During the first 2 years of its stint, Modi – government did a splendid job sticking to its fiscal consolidation road-map. It achieved fiscal deficit target for both 2014-15 and 2015-16. This was despite a substantial step up in the planned expenditure [a major chunk of this going into roads including rural roads, highways, irrigation, agriculture and railways] besides meeting social welfare commitments etc. This was the outcome of reforms in the area of FDI [foreign direct investment], ease of doing business and fast track approvals of stuck projects [leading to acceleration in GDP growth and buoyancy in tax receipts] on one hand and rationalization of subsidies on the other. The latter focused mainly on plugging leakages and efficient delivery...
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Category: Governance reforms
GST rate – “ring-fencing” could be fatal
If, there is one reform step that has been held hostage to sheer political maneuvering, it is the Goods and Services Tax [GST]. The most vociferous opponent now happens to be a party which had contemplated this idea more than a decade ago and even introduced a bill in the parliament [2009] to garner the full benefits of this ‘trans-formative’ reform [it will add 2% to GDP, according to an estimate]. Having raised a number of contentious issues, the grand old party is in no mood to relent on its most trumpeted demand for putting a cap on GST rate in the constitution amendment bill itself. Pertinently, it mooted the cap at 18% [being the revenue neutral rate [RNR] determined...
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Concurrent elections – good for economic reforms
In a recent interview given to a private channel, the prime minister, N Modi gave his full endorsement to the idea of holding elections to the Lok Sabha and all state assemblies simultaneously. However, he opined that the necessary initiative in this regard should come from the Election Commission [EC]. Meanwhile, EC has already submitted its views and a group of ministers [GOM] has been put on the job. The founding fathers of the Constitution too had contemplated simultaneous elections and things were on right track till mid-60, when the apple-cart was disturbed due to ‘premature’ dissolution of some state assemblies [1968/1969] and Lok Sabha [1970]. Over time, the mis-match has only got aggravated with dissolution of many more assemblies....
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PLUGGING FOR THE POOR IN A WELFARE STATE
The Modi Government has sought to plug the leakages in the welfare delivery mechanism. It must now sustain the momentum to achieve double-digit growth rates Three decades ago, Prime Minister Rajiv Gandhi estimated that only 15 paise out of every rupee meant for the poor actually reached them because of leakages in the delivery system. This was a tacit admission that brazen loot of public money was happening but nothing was being done to curb it. Successive political establishments happily recalled the statement but never introspected on its seriousness. In his two years in office, Prime Minister Narendra Modi not only analysed the modus operandi of how the resources meant for the poor was being misappropriated, but also galvanised the...
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Local sourcing – license raj through back-door
In the context of the raging debate over relaxing local sourcing norms for 100% foreign direct investment [FDI] in single-brand retail, finance minister, Arun Jaitely [he is the controlling authority for Foreign Investment Promotion Board (FIPB) which approves proposals for FDI] observed that India cannot be turned in to a ground for proliferation of trading activities. The strident observation came in response to intense lobbying by commerce minister, Nirmala Sitharaman for dropping of 30% local sourcing requirement for setting up of retail shop by Apple for selling its hand-sets [i-phones, i-pads etc] directly to customers. She was relying on recent amendment in policy guidelines which provided for such exemption in case of high-tech items. The exemption was justified on the...
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Fiscal deficit ‘range’ – stepping in dangerous terrain
One of the most laudable achievements of Modi – government is its sticking to the fiscal consolidation road-map. Thus, even as it stuck to fiscal deficit [FD] target of 3.9% of GDP during 2015-16, for current year also, it has set an ambitious target of 3.5%. For 2017-18, it aims at lowering it further to 3.0%. In this backdrop, it was rather intriguing for finance minister, Arun Jaitely announcing [budget speech for 2016-17], the government’s intent to review Fiscal Responsibility and Budget Management [FRBM] Act with a view to make the target flexible. He was alluding to make it range bound instead of a fixed number as has been the position hitherto under the extant Act in vogue since 2003....
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Empowering poor via stemming loot
On completion of 2 years in office, Modi – government is presently taking stock of what it has done and its achievements. Even while directing all his cabinet ministers to disseminate their work to the public at large, prime minister himself has taken the lead and is addressing a number of public rallies to highlight key thrust areas. Undoubtedly, this government has many achievements to its credit and as rightly observed during his address at India Gate on May 28, 2016, highlighting all its major programs/schemes and initiatives will consume a full week of broadcast from Doordarshan [the official channel of the Government of India]. While, every bit of Team Modi’s dedicated and relentless work is worth capturing for its...
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DTAA with Mauritius – overhauled to curb “round tripping”
Firing yet another salvo in its fight against back money stashed abroad in safe haven jurisdictions, Modi – government revised on May 10, 2016 India’s Double Taxation Avoidance Agreement [DTAA] with Mauritius that now provides for withdrawal of exemption from tax on capital gains made by investors from alienation/sale of shares of Indian companies. The investors from Mauritius have been enjoying this exemption on their equity investment in India for over 3 decades under the extant DTAA [it was signed in 1983]. Juxtaposed with the fact that they don’t pay tax on such income in that country also [courtesy, a highly liberal taxation and eco-system therein], they had a prolonged “honey moon” period almost eternally. The dispensation was so attractive...
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Grant full autonomy
REJUVENATING PSU banks Last year, a Reserve Bank of India (RBI) committee headed by P Nayak made sweeping recommendations aimed at bringing about structural reforms of public sector banks (PSBs) to enable them meet expanding requirements of an economy on accelerated growth trajectory and improve its competitiveness among the comity of world nations. The committee recommended (i) setting up of an autonomous Bank Boards Bureau (BBB) with a mandate to select the top management; (ii) setting up of a bank investment company (BIC) where all government shares in PSBs will be vested and (iii) divestment of its shareholding in all PSBs to below 50%. BBB was contemplated as an interim arrangement precursor to the BIC. The most crucial of these...
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FDI in retail – shun policy flip-flop
In Union Budget for 2016-17, finance minister, Arun Jaitley announced that “100% foreign direct investment [FDI] would be allowed through FIPB [foreign investment promotion board] route in marketing of food products produced and manufactured in India.” While, the detailed policy guidelines in this regard are yet to be notified [currently, inter-ministerial consultations are in progress and the entire exercise leading to approval by Union Cabinet may take a few months], Jaitely’s announcement in the budget speech is a clear pointer to Modi – dispensation permitting FDI in multi-brand food retail. In 2012, during a heated debate in Parliament, BJP members had vociferously opposed the proposal of then UPA government to allow FDI in multi-brand retail citing threat to millions of...
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