Privatisation and controls can’t go hand-in-hand. The Centre’s instinct to retain its hold on PSUs indirectly should give way to wholesome transfer of ownership and authority to private investors In the Budget presented on July 5, Union Finance Minister Nirmala Sitharaman announced disinvestment of the Government’s shareholding in public sector undertakings (PSUs) to a level below 51 per cent on a “case-by-case” basis. The Cabinet Committee on Economic Affairs (CCEA) is expected to approve this policy soon. The 51 per cent threshold is very crucial as shareholding at this level or above enables the Government to have majority ownership and control over the undertaking. If the holding is reduced to below 51 per cent, this will lead to relinquishment of majority ownership...
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Category: Foreign investment & other inflows
E-commerce norms – violations continue unabated
The global e-commerce majors have been in the news, yet again, for violating norms for foreign direct investment [FDI]. The Confederation of All India Traders [CAIT] has complained to the government that Amazon, Flipkart are giving huge discounts, selling exclusive brands [including their own] and controlling inventory of sellers etc – all of which is prohibited under FDI policy. Under the guidelines on FDI in e-commerce [issued in 2016-17, Press Note 3], 100% FDI is permitted in the ‘market-place’. The market-place is a platform where sellers and buyers meet to conduct sale and purchase transactions even as the owner of market-place [read: e-commerce company] merely acts as a facilitator. It can provide services such as book orders, raise invoice, arrange...
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PSUs – privatization and controls can’t go hand-in-hand
In her budget presented on July 5, 2019, the finance minister, Nirmala Sitharaman announced disinvestment of governments’ shareholding in public sector undertakings [PSUs] to a level below 51% on a ‘case-by-case’ basis. The cabinet committee on economic affairs [CCEA] is expected to approve this policy any time soon. The 51% threshold is very crucial as shareholding at this level or above enables the government to have majority ownership and control over the undertaking. If, the holding is reduced to below 51%, this will lead to relinquishment of majority ownership and control, or privatization in plain words. This will be transformative – a bold reform indeed. But, hold your breath, there is a caveat appended to it. In the budget speech, Sitharaman...
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Booster for corporate India
Much will depend on how the surplus in the hands of companies resulting from tax cuts is apportioned among them and equally importantly, how it is spent In a flurry of announcements made on September 20, 2019 (also described in media circles as a third Union Budget in less than three months), Finance Minister Nirmala Sitharaman handed out a bonanza to the Indian corporate sector. The most pleasing announcement pertains to the steep reduction in the rate of corporate tax for new entities incorporated from October 1, 2019 in the manufacturing sector, that start production before March 31, 2023 from the existing 25 per cent to 15 per cent. After subsuming surcharge and cess, the effective incidence of tax will be lowered...
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Bring transparency to the table
Extra-budgetary resources translate to about 2.3 per cent of the GDP. Had they been included, the FD for 2018-19 would have been 5.7 instead of 3.4 per cent All through its tenure beginning 2014, the Modi Government demonstrated a high degree of sensitivity to millions of poor and downtrodden and spent prodigious sums on providing basic amenities such as affordable housing, electricity, sanitation, toilets, fuel and liquefied petroleum gas (LPG), health care, education etc to improve their lot. In the last five years, it built 1.5 crore affordable housing units and nine crore toilets, gave 2.6 crore and seven crore electricity and gas connections respectively and assured free medical treatment up to Rs 500,000 that covered 10 crore families (or 50 crore...
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A tightrope walk
Instead of mobilising funds through overseas sovereign bonds, the Government must focus on making its balance sheet more robust and improve the quality of fiscal discipline In the Union Budget presented on July 5, Finance Minister Nirmala Sitharaman proposed an “overseas sovereign borrowing plan” to partly fund an ambitious investment programme that will involve a mammoth spending of Rs 100,00,000 crore ($ 1.4 trillion) for the building of infrastructure to make India a $ 5 trillion economy by 2024-25. During the current year, the Government intends to raise $ 10 billion from this source. The contours of the plan are expected to be finalised by October. In sync with the character of the many infrastructure projects such as roads, highways/expressways, railways, ports,...
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Change the narrative
Asking the super-rich to pay a little extra is a modest step in reducing inequalities. Instead, the Government must work towards bringing such citizens under a tax net In the Union Budget 2019-20 presented by Finance Minister Nirmala Sitharaman on July 5, the Government levied a new surcharge on individuals, Association of Persons (AOP) and trusts with an annual income between Rs 2 crore and Rs 5 crore from the existing 15 per cent to 25 per cent and on individuals/AOS/trusts with income an income more that Rs 5 crore from the existing 15 per cent to 37 per cent. Post the hike, the effective incidence of tax will be 39 per cent on earners between Rs 2 crore and Rs 5...
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Overseas sovereign borrowing – a double-edged sword
In the Union Budget presented on July 5, 2019, the government has come up with ‘overseas sovereign borrowing plan’ to meet the funding requirements of an ambitious investment program that involves a spend of Rs 100,00,000 crore [US$ 1.4 trillion] over the next 5 years to make India US$ 5 trillion economy by the year 2024-25. During the current year, it is aiming to raise US$ 10 billion from this source. For now, its intent is to go for US$ 3 – 4 billion the contours for which are expected to be finalized by September, 2019. Currently, there is surplus liquidity and benign interest rate environment in the international market [courtesy, the Federal Reserve of the USA keeping interest rate...
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Taxing the super-rich – is it justified?
In the Union Budget for 2019-20 presented by the finance minister, Nirmala Sitharaman on July 5, 2019, the government announced increase in the surcharge on individuals [or association of persons (AOP) or trusts)] with annual income in the Rs 2 crore to 5 crore range from existing 15% to 25% and on individuals with income > Rs 5 crore from existing 15% to 37%. This will result in an effective tax incidence of 39% on earners in Rs 2 crore to 5 crore range and 42.7% on those earning > Rs 5 crore. There is much hue and cry more so because this will affect foreign portfolio investors [FPIs] who are registered in India as AOP or trusts. The plunge...
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FDI in e-commerce – the logjam
In a meeting with stakeholders in the e-commerce segment – including multinational companies [MNCs] such as Amazon, Flipkart etc – the minister for commerce and industry, Piyush Goyal categorically ruled out any change in the extant policy on foreign direct investment [FDI] in ‘market-place’ model of e-commerce. This has led to huge disappointment among foreign majors who were hurt by the amendments/clarifications to the 2016-17 policy [Press Note (PN) 3] made vide circular dated December 26, 2018 and were looking for necessary correction to remove the anomalies – as they perceived. The U. S. – India Business Council [USIBC] – a US-based lobby group – even termed the amendments as ‘retrospective’ which created uncertainty of the policy environment. What was...
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