Sunset clauses are important to enable states with different socio-economic standards to transition into the GST regime smoothly, and for the Bill itself to be effectively approved. It's important that states fully implement the GST, but also that they be given some leeway todo so. It also avoids the need to modify the bill repeatedly, which would be a costly political exercise each time. Overall, a good stewardship of the process by Modi, Jaitley, Naidu and all others involved. Successfully tabling and passing this build would be a crowning first year achievement.
India exported $94-billion illegal capital in 2012: Study
The total illicit financial outflows from India between 2003 and 2012 were $439 billion —$94.8 billion of that in 2012 alone — shows a study by Global Financial Integrity (GFI), a Washington DC-based research and advisory organisation.
On the list of the world’s biggest exporters of illicit financial flows from 2003 to 2012, India currently ranks fourth — after China, Russia and Mexico, in that order. Compared with the previous rankings, India and Malaysia have switched positions in terms of cumulative illicit financial outflows, with India moving to the fourth spot and Malaysia to fifth. This was due to a continuation of India’s upward move, which began in 2009, and Malaysia’s downward move, which began the next year. To put the figures in perspective, the $439 billion of outflows come to about 23 per cent of India’s gross domestic product in 2013.
The study estimates illicit financial outflows from two sources: As a result of deliberate trade misinvoicing, and due to leakages in the balance of payments (known as illicit hot money narrow outflows). According to the study, while trade invoicing accounted for 77.8 per cent of illicit flows from all developing countries over the period, this number was 85.3 per cent for Asia.
The report says it is likely the repatriation and surrender requirements create strong incentives for exporters to under-invoice exports as a way to circumvent these requirements. While the report provides an estimate of illicit flows, it is difficult to say with certainty what is the exact quantum of funds currently stashed abroad. That is because many allege a substantial portion of these illicit outflows are routed back into the country, often via tax havens. But Aman Aggarwal, director, Indian Institute of Finance, disagrees.
He says: “Very little of these illicit outflows actually come back to the country,” adding “the mechanisms through which these illicit gains are made are known, but very little has been done to curb those. There is a need to bring efficiency into the system to check these gains, which cost the country dear.”
November trade data suggests October IIP figures were an aberration:
October's industrial output decline could be an aberration
A sharp 7.6 per cent drop in India’s manufacturing production in October puzzled many. But that could be an aberration, and the country’s industrial production, a major portion of which is factory output, could see a growth in November from 4.2 per cent fall in October.
Some of the recently released data seem to suggest the same. According to trade numbers released on Monday, India’s non-oil, non-gold imports, a pointer to industrial demand, in November rose 27.7 per cent to $27.5 billion from $20 billion in the same month a year ago. By comparison, these had increased only 5.6 per cent in October (to $22.91 billion from $21.7 billion last year).
Besides, there was a pick-up in automobile sales in November, indicating an increase in production during the month. Domestic car sales in November increased 9.5 per cent over a year ago, compared with declines in the two previous months.
Economists, however, warn growth might not be too high to begin with; it could rise gradually. They cite a sudden drop in consumption demand as one of the main reasons for a manufacturing decline. It is unusual for demand to be this weak during the festival season.
Growth in private consumption expenditure, a proxy for consumption demand in the economy, did not decline much in the September quarter and stood at 5.64 per cent, higher than the 5.81 per cent in the previous quarter. The growth rates in both quarters, though, were much lower than the 8.22 per cent in the March quarter of last financial year.
One possible reason for a sudden drop in industrial production in October could be the presence of a large number of holidays during the month. This time, both Diwali and Dussehra, apart from a number of regional holidays, fell in October. This meant fewer working hours for factories. Even in pre-2008 years, whenever these two main festivals have fallen in the same month, the industrial production story has been somewhat similar to this year’s. However, the difference was that a deceleration in monthly growth was not played up in those years because industrial output was on the rise. By comparison, since production in the secondary sector was crawling to pick up this year, a contraction in October was hard to miss.
