard to increasing employment, reducing inflation, combating corruption and ensuring rapid development. An emboldened BJP is pulling all stops to sustain the momentum till voting is completed in every parliamentary constituency by May 12, 2014. It’s objective is to cross 272 mark on its own to ensure that new government is not hamstrung by compulsions of...
More
No comments