Faced with a shortage of capital and a compelling need to boost economic growth, successive governments have taken steps to attract foreign investment. But when the inflow happens to be of Indian money that left our shores in a clandestine manner and is coming back in the garb of foreign capital — ‘rounding tripping’ in common parlance — it raises many eyebrows. Until a few years ago, the extant policy and regulatory environment hugely facilitated ‘rounding tripping’. There was little regulatory oversight on money leaving and there were tax havens ever ready to attract it. The shell companies, set up in those havens by the people to whom the money belonged, would then invest in India, fully leveraging benevolent tax...
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News & Media
Subsidy sops must stop
The very bane of public policy has been the Government’s interference in subsidising goods and services. Subsidies must be replaced with direct cash transfers The Modi Government has revolutionised the way subsidies are disbursed to beneficiaries by leveraging technology, especially the use of direct benefit transfer (DBT) on the Jan Dhan-Aadhaar-Mobile platform. This has made a dent on pilferage, and gargantuan resources, thus saved, are being used for development and enhanced funding of welfare schemes for wider and deeper coverage. But large-scale pilferage still continues. This happens in ways that even escape the radar of our ever alert Prime Minister. At the fundamental level, it can be sourced to the very existence of controls in sectors, such as food, fertilisers,...
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Fertiliser subsidy:policy reforms needed, not tinkering
Considering the crucial role played by fertilisers in increasing food production and the overarching need to make it affordable to farmers, the union government has followed a policy of controlling their maximum retail price (MRP) at a low level, unrelated to the cost of production and distribution. To ensure that production is viable at this price, it gives subsidy to the manufacturer to reimburse the difference between the two. In case of urea, the subsidy varies from unit to unit and is administered under the New Pricing Scheme (NPS) whereas for decontrolled complex fertilisers, a ‘uniform’ subsidy fixed on per nutrient basis is given to all manufacturers under the Nutrient Based Scheme (NBS). Since this is subject to submission of...
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NDA OVER UPA: NUMBERS WILL SPEAK
In terms of economic growth, the NDA has a distinct edge over UPA. This reality cannot be camouflaged by sheer window-dressing of numbers In 2015, the Narendra Modi Government switched over to generate data on growth in GDP at factor cost using 2011-12 as the base year (instead of the extant practice of base year 2004-05). Under this methodology, growth for the first four years of its stint was 7.4 per cent for 2014-15; 8.2 per cent for 2015-16; 7.1 per cent for 2016-17; 6.7 per cent for 2017-18. Meanwhile, a committee on Real Sector Statistics under Sudipto Mundle, set up by the National Statistical Commission (NSC), has come out with data for the past period (new series) using the new base...
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Union govt must stop using RBI as ‘milch cow’
The Union government has invariably rode piggy back on profit-making public sector undertakings (PSUs) and public sector banks (PSBs) to boost its non-tax revenue (using a variety of means such as high dividend/special dividend, divestment of its stake at premium, etc) for the purpose of keeping the fiscal deficit within the set target. However, little is known about a subtle role that the Reserve Bank of India (RBI) plays in helping the central government in its fiscal consolidation drive. It does so by transferring huge surpluses to the centre year after year. During the last three years — 2015-16, 2016-17, 2017-18 — it transferred Rs 65,900 crore, Rs 40,600 crore and Rs 58,000 crore, respectively. Unlike a PSU/PSB, the RBI...
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GST: AN UNFINISHED PROJECT
It’s encouraging that the regime contains provision for the inclusion of petroleum products but it’s harrowing that the Government is reaping benefits without full implementation Replying to a debate in Parliament on July 20, 2018, during the no-confidence motion against his Government, Prime Minister Narendra Modi gave a comprehensive account of the various schemes, reform measures and achievements during the last four years of his stint. A prominent reform measure listed by Modi was the Goods and Services Tax (GST) launched on July 1, 2017. Dwelling on the contentious issue of five hydrocarbon products: Natural gas, crude oil, petrol, diesel and aviation turbine fuel, he opined that under the UPA, these products were excluded under their version of the Constitution (Amendment) Bill,...
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POLL SOPS DERAIL FISCAL CONSOLIDATION
The Government must shun the practice of giving sops through loan-waivers or the country will plunge into a fiscal disaster, inviting miseries for the poor In elections-after-elections, it has become normal for political parties to promise farm loan-waiver in order to swing votes to their favour. Last year, in Uttar Pradesh, loan waiver to small and marginal farmers promised by the Bharatiya Janata Party (BJP) Government was a major factor in catapulting it to power in the State. It cost the State exchequer around Rs 36,000 crore. In Punjab, the Congress won the election on the promise of waiving all outstanding loans to the farmers. Recently, in Karnataka, the coalition Government led by the Janata Dal (Secular) leader, HD Kumaraswamy,...
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THE MYTH AROUND JOBLESSNESS
Contrary to popular belief, the Modi Government has not failed to deliver on job creation. It’s just that we need to get reconciled to the idea of self-employment Prime Minister Modi (allegedly) failed on his pledge to create around 20 million jobs annually. To demonstrate the point, critics have often point to hundreds and thousands of youth submitting applications for a few vacancies of peon/clerk in Government offices. They cite this yawning gap as an indicator of joblessness in the country. The underlying assumption behind this inference is that all those youths who applied for the available vacancies do not have any work at hand or any source of income. Such an assumption is fallacious. Had it been so — millions of...
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RBI has put growth on backburner, yet again
The decision of the Reserve Bank of India (RBI) last month to increase the repo rate or the policy rate (the rate at which the RBI lends money to commercial banks) from 6% to 6.25% has led to widespread disappointment, especially in industry and trade circles. In 2016, the union government had put in place an institutionalised framework, the Monetary Policy Committee (MPC), to formulate monetary policy and determine the key interest rates. The committee consists of six members drawn from different fields, including the RBI governor, who is also the MPC’s chairperson. With this, the process was expected to become more informed and objective — free from the idiosyncrasies of the governor, who had the sole authority under the...
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Fuel price reduction: the ball is in the states’ court
The steep increase in the prices of petrol and diesel, by over Rs 3.5 per litre each, after the assembly elections in Karnataka has yet again built up pressure on the Narendra Modi government to reduce excise duty on fuel. Between November 2014 and January 2016, excise duty on petrol went up from Rs 9.48 per litre to Rs 21.48 per litre; on diesel, the increase was even sharper, from Rs 3.56 per litre to Rs 17.33 a litre. That coincided with a steep decline in the international price of crude oil from $117 per barrel in November 2014 to a low of $27 per barrel in January 2016. Thereafter, crude price moved up gradually to $40 per barrel by...
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