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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Category: Economic outlook
Tax reforms are yielding good results
The Income Tax Department has successfully used technology to reach out to the assesses in non-intrusive ways A major factor that has helped the Modi – government keep up the tempo of investment in building infrastructure and other development activities and continues with welfare schemes in desired measure without causing any slippage in fiscal deficit target has to do with a steep rise in tax collection. The gross tax revenue (GTR) – including total direct tax collection, proceeds from Goods and Services Tax or GST, customs and excise duty – net of refunds – surged from around Rs 21,11,000 crore during the financial year (FY) 2019-20 to Rs 30,50,000 crore during 2022-23 – an increase of about 50 per cent....
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E-commerce policy conundrum
The government must provide a level playing field to all. It should legitimize 100 per cent FDI in retail, online and offline, big and small Referring to the national e-commerce policy, the Secretary Department for the Promotion of Industry and internal trade (DPIIT) in the Ministry of Commerce Rajesh Kumar Singh has said it will “put in place a streamlined regulatory framework for the ease of doing business, adoption of modern technologies and the integration of supply chains”. It will seek to create “a conducive environment for the overall development of the sector and boost exports”. According to the foreign trade policy, the Union government is aiming at an e-commerce export potential of $200 billion to $300 billion annually by...
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The war against NPAs isn’t over yet
The government should strengthen mechanisms to give a fair deal to MSMEs According to a joint report by ASSOCHAM and Crisil Ratings, gross non-performing assets (NPAs) – an acronym for loans that have gone bad – of banks have declined by 0.9 to less than 5 per cent during the financial year ending March 31, 2023, and are expected to decline by another 1 per cent to a decadal low of less than 4 per cent by March 31, 2024. In respect of loans given to the corporate sector, gross NPAs are expected to be less than 2 per cent by March 31, 2024, down from a peak of 16 per cent as on March 31, 2018. The public sector...
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Rs 2k note exchange: Demonetisation 2.0
Rs 2000 note exchange will not have any impact on black money. It will only help hoarders by exchanging Rs 2000 notes without disclosing their identity In its decision to withdraw Rs 2000 currency notes from circulation announced on May 19, 2023, the Reserve Bank of India (RBI) has stated that they will continue to be legal tender. The notification issued in this regard states:- “…in pursuance of the “Clean Note Policy” of the RBI it has been decided to withdraw the Rs 2000 denomination banknotes from circulation. The banknotes in Rs 2000 denomination will continue to be legal tender.” From the above, prima facie one gets a sense that it is not a demonetization exercise as it happened over...
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Who will end the free-run of freebies?
Political parties don’t want freebies to go. It is their much-cherished tool to harness votes. And they know it works like a charm In the just concluded assembly elections in Karnataka, the grand old party (GOP) Congress had promised five guarantees viz. Gruha Jyoti, Gruha Lakshmi, Sakhi programme, Yuva Nidhi, and Anna Bhagyain in its manifesto. Having got a decisive mandate to form the government, Congress pledged to approve all the five guarantees in the very first meeting of the Cabinet. The big question is: is it worth spending so much of taxpayers money? The guarantees are intended to be a welfare scheme. Under it, the government should ensure that (i) the assistance goes to a person who is desperately...
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Govt must push to privatise fertiliser PSUs
Despite Govt’s announcement to privatise the CPSUs, the fertilizer units remain under its control as fertiliser availability is a politically sensitive issue In the Budget for 2021-22, Finance Minister Nirmala Sitharaman had announced the government’s approach to privatisation of Central public sector undertakings (CPSUs). Privatization occurs when it sells its majority shareholding (more than 50 percent) in the CPSU and transfers control to a private entity. For this purpose, it divided CPSUs in two broad categories—i.e. strategic and non-strategic. The strategy covers four subgroups: atomic energy, space and defense; transport and telecommunications; power, petroleum, coal and other minerals; and banking, insurance and financial services. The non-strategic category includes all other sectors such as industrial and consumer goods, hotel and tourist...
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GST is undergoing metamorphosis
There is a surge in GST collections, which has proved sceptics wrong and even surpassed the expectations of the authorities Only a couple of years ago, top officials in the Department of Revenue used to gloat over a collection of GST Rs 150,000 crore if achieved in any given month. They couldn’t even imagine that collection of Rs 150,000 crore consistently every month in a year would ever be possible. But, this happened during 2022-23, when the department garnered a total of Rs 1800,000 crore. During the current year, it is aiming at a target of Rs 2000,000 crore. A major factor behind this is an increase in nominal GDP during 2022-23 by 15.9 per cent (from a tax collection...
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Countering the menace of corruption
Funds siphoned off from welfare schemes, meant for the benefit of the poor, is also an act of corruption and must be dealt with with a heavy hand Setting aside the anticipatory bail granted by the Gujarat High Court to an IRS officer in a corruption case on April 17, 2023, the Supreme Court said “Corruption poses a serious threat to society and must be dealt with an iron hand as it not only leads to abysmal loss to the public exchequer but also tramples upon good governance”. The observation of the top court has catapulted to the centre stage a malady that has afflicted India for generations. The Government of India’s standards of financial propriety lays down that “no...
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Inflation versus growth: RBI’s dilemma
Too much reliance on monetary policy instruments such as a hike in repo rate is of little help Having already increased the repo rate or RR (interest rate at which the Reserve Bank of India lends to banks) by a cumulative 2.5 per cent in the past 11 months, the RBI’s six-member Monetary Policy Committee (MPC) on April 6 voted unanimously to keep it unchanged at 6.5 per cent. However, RBI Governor Shaktikanta Das pledged to hike the RR again if needed, saying the decision to pause was “for this meeting only”. In 2016, the Government put in place an institutionalised framework, the MPC, to formulate monetary policy and determine the key interest rates. It mandated the RBI to fix...
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