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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Category: Welfare schemes
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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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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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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A mixed bag
While some of the relief measures announced by the FM are just financial jugglery, the remaining items offer some concrete benefits to the poor In his address to the nation on March 19, Prime Minister Narendra Modi announced the setting up of an Economic Response Task Force (ERTF) under the Union Finance Minister (FM), Nirmala Sitharaman to come up with a package of measures to alleviate the problems faced by industries, sectors, businesses and workers due to the economic disruption caused by Covid-19. The most seriously affected sectors, such as aviation, transport, hospitality, tourism, retail, micro, small and medium enterprises (MSMEs), are looking for a host of concessions such as additional interest subvention (for instance, MSMEs are demanding three-five per...
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Fiscal burden of Corona
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 the Finance Minister [FM], Nirmala Sitharaman on March 24 and 26, 2020 and the third by the Governor, Reserve Bank of India [RBI], Shaktikanta Das on March 27, 2020. On March 24, 2020, FM announced reliefs for the 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...
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Corona attack on Union’s fragile finances
In his address to the nation on March 19, 2020, Prime Minister, Narendra Modi announced the setting up of an Economic Response Task Force [ERTF] under the union finance minister, Nirmala Sitharaman to come up with a package of measures to alleviate the problems industries, sectors, businesses and workers are facing due to the economic disruption caused by Covid – 19. The nerve shattering Covid – 19 has come at a time when the union government is facing a huge shortfall of about Rs 200,000 crore in the tax collection vis-à-vis even the revised estimate [RE] of Rs 1400,000 crore for 2019-20 [when compared to budget estimate, the shortfall is much higher at Rs 400,000 crore] and staring at substantial...
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Reduce the income gap
The solution doesn’t lie in more sops, fiscal incentives and so on. There is need for change in the way our industrialists do business and netas and babus conduct themselves Successive Governments have remained obsessed with accelerating economic growth without caring about how it impacts income distribution, forget any attempt to internalise this crucial aspect in development strategies. They believe that the fruits of growth will automatically percolate to the lowest strata of society. Nothing could be farther from the truth. This is evident from a piece of research, Time to Care, released by rights group Oxfam ahead of the 50th Annual Meeting of the World Economic Forum (WEF) held in Davos (Switzerland) from January 21-24. According to the study, India’s richest one...
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Freebies: Why it is a road to fiscal disaster
Freebies provided by state governments need to consider the fiscal burden they will lead to, and must not be used to woo voters. AK has literally mesmerised Delhi voters by promising free/heavily subsidised electricity—24×7—and free water. —————————————————- In the just concluded elections in Delhi, the electorate has returned Arvind Kejriwal (AK) to the coveted position of chief minister with a thumping majority with Aam Aadmi Party (AAP), winning 62 out of a total of 70 assembly seats. AK has literally mesmerised Delhi voters by promising free/heavily subsidised electricity—24×7—and free water, besides several add-ons such as free bus ride for women, free Wi-Fi, full reimbursement of hospitalisation expenses in case of accident on an actuals basis, free testing and diagnostic services—if the facility is...
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Freebies – road to fiscal disaster
In the just concluded elections in Delhi, the electorate has returned Arvind Kejriwal [AK] to the coveted position of Chief Minister with a thumping majority [Aam Aadmi Party (AAP) won 62 out of a total of 70 assembly seats even as its dominant rival BJP secured a mere 8; the third main contestant in the fray Congress got none]. Kejriwal claims that this is a vindication of the ‘development model’ pursued by him during the last 5 years since February 2015. He vows to pursue this in Delhi during the next 5 years and has crafted plans to leverage it for establishing the footprint of AAP in other states. What precisely is the model? Will the states be able to...
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