Tag: budget 2019

Budget 2020: These are the positive and negative takeaways

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The finance minister read out the longest-ever budget speech. By the end of it she was too exhausted to even complete the speech. This pretty much explains the state of affairs.

Like a caged canary aspiring to fly in the blue sky, the finance minister very enthusiastically read out the vision for new modern India. However, after two hours of aspirational efforts, it was clear that she does not have enough strength to break the shackles and release herself. In the end, she was settled in the cage, totally exhausted and her wings ruffled.

The positive takeaway from the budget statement is that the aspirations are really high and the vision of new modern India is very clear. The government for the first time made an unambiguous admission that the way forward is a progressive socio-economic structure that is egalitarian but encourages and supports private enterprise. It is a major achievement to officially abandon the socialist legacy that focused on curbing demand rather than enhancing supply and hindered the seamless integration of the Indian economy in the global economy.

Positive takeaways

The following thoughts in budget speech indicate that some significant structural reforms could be implemented in the next few years. These reforms with stabilisation of the already implemented changes like GST, IBC and simplified corporate tax structure could help in propelling the growth to the desired level:

• Private participation in LIC, railways, and public sector banks;
• Corporate farming through long term leases to improve the productivity and profitability of the farm sector;
• A comprehensive vision for integrated rural development;
• Healthcare in PPP mode;
• Admitting commercialisation needed in the education and training sector, and permitting FDI and ECBs; an admission that education in humanities stream is mostly unproductive; and allowing online degree courses;
• The exploitation of idle farm and railway land for solar energy production;
• Unleashing power sector to grow like the telecom sector did in past 15 years — prepaid metering and portability of service provider;
• Acknowledging the needs for modern businesses and society — local data storage, investment in modern technologies likes analytics, machine learning, robotics, bio-informatics and Artificial Intelligence, ensuring high-quality standards; world-class logistics, etc.;
• Focusing on the strengths of India — iconic heritage centres; preparing teachers and healthcare workers for the global communities; preparing Indian universities for global students;
• Increasing the age of marriage and motherhood for women.

Negative takeaways

The incongruence between the intent (Part 1) and action (Part 2) is the key negative in the budget. For example, consider the following:

• The tax structure for individual taxpayers has been made more complicated, contrary to the promise of simplification.
• It’s the sixth straight budget that talks about eliminating tax terrorism. The finance ministers admit year after year that tax terrorism is a reality and it is hindering growth. So far there is little delivery on the promise of eliminating this undue harassment of taxpayers. Rather each new promise further erodes the credibility of the government.
• The allocation of resources to critical sectors like health, education, rural development is not commensurate with the statement of intent made in the first part of the budget speech.
• The reluctance to temporarily suspend FRBM application is perplexing. The resource constraint is too conspicuous. The benefits of additional spending on the reforms agenda are well defined. The benefits of violating FRBM targets, if the reform agenda as outlined in Economic Survey and Budget speech is religiously implemented, would outweigh the cost in the short term.
• The economy wanted more money in consumers’ hands. The method minister has chosen to discourage savings by opting for the new personal tax rate structure. This may not be the best way of promoting consumption.
• The removal of dividend distribution tax shall result in materially higher taxation for the investors. This is contrary to the intent.

Overall ranking — 6/10

I would rate the budget 6 on a scale of 10 for one simple reason, viz., it is for the first time that the government has officially recognised the need to move away from the socialist charter adopted in 1950-1980 era. It has shown willingness to adopt successful global practices in the socio-economic matters.

However, implementing the agenda would be a challenge because it will require much wider political consensus and far greater resource mobilisation. The track record of the incumbent government on both these fronts so far has been quite poor.

Vijay Kumar Gaba explores the treasure you know as India, and shares his experiences and observations about social, economic and cultural events and conditions. He contributes his pennies to the society as Director, Equal India Foundation. The views are personal. 

Read his columns here.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Budget 2019 highlights: All key announcements that FM Nirmala Sitharaman made last year

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Finance minister Nirmala Sitharaman is all set to announce Union Budget 2020 — her second — on February 1. Sitharaman, India’s first full-time female finance minister, presented her maiden budget on July 5 last year amid increasing economic challenges including slowing growth, high unemployment, declining savings and a slump in consumption. The July 5 budget was also the first of the new Modi government after the BJP-led NDA came to power for the second time following a thumping victory in May.

While the government had to revisit its budget in a month and announce a rollback of its big bold move of a hike in surcharge for super-rich after it spooked the stock market, the challenges — more or less — remain the same — or even worse — this time around with India’s GDP growth expected to be at a 11-year low for FY20. With 10 days left for the budget, here’s a look at the highlights of the last budget announcements:

• India to become a $5 trillion economy by 2024.
• The government proposed to spend Rs 27,86,349 crore in FY20.
• The government targeted to achieve a nominal GDP growth rate of 12 percent for FY20.
• Revenue deficit was targeted at 2.3 percent of GDP while the fiscal deficit was aimed at 3.3 percent of GDP.
• Divestment target of Rs 1.05 lakh crore was announced for FY 20.
• The surcharge on income tax for individuals earning between Rs 2 crore and Rs 5 crore increased to 25 percent and for those earning over Rs 5 crore hiked to 37 percent. This was withdrawn later.
• The threshold for firms paying corporate income tax of 25 percent was raised to Rs 400 crore from Rs 250 crore.
• An additional tax deduction of up to Rs 1,50,000 to be provided on interest paid on loans for self-occupied house owners.
• A tax deduction of up to Rs 1,50,000 to be provided on interest paid on loans to purchase an electric vehicle to promote e-vehicles.
• An increase of Re 1 was announced in the Road and Infrastructure Cess on petrol and high-speed diesel per litre. Excise duty too was hiked by Re 1 per litre for these.
• The customs duty on gold and precious metals was hiked from 10 percent to 12.5 percent.
• Partial guarantee (for first 10 percent of loss) for public sector lenders for funds provided in a pooled manner to NBFCs. Further, Rs 70,000 crore was announced for the recapitalisation of PSBs.
• The government announced its plans to raise a part of its borrowings abroad in foreign currency.
• Rs 100 lakh crore to be invested in infrastructure over five years.
• Minimum public shareholding in listed companies to be hiked from 25 percent to 35 percent.
• The existing policy of 51 percent government stake in non-financial PSUs to be modified to include stake of government-controlled institutions.
• 100 percent Foreign Direct Investment (FDI) allowed for insurance intermediaries.
• Pradhan Mantri Karam Yogi Maandhan Scheme, a new pension scheme, was announced for traders and small shopkeepers with an annual turnover of less than Rs 1.5 crore.
• PAN and Aadhaar interchangeability permitted for ITR for those not having PAN cards.
• Duty hike on auto parts, video recorder, CCTV camera, tiles, cashew kernels, and others.
• 2 percent TDS on withdrawals of Rs 1 crore a year from the bank account on business transactions.
• Aadhaar card on arrival in India for NRIs.
• Rs 3,000 pension per month for the informal sector workers.
• Allocation of Rs 65,837 crore for railways and the highest ever outlay for capital expenditure of Rs 1.60 lakh crore.
• Private players to be brought in to operate train routes and modernisation of stations.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India needs single corporate tax rate of 25%, says KPMG

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The Indian government should move towards a simple tax structure with a single corporate tax rate of 25 percent, without any surcharge or cess above it, global advisory KPMG has said in a report.

The report titled “India: Redefining its growth path” observed that the Minimum Alternate Tax (MAT) should be withdrawn and Dividend Distribution Tax (DDT) should be replaced by the witholding tax.

“Following the global trend on lowering of corporate tax rates and maintaing competitivenesss, India should move to a simple tax rate strucutre — single corporate tax rate of 25 per cent with no surcharge and cess,” it said.

In the 2019 Union Budget, finance minister Nirmala Sitharaman proposed to raise the annual turnover threshold limit from Rs 250 crore to Rs 400 crore for availing a lower corporate tax rate of 25 percent, thereby, lowering the corporate tax rate of companies earning up to Rs 400 crore from the previous 30 percent.

The minister also said recently that the tax rates for companies with over Rs 400 crore turnover will be gradually cut to 25 percent and the government would support wealth creators.

The KPMG report also said that the tax rate for foreign companies should be correspondingly lowered from the current rate of 40 percent (plus surcharge and cess).

“It is hoped that the remodelling of the tax structure, through further simplification of the GST structure and promulgating a new Direct Taxes Code, is likely to make the Indian tax system more equitable for all classes of taxpayers.

“There is also the hope that lower tax rates for all corporates and indeed, all taxpayers, along with a fair, rational and even-handed tax administration will help Indan businesses become more competitive in the global space,” said Hitesh Gajaria, head of tax, KPMG India.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India’s bond rally fizzles on government spending fears

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

A rally in government bonds, spurred by a large and surprise reduction in policy rates last week, has been cut short by renewed fears of government profligacy. Since February, the Reserve Bank of India has cut the key policy rate by 110 basis points, which has pushed bond yields down significantly.

Ten-year yields hit 6.30 percent on August 7, the day of the RBI’s larger-than-expected 35 bps rate cut, and had fallen about 1.2 percentage points since February through the day of last week’s cut.

Over the past four trading sessions, however, bonds have given up some of those gains with the 10-year yield up 31 bps on growing worries the government will boost heavy stimulus and borrowings to quickly accelerate growth.

“Expectations of a fiscal stimulus package seem to be gaining ground in the domestic market on the back of weak economic data and heightened slowdown concerns in the economy,” economists at HDFC Bank wrote in a note. “We believe this could continue to pose as an upside risk to bond yields in the near future.”

Despite much prodding by regulators, Indian banks have been reluctant to fully pass on the benefit of the policy rate cuts to their borrowers.

That is despite the government front-loading its spending for the year and the RBI injecting significant cash into the money markets.

In its budget proposals last month, the government set an ambitious fiscal deficit target for the year of 3.3 percent of gross domestic product, signalling its commitment to financial discipline despite economic growth languishing at near five-year lows.

But comments this month by Finance Minister Nirmala Sitharaman stating plans to improve the economy “fairly quickly” and speculation that there could be budget changes or new sector-specific stimulus have the bond markets worried.

Traders expect some small fiscal slippage and likely additional borrowing of around Rs 40,000 crore ($5.60 billion) above the targeted borrowing of Rs 7.1 lakh crore for the 2020 fiscal year.

Swings in global risk appetite and demand for risk-free sovereign bonds have also added pressure, traders said.

“Uncertainty over sovereign bonds is adding to the selling in bonds along with profit booking,” said Paresh Nayar, head of fixed income and currency trading at First Rand Bank. “But the slowdown will call for more rate cuts.”

Last week, a Reuters poll predicted the RBI would ease its benchmark rate by 25 basis points again to 5.15% at its October meeting, followed by a 15 basis point cut in the first quarter of 2020.

The rate cuts are expected to push down shorter-dated yields more than longer-dated yields, leading to a “bull steepening” of the yield curve.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Legal opinion sought on FPI surcharge matter

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The government has sought legal opinion on the issue related to foreign portfolio investors as FIIs continued to withdraw from the Indian capital markets, CNBC-TV18 has learned. The FPI’s matter is under serious consideration and legal opinion has been sought now on how to deal with the issue.

If you were to do carve out only for FPIs from the surcharge because the view is very clear, it cannot be done for everybody, so the super-rich will continue to fall under the surcharge bracket but if you were to do it specifically for the FPIs, what will be the modalities, legal opinion has been sought and that is where matter currently stand on trying to see how this can be executed.

It’s important to note that the finance bill has been passed by the parliament and so any change for FPIs will have to be done by way of an amendment and the parliament session ends on August 7. Therefore, it is likely if they want to move they will have to move very quickly with an amendment before August 7th, but if they don’t then if any change has to be brought in, it will have to be brought in by way of an open ordinance.

These are matters that are currently under discussion and deliberation and also there is a cabinet meeting this morning but a lot of attention is on the situation in Kashmir. So a lot of the government bandwidth is also occupied with other matters but what I was told this morning is that the carve out is under serious consideration. Legal opinion has been sought and modalities have to be worked out.

– Legal opinion has been sought on carve out for FPIs from surcharge
– Carve out for FPIs from surcharge under ‘serious consideration’
– Modalities with regards to carve out for FPIs from surcharge have to be worked out

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Sebi looks to ease FPI norms to attract overseas inflows, says report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The Securities and Exchange Board of India (Sebi) along with the finance ministry is looking at ways to ease investment norms to attract more overseas inflows, The Economic Times reported.

Earlier this month, Finance minister Nirmala Sitharaman, in her maiden budget, proposed to hike surcharge for ‘super-rich’, leading to foreign portfolio investors (FPIs) withdrawing funds from the country’s stock market.

The Sebi called for a meeting with members of the HR Khan-led committee on easing of the norms on Friday, the report said citing three people aware of the development.

Sebi sought to discuss further measures to make it easier for foreigners to invest more in India, the report said.

Measures discussed in the meeting included further easing of Know-Your-Customer (KYC) norms and easing of broad-based requirements.

Among other proposals, one of them also included allowing foreign funds from the US, the UK, and Canada to obtain an FPI license in India, based on the registration certificate in the home country, the report added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RSS, SJM, top economists pushed centre to review issuing foreign currency bonds

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The government has decided to review its decision of raising money by selling foreign currency bonds after a meeting with Hindu nationalist group Rashtriya Swayamsevak Sangh (RSS), Swadeshi Jagran Manch (SJM) and top economists earlier this week, sources told CNBC-TV18 on Friday.

RSS and SJM top brass, key economists and government representatives held a closed-door meeting on Tuesday on the issue, the sources said on the condition of anonymity.

RSS, SJM and the economists expressed their concerns over the move saying that the “national” decision was taken without consultation, the sources said. They clarified that the economists who attended the meeting are not associated with RSS or SJM.

The North Block representative at that meeting was economic advisor Sanjeev Sanyal, added the sources.

When contacted, Ashwani Mahajan, National Co-Convener of SJM, refused to comment on the meeting but reiterated his position against issuing foreign currency bonds.

Speaking to CNBC-TV18, Mahajan said, “I am happy to note from reports that the sovereign bond issue is being reviewed.” “Sovereign bond issue is a horrible, dangerous idea. It has pushed countries into a debt vortex, subjected them to conditionalities,” he added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Sebi believes new public shareholding rule difficult to implement, says report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The Securities and Exchange Board of India believes the recent budget proposals, particularly the recommendation that the minimum public shareholding be raised to 35 percent, would undermine its role as regulator, The Economic Times reported, citing a senior official, who added that Sebi has conveyed the same to the government.

“Going forward, this has to go up from 25 percent to 35 percent and ensuring compliance would be greatly impacted particularly from PSUs as Sebi has to depend on government for funding,” the official was quoted as saying in the report.

In the budget, the government proposed that Sebi transfer the surplus funds to Consolidate Funds of India (CFI) and take prior approval from the government for its annual capital expenditure plans.

“Regulatory financial independence is core to ensuring arm’s length relationship with the government,” the Sebi official told ET. “This is essential to ensure regulatory compliance from listed PSUs and other government companies without getting adversely influenced by the presence of government shareholding and representatives in these companies.”

As many as 31 PSUs including Punjab National Bank, Hindustan Aeronautics Ltd, Bank of India and Corporation Bank have still not met the 25 percent minimum public shareholding norm, the report added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

First session of 17th Lok Sabha most productive in 20 years

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The ongoing session of the 17th Lok Sabha has been the most productive in the last 20 years, with the Lower House registering 128 per cent productivity till Tuesday, according to think tank PRS Legislative Research.

Lok Sabha members discussed the General Budget for 17 hours, demands for grants for Ministry of Railways for 13 hours and for Ministry of Road and Transport for 7.44 hours, Speaker Om Birla informed the House on Thursday.

He said members discussed demands for grants for Rural Development and Agriculture Ministry for 10.36 hours, and issues related to Sports and Youth Affairs Ministry for 4.14 hours.

Since Zero Hour in Lok Sabha could not take place for the past few days, Birla allowed members to raise issues of urgent public importance around 6 pm.

A total of 162 members raised issues during the extended Zero Hour on Thursday, which went on for 4 hours and 50 minutes before the House was adjourned at 10.50 pm.

The Lok Sabha has been working for more than its scheduled time and has sat till midnight on two occasions to complete its legislative business.

“This session, the Lok Sabha has been working for more than its scheduled time. Till July 16, 2019, the Lok Sabha’s productivity is at 128 per cent which is the highest for any session in the past 20 years,” the PRS Legislative Research said.

Similarly, the productivity of Rajya Sabha, where the Prime Minister Narendra Modi-led dispensation lacks majority, unlike Lok Sabha, is also relatively high.

The productivity of the upper house was 98 per cent till Tuesday, according to the non-profit organisation.

Productivity means the number of hours the House actually functioned compared to the number of hours officially earmarked for it to work.

The session started on June 17 and will conclude on July 26.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow