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Economy

GST Council turns mobile phone devices dearer

While the conclusion of the Goods and Services Tax (GST) Council meeting came with the welcome news of no change in the rates on fertilisers and footwear, that on mobile phone devices has risen from 12% to 18%. The proposal to rationalise GST rates on textile items has been rejected.

The council made it mandatory to fill the GSTR-1 form for B2B (business-to-business) supplies and exports. The council decided to extend the deadline for filing the GST9R and GSTR9C for FY18-19 to 30 June.

Filing will be mandatory for taxpayers over Rs 5 crore of annual turnover. The previous deadline was 31 March and the turnover limit Rs 2 crore.

The 39th meeting of the GST Council took place today. Finance Minister Nirmala Sitharaman and senior officials of several states attended the meeting. The delegates discussed among other things the impact of the coronavirus outbreak in the country on the economy.

Domestic maintenance, repair and overhaul service providers have got relief. The council made this decision to bring equality in the input tax credit of 5%.

Delayed GST payment will attract interest on net tax liability from 1 July.

The finance minister said that the government had collected Rs 78,000 crore as compensation cess. The total compensation related to stats is over Rs 1.2 lakh crore, she said.

Sources said Nandan Nilekani had given a detailed presentation to remove technical flaws in the GST network. He has assured the council that by January 2021 all technical flaws associated with GSTN will be removed.

The GST Council reviewed the IT glitches, as pointed out, thoroughly. Bihar Deputy Chief Minister Sushil Modi made a presentation on the IT challenges too.

Sitharaman said that Infosys would provide a better GST system by July. She said Nilekani would attend the next three meetings of the GST Council, update the council on the status of implementation of the council’s decisions and assist in making appropriate decisions on technology-related issues.

Nilekani meanwhile asked for time until January 2021 to ensure smooth functioning of GST’s IT systems.

The government had expressed hope last month that the impact of decisions like that on GST will be seen in the coming days.

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Crime

OSD of Sisodia sings: Racket of corrupt IAS officers thriving in Kejriwal govt

After arresting Gopal Krishna Madhav, OSD of Delhi Deputy Chief Minister Manish Sisodia, the CBI searched the house and office of Udit Prakash Rai, another Delhi government official. Apart from him, about a dozen officers of the Delhi government are under the scanner of the investigating agency.

According to the CBI, a bribery racket was thriving in Delhi’s GST department, which included several senior officials. According to the agency, the racket was exposed on Wednesday after the arrest of a broker Dheeraj Gupta while he was accepting a bribe amount.

During interrogation, Gupta told the CBI that he was taking money at the behest of Gopal Krishna Madhav, Sisodia’s OSD. Madhav was posted to the GST department of the Delhi government in October last year.

During the interrogation on Friday, Madhav named Udit Prakash Rai, a 2007 batch officer. Investigating officers then searched Udit Prakash Rai’s house and office. The agency raided the offices of several officials in the GST department.

According to a senior CBI official, a transporter had complained of a large racket of bribery in the GST department of the Arvind Kejriwal government. The complainant said that officials were seeking bribes worth lakhs of rupees to free seized trucks.

On the basis of this complaint, CBI laid a trap. Gupta demanded Rs 3.5 lakh from the transporter to get his two trucks released. While he was receiving a bribe of Rs 2.6 lakh, the CBI team waiting for an ambush caught Gupta red-handed.

CBI believes that Gupta used to broker for senior officers of Delhi GST, like the arrested OSD of Sisodia, as well as many senior officers of Delhi government. The agency is questioning Gupta further. Based on his confessions, CBI may conduct searches at several other authorities in the coming days.

A CBI source said the agency has found no evidence of Manish Sisodia’s involvement in this case. He had said yesterday after his OSD’s arrest that the officer must be punished. He had said further that he did not see the arrest as having anything to do with the Delhi election.

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Economy

Budget 2020-21: 10 big takeaways for businesses, individuals

Union Finance Minister Nirmala Sitharaman presented the second budget of the second term of the Narendra Modi government in the Lok Sabha today. The finance minister arrived in a turmeric yellow sari to read the budget speech.

The minister said that this budget was committed to ensuring income of common people and increasing their purchasing power. She paid tribute to the late GST architect Arun Jaitley.

1. Budget announces big relief for income tax assessees

The new tax slabs are just four in number. Those earning between Rs 5 lakh and Rs 7.5 lakh will be taxed at the rate of 10%, which was 20% earlier.

An annual income from Rs 7.5 lakh to Rs 10 lakh will be subjected to an income tax rate of 15%. This was earlier 20%.

Income between Rs 10 lakh and Rs 12.5 lakh will be taxed at the rate of 20%. This was earlier 30%.

Income from Rs 12 lakh to Rs 15 lakh will be taxed at the rate of 25%, which was 30% earlier.

Income above Rs 15 lakh will be taxed at the rate of 30% as before.

If the taxpayers do not take some of the exemptions under the Income Tax Act, those with an annual income each of up to Rs 15 lakh will have to pay tax at a lower rate than before.

2. Budget to boost investment, generate jobs

Sitharaman said that the government would set up an investment clearance cell to support startups and entrepreneurs in funding. “I propose to set up an investment clearance cell that will provide end-to-end facilitation and support including pre-investment advisory, information related to land banks and facilitate clearances at Centre and also at the state level,” the finance minister said.

The budget speech included a proposal for a new portal for the same purpose.

Sitharaman said entrepreneurship was the spirit of India; it has been its strength. Sitharaman said this budget would create more opportunities.

The finance minister said India had embraced the trends of a shared economy with aggregators replacing regular businesses. Among the old and big businesses, pipeline suppliers, GAIL, port facility and gas importing companies will benefit from the expansion of the gas grid.

Data Centre Parks will boost IT companies to expand their data business division.

Optic fibre companies like Finolex Cables and Sterlite Technologies will benefit from the Rs 6,000 crore allocated to Bharat Net.

A significant increase by 6% in the expenditure on infrastructure, exceeding Rs 5 lakh crore, announced during the budget speech, will not only accelerate the building of roads but also help urban infra companies. In the process, it will create a lot of jobs. “A huge employment opportunity exists for India’s youth in construction, operation and maintenance of infrastructure,” Sitharaman said.

The finance minister said in her budget speech that she would like to encourage the manufacturing of mobile phones, electronic equipment and semiconductor packaging, but added that the details of the scheme would be announced later. Whatever the details are, both big companies and small firms in these segments of the market will stand to benefit from the scheme.

Sitharaman’s budget announcement of “development of 2,500 km access control highways, 9000 Km of economic corridors, 2,000 km of coastal and land port roads and 2,000 km of strategic highways” is bound to generate employment on a massive scale besides improving transportation in the country and creating new centres of businesses.

3. Sensitivity to ‘tax terrorism’

While it was nobody’s case that Indians were taxed the highest, the business class in the country had got the jitters due to an indirect impact of Prime Minister Narendra Modi’s anti-corruption drive. This gave the taxman the idea of being a new-age lagaan collector. Chartered accountants complained of the unpredictable nature of the new regime. Those given to hyperbole called it “tax terrorism”. Sensitive to this concern, the finance minister announced there would now be a taxpayer charter.

This means that while reminding the taxpayer his duty to serve the country as a citizen, there will be a guideline or code of conduct in place for the tax officials. This will, hopefully, keep the zealots in the tax department under check.

4. Budget for competition among discoms: Prepaid electricity meters

The finance minister proposed changing the electricity meters across the country. She said that in the coming months, prepaid meters will be installed all over the country.

This may be seen as a step towards service portability in this age of private-sector discoms. During the 2015 Delhi election campaign, Prime Minister Narendra Modi had promised service portability for electricity consumers. Although the BJP did not win that election, the idea remains consumer-friendly. But to implement it, people need pre-paid as much as postpaid connections so that they can evaluate which discom is charging higher per unit of electricity consumption.

5. New GST regime from 1st April

Sitharaman said that from 1 April, the government will implement the new simplified return regime of GST.

The finance minister said that in the last two years, two lakh new taxpayers had been added to GST and 40 crore returns had been filed.

6. Government stake in LIC to be reduced

The finance minister announced that the government would sell part of Life Insurance Corporation (LIC), moving the disinvestment process forward.

The state stakes in IDBI Bank will also be sold.

An IPO will be issued for LIC. Sitharaman did not reveal how much of the LIC shares the government would sell. The socialist opposition expectedly did not like this announcement.

7. Budget for those who save in banks

Sitharaman made a big announcement about customers’ bank deposits. She said that customers would henceforth get a guarantee of up to Rs 5 lakh on bank deposits.

That is, in the unfortunate event where the bank sinks, Rs 5 lakh out of all the amount you had saved there will be absolutely safe.

8. How government plans to double farmers’ income

The finance minister said in her budget speech that the government was committed to the goal of doubling the income of farmers by 2022. The government will provide financial assistance to 20 lakh farmers to install solar pumps.

A detailed plan will be brought for 100 districts affected by the water crisis.

9. Railway network enhancement

The finance minister said that 27,000 km of railway tracks will be electrified.

As many as 150 trains will be launched via public-private partnerships. This means more Tejas routes and Tejas-like trains will run on the tracks.

Sitharaman said that the government plans to connect famous destinations with Tejas trains.

10. Boost to health and education in budget

Health

The finance minister allocated Rs 69,000 crore for the health sector. There is a proposal of Rs 6,400 crore for PM Jan Arogya Yojana.

The mission Indradhanush has been expanded to include 12 diseases. Five vaccines have been added to it.

Hospitals will be built on PPP mode in Tier-2 and Tier-3 cities for the beneficiaries of Ayushman Bharat. In the first phase, this will be started in 112 districts. These hospitals will be constructed with money collected as tax from the business of medical equipment.

Education

Finance Minister Sitharaman said that a new education policy would be announced soon.

By March 2021, 150 higher educational institutions will be started in which skilled training will be given.

Online degree programmes will be launched for quality education.

The finance minister proposed the setting up of a National Police University and a National Forensic Science University.

Sitharaman said that, to overcome the shortage of doctors, a medical college would be built in every district hospital.

The finance minister allocated in the budget Rs 99,300 crore for education. She set aside Rs 3,000 crore for skill development.


Sirf News gave live commentary on Union Budget 2020-21 earlier today.

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Economy

Union Budget 2020-21 Live

Union Finance Minister Nirmala Sitharaman has concluded reading the document of Union Budget 2020-21 proposals. Sirf News‘ live blogging has ended.

The tweets posted after 1:50 PM below are of verified accounts still using the hashtag #Budget2020.

Finance Minister Nirmala Sitharaman and Minister of State for Finance Anurag Thakur have reached Parliament House. The Modi Cabinet meeting has started in Parliament House. The Union Budget 2020-21 will be approved by the cabinet, after which the budget will be presented in the Lok Sabha at 11 AM. Budget copies have reached Parliament House.

Sitharaman is the first woman finance minister, who has full charge of the finance ministry. She will present her second budget today.

Before the budget is presented, officials and ministers have started arriving in the Parliament House. Union Minister Jitendra Singh, Prakash Javadekar, Cabinet Secretary Rajiv Gauba have reached Parliament House.

Prime Minister Narendra Modi has reached Parliament House as well. There is to be a meeting of the Modi cabinet sometime from now, in which the Union Budget will be approved. Today, the world is eyeing this budget coming amidst the staggering economy.

Like every time the Finance Minister met the President before presenting the budget in the Lok Sabha. Finance Minister Nirmala Sitharaman, Minister of State for Finance Anurag Thakur met President Ram Nath Kovind on Saturday morning. The budget has been approved by the President and now the budget will be passed in the Union Cabinet.

The Prime Minister Narendra Modi-set target of Indian economy turning as voluminous as $ 5 trillion by 2024 is near-impossible to meet, suggests this year’s Economic Survey. Economists believe that to reach this goal, the GDP growth rate should be 8% per annum. But in the first year of chasing this goal set by the prime minister, the GDP grew at around 5% or a notch below that level. This will more or less remain the rate of growth next year. The Modi government itself believes that the GDP growth rate will be 6-6.5%.

India in 2018 was expected to grow at a break-neck speed in 2019, but that did not happen.

The government has presented the Economic Survey for the year 2019-2020 in the parliament. This survey report states that the GDP growth rate will be 6-6.5% in the financial year 2020-21. That is, the Indian economy is lagging in the speed of about 1.5% to meet the target of $ 5 trillion by 2024.

If the GDP growth rate is 6-6.5% in FY 2020-21, it is projected to attain a pace of above 8% in three years to turn Indian into a $ 5 trillion economy. The data of the Economic Survey before Budget 2020 has given a shock to the government on the GDP growth front.

Categories
Economy

CJI Bobde speaks up against excessive taxation

A week before the presentation of the general budget, 2020-21, Chief Justice of India (CJI) SA Bobde said that tax should not be burdened on the citizens. While tax evasion is a social injustice to the rest of the country, the CJI said, if the government imposes arbitrary or excessive taxes, it will also be a social injustice by the government.

Reminding people of the world’s first pro-market economist, India’s very own Chanakya or Kautilya, the CJI cited ancient laws of the land on taxation. He said taxes should be collected from people in a manner honey bee draws nectar from flowers without harming it.

CJI Bobde was speaking on the occasion of the 79th establishment ceremony of the Income Tax Tribunal (ITAT).

While successive finance ministers in India have eased income tax on the middle class by tweaking the slabs and the rates of this particular kind of tax and GST rates are constantly reduced in council meetings, several governments in the recent past including the current one squeeze money out of the people through “cess”, a tax charged over another tax to meet the financial demand of a certain project of the government of the day.

From THE GAZETTEER OF INDIA Volume 2

Swachh Bharat is funded since 2015 by a 0.5% cess on services. The Narendra Modi government hiked the cess on petrol and diesel in 2019. Current minister with the finance portfolio Nirmala Sitharaman introduced a communist-like tax the “super-rich” must pay. Cess was how both the British government and the Jawaharlal Nehru government used to fund their fancy projects. Indian taxpayers pay cess on school, higher and senior citizens’ education and for farmers by way of the Krishi Kalyan cess too.

The salaried class complains also about the fact that they are the only taxpayers whom the income tax system punishes via TDS; the business class gets away by under-reporting their real income.

Concerned about a huge backlog of tax-related cases, the CJI said, “A just and speedy dispute resolution is perceived as a tax incentive by the taxpayer. To the tax collector, an efficient tax judiciary assures that demands arising out of legitimate assessment are not strangled in delayed litigation.”

At the Supreme Court, High Court and Customs Excise and Service Tax Appellate Tribunal (CESTAT) 2,73,591 cases were pending as on 30 June 2017 whereas the backlog had significantly dropped to 1,05,756 as on 31 March 2019, which was a reduction of 61%.

As many as 3.41 lakh direct tax cases were pending before commissioner (appeals) while 92,205 cases were unaddressed before the Income Tax Appellate Tribunal (ITAT) as on 31 March 2019.

The CJI said that an efficient tax justice system should ensure that the cases arising out of valid assessment did not get caught in litigation. He reminded the audience that in 2008, the United Nations Development Programme had taken the Indian Income Tax Appellate Tribunal as a case study of a success story from the developing world and it was introduced as a role model to other developing countries during the UNDPI event in New York.

On the question of automation to speed up trials, the CJI preferred a balance between artificial intelligence and human discretion.”I am firm in the view based on the experience of systems that have used artificial intelligence that it is only the repetitive area or decision making that is rates of taxation etc or something which is invariably the same which is in a sense mechanical that must be covered by artificial intelligence. I do not believe that artificial intelligence should ever be allowed to substitute the human discretion which is necessary for a just decision making,” he said.

Categories
Crime

CBI sues 51 companies for hiding ₹ 1,038 cr in Hong Kong

The government’s campaign against black money crossed a milestone today when the CBI named 51 companies or accounts for sending black money Hong Kong worth Rs 1,038 crore in 2014-15. Officials gave this information on Monday. It is alleged that these 51 entities sent unaccounted black money worth Rs 1,038 crore to Hong Kong in collusion with unknown officials of three state-owned banks: Bank of India, State Bank of India and Punjab National Bank.

Most of these units are owned by Chennai residents. The CBI was informed that the current accounts of 48 out of 51 units were opened in four branches of these banks only to send out an amount of Rs 1,038.34 crore.

The CBI has alleged that 24 accounts have been used to send money abroad as an advance payment for import of goods, under which an amount of Rs 488.39 crore was sent in dollars. Also, 27 accounts were used to send an amount of Rs 549.95 crore for overseas visits of Indian tourists.

The Narendra Modi government has taken a slew of measures to extract Indian black money from the domestic as well as international markets. While the business world in the country appears living in constant fear of raids by agencies, so far premier investigative agency CBI has not been successful in putting behind bars alleged offenders who are high profile like 2G spectrum accused A Raja or members of P Chidambaram’s family.

Demonetisation was meant to deliver a jolt to cash hoarders. GST is supposed to make accounting more complex but cleaner. Now there is a strong law against benami properties.

On the other hand, the black money in Switzerland has turned out to be a small fraction of what was claimed to be the volume of Indian cash stashed abroad in the period between 2011 when an anti-corruption movement started in the country and the BJP campaign for the 2014 Lok Sabha election. Also, no industrialist whom the activists alleged to be corrupt has been named by any authority abroad. The big names the International Consortium of Investigative Journalists (ICIJ) mentioned in their reports under the title “Panama Papers” mostly turned out to be legitimate holders of overseas accounts.

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Economy

Economy: 7 positive reports in 2019 you might have missed

The state of the economy apparently deteriorated in 2019 and the government in general and Finance Minister Nirmala Sitharaman in particular lost their sweat in an effort to improve it and respond to attacks of the opposition. Negative news arrived from almost every quarter while the government targeted the messenger rather than the message.

However, by the end of 2019, there had been several pieces of good news for the Narendra Modi government. Some figures from previous months may bring a smile on the face of the finance minister too.

1. Manufacturing sector, a fundamental of the economy

The biggest news was the improvement in the manufacturing sector. According to the survey “The Nikkei Manufacturing Purchasing Managers Index” of IHS Markit, a private body that came out with its report on Thursday, the country’s manufacturing sector attained a seven-month record in production in December 2019.

The index rose to 52.7% in December 2019. It was 51.2% in November of the last year. This is the highest level since May 2019. Its staying above 50 means that manufacturing is not likely to decline in the coming quarters.

2. 15% increase in FDI: External support to the economy

There was good news about the economy on the foreign direct investment (FDI) front as well. FDI inflows rose 15% to $ 26 billion during the first half of April-September of the fiscal year.

Government data revealed this detail. Foreign direct investors pumped $ 22.66 billion into India in the same half-year of the last financial year.

3. GST collection: The state of the state economy

The GST collection crossed Rs 1 lakh crore for the second consecutive month. The GST collection in December 2019 was Rs 1,03,184 crore.

Earlier in November 2019, the GST collection was a total of Rs 1,03,492 crore. GST collection was Rs 95,380 crore in October 2019 and Rs 91,916 crore in September.

4. Relieving news from the auto sector

There was good news in December 2019 for the auto sector, which has been facing a recession for almost a year. Sales of Maruti, Mahindra and MG Motors jumped last month.

According to the data released on the first day of the year, Maruti Suzuki achieved a 2.4% increase in its sales in December 2019. Maruti sold a total of 1,22,784 cars in December last.

Mahindra’s domestic vehicle sales rose by 1% in December.

MG Motor India has sold 3,021 units of Hector in the month of December.

5. Air India’s international income rises

The condition of Air India has been bad for a long time. The government and economists have warned on many occasions it is not sustainable and so the state must disown it. However, at the beginning of the new year, the airlines gave good news.

Air India got the benefit of the shutdown of Jet Airways. In the eight months from April to November of this financial year, Air India’s revenue on international routes increased by 20%.

6. FASTag doubles toll tax collection

It will be mandatory to pay toll tax using FASTag rather than by cash, beginning 15 January, on the country’s highways. The good news is that the transactions from FASTag almost doubled in December as compared to November 2019.

The deadline for acquiring a FASTag for every car to use the highways was initially 1 December 2019, but the inability of many car owners to do so made the government extend the last date to 15 January.

According to data from the National Payments Corporation of India (NPCI), the total transaction from FASTag was Rs 1,256 crore in December, compared to Rs 774 crore in November last. There was a transaction of Rs 703 crore that month.

7. Transactions from UPI: Towards digitised economy

On the digital transaction front too, the Modi government gave the people some good news. On the Unified Payments Interface (UPI), transactions increased to Rs 2 lakh crore in December.

UPI had started in the year 2016. For the first time, it has seen transactions worth over Rs 2 lakh crore.

December 2019 saw a total transaction of Rs 2,02,506 crore on UPI. In November last, there were transactions worth Rs 1.89 lakh crore from UPI.

The significance of this achievement can be understood from the fact that almost the same volume of transactions was seen through the Immediate Payment Service (IMPS) system of banks. In December, transactions worth Rs 2.1 lakh crore were recorded on the intermediate payment service of the Inter-bank Electronic Funds Transfer System. This is a big step towards seeing a largely digitised economy.

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Economy

GST collections soar above Rs 1 lakh crore again

The year 2020 has brought relief to the Narendra Modi government amid all the negative news on the economy front. The goods and services tax (GST) collection has crossed Rs 1 lakh crore for the second consecutive month.

The GST collection in December was Rs 1,03,184 crore. Earlier in November, the GST collection was worth a total of Rs 1,03,492 crore. The collection had gone down before that: Rs 95,380 crore in October and Rs 91,916 crore in September 2019.

A comparative study makes it clear that there has been a total increase of 16% in GST collection. This is an annual increase. There was a 124% jump in the collection of Arunachal Pradesh. This figure was Rs 26 crore in December 2018; it reached a total of Rs 58 crore in December 2019.

Highlights

* Economy looking up: GST collection crosses Rs 1 lakh crore

* GST collection in December was worth Rs 1,03,184 crore

* Among the states, Arunachal Pradesh saw the highest percentage-wise rise in the collection: 124%

Nagaland saw the collection rise by 88%. There was Rs 17 crore worth GST collection in December 2018 while, by December 2019, this figure reached Rs 31 crore.

An approximately 40% higher collection has been reported in Jammu and Kashmir.

The collection had fallen by 2.7% in September while it fell by 5.3% in October. At the central level, the total collection in November was Rs 19,592 crore. There was Rs 27,144 crore worth of GST collected at the state level. Integrated GST was worth Rs 49,028 crore, which included a share of Rs 20,948 crore from imports. A total cess of Rs 7,727 crore is included in the sum. The total number of GSTR 3B returns filed for October up to November 30 was 77.83 lakh.

In December, according to IDST Imports, there has been a 9% increase in the total revenue. This figure is from December 2018 to December 2019. Though a negative growth of 10% was seen according to IGST import, by November, it showed improvement. October saw a 20% dip in the collection.

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Article

Slowdown Has Reasons Other Than GST, Demonetisation

The growth rate has come down to the lowest level in the last six years. Demonetisation and GST are being held largely responsible for the slowdown in the economy for the last few months. Along with the general public, businessmen believe that GST, which came into effect from 1 July 2017, has made it difficult to do business.

At the same time, people believe that the two measures did not put brakes on inflation; much as the figures released by the RBI tell a different story, the lay people complain of price rise (we will see how this perception is false later in this article). Apart from demonetisation and GST, there are many other reasons, which caused the slowdown. Industrial production reached the lowest level since August 2013 this August. Its pace has come down to 1.1%.

With demonetisation and then the introduction of GST, the growth rate started to decline. Earlier, the growth rate was 8.2%. At present, it has gone much below the growth rate of 2013-14. That year the growth rate was 6.4%. Thereafter, it increased to 7.4% in 2014-15. The growth rate reached 8% in 2015-16. It was at the highest level of 8.2% in the pre-demonetisation year ie 2016-17. After this, the government announced demonetisation.

It was too simplistic to assume that cash was a convenient tool in the hands of crooks. Hundreds of businesses in the rural landscape had not traditionally known the use of electronic money. Farmers, for example, were rarely seen queuing up in front of the ATMs in cities to narrate their woes. The urban middle class, therefore, happily carried the notion that the filthy rich alone had been dealt a heavy blow.

Post demonetisation, the growth rate fell to 7.2%. After the implementation of GST in 2017-18, the growth rate increased to 8%. However, the GST was implemented only for nine months until then.

There has been a severe decline in the economy since the first quarter of the last financial year 2018-19. In the first quarter it was 8%, in the second quarter it was 7%, in the third quarter, it came down to 6.36%. It came down to 5.8% in the initial quarter of this year and the fourth quarter of the financial year.

The decline in businesses due to demonetisation and GST almost cost the BJP the Gujarat election. If Uttar Pradesh was won, that should not have determined the central government’s economic policy. For, richer spots in the country fend for the poorer ones, too — by not only attracting manpower from the poorer regions of the country but also supplying branch offices, services and goods to the latter.

Slowdown started in 2013

The slowdown began to pick pace from 2013 onwards when retail inflation had crossed 9% during the UPA-II regime. The repo rate of RBI was 8% during this period. However, after Prime Minister Narendra Modi took over in 2014-15, the repo rate reduced to 7.5% and inflation became 6%.

In 2015-16, the repo rate was 6.5% and inflation was 4.9%. In 2016-17, the repo rate in the year of demonetisation was 6.25% in November while inflation had come down to 4.5%. GST came into force in July 2017-18, with the repo rate being 6% and inflation going down to 3.6%. Inflation fell to 3.4% in 2018-19, while the repo rate reached 6.25.

Demonetisation saw an impact on demand, which affected people’s income and resulted in loss of jobs, which economists call the “multiplier effect”. After this, imports were affected following the implementation of GST, as importers’ refunds were delayed.

As the negative impact of demonetisation and GST began to wane, the IL&FS crisis at the same time led to a crisis in NBFCs and housing finance companies. At the end of 2018, the impact of the trade war between US-China and weak business globally was equally visible in the country. The impact of this international development added to the slowdown.

Finance Minister Nirmala Sitharaman said that despite all the problems, it is the law of the country that is to be followed by all. The finance minister may have erred here, which is troubling the people, but now it is a law, which we all have to follow.

Crisis in NBFC worse than reluctance of banks

With the IL&FS crisis, the liquidity of capital in the country started declining. Generally, it has a more severe impact on the market than what is caused by banks’ reluctance to disburse loans because these companies give loans to all types of mutual funds, the corporate sector, people in small towns and villages.

The crisis in the NBFC segment affected the marginalised businessmen, especially in rural areas, due to which there was a drop in demand. Banks, anyway, largely give loans to big businesses alone whereas, as the SBI said recently, there is no considerable drop in the number of loans to consumers.

Every sector affected, creating a vicious cycle

The slowdown is now ubiquitous. Industries ranging from that of auto, real estate, FMCG, readymade garments, and even the biscuit industry in the last year-and-a-half are feeling the impact. A report has revealed that $ 6,300 million worth residential projects are stuck in the country, which is worrisome for the country’s economy. The report was published by property consultant Enarock.

In September, Ashok Leyland’s vehicle sales fell by 57%. The company sold a total of 7,851 vehicles in the month of September. In the same month last year, the figure was 18,078. The vehicles which have seen the biggest decline in sales include medium to heavy vehicles.

According to the data released by the National Statistics Office (NSO), the manufacturing sector, which contributes 77% to the IIP, recorded a 1.2% decline in production, the lowest level in five years, compared to 5.2% in August 2018. Earlier, the manufacturing sector was at a low level in October 2014 when it had recorded a decline of 1.8%.

At the same time, electricity generation registered a decrease of 0.9% while, in August 2018, there was a growth of 7.6%. The growth rate of the mining sector remained flat at 0.1%. On the other hand, the capital goods segment also performed the worst, with a 21% decline in production compared to 10.3% in the previous year.

When all economic sectors decline, the mood of the market turns sombre, turning investors all the more reluctant to pump in money. The interdependence of industries means that the slowdown suffered by one would affect many. The relatively better show by online goods aggregators like Amazon, Flipkart, eBay, etc projects a misleading picture as these companies do not have the capacity to revitalise the whole economy.

Furthermore, businesses in India are failing to gauge the changing mood of consumers in an evolving market. Products like private passenger cars, no longer being in high demand in cities, must explore small towns where a family’s own car is still an index of upward mobility. There, affordability will be a greater factor than what it is in the urban landscape. The Indian phenomenon called information technology is at a cusp, as the end user’s taste is changing fast. We may soon see an era of IT experts excelling individually rather than as staff members of large organisations because a company cannot afford to invest in some new technology only to see it get outdated in no time.

Finally, all the pressure to reform the economy is on Prime Minister Narendra Modi whereas few state governments have changed their respective sluggish systems. Local governance is worse, with a single-point agenda of corporations being harassment of the business class. We live in an inspector raj; the end of licence-quota raj in 1991 looks good only on the paper. While the traders must thank the central government for NITI members’ coordinated efforts with different states to abrogate redundant laws, the attitude of local government functionaries hasn’t changed. Unless reform happens at the grassroots, which includes an overhaul, downsizing and revised training of the bureaucracy to make the babu people-friendly, any adjustment that the Union government makes will at best create media headlines and will not be felt on the ground.

The writer is a businessman who wishes to stay anonymous in media
Categories
Economy

Today onwards, here’s how your economy has changed

There have been various changes in the rules of various sectors of the economy including banking, driving license, GST from 1 October that is today. These changes are going to have a significant impact on the lives and economies of all of us.

According to the guidelines of the Reserve Bank (RBI), today onwards, banks will give retail loans at a repo rate-linked interest rate. Due to the revision in GST rates, the prices of some commodities will increase wil those of some others will decrease. Some very important changes related to driving license have come into effect from today, too.

Let us know in detail about these changes.

Repo rate-linked interest rate today onwards

Following the RBI guidelines, public sector banks, including SBI, Canara Bank and Corporation Bank, have begun offering retail loans at repo rate-based interest rates beginning 1 October. This will result in a decrease in your monthly EMI due to the reduction in repo rate by RBI.

Earlier, banks did not pass on the full benefit of a reduction in repo rate to the customers. In view of this reluctance of banks, the central bank issued guidelines on 4 September, directing retail and MSME loans to be linked to external benchmarks.

Changes in GST rates: Difference to your consumption beginning today

According to the decisions of the GST Council, the new rates have come into effect from 1 October. Now, GST will not have to be paid on hotel rooms for a daily rent of up to Rs 1,000. Also, the new rate of GST will be 12% on rooms with a rent of Rs 7,500.

The new GST rate on train coaches and wagons is now 12%. In addition, caffeine drinks also will become more expensive. Now GST will be levied on such substances at the rate of 28% and additional cess of 12% have to be paid.

No cashback on payment by credit card at petrol pumps

On filling petrol or diesel at a pump, you will no longer get a cashback of 0.75% if you pay the amount due using a credit card. Banks offering credit cards have sent a message to their customers, informing them that the public sector petrol companies have decided to abolish this exemption from 1 October onwards. However, this exemption on payments by other means will continue.

Drastic reduction in corporate tax: Impact begins today

Finance Minister Nirmala Sitharaman recently announced a huge reduction in corporate taxes, giving relief to domestic companies. The finance minister announced the reduction of corporate tax from roughly 30% to approximately 22%. This deduction will be effective beginning today.

Manufacturing companies formed after 1 October will now have to pay corporate tax at the rate of just 15%. There will be an option to pay a 15% tax.

Rules related to driving licence and RC have changed

Many rules related to driving licence have changed from today onwards. You will have to update your old licence, which you can do online. With the implementation of this rule, driving licence and the vehicle registration certificate (RC, available in the form of a card) will be of the same colour everywhere in the country.

SBI to charge less penalty

The State Bank of India (SBI), the country’s largest bank, has announced a drastic reduction in the amount of penalty for not maintaining the minimum balance stipulated. This reduction will be effective from today onwards.

SBI customers in the metropolitan cities can make 10 and those from non-metro locations can make 12 transactions a month free of charge.