At present, India is the fastest growing economy [registering a growth rate of around 7.5% for two consecutive years viz., 2014-15 & 2015-16 and likely to be even higher during the current year as well] at a time when majority of economies – developed and developing – are either stagnating or caught in low growth trap. That makes us feel really very proud and confident. An equally heartening fact is the increase in the number of high net-worth individuals [HNI: defined as a person having wealth of US$ 1 million] to over 200,000 during 2015 [from 180,000 in 2014]. That makes India home to ‘Fourth’ largest population of HNIs in Asia-Pacific [APAC] region. Together, these HNIs account for US$ 797...
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Category: Governance reforms
Service tax demand on OVL – wholly unwarranted
The tax department is reported to have slapped service tax demand of over Rs 6,100 crore [Rs 2,816.31 crore for April 1, 2006 to March 31, 2010 and Rs 3,286.36 crore for April 2010 to March 2015] on ONGC Videsh Ltd [OVL] – an overseas arm of central government undertaking viz., Oil and Natural Gas Corporation [ONGC]. Including interest and penalty, the liability will be much higher. This has caused much consternation at a time when OVL is already financially stressed. OVL had reported a net loss of Rs 2,093.5 crore in 2015-16 fiscal against a net profit of Rs 1,904.2 crore in 2014-15 despite increase in production of oil and gas. Such humongous demand will seriously impair return from...
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Collegium system flawed, restore NJAC
On October 16, 2015, a five-judge Constitution Bench of the Supreme Court [SC] vide a majority vote of four-to-one quashed the 99th Constitution Amendment which established the National Judicial Appointment Commission [NJAC] for appointment of judges to the apex court and High Courts. The court also resurrected the collegium system which NJAC Act had replaced on April 13, 2015. Following this, the SC advised the Union government to draft a Memorandum of Procedure [MoP] for appointment of judges. But, it has been repeatedly turning down suggestions made by latter. Those rejected include (i) government reserving the right to reject names recommended by Collegium if they are not in ‘national interest’ and (ii) recording in writing dissent, if any, expressed by...
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Policy mess getting worse
FDI IN RETAIL : While the Centre wants to welcome FDI, it does not want to displease its core constituency of traders, opposed to FDI per se. The government has set up a committee under the Niti Aayog CEO to look into all issues including the Foreign Direct Investment (FDI) norms pertaining to the fast growing e-commerce industry. Since much of e-commerce is in retail, and trade via this route is a portion of overall retail wherein also contentious issues relating to FDI are involved, it would be apt if the committee examines investment norms in a holistic framework covering both online and offline. At present, the retail sector in India is hamstrung by a policy maze which gives too...
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Advancing budget date – freedom from British legacy
The news of Modi – government seriously pursuing changing the date of presentation of Union Budget from the last day of February [a practice continued from the British era] to last day of January is music to the ears of every one who has lived with the pains and nuances of the extant dispensation. The last time India de-linked from the vestiges of colonial raj [though that was more symbolic] was also under NDA – government then led by Vajpayee. In 2000, it switched over to presenting the budget at 11 AM instead of customary 5 PM on last day of February [a follow-up to presentation of British budget earlier in the day]. Reform is in DNA of NDA Such...
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Tackling inflation – get out of monetary policy groove
The International Monetary Fund [IMF] has released a staff paper on “Monetary policy transmission in developing countries – evidence from India” which concludes that the co-relation between monetary policy changes and aggregate demand [which has a direct bearing on inflation] in developing countries like India is weak. The revelation has come at a time when the government has amended the RBI Act [June 27, 2016] to set up a Monetary Policy Committee [MPC] and is now in the process of constituting it [it will have 3 nominees from GOI and 3 from RBI including the governor who will also be its chairperson]. The union cabinet has also fixed the inflation target at 4% [+/- 2%] for a 5 years [2016-2021]....
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FDI in retail – policy mess getting worse
The government has substantially liberalized the policy environment relating to foreign direct investment [FDI] thereby bolstering the prospects of increasing foreign fund inflows. But, that is hardly true for investment in retail which is the fastest growing sector. The biggest stumbling bloc is the policy maze which gives too many confusing signals and gives scope for varied interpretations. Even worse, it gives too much of ‘discretion’ to the bureaucrats in deciding as to who would be allowed and on what terms. It tantamount to bringing the license raj through the back door. For the purpose of FDI, the retail sector has been divided in to several classes which is completely out of sync with international practice of treating retail as...
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Shun subsidies, go for income support to poor
Prime minister, N Modi was romped to the seat of power on the promise of fulfilling the aspirations of 1.25 billion people of India. Those aspirations include rooting out corruption, inclusive development, jobs for all, house for all, electricity for all homes, toilet in every home, subsidized gas for all poor households, road connectivity for all habitats, model villages, smart cities, to name a few. True to his promise, he started in all earnestness implementing policies and programs to achieve these highly ambitious goals. His deliverable so far are a matter of tremendous relief and bolster confidence of the public at large about his ability to reach the goal post. It is worth mentioning some of these here. 220 million...
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Waning exports – go for ‘sustainable’ therapy
If, there is one single area that has given jitters to Modi – government during its 2 years stint, it is exports. Beginning December 2014, exports decreased for 17th consecutive month in April, 2016. This would have taken a serious toll on India’s balance of payments [BoP] but for the oil bonanza [due to slump in crude oil] which led to steep reduction in oil imports more than offsetting its negative impact. To a considerable extent, the slide can be attributed to global economic slow down even as China’s has crash landed from double digits [until 2 years back] to around 6.5-7%; developed countries [other than USA] struggling to sustain their already low growth of well below 3%, US growth...
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Seize the moment
STRATEGIC DIVESTMENT : Unwillingness to go for strategic sale would be a tactical blunder. So far, the outcome on this front has been rather disappointing In its previous incarnation under A B Vajpayee, the BJP-led NDA dispensation (1998-2004) had vigorously pursued “strategic” disinvestment of Union government’s shares in public sector undertakings (PSUs), some of the high profile cases being Modern Food Limited (MFL), Hindustan Zinc Limited (HZL), Bharat Aluminium Company (BALCO) etc. The UPA government which took charge in 2004, abandoned this route. The present NDA regime under Modi may have resurrected the idea. Looking at the budget for current and previous year, it would appear so. For these years, Finance Minister Arun Jaitley provided for Rs 28,500 crore (2015-16)...
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