A major contentious issue amidst stand-off between the Reserve Bank of India [RBI] and the union government [this had reached a brink prior to the meeting of RBI board on November 19, 2018 but a showdown was averted due to some flexibility shown by both the sides at the last minute] was in regard to the Prompt Corrective Action [PCA] framework for the weak public sector banks [PSBs]. In the wake of the steep increase in the NPAs [non-performing assets] of the PSBs resulting in their capital erosion, the apex bank has brought 11 PSBs – out of a total of 21 – under the PCA framework which it made stiffer than even the global standards. Thus, it uses three...
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Category: Growth & employment
Demonetization – the poor backs Modi
On the second anniversary of demonetization [on November 8, 2016, the prime minister, Modi had declared the old 1000/500 rupee notes invalid], the opposition parties led by grand old Congress continue to demonize this far reaching policy reform alleging that it has led to precipitous decline in economic growth, caused unprecedented miseries to the poor even as the rich continue to add to their wealth and have even got away scot free converting their black money/unaccounted cash into white. There was some short-term disruptive effective [Modi himself had anticipated at the time of announcement and even requested the citizens to bear this pain for the sake of long-term gains] which was manifest in decline in GDP [gross domestic product] during...
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Rs 3.6 trillion demand – should RBI accept?
The malicious propaganda campaign launched by the grand old party [read: Congress] to discredit prime minister, Modi and tarnish his image has reached a crescendo with its President, Rahul Gandhi now alleging that the former is hell bent on plundering the Reserve Bank of India [RBI] to the tune of Rs 360,000 crore to deal with the mess created by his policies and actions. Rahul Gandhi’s indictment is two-fold. First, he holds Modi – dispensation squarely responsible for the mess. Second, he questions the logic of the center asking RBI to give a mammoth sum. On both counts, his diatribe is untenable and preposterous. As for the mess, he is essentially referring to the banks’ non-performing assets [NPAs] – a...
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Trim sops, create jobs
For a decent living, a person needs a house [reasonable size], a power connection, supply of clean fuel, access to food at affordable price, medical facilities and basic education. A person who has a good source of income on a sustainable basis is well equipped to make arrangement for all these basics. But, what about those who are not so blessed? Indeed, an overwhelming proportion of our population belong to this category and they are the ones who look to the government for providing help in arranging for these. Prime Minister, N Modi has often said that unlike the previous dispensations who promised these things in bits and pieces – that too keeping an eye on elections – and failed...
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Shutting out NRI/PIO-run funds, a bad idea
Faced with a shortage of capital and a compelling need to boost economic growth, successive governments have taken steps to attract foreign investment. But when the inflow happens to be of Indian money that left our shores in a clandestine manner and is coming back in the garb of foreign capital — ‘rounding tripping’ in common parlance — it raises many eyebrows. Until a few years ago, the extant policy and regulatory environment hugely facilitated ‘rounding tripping’. There was little regulatory oversight on money leaving and there were tax havens ever ready to attract it. The shell companies, set up in those havens by the people to whom the money belonged, would then invest in India, fully leveraging benevolent tax...
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Empowering the poor – shun subsidies, build assets
Recently, during launch of a book, union finance minister, Arun Jaitely concurred with the author [an economist] that increase in capital formation in agriculture is a far better way of helping the farmers instead of the extant system of giving subsidies. The increase in investment – be it in soil conservation and improvement in its health, irrigation and water conservation, agricultural implements, infrastructure for storage/handling/quality testing, information technology, marketing infrastructure and use of modern technology for crop production – lays the foundation for sustainable increase in the income of farmers. This is in sharp contrast to subsidies on agricultural inputs viz. fertilizers, seeds, pesticides, power, credit, fuel etc whose positive impact is felt only as long as these are given....
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FDI in retail – policy void and unfounded fear
Recently, a task force [TF] on e-commerce under the then commerce secretary, Rita Teaotia had recommended 49% FDI [foreign direct investment] in Indian retail in online marketplaces that hold inventory and sell directly to consumers [B2C]. However, this is subject to only 100% made-in-India products being sold through such platforms. Further, the platform must be promoted by resident Indian and controlled by Indian management. This had led to consternation among Indian companies in the organized retail such as Reliance Retail Limited [RRL], Futures Group etc who opined that this would violate guidelines as encapsulated in Press Note [PN] 3 [2016-17] which bars foreign investment in B2C. The foreign majors operating in on-line market place viz. Amazon, Flipkart etc also protested...
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Shutting NRIs/PIOs-run FPIs – a bad idea
Faced with shortage of domestic capital and compelling need to accelerate the rate of economic growth, successive governments have taken steps to attract foreign investment. Strictly speaking, the capital inflows to India should be sourced from income generated from business or otherwise – by persons located in foreign jurisdictions. The persons could be foreigners or non-resident Indians [NRIs] or persons of Indian origin [PIOs] or overseas citizens of India [OCIs]. In case however, the inflow happens to be Indian money which left our shores in a clandestine manner and comes back in the garb of foreign capital [also known as ‘rounding tripping’ in common parlance] then, it raises many eyebrows. Until a few years ago, the extant policy and regulatory...
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Modi’s onslaught on shell companies/ghost directors
A marathon exercise initiated by the ministry of corporate affairs [MCA] early this year which got consummated on September 15, 2018 on KYC [know your customer] norms for company directors has thrown up results that tell a lot about the existence of a monstrous ghost economy and the manner in which the present dispensation led by Modi is endeavoring to stem the rot. The exercise reveals that a total of 5000,000 DINs [director identification number] were issued by the authorities. On records, these were the number of directors serving on the companies. Out of these, only 3300,000 were ‘active directors’ implying that the balance 1700,000 were inactive or ‘defunct’. Put in simple terms, an inactive/defunct director is a person who...
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Demonetization forces tax compliance on Indians
Nearly two years after the demonetization [November 8, 2016] announced by the prime minister, N Modi, the Reserve Bank of India [RBI] has released – in its Annual Report for 2017-18 – the numbers on the value of the demonetized old 500/1000 rupee notes that were not returned to the banking system. This is about Rs 10,700 crore out of a total of Rs 1541,000 crore which were with the public as on November 8, 2016. This has triggered waves of exhilaration among the critics of demonetization [especially the main opposition party Congress] who have been quick to point out that this was a flop show. They contend that it achieved nothing in terms of its stated objective of denting...
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