Category: Infrastructure

Currency scrap – bear short-term pain for long-term gain

For almost seven decades since independence, India has been grappling with the menace of black money [and corruption]. Despite political parties of all hues making lofty promises to stem it, it has only increased leaps and bounds assuming monstrous dimensions. Prime minister, Modi who was catapulted to the seat of power on the promise of rooting out this menace [besides delivering good governance and inclusive development] has taken several credible steps viz., plugging loopholes in existing laws/enacting new laws, streamlining procedures /processes and cutting bureaucratic red tape to curb its generation. These efforts continue unabated. Meanwhile, a huge stock of black money already existing in the economy [courtesy, rampant corruption and mis-governance in the past especially the period 2004-2014, better...
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EMPOWERING THE PEOPLE

Prime Minister Modi’s demonetisation drive is a master-stroke which will lay the foundation for double-digit growth When the four-month window (June 1 to September 30) for the declaration of black money under the Income Declaration Scheme (IDS) was open (under it, a person could pay 45 per cent of disclosed amount (30 per cent tax plus 15 per cent penalty) and thus, convert black in to white), Prime Minister Narendra Modi had issued a veiled but stern warning to tax dodgers. He opined that persons who do not come clean now will be dealt with a heavy hand after September 30. Based on information collected from various sources viz, banks, property registration offices, jewellers and other platforms, where big ticket...
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Demonetization of 500/1000 notes – body blow to black money

When, the 4 months window [June 1- September 30, 2016] for declaring black money under income declaration scheme [IDS] was open [under it, a person could pay 45% of disclosed amount (30% tax plus 15% penalty) and thus convert black in to white], prime minister Modi had issued a veiled but stern warning to tax dodgers. He opined that persons who do not come clean now, will be dealt with a heavy hand after September 30, 2016. Based on information collected from various sources viz., banks, property registration offices, jewelers and other platforms where big ticket transactions are done, finance ministry had compiled a list of 9 million persons who spent up to Rs 1 crores in previous year but...
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Setting policy rate – break inflation-interest nexus

It is generally said that elections are won on ‘perception’ – an impression [or interpretation] based on one’s understanding of something. If, a particular party and its leader is perceived to be good then people vote for it en mass – irrespective of the situation on the ground in regard to its contribution to their welfare and economic development. This is also true of the process of policy formulation which too is guided by impressions formed over a period of time and get assimilated in an institutional set up. The perception influences the decision making process even transcending individuals who sit at the helm. The making of monetary policy is a classic example. Thus, for generations, there has been a...
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Effective implementation key

MOMENTOUS REFORM On August 3, 2016, Rajya Sabha (RS) passed the 122nd constitution amendment bill (already cleared by Lok Sabha last year) paving the way for the Goods and Services Tax (GST). This is a ‘transformative’ reform that will convert the Indian Union of 29 states in to a seamless national market enabling free movement of goods and services as a single uniform tax replaces a plethora of existing taxes. Promising multiple benefits for producers, exporters, businesses, consumers and governments via increasing efficiency in supply chain, reducing transaction cost, improving ease of doing business, tax buoyancy and stemming evasion and black money, GST will lay the foundation for putting India on double digit growth trajectory in the next couple of...
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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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Wither fiscal discipline sans oil bonanza

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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Soft on borrowers

STRESSED ASSETS SCHEME : A close look at the scheme reveals that this is nothing but skulduggery and playing with jargons to make it look robust. Even as the Reserve Bank of India (RBI) has become increasingly tough with public sector banks ordering them to clean up their balance sheets by March 2017, it continues to treat the defaulting borrowers (who were responsible for their proliferating non-performing assets in the first place) with kid gloves. First, it was a scheme nick-named 5/25 introduced in December 2014, under which maturity of loans given to infrastructure companies could be extended up to 25 years. Six months later, this was followed by a scheme for “Strategic Debt Restructuring” (SDR). Under SDR, banks can...
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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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