Modi Government unveils unified pension scheme to bridge old and new, aiming to satisfy Central and State employees On August 24, 2024, the Union government announced the new Unified Pension Scheme (UPS) for central government employees. In fact, what looked like a well-orchestrated action plan, on the following day the BJP-led government in Maharashtra approved the implementation of the Scheme for its employees. Madhya Pradesh government is likely to implement the UPS soon. The above announcements are in response to the earlier decisions of Opposition-ruled States, including Rajasthan, Chhattisgarh (before the November 2023 elections), Jharkhand, Himachal Pradesh (HP) and Punjab to revert to the old pension system (OPS) which it felt tilted the electoral pendulum towards those parties, particularly in...
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Category: Economic outlook
E-commerce giants versus mom-and-pop stores
Amazon’s aggressive pricing strategies could lead to a massive e-commerce expansion, capturing half of India’s retail market within the next decade At the launch of the Pahle India Foundation’s report ‘Net Impact of E-Commerce on Employment and Consumer Welfare in India’ on August 21, 2024, Union Commerce and Industry Minister Piyush Goyal took pot shot at the world’s biggest e-tailer Amazon, for selling products directly to consumers and indulging in “predatory pricing” that could lead to massive growth of e-commerce capturing half of Indian retail market ten years from now. This would adversely impact an estimated 100 million small retailers across the country and in turn, lead to “social disruption”. E-commerce, put simply, is the practice of buying and selling...
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Prospects of privatisation of PSUs are bleak
As the Modi government shifts its strategy towards ‘prudent public wealth management’ the prospect of privatising PSBs are increasingly unlikely. Announcing Modi – government’s policy on disinvestment of central public sector undertakings (CPSUs) in her Budget speech for FY 2021-22 the Union Finance Minister, Nirmala Sitharaman had talked of privatizing two public sector banks (PSBs) and one insurance company. A CPSU is an undertaking in which the Central government has majority share holding of more than 50 percent. Disinvestment refers to sale of its shares to private investors. When, such sale results in reduction of the government’s shareholding in the CPSU to below 50 percent and concomitant transfer of ownership and management control to private entity, this is termed as...
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FM bows down to real estate lobby
In the Union Budget for 2024-25 presented on July 23, 2024, Finance Minister Nirmala Sitharaman reduced the tax on long-term capital gains (LTCG) from sale of Real Estate (Physical) and Physical Gold from 20 percent with the benefit of indexation to 12.5 per cent but without the indexation benefit. However, owners of old houses acquired before 2001 (ancestral property) will continue to get indexation benefit. For the purpose of deciding that the capital gain is long-term, the holding period for both the asset classes is 24 months. Whereas, for Physical Gold, it is down from 36 months earlier, in case of Real Estate (Physical), it remains unchanged. The benefit of indexation allowed a person to adjust the cost of her...
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Centre’s fiscal outlook isn’t rosy
In the Union Budget 2024, the government has set a fiscal deficit target of 4.9 per cent of the gross domestic product, which is 0.2 per cent less than the 5.1 per cent target fixed in the Interim Budget. In fixing that target, the finance minister had assumed a dividend receipt of Rs 80,000 crore from the Reserve Bank of India from the latter’s operations during the financial year 2023-2024 to be available for use by the Centre during the FY 2024-2025. In May, the RBI approved a mammoth dividend transfer of Rs 210,000 crore to the Centre, which is Rs 130,000 crore higher than the provision of Rs 80,000 crore in the Interim Budget. Taking nominal GDP of around...
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Reforming the personal income tax regime
In the Budget for 2024-25, Finance Minister has made the ‘new regime’ of personal income tax more appealing, while continuing to rationalise the capital gains tax structure In the Union Budget for 2024-25, Finance Minister Nirmala Sitharaman has endeavoured to make the ‘new regime’ of personal income tax (PIT) a bit more attractive besides continuing the process of ‘rationalising’ and ‘simplifying’ the structure of capital gains tax (CGT) that was started in her budget for FY 2023-24. Sitharaman had introduced the new PIT regime in the Budget for 2020-21. Even while retaining a 5 per cent tax for annual income in the Rs 250,001-Rs 500,000 range (as under the old regime before 2020-21), on income higher than Rs 500,000, the...
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Budget is pro-growth but stability concern remains
Major expenditure items may go out of control, raising concerns about the budget’s feasibility; moreover, the Government’s gross tax revenue target of Rs 38.40 lakh crore is overly ambitious On top of a GDP (gross domestic product) growth of 8 per cent plus for three consecutive years, the Union Budget for FY 2024-25 presented by Finance Minister Nirmala Sitharaman on July 23, 2024, has all the ingredients to sustain the momentum during the current year as well. For the current year, she has proposed capital expenditure at Rs 1111,111 crore, which is 17 per cent higher than the revised estimate (RE) for FY 2023-24.In her Budget for 2019-20, she had laid a roadmap for catapulting the Indian economy to US$5...
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Income tax amendment promises relief for MSMEs
The biggest problem faced by small enterprises is delayed payment of their dues by large enterprises as it results in a shortage of working capital severely impacting their production An amendment to the Income Tax Act, introduced through Finance Act 2023, and effective from April 1, 2024 stops businesses from claiming tax deductions for payments beyond 45 days to the Micro, Small and Medium Enterprises (MSMEs) for supply of goods and services has caused much consternation. The MSMEs are ancillary units engaged in the production, manufacturing and processing of goods and commodities (mostly intermediate goods) which are supplied to large enterprises or master units. These units operate on a small scale and are further categorized into micro, small and medium enterprises...
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India narrowly escapes fiscal catastrophe
India needs to strengthen its economic health with sustainable fiscal policies for long-term stability; state guarantees only put it in a perilous situation After the Lok Sabha elections 2024 on June 4, the Center narrowly escaped plunging into a state of ‘fiscal catastrophe’. Even as Modi–-led BJP failed to secure an absolute majority on its own, it garnered the support of 293 MPs including 53 from its allies under the National Democratic Alliance (NDA) and formed the Government. On the other hand, the I.N.D.I.A bloc led by the grand old party (GOP) namely Congress cobbled up a total of 234 MPs. A swing of just 38 from NDA to I.N.D.I.A bloc could have enabled the latter to catapult itself to...
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The cost of freebies and the legal quagmire
Despite a Supreme Court ruling highlighting the impact of freebies on election fairness, political parties continue to leverage public funds for electoral gain In the Maharashtra Budget for 2024-25 presented by Deputy Chief Minister Ajit Pawar, the BJP-led MahaYuti has announced financial assistance of Rs 1,500 per month for eligible women between 21 to 60 years of age, a stipend up to Rs.10,000 per month for youth in industrial and non-industrial sectors, electricity bill waiver for farmers etc. Unambiguously, these are freebies – an acronym for something given by the State free of charge – aimed at garnering votes during the State assembly elections later this year. In a July 2013 order in S Subramaniam Balaji vs Government of Tamil...
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