In a brief prepared for the G-20 meeting at Hamburg, the International Monetary Fund [IMF] turned the spotlight on vulnerabilities of the Indian banking sector caused primarily by unsustainable level of non-performing assets [NPAs]. As on December 31, 2016, gross NPAs were about Rs 676,000 crores – 90% of these with public sector banks [PSBs]. The figure will be close to Rs 1000,000 crores if one includes the bad loans given a lease of life via ‘restructuring’ – a euphemism for relaxing payment terms. The problem had been festering for quite some time under United Progressive Alliance [UPA] and assumed monstrous proportions during its second term [2009-2014]. This remained camouflaged until such time the Reserve Bank of India [RBI] initiated...
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Category: Growth & employment
TELECOM INDUSTRY IN SELF-DESTRUCT MODE
A good deal of the problems that the telecom sector faces today has been solely created by service providers. They must keep it in mind that public interest cannot be won by just keeping price low. It’s important to maintain quality of service Arundhati Bhattacharya, chairperson of the State Bank of India, recently sounded alarm bells over troubles surrounding the telecom sector. She wrote to the Government about the “highly unsustainable levels” of debt mobile companies face today. The industry’s debt to the banking sector is estimated at four lakh crore rupees. In a letter to the telecom secretary, Aruna Sundararajan, Bhattacharya stated that “stress in the sector has reached highly unsustainable levels after the entry of new players and launch...
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Making dodgers pay tax – will CAs help Modi?
Addressing a gathering to celebrate the Foundation Day of the Institute of Chartered Accountants of India [ICAI] on July 1, 2017 which coincided with the launch of the most revolutionary reform viz. GST [Goods and Services Tax] of post-independence India, prime minister, Modi shared some startling numbers. Saying chartered accountants [CAs] best understand the language of numbers, he opined “while, there are crores of Indians going on foreign trips every year, crores having luxurious/high end cars and crores of palatial homes/farm houses, yet there are a meager 32 lakh persons declaring their annual income above Rs 10 lakh”. 32 lakh persons declaring income above Rs 10 lakh are mostly from salaried class and include only a fringe of those living...
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Exporters’ trail of woes continues under GST
Some relief is offered via input credit. But a seamless tax credit chain is inevitable in a regime of taxes coming under different jurisdictions On the midnight of June 30, 2017, the government flagged off the most revolutionary economic reform, viz. the Goods and Services Tax (GST), ever undertaken post-independence. Even as expectations run high, the GST Council is having a tough time dealing with a plethora of exemptions particularly in the export sector — a baggage that got deeply entrenched under the existing system of taxation. Under the extant system, the Indian industry had to pay multiple taxes such as Excise Duty, Countervailing Duty (CVD), Special Additional Duty (SAD), Central Sales Tax (CST), Value Added Tax (VAT), and a...
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GST – gas in, what about others?
Prior to the launch of most revolutionary reform post-independence viz. Goods and Services Tax [GST] on July 1, 2017, finance minister, Arun Jaitely had alluded to the GST Council – all powerful body mandated to decide on tax rates, inclusions/exclusions, exemptions etc – taking up for consideration inclusion of natural gas within the ambit of GST. The idea was to do it in the 18th meeting just before the launch but it appears to have been deferred. Keeping in mind Jaitely’s assurance that Council is open to making changes to accommodate genuine concerns, hopefully, this should happen sooner than later. It is important to understand as to why it must happen without slightest of delay. But, first, a few words...
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Too early to look for jobs
Air India – privatization is the way forward
Recently, finance minister, Arun Jaitely in a veiled statement raised a question mark over the desirability of the government continuing to run Air India [AI] with a meager 14% share when private sector occupies an overwhelming 86% of the space. The statement lends credence to a possibility that the recommendation of Niti Aayog for privatization of AI could be taken on board. But, the ministry of civil aviation does not appear to be too enthusiastic about privatization. It has mooted bringing in a ‘strategic’ partner even while retaining majority control. It believes that the government on its own, is capable of turning around if only the airline is unshackled from its huge debt [currently, over Rs 50,000 crores]. Within a...
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SEARCH FOR THE RIGHT SOLUTION
Loan waivers and written-offs given to corporates or farmers are totally unacceptable. They impact viability of banks and erode their capital base In the last session of the Parliament, members of the Opposition alleged that, while the Government had no qualms in waiving loans worth hundreds of thousand crore rupees given to industrialists and corporates, it showed little inclination to extend the same relief to farmers who are unable to pay back loans for no fault of theirs. The treasury benches responded by saying loans given to corporates are not waived; instead, they are written-off. To a layman, write-off and waiver would appear to convey the same meaning — in both, lender decides not to recover unpaid loans from borrower....
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Telecomm industry – in ‘self-massacre’ mode
Arundhati Bhattacharya chairperson, State Bank of India [SBI] – India’s largest bank – has sounded alarm bells over troubles facing the telecommunication industry due to “highly unsustainable levels” of debt of mobile companies. The industry’s debt to the banking sector is estimated at Rs 400,000 crores. In a letter to telecom secretary, Aruna Sundararajan, Bhattacharya stated “the stress in the sector has reached highly unsustainable levels after the entry of new players and launch of free services, which led to erosion of EBITDA [earnings before interest, taxes, depreciation and amortization] of telecom service providers.” The gravity can be gauged by looking at following numbers. The total annual cash outflow of industry is Rs 178,000 crores which includes interest payments: Rs...
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RBI has no interest in growth
In the second bi-monthly monetary policy review for the current year announced on June 7, 2017, the Reserve Bank of India [RBI] has kept the policy rate [rate at which apex bank lends money to commercial banks] unchanged at 6.25%. This has caused consternation among stakeholders including from the government. The chief economic adviser [CEA], Dr Arvind Subramanian has gone that far to lambast the apex bank for erring in projecting inflation disproportionately on the higher side. The inflation rate as measured by consumer price index [CPI] is used by RBI as benchmark for deciding the policy rate. The prime reason for the disappointment is that the Monetary Policy Committee [MPC] which decides the rate has refused to factor in...
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