They should assess the amount needed for April-June, consider what is being given by the Centre and if more is still needed, seek incremental funds only Even as corporates, MSMEs, informal sector workers and others impacted by the pandemic are demanding relief packages from the Centre, the States, too, have given the Government their wish list and five States have collectively sought close to Rs 2,25,000 crore. While Maharashtra has asked for Rs 50,000 crore, Chhattisgarh wants Rs 30,000 crore, Kerala, Rs 80,000 crore, Rajasthan Rs 40,000 crore and West Bengal has demanded Rs 25,000 crore as immediate compensation for the revenue loss suffered because of the nationwide lockdown. Rajasthan Chief Minister, Ashok Gehlot has also proposed setting up of...
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Category: Economic outlook
Hike in oil duties – a retrograde move
In the wake of widespread destruction of demand triggered by Covid – 19, the international price of crude has plummeted to a low of about US$ 20 per barrel despite a historic agreement between OPEC and non-OPEC suppliers on April 10, 2020 to cut production by 10 million barrels per day [mbpd] – as demand destruction [about 29 mbpd] far exceeds the cut in supply resulting a huge glut. De jure, the prices of petrol and diesel are deregulated [this was done: petrol in June 2010 and diesel in October 2014]. The oil marketing companies are expected to adjust the price in line with movement in their international price. Now, that the international price of crude has declined [albeit steeply],...
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Mass movement of migrant labor – a Himalayan Blunder
Announcing the lockdown on March 24, 2020, Prime Minister, Narendra Modi offered the mantra of ‘social distancing’ [put simply, this requires maintaining a minimum distance between two persons] to prevent Covid – 19 pandemic from spreading. Accordingly, all activities involving assembly and movement of persons in group were brought to a grinding halt. Amongst others, these included complete ban on inter-state and intra-state movement of persons. The announcement came under flak from critics who argued that people should have been given time to prepare themselves; this included letting migrant labor working in urban agglomerations [UAs] such as Delhi, Mumbai etc move to their native place. The government’s decision was perfectly in order. Had it given time and allowed people to...
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Battered states, bloated demands
Even as corporate, small, medium and micro enterprises [MSMEs], tens of million workers in the informal sector, self-employed and all others impacted by the Covid-19 pandemic are demanding relief package from the union government, the states too have pitched in with a volley of demands which have huge financial implications. This came to the fore during a video-conference held by the Prime Minister, N Modi with chief ministers on April 26, 2020 to discuss the exit strategy after the current lock-down ends on May 3, 2020. Five opposition ruled states have sought close to Rs 225,000 crore: Maharashtra, Rs 50,000 crore ; Chhattisgarh, Rs 30,000 crore; Kerala, Rs 80,000 crore; Rajasthan, Rs 40,000 crore and West Bengal [WB] Rs 25,000...
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Don’t expect the moon
The RBI has given a boost to the economy in these testing times. But India Inc. argues that this won’t be of help in the absence of demand. This is flawed thinking On March 27, in a bid to resuscitate the economy devastated by the Coronavirus, the Reserve Bank of India (RBI) Governor, Shaktikanta Das, announced a host of measures to inject liquidity into the country’s financial system; reduce the cost of capital and ease the stress of loan repayments. These included reduction in policy rate by 75 basis points to 4.4 per cent; a three-month moratorium on payment of installments in respect of all term loans outstanding on March 31; relaxation in the norms for cash credit and working capital limits;...
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Facebook–Jio deal – will it cheer mom-and-pop
Amidst all round gloom caused by Corona virus that has also impacted foreign direct investment [FDI] [during the first quarter of 2020, it has dipped by 30%], comes a buoyant news. On April 22, 2020, the California based US Internet giant Facebook announced its decision to buy 9.99% stake in Reliance Industries Limited [RIL] digital unit Jio Platforms Limited [it owns a wide spectrum of businesses viz. wireless broadband, home broadband, enterprise broadband, narrow-band, internet-of-things businesses and a bouquet of digital apps], for US$5.7 billion [more than Rs 43,450 crore]. While, the deal gives an opportunity to Facebook foray in India’s telecommunication sector [after unsuccessful attempts made in the past], RIL gets to pare its debt – currently about Rs 300,000...
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Adopt fiscal prudence
The Govt must implement much-needed reforms to rein in unproductive spends and prevent revenue leakages to create a sustainable basis for balancing its budget The economic crisis triggered by Covid–19 has forced the Government to take recourse to some extraordinary measures, which include among others 30 per cent cut in the salary of all Members of Parliament (MP) besides the President, Vice-President and the Prime Minister, suspension of the MPLAD (MP Local Area Development) fund and a steep cut in expenditure of Ministries/departments. Reportedly, barring 18 Ministries/departments connected with healthcare, medical infrastructure and other essential services, all others are facing expenditure cuts for the April-June quarter. While 33 Ministries/departments can spend only up to 20 per cent of the budget,...
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RBI booster dose – will it work
In a bid to resuscitate the economy devastated by the Corona virus, on March 27, 2020, RBI governor, Shaktikanta Das announced a host of measures to inject liquidity in the country’s financial system; reduce the cost of capital and ease the stress of loan repayments. These included (i) reduction in policy rate [interest rate charged by the apex bank on loans given to banks] by 75 basis points to 4.4%; (ii) 3-month moratorium on payment of installments in respect of all term loans outstanding on March 31, 2020; (iii) relaxation in the norms for cash credit and working capital limits; (iv) reduction in cash reserve ratio [CRR] [portion of deposits, banks are required to keep with RBI] by 100 basis points...
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Corona crisis – shun fiscal profligacy
The economic crisis triggered by Covid – 19 has forced the government to take recourse to some extraordinary measures which include among others 30% cut in the salary of all Members of Parliament [MP] besides the President, Vice-President and the Prime Minister, suspension of the MPLAD [MP Local Area Development] scheme and steep cut in the expenditure by ministries and departments. Reportedly, barring some 18 ministries/departments connected with healthcare and medical infrastructure and other essential services who can spend 100% of their budgeted allocation, for all others, steep cuts are contemplated. Whereas, 33 ministries and departments can spend only up to 20% of the budget, in case of 50 others, the expenditure limit is even lower at 15%. This would...
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Coronavirus scar to haunt economy for long
In a span of less than a week, there have been three sets of official announcements enumerating the measures to alleviate the problems faced by industries, businesses and workers due to the economic disruption caused by COVID-19. The first two were made by Finance Minister Nirmala Sitharaman on March 24 and 26 and the third by the RBI Governor Shaktikanta Das on March 27. On March, the FM announced reliefs for industries and businesses which are largely ‘procedural’. These include extending the date for filing returns [income-tax, GST, customs, excise and statutory filings under Companies Act], reducing interest chargeable on delayed payments, exemption from penalty, increasing threshold of filing under the Insolvency and Bankruptcy Code [IBC] etc. The firms have...
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