The Government should take recourse to borrowings only for the creation of long-term assets. This will help generate income streams that can help in servicing the loans Recently, the International Monetary Fund (IMF) has forecast that India’s general government debt – it comprises the debts of the Centre and states – will overshoot 100 per cent of the GDP (gross domestic product) by the financial year (FY) 2027-28. Responding to this, the Ministry of Finance (MoF) clarified that this wasn’t under a ‘baseline scenario’ – a jargon to describe normal economic conditions. It added the IMF was referring to a ‘worst-case scenario’ wherein a global shock would equally affect all countries. Is the government’s debt sustainable? The government’s debt is...
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News & Media
Differentiating welfare schemes from freebies
As election pledges of freebies escalate, Modi Government issues a warning to States at the third National Conference of Chief Secretaries In the third National Conference of Chief Secretaries held in Delhi on 28th and 29th December 2023 under the chairmanship of Prime Minister Shri Narendra Modi, the central government cautioned the states against giving freebies, and goaded them to increase capital expenditure by rationalizing welfare schemes with emphasis on eliminating inefficient subsidies. The Centre’s concern over freebies – an acronym for “something given free of charge” – has heightened because of a volley of these promised by almost all political parties in five state elections held in November 2023. It apprehends that the freebies would drain state coffers, lead...
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Establishing a robust and resilient tax system
The Modi Government has successfully addressed all key aspects to ensure the strength and resilience of the tax system The robustness of the tax regime in a country can be tested by looking at its ability to engineer and sustain an accelerated growth in its GDP (gross domestic product); help the government in garnering tax revenue commensurate to growth in GDP and be ‘progressive’ in as much as it collects more taxes from those who can afford to pay more while imposing less burden on those who can’t. Look at the growth in real GDP which is GDP at constant prices. After a decline of 5.8 percent during 2020-21 caused by Corona – pandemic, growth in real GDP rebounded to...
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All talk no action on fossil fuel phase-out
With no concrete steps to move away from fossil fuels, are countries really serious about net zero commitments? Climate activists protest against fossil fuels at Dubai’s Expo City during the United Nations Climate Change Conference COP28 in Dubai.Credit: Reuters Photo The recently concluded 2023 United Nations Conference of the Parties (CoP28) in Dubai has pledged to “transition away from fossil fuels in energy systems in a just, orderly, and equitable manner, accelerating action in this critical decade, to achieve net zero by 2050 in keeping with science.” ‘Net zero’ refers to a scenario in which the emission of greenhouse gases (GHGs) into the atmosphere equals their removal. In the past, indiscriminate and excessive use of fossil fuels, a generic term...
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The Centre has no control over subsidies
The biggest drawback with the current system of food subsidy is making it available at throwaway prices. It allures dubious players who buy it cheap and sell it at higher prices The Union government’s total expenditure on the three major subsidies – fertiliser, food and cooking gas – during the current financial year (FY) is likely to be around Rs 400,000 crore as against Rs 549,000 crore spent during FY 2022-23. From this, it might appear that the government has made serious efforts to trim the subsidy. But, looking at the situation on ground zero, this isn’t so. The subsidy on each tonne of fertiliser produced (or imported) and sold is the excess of the cost of production/import and distribution...
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New mechanism to ensure utilisation of funds
The new mechanism would regulate the release of funds to the states and track their use, thereby preventing idling The Union government executes a plethora of welfare programs aimed at providing basic and necessary amenities and upliftment of the most disadvantaged members of society. It does so mainly through “Central Schemes” (CS) which are fully funded and implemented by it. A total of 740 CS schemes are currently under implementation. During FY2022-23, the CS spending was Rs 1208,000 crore In addition, there are “Centrally Sponsored Schemes” (CSS) designed to supplement the efforts of the states in achieving various socioeconomic goals and implementing national priorities. These are funded by the central government and the states in varying proportions viz. 90:10, 60:40,...
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AAP pushing discoms into crisis
The AAP government’s decision to supply subsidised power in Delhi is adversely affecting the financial health of discoms Since the financial year (FY) 2019-20, the AAP government in Delhi led by Arvind Kejriwal has been subsidising the distribution of electricity to household (HHs) consumers. Whereas, HHs consuming up to 200 units per month are fully exempt from paying any charges, those with consumption between 201-400 units per month get 50 per cent of the bill amount as a subsidy subject to a cap of Rs 800. During FY 2019-20, the government spent Rs 2405 crore on subsidizing these consumers. The expenditure increased to Rs 2940 crore during FY 2020-21. It further increased to Rs 3090 crore during FY 2021-22. In...
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MSP guarantee is bad economics
Yet, political parties give because it helps them win elections. MSP representative image. Credit: DH File Photo In the recently concluded state assembly elections, among the various guarantees made by the BJP—Modi’s guarantees—a significant commitment is a hefty increase in the minimum support price (MSP) for paddy and wheat offered to farmers in Madhya Pradesh and Chhattisgarh. In MP, the party promised an MSP of Rs 3,100 per quintal for paddy, a 42% increase from the current Rs 2,183 per quintal fixed by the Centre. For wheat, the promised MSP is Rs 2,700 per quintal, a 27% rise from the existing Rs 2,125 per quintal. In Chhattisgarh, a commitment was made to procure paddy at an MSP of Rs 3,100...
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COP28: High on rhetoric, less on action
The COP 28 offers no credible action. On meeting the ‘funding gap’, save a token amount for Loss and Damage Fund (LaDF), there was nothing to show The just concluded 2023 United Nations Conference of the Parties (COP28), in Dubai, has pledged to “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, to achieve net zero by 2050 in keeping with the science”. The ‘net zero’ refers to a scenario wherein the emission of greenhouse gases (GHGs) into the atmosphere equals their removal. Historically ‘indiscriminate’ and ‘excessive’ use of fossil fuels – a generic term for major fuels such as coal, oil and natural gas – mostly by...
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FDI in export–linked e-tailing is a bad idea
When the government expects the foreign companies to do almost everything that a retailer do, how can the former deny the latter the right to sell The government is considering allowing foreign direct investment (FDI) in inventory-based models of e-commerce, subject to the rider that these will be solely aimed at export markets. A comprehensive policy on FDI in e-commerce has been under deliberation since 2018. In fact, during discussions with representatives of e-commerce firms and a domestic traders’ body viz. Confederation of All India Traders (CAIT) held on August 2, 2023, the Department for Promotion of Industry and Internal Trade (DPIIT) in the Ministry of Commerce and Industry made a presentation on the ‘fundamentals’ of the proposed e-commerce policy....
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