Prime minister, N Modi was romped to the seat of power on the promise of fulfilling the aspirations of 1.25 billion people of India. Those aspirations include rooting out corruption, inclusive development, jobs for all, house for all, electricity for all homes, toilet in every home, subsidized gas for all poor households, road connectivity for all habitats, model villages, smart cities, to name a few. True to his promise, he started in all earnestness implementing policies and programs to achieve these highly ambitious goals. His deliverable so far are a matter of tremendous relief and bolster confidence of the public at large about his ability to reach the goal post. It is worth mentioning some of these here. 220 million...
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Category: Regulatory environment
GST rate – “ring-fencing” could be fatal
If, there is one reform step that has been held hostage to sheer political maneuvering, it is the Goods and Services Tax [GST]. The most vociferous opponent now happens to be a party which had contemplated this idea more than a decade ago and even introduced a bill in the parliament [2009] to garner the full benefits of this ‘trans-formative’ reform [it will add 2% to GDP, according to an estimate]. Having raised a number of contentious issues, the grand old party is in no mood to relent on its most trumpeted demand for putting a cap on GST rate in the constitution amendment bill itself. Pertinently, it mooted the cap at 18% [being the revenue neutral rate [RNR] determined...
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Concurrent elections – good for economic reforms
In a recent interview given to a private channel, the prime minister, N Modi gave his full endorsement to the idea of holding elections to the Lok Sabha and all state assemblies simultaneously. However, he opined that the necessary initiative in this regard should come from the Election Commission [EC]. Meanwhile, EC has already submitted its views and a group of ministers [GOM] has been put on the job. The founding fathers of the Constitution too had contemplated simultaneous elections and things were on right track till mid-60, when the apple-cart was disturbed due to ‘premature’ dissolution of some state assemblies [1968/1969] and Lok Sabha [1970]. Over time, the mis-match has only got aggravated with dissolution of many more assemblies....
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Strategic divestment of PSUs – seize the moment
In its previous incarnation under Vajpayee, the BJP-led NDA [National Democratic Alliance] during 1998-2004 had vigorously pursued “strategic” disinvestment of Union government’s shares in public sector undertakings [PSUs], some of the high profile cases being Modern Food Limited [MFL], Maruti Udyog Limited [MUL], Hindustan Zinc Limited [HZL], Bharat Aluminium Company [BALCO] etc. The UPA – government which took charge in 2004 abandoned this route even as it sold shares in small lots with the sole aim of garnering resources to meet fiscal deficit target. The present NDA – regime under Modi may have resurrected the idea as would be evident from a provision of Rs 28,500 crores in the budget for 2015-16 as proceeds from strategic route out of total...
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Soft on borrowers
STRESSED ASSETS SCHEME : A close look at the scheme reveals that this is nothing but skulduggery and playing with jargons to make it look robust. Even as the Reserve Bank of India (RBI) has become increasingly tough with public sector banks ordering them to clean up their balance sheets by March 2017, it continues to treat the defaulting borrowers (who were responsible for their proliferating non-performing assets in the first place) with kid gloves. First, it was a scheme nick-named 5/25 introduced in December 2014, under which maturity of loans given to infrastructure companies could be extended up to 25 years. Six months later, this was followed by a scheme for “Strategic Debt Restructuring” (SDR). Under SDR, banks can...
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Stressed assets scheme – soft on borrowers, harsh on lenders
If, there is any sector that is under maximum stress today it is banking. And, the sole reason for this is monumental loans given in the past that turned in to non-performing assets [NPAs]. For public sector banks [PSBs], these are Rs 476,000 crores on March, 2016 [up from Rs 267,000 crores on March, 2015]. In the past, their managements suffered from inertia of two types; first, they won’t recognize the existence of the problem and second, despite recognition they would do nothing to solve it. Raghuram Rajan – the tough governor, Reserve Bank of India [RBI] forced them to clean up their balance sheets. As a result, some 20 banks who would have otherwise made a profit of Rs...
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Local sourcing – license raj through back-door
In the context of the raging debate over relaxing local sourcing norms for 100% foreign direct investment [FDI] in single-brand retail, finance minister, Arun Jaitely [he is the controlling authority for Foreign Investment Promotion Board (FIPB) which approves proposals for FDI] observed that India cannot be turned in to a ground for proliferation of trading activities. The strident observation came in response to intense lobbying by commerce minister, Nirmala Sitharaman for dropping of 30% local sourcing requirement for setting up of retail shop by Apple for selling its hand-sets [i-phones, i-pads etc] directly to customers. She was relying on recent amendment in policy guidelines which provided for such exemption in case of high-tech items. The exemption was justified on the...
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Time to shut door to P-notes
Close on the heels of revising the India-Mauritius DTAA [double taxation avoidance agreement] which will completely eliminate tax arbitrage opportunities from April, 2019 and hence, the incentive for routing of Indian money through that tax haven jurisdiction, Modi – government has taken the fight against black money and rounding tripping to the next higher level. The Securities and Exchange Board of India [SEBI] – national regulator for investment in shares and other securities issued by Indian companies – has drastically amended the norms for foreign investment via offshore derivative instruments [ODIs] or Participatory notes/P-notes [as these are known in common parlance] which have been used a major conduit for reverse flow of Indian black money as well as other forms...
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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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FDI in retail – shun policy flip-flop
In Union Budget for 2016-17, finance minister, Arun Jaitley announced that “100% foreign direct investment [FDI] would be allowed through FIPB [foreign investment promotion board] route in marketing of food products produced and manufactured in India.” While, the detailed policy guidelines in this regard are yet to be notified [currently, inter-ministerial consultations are in progress and the entire exercise leading to approval by Union Cabinet may take a few months], Jaitely’s announcement in the budget speech is a clear pointer to Modi – dispensation permitting FDI in multi-brand food retail. In 2012, during a heated debate in Parliament, BJP members had vociferously opposed the proposal of then UPA government to allow FDI in multi-brand retail citing threat to millions of...
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