After a protracted wait, India has got a Prime Minister who has risen from the ranks and hails from the majority of the poor. The other redeeming feature is that PM Narendra Modi leads a party that has an absolute majority in the Lok Sabha. This makes a happy combination. It ensures that every policy decision taken by the present dispensation is guided by the overriding concerns of the poor and the common man of India and seeks to benefit them. At the same time, the absolute majority of the ruling party ensures that people-friendly legislations (for instance, the Bill giving statutory backing to the Aadhaar card) have a smooth passage in the House. Demonetisation, announced on November 8, 2016,...
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News & Media
Viewpoint: Expedite subsidy reforms
By Uttam Gupta, New Delhi 05/01/2017 After protracted wrangling, members of the Organization for Petroleum Exporting Countries (OPEC) agreed on November 30, 2016 to reduce their combined output by 1.2 million barrels a day. Likewise, 11 non-OPEC countries led by Russia decided on December 10, 2016 to knock off over 550,000 barrels from their supplies. The agreement is effective from January 1, 2017. These developments need to be viewed in the backdrop of a steep drop in the price of crude from its peak of US$ 114 per barrel in mid-2014 to US$ 27 per barrel in February, 2016 and had recovered only marginally to US$ 40 per barrel by November-end. The price of LNG which follows the trend in...
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Rajan’s legacy continues
Much like his predecessor, RBI Governor Urjit Patel too sees interest rate as a potent instrument of reining in inflation. In the first monetary policy review under the Monetary Policy Committee (MPC) dispensation announced on October 4, 2016, Reserve Bank of India Governor Urjit Patel had reduced the policy rate (interest rate at which RBI lends money to commercial banks) by 0.25%. He had then maintained an ‘accommodative’ policy stance thereby alluding to apex bank intent for reducing it further. However, in the second policy review announced on December 7, Patel has dashed this hope by keeping the repo rate unchanged. Concurrently, he has also revised downwards its earlier estimate of GDP for 2016-17 from 7.6% to 7.1% now factoring...
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Can India survive Trump bombshell?
The election of Republican Party candidate Donald Trump as the next President of the US has sent shock waves across the world. All along, America has been a strong protagonist of free flow of international trade and investment in goods and services. If Trump acts on his electoral pronouncements, this will tantamount to a reversal of the existing US policy stance. It will herald an era of “protectionism”. So what are the major areas of concern for India? President-elect Donald Trump wants American companies to operate from within the US and achieve this aim by imposing an import tariff of 35% on those who set up manufacturing facilities in other countries. Such a high tariff will seriously impact India where...
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SHEDDING TEARS FOR THE WRONG ‘VICTIMS’
A great deal of misinformation is being spread by vested interests to demonise demonetisation. Positive results of the Government’s courageous move will be seen soon A couple of days ago, Revenue Secretary Hasmukh Adhia had alluded to a good chunk of over Rs15,00,000 crore cash embodied in Rs1,000/500 notes (these were declared invalid by Prime Minister, Narendra Modi from November 8-9 midnight) coming back to the banking system. This was interpreted to mean that the ‘entire’ cash would return by December 30, when the scheme closes. Extrapolating from here, critics (opposition parties included) argue that demonetisation has been a monumental failure as there was either no black money, or that whatever existed, hoarders managed to get this converted into ‘white’....
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Taxing times: judiciary slower than bureaucracy
Giving its verdict on a bunch of petition challenging levy of ‘entry tax’ by states, a nine judge constitution bench of Supreme Court recently upheld its constitutional validity. It directed that individual cases will be decided by the regular benches concerned keeping in mind laws of the respective states. Even as regular benches take their own sweet time to conclude proceedings, the affected companies may get breather for a while to actually pay up. But, ‘Damocles sword’ hangs! The total liability on the companies – mostly in infrastructure and energy sectors which resort to large-scale transportation of goods in bulk across states – is about Rs 30,000 crore plus interest which itself would be a humongous amount considering that these...
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Keep gas pricing formula-driven
On October 1, 2016, the Indian Government reduced the price of domestic gas by 18% to US$ 2.78 per million British thermal units [mBtu] on a net calorific value [NCV] basis. The public sector Oil and Natural Gas Corporation and Oil India Limited raised a hue and cry saying this is even lower than their cost of production at US$ 3.59 per mBtu/US$ 3.06 per mBtu. They want a “floor” below which the price should not be allowed to go. Their demand is flawed. Under the guidelines for domestic gas pricing in vogue since November 1, 2014, the price of this gas was based on a weighted average of prices at four global locations viz., Henry Hub [USA], NBP [National...
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IDEA IS GRAND, BUT WILL IT WORK WELL?
Running a pilot project on DBT for fertiliser by itself does not ensure that the scheme will actually be launched. Moreover, the project is deeply flawed Alluding to direct benefit transfer (DBT) of fertiliser subsidy, in his Budget speech for 2016-17, Union Minister for Finance Arun Jaitley had stated: “We have already introduced DBT in LPG. Based on this successful experience, we propose to introduce DBT on pilot basis, for fertiliser in a few districts in the country, with a view to improving quality of service delivery to the farmers.” The focus on DBT links with a revelation made in the Economic Survey (2015-16). It stated that “24 per cent of the fertiliser subsidy is spent on inefficient producers, 41...
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Neem-coated urea: Why is Narendra Modi govt waiting for 5 years to make India self-sufficient in fertilisers?
Addressing the 9th Global Agriculture Leadership Summit on September 8, 2016, chemicals and fertiliser minister, Ananth Kumar proclaimed that neem-coating of all urea supplies meant for use by farmers has resulted in elimination of diversion to chemical industries and smuggling to neighbouring countries. If, the claim is true, it will have a profound impact on the larger picture of demand-supply balance, self-sufficiency in fertilisers, dependence on import, subsidy pay-out, demand for hydrocarbons especially gas and impact on the environment. The total consumption of urea is about 30 million tonnes annually, including 22 million tonnes indigenous and 8 million tonnes of imported product. Since, all of this is sold by manufacturers/importers at a low ‘controlled’ price, excess of cost of production/import...
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Crippled at Bombay House
GOOD CORPORATE GOVERNANCE The revelations made by Cyrus Mistry, ex-Chairman, Tata Sons (letter dated October 25, 2016) immediately following his dismissal point towards a new low in corporate governance in India. If it can happen in one of India’s leading conglomerates which has a turnover of close to Rs 7,00,000 crores, market capitalisation of Rs 8,50,000 crores, operations in more than 100 countries and has about 7,00,000 employees on its rolls, this speaks volumes about the extent of degeneration that has set in corporate board rooms. What is so disconcerting about the recent events at Bombay House? The most worrying point is the brazen muscle-flexing by Tata family-owned trusts (they have 66% share in Tata Sons) which reduced its head...
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