All things Money Thread

Big Daddy

Super User
If Indian government messes with us then we are going to support or even ask for S-400 sanctions when the time comes. Either they get responsible or competent or India goes bankrupt. You cannot have incompetent people in power and get wonderful economic results. Bad people give bad results. If these bad people have problems accepting the truth then, well, you cannot hide the truth.

Big Daddy

Super User
#GDP #ManmohanSingh #IndianEconomy

Manmohan Singh says GDP figures are unacceptable

442K subscribers
Published on Nov 29, 2019
Former prime minister Manmohan Singh Friday said that India’s economic condition is “deeply worrying” and that the latest GDP figures released by the government are clearly “unacceptable”.
Manmohan is right of government harassment of everyone. I am thinking that I might give money to people in India and they will be unable to withdraw it from their banks.


Senior citizens do not fall for 'guaranteed return' plans.
Check details inside
Updated Dec 21, 2019 | 14:16 IST | ET Now

Senior citizens should not fall for guaranteed return policies or the traditional plans which are a mix of insurance and investment as these provide a maturity corpus at the end of the termPhoto Credit: BCCLRepresentational image
Key Highlights
In case you have been mis-sold insurance policy during the free-look period, return the plansenior citizens often skip reading the terms and conditions while purchasing an insurance policyMost of the mis-selling happen due to the bancassurance tie-ups with insurers

Delhi: Senior citizens should not fall for guaranteed return policies or the traditional plans which are a mix of insurance and investment as these provide a maturity corpus at the end of the term. The return on such plans is extremely low and the premium is very high. One should stay away from these policies.

In case you have been mis-sold insurance policy during the free-look period, return the plan. If the free-look period is over in case of traditional plans, then it is better to either make it a paid-up policy or surrender it. In paid-up policy, one should have paid the premium for at least three years for policies with a term of more than 10 years and for a term lower than that, the premium should have been paid for two years. Going ahead with a wrong insurance policy or a policy that is not in line with your objective could be hazardous to your financial health.It is usually noticed that senior citizens often skip reading the terms and conditions while purchasing an insurance policy. While it is advisable to read or discuss the hidden terms and conditions with the respective relationship manager or any financial advisor. Most of the mis-selling happen due to the bancassurance tie-ups with insurers. They keep an eye on senior citizens as they have adequate availability of funds after retirement and are ill-informed about the investment avenues. They tend to dupe the old people by not giving anything in writing and promising them high returns on their investment. Often, the policy document is sent after the free look period and the bank refuses to take the responsibility as the signatures are on the document and there is no evidence of mis-selling.Single premium Ulips are usually mis-sold as bank fixed deposits (FDs) with higher returns and tax benefits. Ulips and other conventional insurance plans often have three modes of premium payments -- periodic, limited period and single (lump sum). The insurers put the total sum assured at 1.1 times for those above 45 years, which means that for senior citizens, this invariably breaches the requirement of the premium being 10 per cent of the sum assured for the maturity proceeds to be tax-free. This is why the single premium Ulip plans should certainly be avoided.



PPF 2020 :

PPF 2020
बदल गए ppf से जुड़े नियम
Ppf मे investment करने वालो के लिए बड़ी खबर।


explorer » Business » 'Economy is already in recession'
'Economy is already in recession'
January 13, 2020 09:51 IST

'When you have both cancer and fever, you cannot have just paracetamol. You have to give paracetamol for the fever and chemotherapy for cancer.'

IMAGE: Prime Minister Narendra Damodardas Modi, centre, with from left, Tata Sons Chairman Natarajan Chandrashekharan, Jindal Steel Chairman Sajjan Jindal, Kalyani Group Chairman Baba Kalyani, Bharti Airtel Chairman Sunil Mittal, Reliance Industries Chairman Mukesh Ambani, Tata group patriarch Ratan Tata, Mahindra and Mahindra Chairman Anand Mahindra, Adani Group Chairman Gautam Adani, L&T's A M Naik, Venu Srinivasan of the TVS group and Vedanta Group Chairman Anil Agarwal at an interaction to discuss ways to improve growth and job creation, January 6, 2020. Photograph: PTI Photo

In 2019, it was said the Indian economy was slowing down. Now in 2020, people have started talking about recession.
After registering a growth of 8% in 2016, India's growth has fallen steeply to below 5%.
Where is the Economy heading to?
"The economy will pick up in 2020 or a little later... When it picks up, will it reach 10%, 8% or still lower? It all depends on how realistic are the diagnosis and the prescriptions that follow," Professor K J Joseph, director, Gulati Institute of Finance and Taxation, tells's Shobha Warrier.

Are we moving towards recession, or are we already in recession?
We are already in recession. How do you describe recession? When you clock declining GDP growth for six consecutive quarters, it is recession.
Anyway, it is by now well understood that the economy is slowing down. Economists have even termed it as the great decline.
The question now is where is this decline happening? After India started liberalising in the 1980s and globalising in the 1990s, India's economic growth has steadily increased.
India's growth rate from 1991 to 2000 was 5.5% to 5.6%, and from 2001-2010 it was 6.5%. The growth rate accelerated by one per cent.
But after 2010 till 2018, it was 6.8%, which means that the growth rate was merely 0.3% higher than the previous decade.
Coming to the present, the current year's growth rate is expected to be only around 5%. It is quite likely that this decade is going to record a lower growth rate than previous decades.
If it so happens, it also means India appears to have already peaked its performance. Deceleration has set in, which we cannot afford.

Peaking at less than 7%? Does that mean it can only decline from now onwards?
If you are good enough, you may stabilise. Else, you will decline.
Now, we have to compare this performance with that of China. How has it been in the case of China?
China registered a growth rate of 9.6% from the 1980s till 2017. If you look at India's performance, you will see that it was never a steady growth. It had occasional downs.
For example, in 1991, we had a growth rate of just 1%, in 2000, it was 3% and 2003, 3% and now again, it is coming down to 5%.

But it has been said we were growing at 7%, 8%, 9%...
After growing at 3% in 2003, it picked up to almost 8.1% in 2016 which was the highest among many of the comparable countries at that time.
But the point is today China is recording a growth rate of 6% which is after achieving 9.6% for nearly 37 years!
The Japanese economy doesn't grow now; even a growth rate of 1% is great for them.

Can we afford to stagnate?
Exactly. And that is a point of major concern.
It is not for the first time after globalisation that the economy is facing this kind of recession. I will consider liberalisation as a 1980s phenomenon. In 1991, we had a slowdown, early 2000s we had a slowdown, and now we are experiencing one.
What I want to argue is that Indian economic performance was never steady; it has always been fluctuating.
If you look at the annual growth rate from the 1980s, you will see that it always had violent fluctuations unlike China. If at all China had fluctuations, it was much less violent as compared to India.

Why is it that we experience violent fluctuations? Has it anything to do with uncertain political situations?
No, it is not so much due to the political atmosphere. It can be due to endogenous and exogenous factors, that is something very specific to the economy and also something external to the economy.
I would like to compare this kind of economic situation to a human being. For example, what enables a baby to grow physically, mentally and intellectually strong? If the baby is malnourished, it catches cold and fever quite often. That is because it is not healthy. On the other hand, a healthy child can fight the viruses.

You mean the Indian economy is an unhealthy economy?
Precisely. That's why I said we had structural problems.
When your fundamentals are not sound enough to sustain a growth that India badly needs. When you take the example of China, it has been shown that it is possible for large economies like India to grow steadily.

Compared to China, what is it that India lacks?
That is the question we need to answer. What generates growth? Growth does not come from the heavens.
The basic thing you need is capability.
And the most important capability is human capability. That human capability has to be manifested in terms of the capability of individuals and organisations to survive in the fiercely competitive global environment in which they operate.
Today it is more competitive than ever before. To survive in a highly competitive economy, you need the capability.

Does that mean people themselves are responsible for the violent fluctuations in the economy?
Exactly. Who are the agents of an economy? The labour force.
They should be educated, they should be knowledgeable, they should be competent. These qualities make entrepreneurs. It is the people who make the enterprises.
Entrepreneurial capability is nothing but the manifestation of the overall capability of the people who manage them.
Today you are living in a world where knowledge is the key resource; not capital, not land. You can survive in a globalised open economy only if you are competitive.
And that competitiveness depends upon your capability, and that capability is essentially a function of your knowledge and learning capability.

We are all the time talking about the large human capital that we have...
I would say that human capital is used in a very wrong way.
For example, when you talk about learning capability, it can be in terms of science-based learning, research and development. It can be the number of scientists, engineers, R&D expenditure and patents you generate.
India has been talking about spending 2% of the GDP on R&D from the 8th Plan onwards. But it is not even 0.9% today. Compare this to the 2.1% of the GDP in China. With respect to patents, India is nowhere near China.
Secondly, the experience-based knowledge, which is different from science-based knowledge.
Perhaps you can describe it as scientific knowledge and synthetic knowledge.
In fact, under globalisation, India's strategy has been to make use of synthetic knowledge, by borrowing from others, by attracting FDI, by importing and other such means.

What about ideas like Start up India, Make in India, Skill India, etc? The intention was to encourage new ideas, and not synthetic knowledge.
These are all wonderful ideas. But unless you have a judicious mix of scientific knowledge with synthetic knowledge, none of this will succeed. This has to come from stronger Academia-Industry collaboration which is very much missing in India.
What is happening to the best brains? In fact, today India has been facing a brain drain of much severe intensity than what we faced before liberalisation.
Whether you succeed or not depends on the knowledge economy in the Fourth Industrial Revolution.
Compare India's software capability with that of China. Today, China has a software market of about $550 billion, and they export around $70 billion. That means $480 billion worth of software is used in the domestic economy.
This domestic use of software, in fact, makes the Chinese economy in general more competitive and efficient. They are able to flood the world market with their products so much so that they have generated huge employment in manufacturing.
Now, in the case of India, we have around $150 billion worth of software, out of which $100 billion is exported. Our domestic consumption may be around $50 billion only. This is as against the $480 billion in China.
Why are we exporting $100 billion worth of software instead of exploiting the huge domestic market?
The best minds of India do not work for India, but for other countries. By exporting, they are working for the companies outside this country.
In an economy where there are no barriers to import, we are actually working against our own domestic firms and working for our competitors.

We hear about India's huge domestic market all the time, but why is it that nobody is really exploiting it?
Exactly. I would even go on to say that there may not be any county in the US which is working so hard for the American economy like Bangalore!
I am not against software exports.
In 1991, when India was facing a severe imbalance in the external sector, it was ideal to promote software exports. Today, we are sitting on a foreign exchange reserve of $450 billion.
We should have changed our policies according to the needs of the time.
What we miss is an ability to change according to the changing needs and contexts.

Do you think this is why China could produce an Alibaba while we have not been able to produce a single global company like that?
Do you know Alibaba has a domestic arm which has created 600 Taobao villages all over China? (Taobao village is a cluster of rural e-tailers where at least 10% of village households engage in e-commerce or at least 100 online shops have been opened by villagers.)
This is entirely for rural China. The turnover of Taobao villages is double that of Alibaba.
How much have Indian IT companies done to make the Indian agricultural sector competitive which is lagging behind by centuries?
How much have they done to transform India's rural and agrarian economy which would have increased domestic demand? The truth is, they haven't done much.

For the last almost three decades, we have been hearing about the need to use technology in rural India and the need to have food processing units, but even today, we waste 16% of our fruits and vegetables produced and 10% of our oil seeds, pulses and cereal production...
Yes, in the case of agriculture, makers of value are not the takers of value. In enabling the makers of value to be its takers, IT has a huge role to play.
Because of the dominance of the IT sector, there is reason to believe that other industries are also suffering because of competition for skilled manpower and the so-called resource movement effect. And it has affected India's manufacturing capability.
If we were to ask the question, why do we not have sustained growth, I would say it is because after globalisation, the kind of growth India have had only aggravated inequality.
Today, we have a service sector, including IT and software, that contributes 62% of GDP which is produced by 33% of the workforce.
But take agriculture, 50% of the population is involved in it, but it contributes only 17% of GDP, indicative of very low productivity.
This essentially is the first manifestation of inequality.
In the case of manufacturing, it contributes about 16% of GDP and employs about 13% to 14% of the population. But this is the sector that is suffering the most.
In 1950-1951, India had 9% of GDP coming from manufacturing which increased to 15% by 1996.
After 1996, despite new manufacturing policies, it has not gone up. It is only 16% of GDP now.
What we need for the economy to grow is there has to be a seamless transfer of people from agriculture to industry. It was made possible in China. And it was only because people got educated that they could move to industry. Even today, our rural folks cannot be transferred to industry.
Even if our agricultural contribution did not increase, industry's contribution should increase and for that, their productivity has to increase. 50% of the people contributing only 17% of the GDP is unsustainable.

Is it because they are not educated or skilled that the seamless movement of people from agriculture to industry not happening?
Yes, lack of skill. We should ensure that at least for the next generation, it happens.

Who is to be blamed, the policymakers?
Instead of blaming anyone, what we should do is change our approach.
We have one monetary policy for the whole country. One size doesn't fit all.
Further, simple reduction in interest rates will not induce investment when investors don't find demand for their products due to low purchasing power on account of growing inequality.
India being a country that is more diverse than all the continents, we should have location specific, region specific and state specific policies with the states having the freedom to articulate policies.
Unfortunately, the fiscal federalism as it exists today hardly leaves any scope.

More autonomy?
Yes, more autonomy to the states. The states should have more freedom to decide the destiny of their people.

Would you say the problem the economy faces now is more structural?
I am rather puzzled to see the great divide among the scholars of eminence. While one group considers it as an outcome of structural factors like labour market rigidity and inequity, others consider it as emanating from cyclical factors -- slump in demand, demonetisation, GST etc.
To my mind, the key ingredients in the making of the current economic problem are both structural and cyclical.
Since your child is already weak due to growing inequality and capability deficit, any external shock like demonetisation or faulty imposition of GST affects the child and it suffers more.
Further, slump in demand cannot be delinked from the increasing inequality in the distribution of income.
We are prematurely ageing. And we have to be careful about it.
What is the quality of growth we have? You take the problems faced by agriculture, manufacturing -- all structural.
Economies with structural problems are bound to have such cyclical problems. So, you have to address both cyclical and structural problems.
When you have both cancer and fever, you cannot have just paracetamol. You have to give paracetamol for the fever and chemotherapy for cancer.

What kind of 2020 awaits India?
I would say the economy will pick up in 2020 or a little later because our past experience indicates that such slowdowns are not happening for the first time; it has been happening quite often.
The question is: When it picks up, will it reach 10%, 8% or still lower? It all depends on how realistic are the diagnosis and the prescriptions that follow.


'Economy is already in recession'
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Illustration: Uttam Ghosh/

Illustration: Uttam Ghosh/
Assocham's new President and Hiranandani Group Managing Director Niranjan Hiranandani, says tax rates should be slashed for individuals and partnership firms to boost consumption and revive investments.
He tells Subhayan Chakraborty and Indivjal Dhasmana that the low corporation tax rate of 17 per cent should be expanded to all companies and not just the new manufacturing firms.

At the Assocham annual general meeting, Prime Minister Modi exhorted companies to invest. Why is economy not reviving despite reforms initiated by the Modi government?
The prime minister has clarity on what he wants to attain, and has the ability to focus and see that things are done.
Were demonetisation, GST (goods and services tax, RERA (Real Estate Regulatory Authority Act) and the IBC (Insolvency and Bankruptcy Code) not good ideas? The answer is these were.

Now, you have lots of good ideas.
But if you pack them together, without taking care of the fallout of these ideas till they become streamlined is an issue that we are all facing.
During demonetisation there was a problem relating to marginalised people not having enough cash, while in real estate, there was a lack of money available for real estate projects despite setting up of RERA.
So, the processes that were needed to take advantage of all these things were not put into place early enough.

So, what needs to be done?
To become a $5 trillion economy, economic growth rate needs to reach 10 to 12 per cent a year and not the current 4 to 5 per cent.
For that, we need to improve the liquidity and demand conditions in the market.
After demonetisation, the market deposited all the money into banks and mutual funds.
But the banks were not able to lend that kind of money directly, so they lent it to non-banking financial companies.
Mutual funds also put money in the stock market.
NBFCs were the one to lend money to most businesses.
But after the IL&FS debacle, the liquidity in the NBFC sector went down and they stopped lending because they themselves were sick.
Now, there is a lack of liquidity both from the banking system and NBFCs, which is the structural problem that we are facing.
So, we have suggested that NBFCs be revamped fast, allowing them to become banks while more private banks are created.

Aren't licences given on tap for small finance banks?
I want 50 new banks to come up. NBFCs need to be incentivised to become banks.

But how do you activate demand?
There is a lack of confidence right now.
For that, I suggest a cut in the GST rates and an infusion of Rs 1.2 trillion into the economy in six months.
The fallout of this will be higher fiscal deficit and more money would have to be compensated to the states due to GST cuts.
But both these risks are worth taking, because these steps will spur demand at the end.
On the supply side, the government has reduced the corporation tax rate to 25 per cent.
But the tax cuts are also needed for individuals, partnerships firms, and all other kinds of businesses that are still paying much higher tax rates.

Will widening of fiscal deficit not raise the inflation rate?

This is the only way to save the economy today.

Why aren't investments rising despite a cut in the corporation tax rates?
There's an issue.
The government's decision to reduce corporation tax rate to 17 per cent for new companies is faulty.
I am here running my company for 35 years and now need to set up a new company to take advantage of the 17 per cent tax rate, which I think is wrong.

Subhayan Chakraborty and Indivjal Dhasmana

Source: source

'This is the only way to save the economy today'


Modi may shut Air India by June
By A K Bhattacharya
January 09, 2020 08:57 IST

'The Modi government is trying hard to see if it could be sold to a private airline.'
'But it appears there are no takers.'
'If no buyer comes forward by June, the government will close down Air India,' predicts A K Bhattacharya.

With 2019 having ended on a depressing note, a lot of hope rests on 2020.Will the New Year usher in a revival in the Indian economy?And will the Narendra Damodardas Modi government, which in 2019 was mostly focused on achieving its political agenda, pay more attention to the economy in 2020?Nobody can anticipate, let alone predict, what Mr Modi will do in 2020.But what one can safely do is to list out the possible key economic issues that might figure in the New Year.Here are three such issues or developments that you need to be prepared for in the next 12 months.

Air India may be history
Air India, the State-owned airline, may not exist after June 2020, if government officials are to be believed.The Modi government is trying hard to see if it could be sold to a private airline.But it appears there are no takers.

If no buyer comes forward by June, the government will close down Air India.
Its pilots have already sent a letter to the civil aviation ministry urging it to clear their wage arrears and other dues before Air India is shut down.
The closure of Air India will mark the end of a saga in India's civil aviation industry.
It was an airline that was floated by the Tatas and run efficiently as a private airline for quite some time before India's first prime minister decided to nationalise it.
Since then, successive prime ministers have allowed Air India to operate as a public sector enterprise, lose market share, become more inefficient and incur losses.
Air India's financial dependence on the central exchequer has kept rising over the years.
It was only sometime in the middle of 2017 that the Modi government decided to privatise Air India.
However, the procedures adopted for its sale were such that the privatisation exercise was doomed to failure right from day one.
In its second term, the Modi government has once again tried to privatise Air India, but so far with little success.
Hence, there is now talk of its closure in June, if no buyer is found for the airline.
If that indeed happens, it would reflect how governments over the years have neglected Air India and allowed a slow destruction of an asset.
If the privatisation move had been initiated earlier and with a greater sense of realism by making the norms more attractive, Air India could have escaped the ignominious fate that it would face after June 2020.
There is a lesson in this for many other such assets that the Union government still owns.

Budget 2020 may reveal the true state of government finances
Just about a month later, Finance Minister Nirmala Sitharaman will unveil the Union Budget for 2020-2021.
Understandably, the Budget will give a clear indication of the government's approach to how it wishes to tackle slowing economic growth.
Whether it would do so by increasing expenditure on infrastructure projects or by cutting taxes or by a mix of both types of measures keeping in mind the need for fiscal consolidation, the Budget will reveal it all.
However, the more important revelation of Budget 2020 will pertain to the true state of government finances.
It has to acknowledge, for the first time, that the actual gross tax revenue collections in 2018-2019 were substantially lower than what the revised numbers indicated when the last Budget was presented in July 2019.
It may also have to indicate the true extent of the government's off-Budget borrowings which it has resorted to in the past to help meet its expenditure, without adversely affecting its headline fiscal deficit number.
It will be interesting to see if Budget 2020 presents a more realistic fiscal deficit number that is arrived at without seeking recourse to off-Budget borrowings or imaginative accounting.

GST Council meetings will become contentious
The last meeting of the Goods and Services Tax Council held in New Delhi last month provided an early indication of how contentious its deliberations in the coming months will become.
The 38th meeting of the Council had to decide on the fixation of rates for lotteries through a voting, the first time a decision was taken on the basis of voting since the Council was set up more than three years ago.
All decisions in the past were taken on the basis of consensus.
Now, the politics of the country has undergone a significant change.
The Bharatiya Janata Party at present rules only 17 states.
In the GST Council, 29 states and the two Union Territories of Delhi and Puducherry have a vote each that can be exercised when consensus becomes elusive.
But each vote of the states and the Union Territories has a weight of 2.1.
A decision can be taken only when it receives approval from three-fourths of those present and voting.
The Centre has a weight of 33 or one-third of the total.
Of course, the Centre can count on the 17 BJP-ruled states for their support at the GST Council meetings.
But that would give them a total weight of 69, including 33 of the Centre and 36 of the 17 states.
This, however, will be six votes fewer than what will be required to get a decision approved at the GST Council.
In other words, the Centre will not only have to count on all the 17 BJP-ruled states, but also get at least three more states to support its proposals at any voting during the Council's deliberations.

In short, GST Council meetings in 2020 will become more contentious and the Centre will have to embrace the principles of co-operative federalism not just in letter but also in spirit.
The above three issues or developments in 2020 are only a few examples of how the New Year would pose new challenges for the Indian economy as also the polity.
If the right lessons from these developments are learnt early enough by the government, one can expect 2020 to end on a less depressing note than 2019 did.

A K Bhattacharya
Source: source

Modi may shut Air India by June


'Don't sell Air India, BPCL at a loss'
December 04, 2019 09:09 IST

'National assets, created over the years through tax-payers's money, should not be handed over to business houses at throwaway prices.'

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The trouble with India's disinvestment story
The trouble with India's disinvestment story

The Swadeshi Jagran Manch, the Rashtriya Swayamsevak Sangh's economic wing, is likely the bitterest critic of the Narendra Damodardas Modi government's decisions on the economy, be it issuing sovereign bonds, joining RCEP or the divestment of public sector giants.
The SJM has termed the Modi government's move to strategically divest five PSUs as imprudent and against the national interest.
"These are our strategic assets and they should not go into the hands of multinationals," Swadeshi Jagran Manch Co-Convenor Dr Ashwani Mahajan tells's Shobha Warrier.
You oppose the government's decision to divest five PSUs. Does that mean you are against divestment per se?
No. Our resolution clearly says the Swadeshi Jagran Manch is not against divestment.
Right from the very beginning, we are for privatisation though we prefer small scale industries and cottage industries. But we are of the opinion that in some cases, we have to go large, for instance, airlines, refineries, etc.
So, we are not against divestment or privatisation. However, we oppose the idea of strategic divestment. We also opposed the divestment process followed by NDA 1.
In 2001-2002, the Vajpayee government had divested a few public sector organisations with good results.
At that time, we opposed it because we felt the process was not transparent. There were only a few buyers. So, we felt the government did not get a good valuation. That was why then also, we had suggested that the government should do divestment only through the equity route.
When NDA 2 came to power in 2014, we had a detailed discussion with the then finance minister, Arun Jaitley. He agreed that what NDA 1 had followed was not a prudent method and that they had learnt from their past mistakes. He told us that whenever they would go for divestment, they would take only the equity route.
So, whatever divestment the Modi government did in the first five years was all done through the equity route.
But in the last leg of the Modi government, when they spoke about divesting Air India, we had said we were not against the idea of divesting Air India if it was done through the equity route.


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What is the problem in a strategic sale if it is done in a transparent way when there is proper evaluation and when there are at least five bidders?
If you look at the way BPCL, which they are planning to divest now, is valued you will understand whether there was proper evaluation.
I am of the opinion that ownership of a company does not make it efficient or inefficient. It is the management that matters.
You always compare PSUs with private companies. So, if you compare BPCL and Essar, you will see that the profitability of BPCL has been rising consistently.
Essar is only half of what BPCL is in terms of refineries. Essar doesn't run petrol stations, but BPCL does and there are thousands of them.
You mean a profitable and professionally run PSU should not be divested?
That is not the point. The problem is, Essar, which is half of BPCL, is valued more than what BPCL's value has been sought now. Does it mean BPCL has been valued properly?
So, what you are opposing is the way BPCL is valued and not divesting BPCL...
Yes. If they had followed the equity route, this kind of valuation would not have happened. Whenever you make deals with strategic partners, the problem of valuation will arise. And there are only 2-3 buyers.
So, the question is: Why do you have to give up management this way when there is another way, when the equity route divestment will fetch you a very good amount?
If we look at the case of Hindustan Zinc that was sold during Vajpayee's time, its profits increased a hundred fold after Vedanta took over in 2002. So also Balco, IPCL, etc.
Yes, everybody says those companies became more efficient and profitable after divestment. We don't agree. The Rs 769 crores (Rs 7.69 billion) for which Hindustan Zinc was sold was at an undervalued price. You look at it now. Just 30% shares are equivalent to Rs 30,000 crores (Rs 300 billion) now.
Is that not because the company's profits increased 100 times after divestment?
It is not just the profit, there are other considerations also like revenue to the government.
What I am saying is we have very bad experiences with private sector companies when you look at the way they pay taxes, the way they manage all kinds of concessions etc while public sector companies do not hide anything.

So, you are also against privatisation?
You are jumping to conclusions. What I am saying is when you give a PSU to a private business house, why do you want to sell it at a loss?
I will give you some examples of government companies which are run by independent boards. Take, for instance, L&T and ITC. Both are government companies, but run efficiently; the promoter is the government, but the management is not the promoter.
But why should governments be running businesses?
The government should not run businesses and these are not run by the government. As the private equity holding is 51%, bureaucratic control goes away and companies are run by independent boards.
Without bureaucratic control, things will improve.
The problem is bureaucratic control and not the ownership of the company.
National assets, which are created over the years through public sentiments and tax-payers's money, should not be handed over to business houses at throwaway prices.
If you sell companies like BPCL to the private sector, they are always inclined to make them cartels. We have seen this earlier also.
When cartels are made, consumers suffer. We have seen several cases of private houses looting public money.
Ownership does not make you good or bad. What is important is the way it is run.
So, our contention is, BPCL should be valued properly and should be sold through the equity route.
Why should NITI Aayog or other consultants come in the way of the government getting an appropriate price for the assets that are created by public sentiments and tax-payers's money?
Why should we sell them in the name of divestment at a lower price when they can fetch a higher price?
Why not the equity route?
If the strategic sale is transparent and there are more buyers...
It is not transparent and that's the problem.
If there are hundred buyers, it is transparent. Here you have only two or three buyers and they join hands and take away the national assets at throwaway prices.
Why should the government fall into this trap? Why can't they go through the equity route which they had followed in the last five years?
Now, let me tell you about Air India. The assets Air India has are not valued at all.
Over the years, Air India has acquired so many air slots for landing rights and these air slots were not valued at all.
When the consultants say Air India has a negative net value, they are lying. These consultants have not valued air slots at all.
Can you believe we sold one air slot at Heathrow for Rs 400 crores (Rs 4 billion)? And we have 70 such air slots in Heathrow and Birmingham alone.
We have more than 2,500 air slots internationally and there is an international practice of leasing of air slots. No mention of that is made by the consulting company.
But the Cabinet Committee on Economic Affairs has approved the strategic sale of the five PSUs...
I would say the Cabinet Committee on Economic Affairs, the Cabinet and the government had been misinformed and misled by the consultants.
So, when the government is going to sell them saying they had negative value, they are taking away all the tax with that.
What we are saying is you run Air India by a professional management, turn it around, come with an IPO and then sell Air India to retail investors.
We have an example of British Airways. In the 1980s, British Airways was in the same shape. In 1987, it was turned around and an IPO was issued, which was oversubscribed 11 times. It is now run very efficiently.
The attitude of cutting off the hands if they are unwell is not good. Treat them first.
At present the economy is slowing down, GDP growth is down and the government is desperate to turn it around. It is trying to create funds for infrastructure projects through the divestment of PSUs.
Who is stopping the government from infusing funds for infrastructure projects?
What we are saying is sell it through equity route so that they will get more money!
We want the government to get more money than selling at a lower price.
We are supporting the government's decision to invest more money in infrastructure projects.
We have always been critical of foreign consultants who have conflict of interests.
You spoke about the unfair advantage given to the buyers. What is it?
First, we shouldn't be allowing cartels to be made.
Next is these are our strategic assets and they should not go into the hands of multinationals.
It is very unfortunate that a company that has created Rs 60,000 crores (Rs 600 billion) in the last eight years is being sold for Rs 56,000 crores (Rs 560 billion).
Not only foreign consultants, NITI Aayog also made assessment of the PSUs to be divested.
I don't have any faith in NITI Aayog's recommendations. In fact, we have asked for junking the NITI Aayog report. NITI may look like a Hindi name, but many of the consultants are foreign!
You opposed the government on sovereign bonds, RCEP and now divestment. Is the Swadeshi Jaagran Manch going to be the Opposition?
No, we are friends of the government. In Hindi there is a saying that you must carry critics with you so that they can keep checking you when you go wrong.
We opposed RCEP from the beginning. Now, everybody is appreciating the government because they didn't accept RCEP. So, who is the beneficiary? Swadeshi Jagran Manch or me or the government?
We opposed the sovereign bonds and started a debate. Ultimately, the government decided against it. Who benefitted? The country? The government? Or the Swadeshi Jagran Manch?
Swadeshi Jagran Manch is a critic that tries to guide the government the right way so that the whole country gets benefitted!
Is the Swadeshi Jagran Manch going the Left way?
The Swadeshi Jagran Manch is not the Left. The Left will never accept divestment either way. So, are we Left?
There is no Right or Left in our thinking. There is a general feeling that Right means multinationals, corporates, globalisation and big markets. If that is right, we do not like to be called Right.
We are just nationalists. This is the nationalist way of looking at things, and not the rightist way.

Shobha Warrier covers business for Author of Dreamchasers: Entrepreneurs from the South of the Vindhyas, she can be contacted at [email protected]

'Don't sell Air India, BPCL at a loss'


4 mistakes Modi made with GST
By T N Ninan
January 03, 2020 11:57 IST

'Perhaps GST was too complex a system for the Indian economy at its present stage of development,' argues T N Ninan.
Illustration: Dominic Xavier/

The Modi government has rolled out an ambitious spending programme for building the transport infrastructure and the provision of various goods of value to ordinary citizens.

The problem has been arranging the money to pay for it all.
One of the key assumptions was that the introduction of goods and services tax would raise the share of indirect taxes in gross domestic product and provide the wherewithal.
It hasn't worked out that way.
Central revenue from GST may be anything up to 40% short of target this year, and the states are now complaining about non-receipt of their GST share.

Pushed to the wall, the government is busy finding ways to pay its bills indirectly, or not pay at all.
The comptroller and auditor general has reported that the actual central deficit is more than 2 percentage points higher than officially stated.
There were four mistakes made on GST.

First, the political leadership did not realise until quite late in the day that GST is essentially a flat tax, with variations.
So all the goods consumed by the poor, and broadly enjoying favourable tax treatment, would now attract a higher tax.
Equally, the goods consumed by the wealthy would attract a lower tax.
So the poor would end up paying more, and the rich correspondingly less, if the GST rate were revenue-neutral.
That led to the first mistake: Going political, and introducing extreme progressivity in GST rates (all the way from zero to 28%).
This was GST without the logic of GST.

The second mistake was to promise the states a guaranteed 14% increase in GST revenue from one year to the next.
This, when a new monetary policy framework was being put in place for the Reserve Bank, with a target inflation rate of 4% (with 2 percentage point variation on either side).
What this meant was that an economy growing at 7% would ordinarily be expected to deliver nominal growth (including inflation) of about 11% -- well short of the 14% revenue buoyancy promised to states.
The compensation cess was available to help bridge the gap, but only for five years.

The third mistake was to keep key goods outside the scope of GST (petroleum products, tobacco, liquor).
Since these have usually accounted for the bulk of excise revenue, it affected calculations on what a revenue-neutral GST rate might be.

The fourth mistake was the drive by the Modi government to lower the cost of goods in the run-up to the general election.
In the process, the tax rate on many consumption goods was dropped more than the tax rate on their inputs.
So we now have companies claiming refunds of taxes on inputs that are more than the GST they pay on their final produce!
Meanwhile, in the implementation phase, we have seen a repeat of what happened in the wake of the demonetisation three years ago: People found all kinds of creative ways to turn black into white.
In the case of GST, we seem to have spawned a fake-bill industry that provides convenient bills to producers, even as chunks of the production chain seem to have found a way to escape the GST net.
The initial promise, that eventually bills would be matched as a way of preventing such fraud, will be put to the test in April; we will have to see if it is do-able or just causes chaos.

If it does not work, it will have belied one of the central promises of GST, that it would address tax evasion and raise the tax share of GDP.
Even if invoice-matching proves successful, there are other elements of the system that are broken.
Perhaps GST was too complex a system for the Indian economy at its present stage of development.

Regardless, the Centre has to break heads in the GST Council and work out new slabs and rates (the fewer the better) and make a fresh start.
No economy can afford to persist with a tax experiment that has failed.
T N Ninan is the Chief Editor, Business Standard.
T N Ninan
Source: source

4 mistakes Modi made with GST

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