Indian Economy News & Discussion - Nov 27 2017

[Suraj]

The highest US rate quoted is only the federal rate . The highest total rate depends on the state of residence . Someone living in NYC will pay nearly 50% due to combined federal plus state plus local taxes.

In the developed world the top tax range is between 45-60% typically.

By all means, add all the cesses, but you’ll find that our top effective tax rate is hardly about to cause anyone to flee because they’ll pay more, wherever else they live in the developed world.

[hanumadu]

Apart from comparing with other countries, we must also look at the tax rates in India on their own merit. Any more than 35% sounds high to me. I prefer a highest bracket of 32-33% inclusive of all surcharges and cess. I feel that is the threshold most people will pay their taxes rather than try to avoid them.

[Rahulsidhu]

The highest US rate quoted is only the federal rate . The highest total rate depends on the state of residence . Someone living in NYC will pay nearly 50% due to combined federal plus state plus local taxes.

In the developed world the top tax range is between 45-60% typically.

By all means, add all the cesses, but you’ll find that our top effective tax rate is hardly about to cause anyone to flee because they’ll pay more, wherever else they live in the developed world.

Anecdotally, I have been seeing a trend of Indian companies and individuals, wherever possible, shifting tax residence to places like Singapore. A cottage industry of accountants and lawyers has developed around this theme. Most venture funded Indian startups are registered in Singapore these days. Further tax hikes only pushes more people to go this route.

Needless to say all this is forfeited tax base for the Indian govt.

[Suraj]

Apart from comparing with other countries, we must also look at the tax rates in India on their own merit. Any more than 35% sounds high to me. I prefer a highest bracket of 32-33% inclusive of all surcharges and cess. I feel that is the threshold most people will pay their taxes rather than try to avoid them.

The right way to look at it is in the context of whether the tax revenues support a functioning public goods and services platform . Most EU states have topmost rates in the 55-60% range but also have a generous welfare state . Even capitalist US has a peak tax rate approaching 50% for a NYC resident.

Keep in mind that these are effective rates before any exemptions, and are income taxes . The wealthy typically structure their compensation to be derived from the most tax efficient means, such that the rate they actually pay is much less than the effective mathematical rate.

[Suraj]

The highest US rate quoted is only the federal rate . The highest total rate depends on the state of residence . Someone living in NYC will pay nearly 50% due to combined federal plus state plus local taxes.

In the developed world the top tax range is between 45-60% typically.

By all means, add all the cesses, but you’ll find that our top effective tax rate is hardly about to cause anyone to flee because they’ll pay more, wherever else they live in the developed world.

Anecdotally, I have been seeing a trend of Indian companies and individuals, wherever possible, shifting tax residence to places like Singapore. A cottage industry of accountants and lawyers has developed around this theme. Most venture funded Indian startups are registered in Singapore these days. Further tax hikes only pushes more people to go this route.

Needless to say all this is forfeited tax base for the Indian govt.

They’re practically India’s Hong Kong, aren’t they Regardless, the super rich don’t get their wealth in wages as much as business profits, LTCGs and other sources whose effective tax rate is much less than business incomes . In the US there’s a similar route of structuring businesses as S corps or other means to generate more favorable tax treatment or remuneration by non wage means .

[sivab]

Rahulsidhu: what's your take on the sovereign bonds plan ? Personally, I wonder why the government didn't simply authorize RBI to raise the ceiling of foreign holdings in Indian rupee denominated debt instead. It would take away the exchange rate risk element, though at the cost of a higher coupon rate. But higher demand might push down yields there. Raising FDI limits and percentage floats are both good options.

I haven't had a chance to look at the latest economic survey, but will do so sometime soon.

Short version, to reduce interest rate burden for govt debt and reduce crowding out effect for private sector. Hear long version from CEA in tweet below. He gives good explanation.

https://twitter.com/CNBCTV18News/status ... 5450226688

[Rahulsidhu]

Short version, to reduce interest rate burden for govt debt and reduce crowding out effect for private sector. Hear long version from CEA in tweet below. He gives good explanation.

https://twitter.com/CNBCTV18News/status ... 5450226688

So it is as I suspected. This "crowding out" dogma is crowding out investors out of money and young people out of jobs

[Manu]

Suraj, I agree with the view that what Modi did was absolutely needed from 2014-2019. However, the Economy is not growing. The Job Markets have dried up. The need was to revitalize animal spirits, not to burden 'us' with taxes.

Do you know (well, I know you do) that an average meal for say, 4 people - CGST 9%, SGST 9%, Service Charge 10% (compulsory Tip)? Did I mention that this was a Jain meal , as there is separate 20% VAT on alcoholic beverages? And this is not a Hotel Restaurant. Just a regular one.

Apartment Building Maintenance also has GST?? Cinema has 28% GST. So do ceramic tiles, water heater, weighing machine, washing machine, Cars/Bikes, Hotel Rooms.

GST rates are *very* high (but you already know all this). The Middle class, which I am a part of (yes) is hurting and getting squeezed. They are called the sandwich class for a reason. Supporting the Bimaru Population and no escape route like the super rich. When you combine the burden of Direct and Indirect Taxes, I think we are way over taxed (and comparisons to Norther European Countries are not wise as they get a lot back from their welfare states - cradle to grave benefits and top class infrastructure.)

You give the example of NYC, people are fleeing NYC in record numbers, and headed for guess where, Texas & North Carolina (no prizes for guessing why). https://www.investors.com/politics/edit ... igh-taxes/

More Indians will flee to Dubai,. Singapore, anywhere abroad (Anglo Countries). Perhaps that's the plan (to increase remittances ?)

[Suraj]

GST rates are set by the GST Council. This involves all the state finance ministers and the Union FM. Every state has its own prerogative as to taxation, and a unified tax mechanism requires accommodating them all. Further, states are guaranteed 14% growth in the compensation mechanism, which I think is rather too aggressive right now and needs to be dialed down. However, the majority of the voting power at the GST council lies in the hands of states and not the Union FM.

I don't have enough information to agree that GST rates are high. Now, if someone has a broad-based analysis of how cost to customer has changed on account of GST, then that's worth looking at. It could be divided into large categories, e.g. eating out, groceries, real estate, transportation costs, or even total monthly spending changes. Anecdotal references to meal price breakdown doesn't really offer any useful insight. The reason for arguing on that basis is that GST is not an end user tax. It's a complete framework, that affects all manner of things. A lot of prior taxation was essentially invisible because it didn't show up nicely on a bill like current reporting does.

I also do not agree about the job market situation. Job and wage stagnation, particular in relation to prices, tends to be poisonous at election time, but GE2019 did not register such a signal at all. I'm not burying my head in the sand here, but this thread demands data, and if you have data sources, please post them . There have been multiple contradictory claims made regarding the job scene in India.

Moving to TX and NC isn't a panacea . The wage levels there are correspondingly lower than NYC or Silicon Valley too. High wage compensation jobs have their wages tied to cost of living indices . The real wealthy folks depend on passive income and domicile in low/no state tax locations. At the upper end of the wealth scale, far lower fractions of income comes as wages. Motabhai doesn't get a paycheque for several crore every month to go stand in line at Dena Bank to deposit

[Vivek K]

I agree with Manu's post but I also understand that the burden of proof is on us. So I will try to collect some data. Modi 2.0 needs to look at growing the economy and that will not happen by loan waivers of 10s of billions to farmers and throwing industrialists in jail. May not be the best example but the way the auto and airline industries were handled in the US is one way to grow rather than close industries.

Modi 2.0 needs to loosen up and not tighten.

[yensoy]

More Indians will flee to Dubai,. Singapore, anywhere abroad (Anglo Countries). Perhaps that's the plan (to increase remittances ?)

I will argue that Indians moving to Anglo countries is a net loss of forex. Those who move abroad to settle may send remittances for a few years to support their families, maybe build a house or two. Then as the kids grow up and parents pass on, their links to India slowly die out. At some point they sell their properties in India, convert to Euro/USD and repatriate it back to their new home countries; and also decamp with their gold/jewellery inheritance. There is little benefiting India in their financial actions viewed over their lifetime (and they are the first to complain about any capital gains taxes that need to be paid for their property sales).

Indians who are indentured labourers in Gulf are the ones keeping the remittance stream alive.

[Suraj]

Those who talk about the rich going abroad need to explain more clearly where these rich are getting their incomes. Indian sourced income is going to be taxed by India regardless of where they live. Even a DTAA won't prevent them paying these taxes - it just prevents the same thing being taxed twice, and it negotiates how the two countries' tax authorities split up the money between them.

E.g. high income earner (HIE) moves from Mumbai to Vienna and pays 55% instead of <40% in India on Indian sourced income. Move anywhere else in EU and he'll pay anywhere from 50-60% . Move to US and he'll pay ~40-45% . What benefit does he accrue ? He's paying into those welfare pots with no chance to even get benefits until he lives there for many years. Move to Singapore with lower income tax rate (max 22%) and he'll pay 22% to Singapore and the 38-22% difference to India, as compared to paying all that to India.

Taxation is a legislative prerogative, i.e. it doesn't require constitutional amendments or even bicameral acceptance. If tax non-resident HIEs whose income generating assets are based in India becomes a trend, GoI will just mandate higher tax rates for them. In effect, whatever GoI mandates will become the floor they will pay, regardless of where they move and how much they pay to whom.

India's biggest carrot is higher return on investment, combined with the lowest maximum marginal and effective tax rates for HIEs.

[Rishirishi]

More Indians will flee to Dubai,. Singapore, anywhere abroad (Anglo Countries). Perhaps that's the plan (to increase remittances ?)

I will argue that Indians moving to Anglo countries is a net loss of forex. Those who move abroad to settle may send remittances for a few years to support their families, maybe build a house or two. Then as the kids grow up and parents pass on, their links to India slowly die out. At some point they sell their properties in India, convert to Euro/USD and repatriate it back to their new home countries; and also decamp with their gold/jewellery inheritance. There is little benefiting India in their financial actions viewed over their lifetime (and they are the first to complain about any capital gains taxes that need to be paid for their property sales).

Indians who are indentured labourers in Gulf are the ones keeping the remittance stream alive.

Just was a documentary that showed that. The father had build a massive house in a village in Pakistan (some 8 bedrooms and the whole shabang). It was mostly to impress the rest of the villagers. The first thing the kids did after fathers death, was to go to a property agent to sell the house. But the house would not sell for as much as father had built it for. I think the people living in places where they give passports, the decedents will opt to stay there. But in the Gulf people have to come back. Even the kids will sooner or later come back.

[Manu]

I also do not agree about the job market situation. Job and wage stagnation, particular in relation to prices, tends to be poisonous at election time, but GE2019 did not register such a signal at all. I'm not burying my head in the sand here, but this thread demands data, and if you have data sources, please post them . There have been multiple contradictory claims made regarding the job scene in India.

GE 2019 was won on the back of the poor (mostly) who voted for Modi as they were the direct beneficiaries of the redistributed wealth. This does not hold true for some states like Gujarat (which is Gujju Pride). Hindutva was also a factor. "TINA" was also a factor given how terrible Congress is as an alternative.

Well, since you asked for data:
(1) https://qz.com/india/1641222/siam-car-s ... -in-dumps/

There are so many unsold cars in India now that automakers are taking forced holidays

(2) https://www.business-standard.com/artic ... 053_1.html

Unemployment rate at four-decade high of 6.1% in 2017-18: NSSO survey

(3) https://www.businesstoday.in/current/ec ... 15847.html

It does not end at the NSSO survey, either. Even the payroll data by Employees' Provident Fund Organisation (EPFO), which is treated by the government as the evidence of formal job creation in India, does not support these claims of job creation.

(4) https://economictimes.indiatimes.com/ma ... 626276.cms

A survey done by the US-based Pew Research Center showed lack of employment opportunities is currently the biggest concerns for the economy. The study showed 67 per cent of the respondents felt things had become worse in terms of job opportunities (including 47 per cent who said much worse) and only 21 per cent said things had become better under Modi.

(5) https://qz.com/india/1639459/graduates- ... dis-india/

The unemployment rate among male job seekers with secondary-level education far exceeds joblessness among illiterates, in both rural and urban areas, Kotak Institutional Equities said in a report released last week, citing data from the government’s periodic labour force survey (PLFS).

(6) https://www.deccanherald.com/national/o ... 19000.html

Prime Minister’s Employment Generation Programme (PMEGP)created only 17.88 lakh jobs from 2014-2018. Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY), under which rural youth are skilled in job competencies, only about 5 lakh placements could be made across the country. A third scheme — Deen Dayal Antodaya Yojana-National Urban Livelihoods Mission (DAY-NULM) launched by Modi to reduce poverty and vulnerability among urban poor — could see the placement of only 4.72 lakh youth in almost the entire period of Modi govt. Lastly, Besides these, 1080.6 crore man days of work was generated under the MGNREGA, the data tabled in the Rajya Sabha showed

(7) https://www.japantimes.co.jp/news/2019/ ... SUYGehKhPY

The Centre for Monitoring Indian Economy, a private research firm, estimates the jobless rate rose to 7.6 percent in April. A Deloitte consultancy report in March said female labor force participation fell to 26 percent in 2018 from 36 percent in 2005 because of poor education and socio-economic barriers.

BTW, this is when More than half of India’s population depends on the agriculture sector for work.

Other than hard data, ask around your friend circle in the services sector for anecdotal / 'andaaza' evidence: IT, retail, construction and financial services - what is the net addition of jobs? It has been static. Some cases, even de-gowth.
You *have* to encourage private capex - that is the only way out. Ain't going to happen in this kind of regime. All of (sane) Twitter is saying its a crap budget, its hardly as If I'm the lone voice of insanity here.

Lastly, not to end on a rona dhona type of note , I do agree that Modi has inherited most of these problems from the UPA and jobless growth has been a feature of India's economy since 1990s. However, now we are in this situation - and Modi 2.0 cant blame UPA 1.0/2.0 for the present (well, he can, but no one will have the patience to buy it).

If we listen to the crazy old Man (Sub. Swamy) and abolish Income tax all together, that will unleash massive tectonic energies and the revenue loss will likely be made up by the fact that the parallel 'black' economy will also hugely diminish (and come into the formal segment and increase indirect tax revenue), if not vanish altogether, However, Swamy is a bit of a nutcase, so not sure how viable this idea really is.

[ShauryaT]

GST rates are set by the GST Council. This involves all the state finance ministers and the Union FM. Every state has its own prerogative as to taxation, and a unified tax mechanism requires accommodating them all. Further, states are guaranteed 14% growth in the compensation mechanism, which I think is rather too aggressive right now and needs to be dialed down. However, the majority of the voting power at the GST council lies in the hands of states and not the Union FM.

The GST amendment was all about states losing their "prerogatives" on indirect taxation - the only major tax prerogative states had under the Indian constitution and subsuming these powers with a vote in the GST council. The majority of the voting power 2/3'd is indeed with the states, with the center holding a 1/3'd vote BUT all decisions are to be taken only with a 75% majority!! Translation, no decision can be taken if the center does not agree even if EVERY one of the states votes against the center. Now the reality of the Indian system is, the state vote is beholden to the political parties in power. IOW: If UP is in control of the BJP, it would be far fetched to expect the UP vote to go against the center. If Bengal wants to promote say fisheries by attracting investment and provide say a tax break to that industry, it would have virtually no chance - meaning no prerogative to enact this policy under current law. Its attempts to try to get a politically opposed GST council to enacts its wishes would be subject to political forces outside of the party in control in the state.

We should be clear on what GST is and is not. GST is a step towards centralization of power and not federalization. It is also a system, which seeks to centralize tax administration bankrupting the states own administration capacities. The state is the net loser of power in this new GST equation. But in all fairness, even in the earlier system, article 200 essentially required the center's assent to any bill the state legislature passed - effectively providing for a veto even there. The truth of the matter is India is far from a truly federal model and the GST makes it even less so.

Mandate of GST Council

[Suraj]

Ideas like abolishing income tax aren't going to come to pass. Every once in a while some rushes in with some new idea from Su Swamy or someone else. Sorry, please don't derail this thread with such talk. Use the politics thread.

Using the recent GE as the most recent nationwide barometer on the economic situation, it's clear that both urban and rural India offer overwhelming support to the direction in which things happened in 2014-2019. Therefore, there's prima facie not enough to support the claim that things need to change a lot. There's however a lot of data supporting the fact that the population still lacks some basic needs - healthcare and clean water being primary issues the administration is currently emphasizing.

Please don't just quote the first N news articles you see. Please find RBI, CMIE or other sources of actual data, not merely news articles describing things second hand. Here's an example of data: June 2019 EPFO Payroll Data (pdf)

[Katare]

6million net payroll addition last year and 1 million in April this year points to very strong job growth. Add the mudra loan funded self employment and unorganized sector you have a good story to tell.

Anyway you cut it but there is no escaping the fact that the animal spirit of high growth of early last decade is missing.

[vimal]

Deleted

[Dumal]

Do you know (well, I know you do) that an average meal for say, 4 people - CGST 9%, SGST 9%, Service Charge 10% (compulsory Tip)? Did I mention that this was a Jain meal , as there is separate 20% VAT on alcoholic beverages? And this is not a Hotel Restaurant. Just a regular one.

Apartment Building Maintenance also has GST??

I thought the GST on restaurant food was set to 5% (down from 18%) more than a year ago. Apartment maintenance threshold for GST was raised from 5000 up to 7000 or 7500, again more than a year back.

[Yagnasri]

Anyway you cut it but there is no escaping the fact that the animal spirit of high growth of early last decade is missing.

This is observed in many sectors. Of course this is all subjective.

The reason may be the more formalization of the economy and the informal sector is not so keen on increasing their commercial activities and play as the the new rules of the game. Many crony gangs which used to "invest" their "funds" also held back looking for "good times". The hope now is not there. Therefore I think we may see further investments and increase in activities in the next one or two years as the new rules of the game become new normal.

Labour law reform, action on NBFC problems, banks are getting additional capital are good steps which may help.

We need to stop looking at Budget alone as a reform tool. Other steps can be taken all around the year and hopefully will be taken.

[JayS]

Do you know (well, I know you do) that an average meal for say, 4 people - CGST 9%, SGST 9%, Service Charge 10% (compulsory Tip)? Did I mention that this was a Jain meal , as there is separate 20% VAT on alcoholic beverages? And this is not a Hotel Restaurant. Just a regular one.

Apartment Building Maintenance also has GST??

I thought the GST on restaurant food was set to 5% (down from 18%) more than a year ago. Apartment maintenance threshold for GST was raised from 5000 up to 7000 or 7500, again more than a year back.

it is 5% now. 18% only for TFTA restaurants. In fact now the Restaurant owners are demanding to increase it to 12% and re-introduce ICT. The thing is one cannot take GST rate at face value, the final tax incidence needs to be considered taking into account the ITC. Ideally speaking, the ITC should be adjusted in the sticker price, i.e. lowering the price and then GST applied to it. As far as the taxation rules are concerned, no item has seen increased taxes, except Services. Almost every item has seen only tax reduction compared to previous tax regime over the last two years. Its only that the businesses are not honestly transferring the benefits to the consumers. But an equilibrium will be found eventually due to the market forces.

The taxes on food earlier were around 10-12% taking VAT and ST together. Taking ITC into consideration, even the 18% tax rate should have less overall tax incidence on food, that what was there earlier. There was no tax credit previously for food at least.

Earlier taxes were hidden. Now we see them on every bill. Its making people ask question, which is a good thing.

[hanumadu]

Anyway you cut it but there is no escaping the fact that the animal spirit of high growth of early last decade is missing.

Labour law reform

There is no labour law reform in sight, AFAIK. There is a wage bill which seems to be close to ready and which primarily deals with wage related issues like minimum wage, over time pay, working hours etc.

The real labour reforms are not even in draft stage or even being contemplated.

[Katare]

Engine of economic growth is its banking system, until its fixed growth would not return. It appears to me that increased Govt spending can’t prime the pumps of such a huge and mostly private economy anymore. In my opinion, take it for whatever it’s worth, Jetly made a mistake by not allocating enough capital for banks recapitalization in 2014/15. He waited until last year to allocate sufficient money to be spent in next 3 years.

Uncooperative RBI led by imported superstar governors didn’t help either. The mismatch resulted in RBI tightening noose on lending quality to western standards while govt babus were still running the finmin on turdworld standards.

It seems until banking sector is fixed (it has been done many times before) all govt efforts of - quick actions, corruption free environment, efficient governance, unified/streamlined taxation, reduced regulations, better policy frameworks (ease of business etc) and enhanced govt spending, would get buffered by the anemic credit flow and slowing momentum. On the upside such a proactive and efficient, right to center, govt would ensure that economy would bot sink either.

Couple of other factors, actually monumental achievements of the govt, that are hindering growth and credit are - low inflation, reduced corruption and increased tax compliance. But these factors would soon turn around and start to pay positive dividends.

To government’s credit they have taken a long term view by bringing paradigm changing legislations to solve the problem and prevent it’s recurrence. But in short term promotors are shitting bricks and everyone is deleveraging to ensure they don’t get thrown into jail by me-lards.

Fix the short term with a patch and then setup long term solution and systems

hindsight makes everything look easy!!!

[Suraj]

Thankfully Shantikanta Das is working much better with FinMin so far, compared to his two predecessors.

[vijayk]

Looks like everyone gave up on Modi on economic front. I do have a feeling that he will pull it off. There will be surprises and programs that will be pushed through. It took them time to resolve NPA mess. Eventually they came up with IBC and looks like getting it under control



Modi 1.0 was GST and optimizing delivery
Modi 2.0 will be reforms. I hope he will surprise naysayers

https://swarajyamag.com/economy/explain ... he-mgnregs
Explained: How Aadhaar-Enabled DBT Programme Rescued The MGNREGS

The Pre-Jan Dhan Era Versus Post-Jan Dhan Era

Before 2015, more than 650 million people in India were without bank accounts. Therefore, for the transfer of payments under the MGNREGS and several other welfare schemes, the government had to rely on panchayat bank accounts. Further, the workers were required to collect their wages from the gram panchayat office in cash.

This resulted in two problems. One, monetary leakages, and two, the connectivity. As per the Reserve Bank of India (RBI), in March 2014, there were 115,350 banking outlets across villages in India. The problem of delayed payments along with that of geography further alienated many more rural workers from the MGNREGS.

Today, every fourth person in India has a bank account. With more than 350 million accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY), the National Democratic Alliance (NDA) government, in its first tenure, ensured that every household had access to a formal financial instrument. Today, these accounts hold close to Rs 100,000 crore.

From 115,350 banking outlets in March 2014, the villages across India now have over 569,000 outlets. However, bank accounts served only a part of the solution. With Aadhaar, the government ensured that each bank account under the PMJDY was connected to an Aadhaar card, thus solving the problem of beneficiary identification.

The government is now using Aadhaar-linked payments (ALP) model to speed up the crediting of wages. Given Aadhaar is linked to one’s biometric credentials, the chances of fraudulent data under the ALP are zero. This also lessens the time that the government may require to verify claims from Aadhaar-linked bank accounts.

Today, of the 11.61 crore active workers under the MGNREGS, around 10.16 crore workers have their Aadhaar cards linked to their respective bank accounts. The total funds credited for the MGNREGS via the direct benefit transfer (DBT) mechanism has increased four times from 2015-16 to 2018-19.

A New Lease Of Life For MGNREGS Under The DBT

Firstly, coverage for MGNREGS has improved. As per the data from the muster rolls (muster rolls are similar to attendance registers used to record worker turnout), the number of such rolls has increased by two times between 2014 and 2018

The skill development would further result in overall improvements in their standard of living, aspiration for better education for their children, access to healthcare and much more. In the larger scheme of things, a digital payment system will enable social development for hundreds of millions of people.

Thus, it will not be an exaggeration to say that the MGNREGS has been successfully rescued by a well thought out DBT system. With the JAM (Jan Dhan-Aadhaar-Mobile) trinity seeded in their daily work routine, not only will rural workers find themselves with greater access to public welfare schemes, healthcare, and other formal financial instruments, but also play a far greater role in India’s pursuit of becoming a $5 trillion economy.

[vijayk]

Thankfully Shantikanta Das is working much better with FinMin so far, compared to his two predecessors.

whatever happened to 3 lakh crore transfer from RBI to Govt?

https://swarajyamag.com/politics/explai ... nterprises
Explained: What Is A Social Stock Exchange Proposed In Budget, And How Will It Help Social Enterprises?

Finance Minister Nirmala Sitharaman, in the Budget last week, announced that the government plans to create a social stock exchange (SSE), a platform on which social enterprises, volunteer groups and welfare organisations will be listed so that they can raise capital. The proposal has attracted much attention, and social entrepreneurs, among others, have said that the move can have a revolutionary effect on how they tap investors for capital.

A social enterprise is a revenue-generating business, but with a twist — its primary objective is to achieve a social objective, for example, providing healthcare or clean energy. But even though profit is not the primary goal, it is an essential part of the puzzle — it ensures the sustainability of the entity.

Envisioned as an electronic platform, an SSE will bring together social enterprises and impact investors on a common platform. On this platform, investors, like in any other stock exchange, will be able to buy shares (trading of securities or potentially debt, in the form of bonds) of listed entities

The Narendra Modi government has been cracking down on non-government organisations after intelligence agencies accused NGOs such as Greenpeace, Cordaid, Amnesty, and Action Aid for reducing India’s GDP by 2-3 per cent per year. Over the last few years, the government has acted against 13,000 NGOs till 2019 and this, in turn, says Brain & Company, has led to a 40 per cent decline in the flow of funds from external sources.

[Katare]

Sucy a large increase in MGNREGS could point to better and honest management of program or increasing rural distress.

MGNREGS was designed with self governing features to regulate its expansion or contraction. It expends only if there is additional demand (rural unemployment). Low wages coupled with hard manual work ensures it remains the last choice of the workers. In theory at least, MGNREGS should contract when rural economy blooms.

[Suraj]

The DBT JAM solution is yet another example of how this government operates. People bemoan the lack of big picture reforms. But this government has demonstrated that there's a lot that can be accomplished by doing straightforward things well. What is the point of establishing a large welfare system when there's no effective means of paying the end user ? If all the end user sees is corruption and difficulty in getting money, he'll never politically back the reform. Instead, just open hundreds of millions of bank accounts, and set up a simple ID mechanism and deposit the money directly, and suddenly a lot more things become possible. To build big ideas, we need basic things to work.

I'll ask a simple question - how many people here knew that as recently as 2014, about 60% of rural India had no access to clean water, sanitation, electricity, roads, bank accounts, i.e. they basically lived a life like you'd see in 'Mother India'. 70 years of misgovernance and even almost 25 years of liberalization and that was our situation. If we want people on board with big picture reforms, we MUST get the bottom tier of the Maslow hierarchy needs sorted out completely first. I've posted data about this in earlier pages - as an example, the percentage of villages with sanitation facilities in 1980 was 1% . ONE PERCENT. Others like China and SEA got this done between 20-30 years ago. That is what Modi focused on - demonstrated in the huge jump at the end of the graph.

Getting back to 'big picture reforms', let's take the example of labor law reform. I'd really appreciate it if people actually dig deep into the question. *What* are the laws in question. You can get references to them from PRSIndia or elsewhere. What are the issues with the laws ? What existing committees or submitted reports constitute prior or ongoing efforts at defining new labor laws ?

Just googling 'labour law india' or something, and posting the first few articles we see, is really not much digging. Please do more. Go look for the laws in question, the websites of the ministries, CMIE, ICRIER or any others with interesting studies on the topic.

[Katare]

I don’t think that Modi govt lacked in big bang second gen reforms in its first term. They simply avoided big reforms that had large nationwide opposition like land reform or labor.

I think Modi figured why fight a battle that I can’t win? They won’t get done, would cost dearly in political terms and distract from tasks and things that can be done!

[vijayk]

https://www.business-standard.com/artic ... 476_1.html
Railway union says will launch protest after Budget proposes privatisation
FM Sitharaman in her Budget speech on Friday proposed that railways should use Public Private Partnership (PPP) model for faster development

Stating that the Union Budget has revealed the intention of the government to go ahead "aggressively" towards corporatisation and privatisation of railways, the National Federation of Indian Railwaymen (NFIR) has said its affiliates are going to launch massive protests across the country against the move.

Union Finance Minister, Nirmala Sitharaman in her Budget speech on Friday proposed that railways should use Public Private Partnership (PPP) model for faster development, rolling stock manufacturing and the delivery of freight.


"The Budget reveals the government's intentions to aggressively proceed towards corporatisation and privatisation.

[vijayk]

https://www.theweek.in/news/biz-tech/20 ... halla.html

Modi 2.0 brings in new era of budget making: Economist
Surjit BhallaBhalla delivered the 20th Malayala Manorama Budget Lecture in Kochi

he first budget of the second Narendra Modi-led goverment is a deviation from the past and has paved way for a new era of budget making, observed eminent economist Surjit S. Bhalla. “The budget is no more a financial statement by accountants, for accountants. It has now become a vision document for the future suggesting long-term possibilities, long-term policies and long-term projections,” said Bhalla while delivering the 20th Malayala Manorama Budget Lecture in Kochi.

“Around the world, policies are made in consensus and consultation with NGOs, economists, and policy makers along with the government, to figure out what the next best policy is. All policy changes and directives are not made on the budget, so that everything is transparent. And that is where we are going to,” said Bhalla. He added, with the introduction of GST Council, indirect tax policies have been completely removed from the ambit of the Union budget. Now, changes in direct tax policies and “tinkerisation” of import duties will also fade away from the budget as India moves towards the “future budget” and it would remain a part of the old methods of political economy

He added that without freeing the agriculture sector from licensing, it is impossible to reach anywhere near the high growth rate of around 10 per cent. He also called for the abolition of Public Distribution System, Agricultural Produce Market Committee, and Essential Commodities Act, so as to evade the corruption by intermediaries.

The former member of PM-EAC said Indian policy makers must understand that the world has changed, both in terms of inflation, which is around 2 per cent in many countries, and technology. India now enjoys an inflation that is close to the global inflation rates. Now the policy makers, especially the RBI, must recognise inflation rates are no longer an issue.

[M_Joshi]

Do you know (well, I know you do) that an average meal for say, 4 people - CGST 9%, SGST 9%, Service Charge 10% (compulsory Tip)? Did I mention that this was a Jain meal , as there is separate 20% VAT on alcoholic beverages? And this is not a Hotel Restaurant. Just a regular one.

Apartment Building Maintenance also has GST?? Cinema has 28% GST. So do ceramic tiles, water heater, weighing machine, washing machine, Cars/Bikes, Hotel Rooms.

GST rates are *very* high (but you already know all this).

It has been explained 19,82,748 times but still to be understood by some people. 28% GST on say a washing machine is equivalent to 12.5% Excise Duty compounded by 15% VAT in pre-GST regime. So the net tax is almost same. Only difference is earlier your bill was 20000 + 15% VAT, now it's 19000 + 28% GST. You only lament on 28% increase from 15%, without seeing the basic price. I work in manufacturing & the price of our product is commodity based. If commodity prices are assumed to be the same then the end price of my industrial product would be the same in pre-GST & post-GST regimes. Earlier the consumer only saw 5% VAT, now it's 18% GST, what they never saw was hidden cost of 12.5% Excise Duty. Infact better thing has happened that B2B clients can now take input claim on whole 18% paid on capital goods like machinery made by us, so less incentive to pay by cash & thus save on tax. When you get 100% input you prefer taking the full bill. I'm glad & happy that GST has come. I was frustrated by earlier regime of VAT, CST, Entry Taxes & C-forms etc., & got shivers hearing horror stories of even olden form of taxation on businesses like manual VAT forms & Octroi forms from seniors. Wonder when did they get the time to conduct the business in between all this hulabaloo of ED, CST, VAT, Entry Tax, Custom duty, special custom duties, cesses, C Forms, ye form vo form, just so end consumer can see 5% VAT & be happy instead of 18% GST & be sad that things are expensive now.

[Suraj]

Environmental clearances for businesses to speed up; if Javadekar has his way, these many days will be needed

With an aim to increase investments so as to soon meet the ambitious goal of $5-trillion economy, Prime Minister Narendra Modi-led government intends to fasten the process of granting environmental clearances to the businesses. The processes will become even faster as the government intends to reduce the average number of days for granting permissions and approvals from 108 to 70-80 days, Prakash Javadekar, Minister for Environment, Forest and Climate Change, said at a conference organised by the industry body FICCI.

The government has already eased the process of granting environmental clearance to 108 days from 640 days earlier. “Unless we implement what we have decided, we can’t achieve our goals. Countries such as US and UK implement the laws ruthlessly. We have decided to give importance to the implementation aspect of the industry, and we want to see the disaster management preparedness of the industries,” the Union minister said.

No more unregulated deposits trap; Cabinet okays bill to check menace of illicit schemes

The Union Cabinet Wednesday approved Banning of Unregulated Deposit Schemes Bill with an aim to tackle the menace of illicit deposit-taking activities in the country. The bill will replace the Banning of Unregulated Deposit Schemes Ordinance, 2019. The proposed legislation is likely to be introduced in Parliament during the ongoing session. Talking to reporters after the Cabinet meeting, Information and Broadcasting Minister Prakash Javadekar said people are suffering due to chit fund scams.

“The bill will help tackle the menace of illicit deposit-taking activities in the country, which at present are exploiting regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard earned money,” an official release said. The proposed legislation will have adequate provisions for punishment and disgorgement/repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally, it added.

The banning of Unregulated Deposit Scheme Bill, 2018 was considered by the Lok Sabha in February and after discussion, the same was passed. However, before the same could be considered and passed in the Rajya Sabha, the Rajya Sabha was adjourned sine die on the same day.

Monsoon deficiency drops to 21 per cent but large parts of country still under deficient rainfall category

Monsoon has covered almost the entire country, but three-fourths of MeT department’s sub-meteorological divisions still fall under the “deficient” rainfall category, the India Meteorological Department’s data shows. The overall monsoon deficiency, which was 33 per cent at the start of the month, has dipped to 21 per cent. No sub-division in the country recorded “large deficiency”.

According to the Central Water Commission, of the 91 major reservoirs in the country, 62 water bodies reported 80 per cent or below of normal storage.

[vijayk]

https://swarajyamag.com/insta/tech-to-t ... water-woes
Tech To The Rescue: NITI Aayog Plans Desalination Plants Along India’s 7,800 Km Coastline To Meet India’s Water Woes

by Swarajya Staff - Jul 09 2019, 6:11 pm,
Tech To The Rescue: NITI Aayog Plans Desalination Plants Along India’s 7,800 Km Coastline To Meet India’s Water Woes
Minjur desalination plant near Chennai.
With the newly instituted Jal Shakti ministry in tow, the NITI Aayog is looking at setting up a large number of desalinations plants along India’s vast 7,800 km coastline to meet the water woes India faces, Economic Times has reported.

With one of the Aayog’s report predicting that 21 major cities face major water crunch by 2021, water crisis is a very real problem and imminent problem for India. While river linking projects are also going on in several states of the country, NITI Aayog is now looking at desalinations plants to remedy the issue in the short term.

India’s territorial plants extend to 12 nautical miles from the shore with the Exclusive Economic Zone stretching upto 200 nautical miles. The Aayog is planning to set up floating plants in these waters or plants along the coastline as part of the project with the plants using solar or ocean energy to operate.

India currently has two such plants operational in Chennai which help meet about a fourth of the city’s daily water need. Of the city’s 830 Million Litre Per Day (MLD) requirement, 200 MLD is met by the plants. Plants have also been announced by the Gujarat Chief Minister Vijay Rupani to meet the demands of cities near the coast.

Modi got re-elected on May 23. By July 4, all have given up hope on him having plan to fix all economic/cultural/social problems facing India.

[kittigadu]

Deleted . Please don’t post such political talk here . Your polemics should have been enough of a clue to you that you’re in the wrong thread . The post had been moved to the politics thread .

[Rishi_Tri]

Deleted. If you're going to post a long rant about politicians, it does not belong here.

[hanumadu]

Getting back to 'big picture reforms', let's take the example of labor law reform. I'd really appreciate it if people actually dig deep into the question. *What* are the laws in question. You can get references to them from PRSIndia or elsewhere. What are the issues with the laws ? What existing committees or submitted reports constitute prior or ongoing efforts at defining new labor laws ?

Just googling 'labour law india' or something, and posting the first few articles we see, is really not much digging. Please do more. Go look for the laws in question, the websites of the ministries, CMIE, ICRIER or any others with interesting studies on the topic.

I posted a fairly lengthy article on the four laws that are supposedly in the works concerning wages, pension and labour.
viewtopic.php?f=2&t=7613&p=2364250#p2364250

Considering that the first law related to wages that has been talked about since early days of the last term hasn't been passed yet, I don't see the law regarding labour being passed in this term.

[Schmidt]

Why the investor class is not happy with the 2019 Budget :

https://economictimes.indiatimes.com/ne ... 169542.cms

[Rahulsidhu]

Why the investor class is not happy with the 2019 Budget :

https://economictimes.indiatimes.com/ne ... 169542.cms

IMHO this article is an example of how this whole debate is being handled the wrong way. It is not a question of rich investor class vs poor working class. To frame it thus is not only self-defeating, it is objectively wrong.

What the debate should be is to ask whether we want to grow the size of the pie, or fight over redistribution of a stagnant pool of income. The narrative that needs to be built and disseminated is that lower taxes will lead to everyone being better off. Working class gain with more jobs and welfare while the rich can enjoy their capital gains. We are a poor country far away from the productivity frontier, lots of room for everyone to grow.

Everyone needs to be told that a stimulatory policy, be it monetary or fiscal, will create more jobs. The govt can spend on welfare and yet keep taxes low. Let the fiscal deficit rise, we have room. Or the govt can do accounting tricks and borrow off balance sheet.

Contractionary policy on the other hand will only cause more conflict in society, less to spend on welfare. The govt has missed its tax collection targets even with good tax buoyancy, simply because nominal GDP growth has been too low. A large part of the problem has been the RBI, but also because govt. advisors cannot seems to think beyond their textbooks. Sorry for the harsh words.

Anyway, framing it thus will not only be politically defendable, IMO it will indeed be popular. In India I have not seen the kind of animus among the poor towards rich people that is common in the west.

[Rahulsidhu]

Regarding GST rates: If we compare with the previous regime (strictly talking about rates here, I don't think anyone would argue with GST being the better system), then while its true that rates on manufactured items have come down/are at par, we should take into account the services rate having gone from 12% to 18%. In services there isn't usually much input credit to be had either. This is a huge jump!

Thinking of it in some absolute sense, it is definitely subjective, but to me current GST 18% base rate seems too high. I know there are countries like the UK with 20% VAT but then they offer free quality education, healthcare etc too. Don't think that benchmark is justified. Moreover an 18% rate is self-defeating to a certain degree -- it's a huge barrier to compliance.

Then there are other more egregious examples like 28% on cement and auto/auto-parts. Even the govt has said it is too high and wants to bring it down, but hasn't done so. Why? The same "fear of fiscal slippage" that I alluded to in my earlier post.

If I may speculate a bit on this, I think cutting GST would be more stimulatory/per rupee forgone in taxes than income or corp tax cuts. Should definitely be done ASAP.