Modi Government unveils unified pension scheme to bridge old and new, aiming to satisfy Central and State employees On August 24, 2024, the Union government announced the new Unified Pension Scheme (UPS) for central government employees. In fact, what looked like a well-orchestrated action plan, on the following day the BJP-led government in Maharashtra approved the implementation of the Scheme for its employees. Madhya Pradesh government is likely to implement the UPS soon. The above announcements are in response to the earlier decisions of Opposition-ruled States, including Rajasthan, Chhattisgarh (before the November 2023 elections), Jharkhand, Himachal Pradesh (HP) and Punjab to revert to the old pension system (OPS) which it felt tilted the electoral pendulum towards those parties, particularly in...
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Category: Pioneer
E-commerce giants versus mom-and-pop stores
Amazon’s aggressive pricing strategies could lead to a massive e-commerce expansion, capturing half of India’s retail market within the next decade At the launch of the Pahle India Foundation’s report ‘Net Impact of E-Commerce on Employment and Consumer Welfare in India’ on August 21, 2024, Union Commerce and Industry Minister Piyush Goyal took pot shot at the world’s biggest e-tailer Amazon, for selling products directly to consumers and indulging in “predatory pricing” that could lead to massive growth of e-commerce capturing half of Indian retail market ten years from now. This would adversely impact an estimated 100 million small retailers across the country and in turn, lead to “social disruption”. E-commerce, put simply, is the practice of buying and selling...
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Prospects of privatisation of PSUs are bleak
As the Modi government shifts its strategy towards ‘prudent public wealth management’ the prospect of privatising PSBs are increasingly unlikely. Announcing Modi – government’s policy on disinvestment of central public sector undertakings (CPSUs) in her Budget speech for FY 2021-22 the Union Finance Minister, Nirmala Sitharaman had talked of privatizing two public sector banks (PSBs) and one insurance company. A CPSU is an undertaking in which the Central government has majority share holding of more than 50 percent. Disinvestment refers to sale of its shares to private investors. When, such sale results in reduction of the government’s shareholding in the CPSU to below 50 percent and concomitant transfer of ownership and management control to private entity, this is termed as...
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Gas pricing: Reforms turn into a control regime
Government’s decision to grant a 20 per cent premium on natural gas from the state owned new wells has added complexity to the gas pricing regime The decision of the Union Government to grant a 20 per cent premium over the APM price (a jargon for administered or controlled price) for any natural gas (NG) that state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) will produce from the ‘new wells or well interventions’ from their nominated fields has made the NG pricing more complicated. It is an outcome of a thought process that focuses on unshackling the oil and gas industry from price controls to start with but ends up exercising more controls. Every year, India...
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Populism will not let food subsidy reforms take off
Leakages can be curbed if the subsidy is given directly to the beneficiaries using ‘direct benefit transfer’ mode. The potential for reducing food subsidies is immense In the full Budget presented by Union Finance Minister Nirmala Sitharaman on July 23, 2024, the government has pegged the budget estimate (BE) food subsidy for FY 2024-25 at Rs 205,250 crore which is no different from the estimate given in the interim Budget. Though slightly lower than the revised estimate (RE) of Rs 211,394 crores for FY 2023-24, this is no consolation as invariably, the RE for any financial year turns out to be higher than the BE. For instance, while presenting the budget for FY 2023-24, Sitharaman kept the BE for food...
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Need for rationalising taxes on fertilisers
The GST Council, responsible for tax rate decisions has yet to resolve the tax discrepancies despite multiple discussions and recommendations For over five years now, the fertilizer industry has been facing an ‘inverted duty structure’. Inverted duty structure refers to a situation in which raw materials (RMs) are taxed at a higher rate than finished products in whose manufacture these are used. But, there was little that the Budget presented by the Union Finance Minister (UFM) Nirmala Sitharaman on July 23, 2024, could do to address it. Fertilizers and RMs used in their making are mostly taxed under the GST (Goods and Services Tax) regime. The GST Council – headed by the UFM that includes finance ministers from all States...
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Reforming the personal income tax regime
In the Budget for 2024-25, Finance Minister has made the ‘new regime’ of personal income tax more appealing, while continuing to rationalise the capital gains tax structure In the Union Budget for 2024-25, Finance Minister Nirmala Sitharaman has endeavoured to make the ‘new regime’ of personal income tax (PIT) a bit more attractive besides continuing the process of ‘rationalising’ and ‘simplifying’ the structure of capital gains tax (CGT) that was started in her budget for FY 2023-24. Sitharaman had introduced the new PIT regime in the Budget for 2020-21. Even while retaining a 5 per cent tax for annual income in the Rs 250,001-Rs 500,000 range (as under the old regime before 2020-21), on income higher than Rs 500,000, the...
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Budget is pro-growth but stability concern remains
Major expenditure items may go out of control, raising concerns about the budget’s feasibility; moreover, the Government’s gross tax revenue target of Rs 38.40 lakh crore is overly ambitious On top of a GDP (gross domestic product) growth of 8 per cent plus for three consecutive years, the Union Budget for FY 2024-25 presented by Finance Minister Nirmala Sitharaman on July 23, 2024, has all the ingredients to sustain the momentum during the current year as well. For the current year, she has proposed capital expenditure at Rs 1111,111 crore, which is 17 per cent higher than the revised estimate (RE) for FY 2023-24.In her Budget for 2019-20, she had laid a roadmap for catapulting the Indian economy to US$5...
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Income tax amendment promises relief for MSMEs
The biggest problem faced by small enterprises is delayed payment of their dues by large enterprises as it results in a shortage of working capital severely impacting their production An amendment to the Income Tax Act, introduced through Finance Act 2023, and effective from April 1, 2024 stops businesses from claiming tax deductions for payments beyond 45 days to the Micro, Small and Medium Enterprises (MSMEs) for supply of goods and services has caused much consternation. The MSMEs are ancillary units engaged in the production, manufacturing and processing of goods and commodities (mostly intermediate goods) which are supplied to large enterprises or master units. These units operate on a small scale and are further categorized into micro, small and medium enterprises...
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India narrowly escapes fiscal catastrophe
India needs to strengthen its economic health with sustainable fiscal policies for long-term stability; state guarantees only put it in a perilous situation After the Lok Sabha elections 2024 on June 4, the Center narrowly escaped plunging into a state of ‘fiscal catastrophe’. Even as Modi–-led BJP failed to secure an absolute majority on its own, it garnered the support of 293 MPs including 53 from its allies under the National Democratic Alliance (NDA) and formed the Government. On the other hand, the I.N.D.I.A bloc led by the grand old party (GOP) namely Congress cobbled up a total of 234 MPs. A swing of just 38 from NDA to I.N.D.I.A bloc could have enabled the latter to catapult itself to...
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