In her maiden budget presented to Parliament on July 5, 2019, Finance Minister Nirmala Sitharaman laid a roadmap for catapulting the Indian economy to $5 trillion by 2024-25. The most crucial component of this roadmap is the investment in infrastructure to the tune of a mammoth Rs 100,00,000 crore or $1.4 trillion. In the follow-through, in an interactive session with the media on August 24, 2019, she announced setting up of a high-level inter-ministerial committee to work out a detailed action plan. During its first term also, the Narendra Modi government gave overriding importance to building infrastructure. Indeed, it achieved a fair amount of success with a cumulative investment of about Rs 20,00,000 crore and commensurate output in terms of roads and highways built. This was commendable...
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Category: Growth & employment
FM’s booster dose for corporate India
In a flurry of announcements made on September 20, 2019 [also described in media circles as a third budget in less than three months], the finance minister, Nirmala Sitharaman handed out a bonanza to the Indian corporate sector. The most pleasing announcement pertains to steep reduction in the rate of corporate tax for new entities incorporated from October 1, 2019 in manufacturing sector and start production by March 31, 2023 from existing 25% to 15%. After subsuming surcharge and cess, the effective incidence of tax will be lowered from existing 29.15% to 17.01% – a drop of 12%. Such companies won’t have to pay minimum alternate tax [MAT] [levied on book profit of firms which have no taxable profit courtesy,...
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GST math goes haywire
One of the reasons for inordinate delay in taking up the constitutional amendment bill for enactment of the Goods and Services Tax [GST] was the reluctance of the then UPA – government at the centre to agree to the demand of the states for compensation of the loss of revenue that would arise with its launch vis-à-vis the revenue they would get under the subsisting dispensation of excise duty, sales tax or value added tax [VAT] plus a host of other local taxes. Modi – government by agreeing to this demand achieved a fair degree of success in building consensus among all the states. Within two years of taking charge in 2014, it was able to steer through the constitutional...
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Growth pangs in auto – avoid GST rate cut
The deceleration in GDP [gross domestic product] which started in the second quarter of financial year [FY] 2018-19 and has continued till the first quarter of current year with the rate of growth plunging to 5 year low of 5% has led to consternation in industry and trade circles leaving a sizeable section of the fraternity worried that this trend might continue till the end of the year. This will mean further aggravation of the income and employment concerns. The government has rightly gone into introspection mode and has demonstrated its willingness to respond to the situation. The finance minister, Nirmala Sitharaman has held a series of consultations with industry and trade and come up with a number of measures...
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PSBs – capital erosion continues unabated
During her second interactive session with the media on the state of the Indian economy and measures to give a boost, finance minister, Nirmala Sitharaman announced a number of bold reforms in the banking sector with major focus on consolidation of 10 public sector banks [PSBs] into 4 big entities – an overarching objective being to make them globally competitive and act as a foundation for achieving US$ 5 trillion milestone. Sitharaman informed about a substantial reduction in their gross non-performing assets [GNPAs] from 11.6% of total loans as on March 31, 2018 to 10.3% on March 31, 2019 [courtesy, huge recovery of over Rs 300,000 crore made possible largely by concerted action under the Insolvency and Bankruptcy Code (IBC)...
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RBI surplus transfer – much ado about nothing
On the face of it, the decision of the Reserve Bank of India [RBI] – India’s apex bank which manages the currency and payment systems as also the borrowings of the Government of India [GOI] and of state governments besides supervising or regulating banks – to transfer a whopping surplus of Rs 176,000 crore to GOI for the year 2018-19 [for RBI, the accounting year is on July-June basis] gives an impression that the latter has got a bonanza. While, some argue that the centre has ‘stolen’ the money from the RBI [e.g. Congress], others aver that this is easy money which the centre will use for bridging its fiscal deficit. The reactions are exaggerated. First, of the total amount Rs...
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Infrastructure investment hits slow lane
In her maiden budget presented to the Parliament on July 5, 2019, the finance minister, Nirmala Sitharaman laid a road-map for catapulting the Indian economy to US$ 5 trillion by 2024-25. The most crucial component of this road-map is investment in infrastructure to the tune of a mammoth Rs 100,00,000 crore or US$ 1.4 trillion. In the follow through, in an interactive session with the media held on August 24, 2019, she announced setting up of a high level inter-ministerial committee to work out a detailed action plan, operational details including identification of projects. During its first term also, Modi – government gave overriding importance to building infrastructure. Indeed, it achieved a fair amount of success with a cumulative investment...
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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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