The increase in life expectancy and rise in the cost of living further reinforces the need for assured monthly income for a decent life in old age Stung by the Opposition States, including Rajasthan, Chhattisgarh, Jharkhand, Himachal Pradesh and Punjab reverting to the old pension system (OPS) and these parties promising the same in the impending state elections as also in Lok Sabha elections next year, the Union government is considering to amend the national pension scheme (NPS) to ensure that its benefits to the employees covered under it are more or less at par with the OPS. This will be at the cost of sacrificing fiscal prudence. The pension provides a person with a monthly income when he is...
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Category: Economic outlook
Simultaneous polls are the way forward
Frequent elections impose enormous social and economic costs on the nation, which leads to corruption and disruption The Union Government has set up a committee under the chairmanship of the former President of India, Ramnath Govind to examine holding simultaneous elections to the Lok Sabha (LS), state assemblies, panchayats and other local bodies. Even as the committee has kicked off the deliberations (its first meeting is scheduled for September 23, 2023) the idea is being staunchly opposed by many political parties. The opposition isn’t new as in 2019 when Prime Minister Narendra Modi convened a meeting on June 19 that year to discuss ‘One Nation, One Election’ (ONOE), it was boycotted by about 50 per cent of the parties who...
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Time for 100 per cent FDI in retail sector
One hundred per cent Foreign Direct Investment should be permitted to all retailers, online or offline, big or small, for the growth of this sector During discussions with representatives of e-commerce firms and a domestic traders’ body viz. Confederation of All India Traders (CAIT) held on August 2, 2023, the Department for Promotion of Industry and Internal Trade (DPIIT) in the Ministry of Commerce and Industry made a presentation on the ‘fundamentals’ of the proposed e-commerce policy. The policy is being deliberated since 2018. The DPIIT highlighted seven salient features of the proposed policy: unambiguous demarcation between the marketplace model where foreign direct investment (FDI) is allowed and inventory model where FDI is prohibited; making the policy congruent with the...
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Off-budget borrowings are unhealthy in nature
The Union Government wants to ‘pre-pay’ the remaining off-budget borrowings of Rs 170,000 crore over a reasonable period of time Off-budget borrowings or extra-budgetary resources (EBRs) – as these are called in budget parlance — are those borrowings that are raised by public sector undertakings (PSUs) and other agencies of the government such as Food Corporation of India (FCI), Housing and Urban Development Corporation (Hudco), Power Finance Corporation (PFC), NABARD etc to fund its schemes for which repayment of entire principal and interest is done from the Union Budget. The Centre had EBRs close to Rs 670,000 crore by the end of 2020-21. If all obligations about such borrowings are met by the Union government then why does it not...
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Rethinking Universal Basic Income and subsidies
There is a compelling case for disbanding all existing forms of support and replace them by what may be termed as ‘Unconditional Basic Income’ or the UBI system. During an interaction organised by the Confederation of Indian Industry (CII) last month, Chief Economic Advisor V Anantha Nageswaran dismissed the idea of Universal Basic Income (UBI) in India. He expressed concerns that UBI might create create ground for “perverse incentives,” discouraging people from actively seeking income-generating opportunities. As a result, he believes that UBI should not be priority in the near future. Drawing comparisons with developed countries, the current CEA highlights that these nations have limited room for increasing economic growth and creating income generating opportunities. Consequently, their governments have established social...
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The scourge of freebies is taking a heavy toll
Freebies are denuding the budgets of many states. This practice must go before states’ coffers run dry Delivering his Independence Day address, Delhi Chief Minister Arvind Kejriwal promised 200 units of electricity a month for ‘free’ to the entire 1.4 billion people of India saying this will cost Rs 150,000 crore per annum. He went on to add ‘When Modi – government can waive Rs 150,000 crore worth of loans given to four top industrialists of the country, why can’t it provide free electricity to the people which would cost it the same amount? In Delhi, Kejriwal is already giving free electricity to all households (HHs) consuming 200 units a month and a flat subsidy of Rs 800 to HHs...
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NPAs down but pain points still remain
As per the information given by the Ministry of Finance (MoF) in Parliament, during the last nine years, scheduled commercial banks (SCBs) have undertaken an aggregate recovery of Rs 10,16,617 crore of loans that had gone bad or non-performing assets (NPAs) as these are called in banking parlance. In reply to a question given in the lower house, Minister of state for finance Bhagwat Karad informed that “Comprehensive measures have been taken by the Government and RBI to recover and to reduce NPAs, including those pertaining to corporate companies”. These include the 2016 Insolvency and Bankruptcy Code (IBC), and the establishment of the National Asset Reconstruction Company Limited (NARCL), among other measures. At banks’ level, the efforts involve early recognition...
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Scrap priority sector lending
PSL is a legacy of the socialist era. It creates distortion in credit flows, keeps bank officials busy with target fulfillment and is prone to blatant misuse Lenders, especially foreign banks have decided to undertake a comprehensive analysis of “sustainable finance” under the aegis of the Indian Banks’ Association (IBA) to make out a case for granting priority-sector lending (PSL) status to such financing for consideration by the Reserve Bank of India (RBI). Globally, “sustainable finance” is broadly defined as any form of financial product/service that promotes environmental, social and governance purposes while contributing to the achievement of relevant targets adopted by countries under frameworks, including the Paris Agreement on climate and the Sustainable Development Goals (SDGs) set by the...
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Don’t block sale of fertiliser PSUs
The fertiliser ministry’s concern about securing adequate supplies is unwarranted Pursuant to the government’s approach to privatisation of Central Public Sector undertakings, or CPSUs, as announced in the 2021–22 Budget, the Department of Public Enterprises (DPE) and Niti Aayog have identified 176 CPSUs in the non-strategic sectors. They have recommended that over 60% of them, or 106, be wound up, while the rest, considered “viable units,” should be privatised. Fertilisers are placed in the non-strategic category. Accordingly, the DPE and Niti Aayog have recommended the privatisation of all nine CPSUs, including Madras Fertilizers (MFL) and National Fertilizers Limited (NFL), which are under the administrative control of the Ministry of Chemicals and Fertilisers. However, the latter has opposed it. But why...
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Time for ‘universal basic income’ is now
There is a compelling case for disbanding all forms of support and replacing them by ‘universal basic income’ (UBI) so that people can live with dignity At an interaction organized by the Confederation of Indian Industry (CII) on July 7, 2023, Chief Economic Advisor (CEA) V Anantha Nageswaran ruled out Universal Basic Income (UBI) for India saying this may create ground for “perverse incentives” and dissuade people from seeking income-generating opportunities. So, “UBI is not something that should be on the agenda in the near term”. In contrast, in the Economic Survey (2016-17) presented on January 31, 2017, the then CEA Arvind Subramanian had advocated UBI to substitute a plethora of extant subsidies. He couched the idea in Mahatma Gandhi’s...
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