In the bi-monthly monetary policy review announced on June 7, 2016, RBI governor, Raghuram Rajan has left the repo rate [interest rate at which the apex bank lends money to commercial banks] and cash reserve ratio [CRR] [funds that banks have to keep with RBI as a percentage of their deposits] unchanged at 6.5% and 4% respectively. In sync with repo rate, the reverse repo [rate at which banks lend money to RBI] remains un-altered at 6.0%. During his press briefing, however, Rajan maintained that his so called accomodative stance [implies being receptive to borrower’s sensitivities by way of lowering lending rate and making adequate funds available] continues. That should have called for reduction in the policy rate or pumping...
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Category: Infrastructure
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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Hapless poor in kingdom of charity
One of the fundamental rights conferred by our constitution to all citizens is the “right to work” for earning a decent living and good quality of life. This can be ensured in a sustainable manner only when the state puts in place requisite policy framework conducive to promoting entrepreneurship, mechanisms for institutional funding of projects, builds infrastructure [roads, highways, ports, rails, irrigation etc] and sets up institutions for imparting education and skills etc all essential ingredients that help create opportunities for work. For six-and-a-half decade since 1950 [the year when the constitution was adopted], these aspects received scant attention resulting in a grim scenario whereby creation of job opportunities are miniscule when compared to the needs. At present, there are...
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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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Divestment of majority stake – key to PSB reforms
Last year, an RBI committee headed by P Nayak had 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 had 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 as a precursor to BIC. The most crucial of these is recommendation (iii) as...
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FDI policy for e-commerce, just a cosmetic change
The problem lies in the government de facto shutting the door for FDI in multibrand offline retail. The department of industrial policy and promotion (DIPP)—the nodal authority for issues relating to foreign direct investment (FDI)—has notified guidelines for FDI in e-commerce. Under these, 100% FDI through the automatic route will be allowed in the ‘marketplace’ format of e-commerce retailing, but not in the ‘inventory-based’ model. Under a marketplace model, an e-commerce entity provides an IT platform on a digital and electronic network to act as a facilitator between buyer and seller. The company may provide support services to sellers in terms of warehousing, logistics, order fulfillment, call centre, payment collection and other services. Post-sales, delivery of goods to the customers...
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Guidelines for FDI in e-commerce – an act of skulduggery
The Department of Industrial Policy and Promotion (DIPP) – nodal authority for issues relating to foreign direct investment [FDI] – has notified guidelines for FDI in e-commerce. Under these, 100 per cent FDI through automatic route will be allowed in the “marketplace” format of e-commerce retailing but not in “inventory-based” model of e-commerce. Under a marketplace model, an e-commerce entity provides an IT [information technology] platform on a digital and electronic network to act as a facilitator between buyer and seller. The company may provide support services to sellers in respect of warehousing, logistics, order fulfilment, call centre, payment collection and other services. Post-sales, delivery of goods to the customers and customers satisfaction will be responsibility of the seller. Any...
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Good move, hasty retreat
TAX ON EPF WITHDRAWAL The 2016-17 budget proposal to tax 60% of withdrawal from EPF (employees provident fund) and other superannuation funds faced flak from all quarters forcing Finance Minister Arun Jaitley to withdraw it lock stock and barrel. How could the Narendra Modi government, which is committed to the welfare of every section of the society, contemplate such a move in the very first place? Was it really targeted against the salaried class? Was it a right step but not properly piloted? Jaitley had proposed tax on 60% of withdrawal from accumulations in EPF account (contributions plus interest accrued) from April 1, 2016. However, the money would be exempt from tax if re-invested in purchase of annuity plan. He...
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Aadhaar – key to plugging leakages in welfare schemes
On March 11, 2016, the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Bill, 2016 was passed by the Lok Sabha [LS]. In the following week, the Bill was returned by the Rajya Sabha [RS] with five key amendments, but these were turned down and the LS passed it as a Money Bill. The Aadhaar Bill plans to use the identification number issued by the Unique Identification Authority of India (UIDAI), to deliver State subsidies directly into the hands (or actually, bank accounts) of beneficiaries. Aadhaar was first mooted as the Indian equivalent to the Social Security Number in the US. Aadhaar isn’t compulsory yet. The Bill is careful in stating that every resident is ‘entitled’ to...
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