If the FD range gets embedded in the FRBM Act, it will give sanction to slippages. It will defeat the purpose of fixing a target, which is to obligate the Govt to keep expenses in check The Finance Ministry is building pressure on the 15th Finance Commission (15th FC) to allow greater flexibility while fixing the fiscal deficit (FD). It wants to adopt a flexible, range-bound FD target instead of a fixed number. With this aim in mind, the Modi Government is reviewing the Fiscal Responsibility and Budget Management (FRBM) Act. The issue was discussed at the Economic Advisory Council (EAC) of the 15th FC, wherein the chairman, NK Singh, cited a similar practice followed by the Reserve Bank of India’s (RBI)...
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Category: Pioneer
A step in the right direction
It is good that the RBI has kept the repo and reverse repo rates unchanged or else in the current economic scenario any further cut would have been infructuous In the last bi-monthly Monetary Policy Committee’s (MPC) review announced by its Governor Shaktikanta Das on August 6, the Reserve Bank of India (RBI) had kept the policy repo rate unchanged at four per cent. It had also kept the reverse repo rate or the interest rate the banks get on their surplus funds parked with the RBI unchanged at 3.35 per cent. It continued with the “accommodative” stance of the monetary policy as long as necessary to revive growth and mitigate the impact of Covid-19, while ensuring that inflation remains within the...
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A taxing question
As pointed out by the nation’s top auditor, there are irregularities galore in the management of the various cesses as they have been appropriated to manage deficits Reining in the fiscal deficit has always been a challenge for the Centre especially after the enactment of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, which requires it to maintain the shortfall within a specified threshold. At the same time, there are certain thrust areas, such as education, roads and other infrastructure, telecommunication networks in rural areas, exploration of oil, gas and so on, which the Government feels won’t get the desired funds in the normal course of budgeting. This led to successive dispensations to think of a special tax or...
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A mixed bag
The labour law reforms are being bandied about as the most crucial second generation amendments that will make it easier to do business but must not compromise workers The Narendra Modi Government recently passed three Bills on labour reforms enshrined in three labour codes, namely The Industrial Relations Code, 2020, The Occupational Safety, Health and Working Conditions Code, 2020 and The Code on Social Security, 2020. Along with The Code on Wages, 2019, passed by the Parliament last year, these four labour law reforms are being bandied about as the most crucial second generation amendments that will make it easier to do business, improve the competitiveness of the Indian industry, make it a manufacturing hub and pursue the “Make in...
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Don’t bank on banks
There’s no pressing need for a firm hit by the crisis to rush to banks for relief. To enjoy the fruits when the going is good and come to the bank or Govt for help when in crisis is unacceptable On March 27 the Reserve Bank of India (RBI) Governor, Shaktikanta Das, announced a comprehensive action plan to resuscitate the economy devastated by the Coronavirus. Apart from measures to increase availability of credit and reduction in the cost of capital, the plan sought to ease the stress of loan repayments on businesses and individuals. Among others, this included a three-month moratorium on payment of instalments in respect of all term loans outstanding on March 31. On May 22, Das announced extension of...
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Open doors for trade
The Govt should shed its current protectionism. Instead, it should go for an open trade policy by slashing import duties and eliminating non-tariff barriers While presenting the Union Budget for 2020-21, Finance Minister Nirmala Sitharaman had renewed the commitment of the Modi Government to “Make in India.” She saw this as the most crucial component of the strategy to make India a $5 trillion economy by 2024-25. To achieve this, she targetted doubling of exports from the current over $500 billion to $1 trillion (that includes an increase in farm exports from $40 billion to $100 billion). Faced with a whopping contraction in the Gross Domestic Product (GDP) by close to 25 per cent during the first quarter, a continuing...
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The GST quagmire
The Centre and States must try to fix all void in GST implementation to achieve buoyancy in tax revenue, thereby obviating the need for continuing with the compensation mechanism Faced with a dwindling tax revenue since the last financial year of 2019-20, the issue of “full” and “timely” compensation for the shortfall in States’ tax revenue (their own collection plus the amount received as their share in indirect tax collected by the Centre as per the Finance Commission’s devolution formula) vis-à-vis a given benchmark, has been a bone of contention between the Centre and the States. It has acquired gargantuan dimensions during the current year with the Coronavirus pandemic forcing a collapse of businesses, cutting across almost all sectors (barring...
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Bite the BIC bullet
The ailments afflicting PSBs won’t go away so long as majority ownership and control remain with the Government. There is a dire need to unshackle them and grant autonomy to the management The Reserve Bank of India (RBI) has recommended to the Centre a reduction in shareholding of the latter in six top Public Sector Banks (PSBs), namely the State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, Union Bank of India (UBI) and Bank of India (BOI) to 51 per cent in the next 12-18 months. At a recent meeting with the Ministry of Finance (MOF), the RBI had argued for reduction in stake to 26 per cent. But, observing that this might...
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Snap the stranglehold
The only way to avoid delay and expedite the process of privatisation of Central PSUs is to unshackle them from bureaucratic red tape Finance Minister Nirmala Sitharaman has announced the broad contours of the Narendra Modi Government’s plans on privatisation of Central Public Sector Undertakings (CPSUs). A CPSU is defined as an undertaking in which the Union Government has shareholding of more than 50 per cent and by virtue of this, exercises majority ownership and control (there were 249 operating CPSUs as on March 31, 2019). Its privatisation means the shareholding of the Centre will be brought down to below 50 per cent. Before we look at the plan and how the Government goes about implementing it, it may be worthwhile to...
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Time to be honest
Modi has done everything to make life easier for the taxpayer. Now, it is for the latter — especially those who have not been paying taxes as currently only 1.5 crore of 130 crore Indians comply — to reciprocate Dubbed as a transformative tax reform, on August 13 Prime Minister Narendra Modi launched a ‘Transparent Taxation: Honouring The Honest’ platform via video-conferencing. The main aim of this reform was best captured in the following statement by Modi, “Honest taxpayers play a crucial role in national development. When the life of an honest taxpayer is simplified, he progresses, which leads to the progress of the nation too.” The resources garnered by collecting cess from the people, who regularly pay their taxes, are the...
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