YES Bank fiasco: Sign of deepening crisis of confidence

Yes Bank has overnight become a No Bank. The pun perfectly sums up the mess in the Indian banking sector. Rahul Gandhi was quick to use it to attack the government’s cluelessness. Media houses followed suit using it left, right and centre. So much so that it has already become a distasteful cliché, one created possibly in the shortest period of time.

“No Yes Bank. Modi and his ideas have destroyed India’s economy,” Rahul Gandhi tweeted, refusing to let go of another opportunity to have a dig at the Prime Minister.

The scenes around Yes Bank branches and ATMs are desperate. Depositors have been besieging branches and ATMs from Friday morning, as the RBI imposed a Rs 50,000 cap on withdrawals. Wailing customers seeking to withdraw their life’s savings meant for treatment of family members, marriage of wards, admission to higher education institutions, house building present a monotonous, yet heart-renting picture: similar to the one witnessed during Narendra Modi’s ill-advised and misdirected demonetisation, a blunder of Himalayan proportions.

Economy

By K Raveendran

February 5, 2020

Gulf countries are no tax havens as FM Sitharaman imagines

It is all too well that the proposal to include income earned by NRIs, especially those working in the Gulf countries, for the purpose of determining tax liability has met with a premature death. Otherwise, it would have created serious problems both in terms of tax administration as well as compliance.

In the first place, it is a misconception that Gulf NRIs do not pay tax. There may be no formal personal income tax in the countries of their residence, but the governments there charge hefty amounts from every expatriate in the form of levies, visa fees, insurance, sponsorship fees etc. They also have to pay for the well-being of the national citizens in terms of higher cost of services.

Gulf has one of the highest rates for phone and internet connectivity as the public utilities contribute the major chunk of resources for the employment of the locals. In fact, the expatriates are forced to pay a premium on the inefficiency and lack of productivity by the local population in the respective Gulf countries.

Economy

By K Raveendran

January 29, 2020

Budget 2020-2021: GST revenue shortfall proves to be a hurdle

India budget exercise for the fiscal 2020-21 is different this year, not only because our Prime Minister, Narendra Modi, has involved himself in the exercise, but also due to multiple new political and economic challenges that enforced him to come into the picture. The focus is on avoiding a turbulent fiscal ahead by resorting to a realistic budget at the time when economy is performing at a low growth rate of 4.8 per cent with huge shortfall in revenue of GST, with sweeping reform recommendations of 15th Finance Commission for revenue sharing with states which is binding on the government from the fiscal 2020-21, mounting inflationary pressure, rising oil prices, distortion in trade balance, deficit, and the political unrest in most of the states which are now ruled by opposition parties depending largely on revenue sharing and grants-in-aid from the Centre.

Before the implementation of the GST, the State governments did have power to raise taxes and the proceeds thereby was used for their expenditure. At the midnight of July 1, 2017, State’s power to collect taxes was done away with after the launch of the GST. Since then our States have become dependent on revenue share to be made by the Centre, which they never get in time. It has resulted into worsening state finances.

Under the rule of the BJP-led government at the centre, barring a few, most of the States ruled by BJP or its alliance partners have kept silent. The political situation since March 2018 has now been reversed. Barring a few, most of the states are now ruled by other political parties opposing policies of the BJP led government at the centre. States have become vociferous in their demand for timely transfer of revenue share, not only as per their share in the GST collection, but also as per the commitment made by the centre at the time of launching the GST to compensate the loss incurred by the state, if any, due to implementation of the new tax mechanism. A huge shortfall in the tax-revenue this year has presented an unprecedented problem to meet even the requirement of the centre, how can the Union government fulfill its commitment on revenue share to the states? The question haunts the budget makers, because share of the states in the GST has considerably fallen and there is a commitment that revenue share to the states will be set off against any loss to them.

Economy

By Gyan Pathak

December 27, 2019

RTI: Why is Reserve Bank standing in the way of transparency?

On December 18 2019, the Supreme Court bench comprising Justices S Abdul Nazeer and Sanjiv Khanna, gave a very concise and brief order which reads as follows-

“Upon hearing the counsel the Court made the following order: Inspection Reports/Risk Assessment Reports/Annual Financial Inspection Reports of the banks including State Bank of India shall not be released by the Reserve Bank of India until further orders.”

In various Supreme Court judgments it has been mandated that all orders must give reasons. I have tried to understand the reason for constraining the citizen’s fundamental Right to Information in this order and have completely failed.

Corruption, Economy, Law, Opinion, RTI

By Shailesh Gandhi

December 19, 2019

January 8 General Strike will set the political course in 2020

The continuing protests in the country, especially by the students against the passing of the Citizens Amendment Bill in Parliament in a hurry without consulting the political parties, are spreading in all states with more and more people of all religions and communities joining the movement against the implementation of the CAA. The ruling regime is adamant in implementing their agenda and so all indications are that this turmoil on the issue of CAA will continue.

Even as this major issue of political and Constitutional importance is happening there are massive preparations on to make the general strike called on January 8, 2020, a big success. 25 crore workers from organised and unorganised sectors are expected to take part in the strike. A ten-point charter of demands have been submitted to the government by the leading trade unions of the country led by AITUC, INTUC, CITU and HMS. The RSS led BMS may not join the strike but the organisation supports the demands in the charter and the BMS leaders have openly come out against the jobless economic policy and opposes the sale of the public sector companies at cheap prices.

This near total unity of the trade unions of the country on the charter of demands and against the economic policies of the Modi 2 government has set the stage of a major confrontation between the working class of the organised sector and the Modi govt before the presentation of the second budget. The slowdown is so pervasive that the former chief economic adviser of the Modi govt Dr Arvind Subramanian has termed is as the “Great Slowdown” on the lines of the Great Depression of USA in 1929. He said that the Indian economy is headed towards ICU which means that the economy is near coma and the patient needs drastic treatment for survival.

Economy

By Nitya Chakraborty

December 4, 2019

Time to track job losses in the Indian Economy

It is high time we tracked job losses in the country alongside the routine study of job growth. The government may disagree, for the country’s job scene looks truly dismal, if not alarming. This is partly because of the dwindling economic growth and recessionary pressure on a number of industries.

Industrial shake up, corporate mismanagement by short-sighted entrepreneurs and new technologies such as artificial intelligence, machine learning also contribute significantly to job losses. The global economic slowdown too is badly impacting the import-dependent Indian market with more foreign countries trying to push their India sales while Indian exports keep shrinking.

Imports adversely affect the local labour market. Falling exports contract it further. Companies in the sectors such as telecom, steel and non-ferrous metals, mining and quarrying, cement, engineering and transport, electronics and software, automobile, brown and white goods and banking among others, are chucking jobs. The so-called ‘voluntarily retirement’ in industry and banking is practically involuntary as surplus employees have little option.

Economy, Opinion

By Nantoo Banerjee

November 30, 2019

Nirmala Sitharaman’s Discerning Eye

Finance Minister Nirmala Sitharaman is endowed with a rare ‘discerning eye’, which has certain magical powers to see imaginary things and filter out the real ones. Not everyone can be expected to have such special faculties. But she has a problem there: she cannot imagine that not everyone is as lucky as she is.

During a short discussion on the economy in the Rajya Sabha the other day, the finance minister categorically denied that the economy was in recession. “If you look at the economy with a discerning eye, you see that growth may have come down… but it is not a recession yet and won’t be a recession ever,” she asserted. It did not quite matter to her whether those sitting opposite to her were really convinced. She was convinced and that is all that mattered.

It seems that she is taking things a bit too personally. True, she is the finance minister. But all the problems of the Indian economy are not solely because of her. The problems with the economy started much before she shifted from South Block to North Block to take up the mantle of the finance ministry.

Economy, Opinion

By K Raveendran

November 30, 2019

GDP Touches A New Low

Four months from now, the financial year 2019-20 will come to an end. Eight months have already passed, with such a fall in the GDP growth rate—slowdown in the Indian economy cannot be reversed in the near future. The country cannot realize the budgeted GDP growth rate for this year.

The fall in the GDP growth rate has touched a new low at 4.5 per cent in the second quarter as against 5 per cent in the first. It is the worst growth figure after 2012-13, the base year for the new series of the data. The average growth rate in the first six month is thus merely 4.75 per cent, and then in the last two months, the economic and financial crises have signalled a further decline.

The slowdown has created a huge shortfall in the budgeted estimates of the current financial year. The GDP for the year 2019-20 was projected 2,11,00,607 crore assuming 12 per cent (nominal) growth over the estimated GDP of 1,88,40,731 crore for 2018-19. At the average growth rate of 4.75 per cent, that we have been able to achieve in the first half of the current financial year, the likely shortfall at the end of this year is quite disturbing. How precarious the situation is can be imagined by the fact that the RBI’s transfer of funds to the tune of 1.76 lakh crore to the government of India was 1.25 per cent of GDP in 2018-19.

Economy, National, Opinion, Politics

By Gyan Pathak

November 30, 2019

Is the ‘Kerala Model’ Sustainable?

Kerala is perilously perched on a financial volcano that is ready to erupt any time. Finance minister T M Thomas Issac misses no opportunity to talk about the impending financial anarchy and blames it on the Centre ad nauseam. It may be politically expedient to do so, but the unfortunate reality is that the state has been following an unsustainable model of economic development.

With virtually no industrial and manufacturing base, there is no wealth creation in the state and as such, the government has only limited means to earn revenue. The revenue collection has remained static at 10 percent or below, but the expenditure has been mounting at 16 percent, which means that the collection has plummeted despite the steady growth in spending.

This has, however, not stopped the government from its prodigal ways of spending, for which it has to borrow from all kinds of sources, often at prohibitively high rates. With each borrowing, the public debt is ballooning and the per capita debt is already unduly high. The public debt is estimated to have nearly doubled from Rs 78,673.24 crore to Rs 1,50,000 crore in the five years from 2011 to 2016. This has further spiralled under the present government as it has gone on a borrowing spree.

Development, Economy, Kerala, Opinion

By K Raveendran

November 27, 2019

Proper Land use legislations for Rebuilding Kerala is necessary

Land Reforms legislation in Kerala was a watershed event and served a huge socio-economic purpose. But fifty years on, Kerala has done little to maximize the use of land in terms of productivity, housing, industries, forests etc. Whilst retaining the spirit of the Land Reforms, it must be examined how economies of scale can be achieved with all its attendant benefits of higher productivity by planned land use.

It’s pertinent that urban and rural areas must have a guideline for personal, industrial and civic use. As a state, do we really have a master plan for land use to serve as a guideline for corporations, municipalities and panchayats keeping in mind the density of population, topography, natural features and local needs? Admittedly, there ought to be a ‘zoning’ approach to planning. This is necessary to prevent geo-climatic disasters and reduce its impact on people.

Our higher density of population and lower land availability vis a vis other states is a reality and should call for pragmatic solution to development needs with regard to human aspirations. This calls for an interface management using adaptive techniques leveraging on technology. Industrial parks must ensure air, water pollution control measures, especially when habitation around industrial areas cannot be averted due to population/land availability.

Agriculture, Climate Change, Development, Economy, Environment, Kerala

By N Dharmaraj

November 26, 2019

Indian Economy in Virtual Recession

On the first day of the winter session of Parliament, the finance minister has stated that though the economy has slowed down, it is well on the target of reaching a $5 trillion economy by 2025. At the current rates of growth, notwithstanding all the data fudging and efforts to show the economy is recovering, the reality is that India’s growth rate is declining steadily and dangerously.

The NCAER has now projected the current growth rate at below 5 per cent (4.9 per cent). The PTI had filed a story on October 31 reporting a US think tank (Centre for Global Development) assessment that “India’s growth is in barely positive territory”. Other top institutions have also similarly rated India’s growth rate projections at below 5 per cent. The ICRA rating agency places it at 4.7 per cent. The State Bank of India pecks it at 4.2 per cent.

A closer look at key parameters of the Indian economy shows that this declining growth rate has severely impacted on people’s welfare pushing up unemployment and poverty across the board.

Economy, Opinion

By Sitaram Yechury

November 21, 2019

Temple alone cannot save Nation’s Economy and People

Now that the Hindus have secured what they wanted, Ayodhya can no longer subsume all other issues of human survival in the Hindi heartland, where a Ram Temple upon Babri Masjid has always had its maximum appeal. Ayodhya has almost played out politically and as such, more mundane issues of day to day life are expected to re-engage the cow belt attention.

It is true that Indians had perfected the art of achieving absolute happiness through spirituality, but this faculty was never universal and only the most enlightened were privy to its secret. For the rest of Indians, spirituality is only a means to achieve greater material progress. So, the Ram temple cannot keep them obsessed for much longer. This puts the attention back on the economic conditions of the nation and the people, which unfortunately have not received Ram’s blessings despite all the sacrifices that have gone into the making of his temple.

No one has elucidated this helplessness more vividly than former Prime Minister Manmohan Singh in his latest critique of the Indian economy and the Modi government. Manmohan Singh’s only blemish perhaps was his tenure as prime minister, which didn’t match up to his stature as an economist. But in everything else, of course, with the exception of politics, where he continues to be as alien as he ever was, his performance has been unimpeachable.

Economy

By K Raveendran