Slowly but surely, India has manoeuvred its way through digital transformation. It must build on this success and the communication revolution to a new level for the creation of a vibrant economy Having missed the first and second industrial revolution of the 19th and early 20th century (courtesy the subjugation of India to colonial rulers of those times) and even the third technology-driven revolution (this one was primarily due to the “protectionist” and “inward-looking” Government policies, which were not conducive to embracing technology), India is at the forefront of leading the fourth industrial revolution — a digitally driven one —with speed and scale. The digital revolution calls for a shift from mechanical and analogue electronic technology to digital electronics, which...
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Category: Savings & Investment
Analyzing growth – slowdown is not structural
During the first five years of Modi – government i.e. 2014-15 to 2018-19, GDP [gross domestic product] grew @7.5% on an average. However, during the first and second quarter of current year, growth has slipped to 5% and 4.5% respectively. Actually, it started moving on a downward trajectory from the third quarter of last year when it was 6.6% followed by 5.8% in the fourth quarter. The average for these 4 quarters [3rd and 4th quarter of 2018-19 and 1st and 2nd quarter of current year] works out to about 5.5%. In comparison with the impressive growth recorded over a 5 year period, this is a significant dip of 2% but can’t be termed by any stretch of imagination as...
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Growth hit by ‘fear’ and ‘distrust’ – really!
In the wake of further deceleration in GDP [gross domestic product] growth to 4.5% during the second quarter ending September 30, 2019 on top of a low of 5% during first quarter ending June 30, 2019, the former Prime Minister, Dr Manmohan Singh has launched a virulent attack on Modi – government squarely blaming the latter for what he terms as ‘disastrous policies’ and creating a palpable climate of ‘fear’ and ‘distrust’ in our society. While, delivering his valedictory address at the national conclave on economy organized by the New Delhi based Rajiv Gandhi Institute for Contemporary Studies, Dr Singh observed:- “There is a palpable climate of fear in our society today. Many industrialists tell me they live in fear...
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Growth remains slack, despite booster doses
The downward revision in the GDP [gross domestic product] estimate for current year by the Reserve Bank of India [RBI] in its latest monetary policy review from the previous estimate of 6.9% [that itself was a significant reduction from the original 7.4%] to 6.1% now confirms the lingering fear of substantial deceleration in the economic activity that started from the second quarter of last year. When, the GDP growth declined to a six year low of 5% during the first quarter of current year, the expectation was that the growth momentum would pick during the 3rd and 4th quarter with the banking regulator projecting growth rate of 6.6% and 7.4% respectively. Now, if RBI itself is forecasting 6.1% for the...
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Booster for corporate India
Much will depend on how the surplus in the hands of companies resulting from tax cuts is apportioned among them and equally importantly, how it is spent In a flurry of announcements made on September 20, 2019 (also described in media circles as a third Union Budget in less than three months), Finance Minister Nirmala Sitharaman handed out a bonanza to the Indian corporate sector. The most pleasing announcement pertains to the steep reduction in the rate of corporate tax for new entities incorporated from October 1, 2019 in the manufacturing sector, that start production before March 31, 2023 from the existing 25 per cent to 15 per cent. After subsuming surcharge and cess, the effective incidence of tax will be lowered...
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FM’s booster dose for corporate India
In a flurry of announcements made on September 20, 2019 [also described in media circles as a third budget in less than three months], the finance minister, Nirmala Sitharaman handed out a bonanza to the Indian corporate sector. The most pleasing announcement pertains to steep reduction in the rate of corporate tax for new entities incorporated from October 1, 2019 in manufacturing sector and start production by March 31, 2023 from existing 25% to 15%. After subsuming surcharge and cess, the effective incidence of tax will be lowered from existing 29.15% to 17.01% – a drop of 12%. Such companies won’t have to pay minimum alternate tax [MAT] [levied on book profit of firms which have no taxable profit courtesy,...
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Rate cut transmission – benchmarking alone won’t help
On September 4, 2019, the Reserve Bank of India [RBI] has made it mandatory for all banks to link new floating-rate loans – to retail customers and micro, small and medium enterprises [MSMEs] – to an external benchmark. The external benchmark could be the repo rate [rate of interest that the apex bank charges on money lent to banks – also known as ‘policy rate’], yields on 3-6 month treasury bills as published by the Financial Benchmarks India Private Ltd [FBIL] or any other benchmark rate published by FBIL. The decision will be applicable to all fresh loans under ‘floating rate’ given from October 1, 2019. Borrowers with a floating rate loan who are eligible to pre-pay without pre-payment charges...
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A tightrope walk
Instead of mobilising funds through overseas sovereign bonds, the Government must focus on making its balance sheet more robust and improve the quality of fiscal discipline In the Union Budget presented on July 5, Finance Minister Nirmala Sitharaman proposed an “overseas sovereign borrowing plan” to partly fund an ambitious investment programme that will involve a mammoth spending of Rs 100,00,000 crore ($ 1.4 trillion) for the building of infrastructure to make India a $ 5 trillion economy by 2024-25. During the current year, the Government intends to raise $ 10 billion from this source. The contours of the plan are expected to be finalised by October. In sync with the character of the many infrastructure projects such as roads, highways/expressways, railways, ports,...
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Change the narrative
Asking the super-rich to pay a little extra is a modest step in reducing inequalities. Instead, the Government must work towards bringing such citizens under a tax net In the Union Budget 2019-20 presented by Finance Minister Nirmala Sitharaman on July 5, the Government levied a new surcharge on individuals, Association of Persons (AOP) and trusts with an annual income between Rs 2 crore and Rs 5 crore from the existing 15 per cent to 25 per cent and on individuals/AOS/trusts with income an income more that Rs 5 crore from the existing 15 per cent to 37 per cent. Post the hike, the effective incidence of tax will be 39 per cent on earners between Rs 2 crore and Rs 5...
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Overseas sovereign borrowing – a double-edged sword
In the Union Budget presented on July 5, 2019, the government has come up with ‘overseas sovereign borrowing plan’ to meet the funding requirements of an ambitious investment program that involves a spend of Rs 100,00,000 crore [US$ 1.4 trillion] over the next 5 years to make India US$ 5 trillion economy by the year 2024-25. During the current year, it is aiming to raise US$ 10 billion from this source. For now, its intent is to go for US$ 3 – 4 billion the contours for which are expected to be finalized by September, 2019. Currently, there is surplus liquidity and benign interest rate environment in the international market [courtesy, the Federal Reserve of the USA keeping interest rate...
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