Reacting to BJP’s demand from the Opposition-ruled states to reduce taxes on the fuel, Biju Janta Dal (BJD) Odisha MP Amar Patnaik on Sunday dismissed the demand citing the “limited scope” for the collection of revenue for the states. The MP further stated that the states “already have a narrow revenueraising space” in the form of Value Added Taxes. The remarks of the BJD leader came after the Centre decided to reduce excise duty on petrol by Rs 8 per litre and on diesel by Rs 6 per litre. Speaking to ANI, Patnaik said, “The Centre collects excise duty, additional excise duty and cess & surcharge on petrol and disease while the States collect only VAT. Therefore, the Centre has much more scope and space for reducing the tax, duty & cess component on these products and they have done that ostensibly to address the issue of rising inflation in the country affecting the common man and the poor who were reeling under its impact for several months now.” Highlighting Odisha’s attempts to bring down the prices of fuel, the BJD MP said that Odisha was one of the few states that had reduced VAT on fuels in November 2021, the last time when the Centre reduced the excise duty. The states have limited scope or space to reduce taxes because it affects the already narrow revenuer a i s i n g s p a c e available for the states. When the Centre reduced the excise duty last in November 2021.
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Public administration: Key issues and the way forward
The fiscal situation of all countries has gone awry amidst the pandemic and India is no exception. Covid-related health expenses besides other expenditure on free food among others led to overall increase in government expenditure. In FY21, actual expenditure was 15% higher than the budgeted, particularly on account of food subsidy, health expenditure and rural development. Coupled with lower revenues (25% lower than the budgeted amount) owing to restrictions and lockdown hitting economic activity, it resulted in higher deficit. Fiscal deficit surged to 9.3% of GDP from the budgeted 3.4% of GDP. This in turn led to higher market borrowing by the government. Net market borrowing of the centre increased to 5.8% of GDP as against 2.0%-2.5% of GDP earlier.
Even the states’ finances went haywire with their revenue receipts falling short of their budgeted estimates by over 21%. However, they curtailed their expenditure, particularly revenue expenditure by 12%, by undertaking various expenditure rationalisation measures, including dearness allowance freeze, deferment of part or full salaries and wages, among others. Moreover, amid the pandemic centre permitted the states to borrow more to prevent drastic reduction in their expenditure. Consequently, states’ fiscal deficit increased to 4.2% of GDP in FY22 from the budgeted 3.2% of GDP. Coming to this fiscal, government has projected fiscal deficit of 6.4% of GDP. Combining with state fiscal deficit of 3.5% of GDP, total fiscal deficit comes at 10% of GDP for FY23. So far this fiscal (Apr-Jul’22) the fiscal deficit of the centre has reached 20.5% of the budgeted target. This is lower than 21.3% of budgeted achieved during the same period last year. Tax revenue remained robust with record high GST revenues which have been possible because of increased compliance and higher economic activity. On the expenditure side, government incurred higher capital expenditure (27.8% of BE in FY23 compared to 23.2% of BE during same period in FY22), which bodes well for our growth potential. Higher deficit level has disrupted out debt trajectory. The FRBM committee recommendations of achieving the combined debt of centre and state at 60% of GDP (40%: centre and 20%: state) by FY23 has moved ahead. In FY22, the combined debt of Centre and states stood at 90% of GDP, thus it appears that the glide path has now been shifted away by several years.
Though the pandemic has made our fiscal situation scary, there are certain positive developments which favour the government’s fiscal scenario. One of the good things is that most of our debt is internal. At end-March 2022, external debt is around 6.5% of the public debt. Low borrowing in foreign currency means that the country is shielded by the external crisis. However, that should not make the government complacent. Another favourable development is the emphasis on capital expenditure by the government at both Centre and states level.
However, there are other key concerns which are denting states fiscal deficit and need to be tackled to ensure faster reduction of debt going forward. One is the rising committed expenditure (which includes salary, pension and interest) by states. Its share in revenue receipts now stands at 55%. Increase in expenditure on subsidies and freebies is also pressurising state finances. States are now resorting to populist measures like providing free electricity, water, public transportation, waiver of pending utility bills and farm loan waiver. Furthermore, revert to old pension scheme (Pay as you Go) by some states (Rajasthan, Chhattisgarh) is another serious problem which would hurt states in future. The end of GST compensation cess is another factor that is going to affect states fiscal situation adversely.
So, the question arises how can the government improve its finances? The first thing that the government can do is use analytics to enhance tax compliance and detect tax frauds. As per the official statistics available informal sector accounted for around 50% of the GDP in 2018. Though there have been some independent studies claiming that this share has reduced significantly to not more than 20% of GDP, India still has a large informal sector. So the next reform could be to bring the informal sector economy under the formal set up. This will broaden their tax base leading to enhanced revenue collection. The administration can also think of increasing the tax rate for super rich people/ businesses, even though it is politically difficult move.
Also, with faster pace of digitalisation and automation there has been an increase in gig economy/free lancing jobs. Future might entail large number of people working in a country for a company not based in the resident’s country. Which country tax rules would be applicable in such cases? Tax revenues are likely to be impacted in future, thus there is a need to consider these while formulating tax policies in future. A good administration should keep in mind the distributional impact of any new tax policy/change in existing policy and accordingly devise compensation plan. Besides improving its revenue stream the government has to improve the quality of capital outlay, focus on education, health, building digital infrastructure and green technology which will strengthen our goal for sustainable development.
Tax incentives or subsidies can be given for green technology adoption and R&D activities. However, it should be ensured that wasteful and redundant tax incentives be curtailed. These ways will make our public administration future ready.
Lastly, it should also be remembered that creating conditions for robust, resilient and inclusive economic growth will support government finances in future.
Disha Kheterpal works as a senior economist in the Indian banking sector with core interests in public administration, external sector dynamics and global economics.
German inflation hits record 7.9 pc in August
Inflation in Germany soared to a record level of 7.9 per cent in August for the second time this year, the country’s Federal Statistical Office (Destatis) said.
Government measures such as a cheap 9-euro ticket for public transport and a fuel discount had a “slight downward effect on overall inflation”, said Destatis President Georg Thiel, with price increases for transport gradually slowing from 16.3 pc in May to 3.7 pc in August.
However, Europe’s largest economy’s fuel discount expired last week, and pump prices jumped immediately, reports Xinhua news agency.
Standard fuelcost 1.99 euros per litre and was 21.6 cents more expensive than at the end of August.
Meanwhile, diesel prices climbed 8.2 cents to 2.16 euros, according to the German Automobile Club (ADAC).
“The main reason for high inflation is still price rises for energy products and food,” Thiel said.
While prices for food rose by 16.6 pc year-on-year, energy prices increased more than four times as fast as inflation levels, and were up 35.6 pc “despite relief measures”. Without the energy and food price rises, overall consumer price inflation in Germany would be 4.4 percentage points lower, according to Destatis.
Natural gas saw particularly high price increases of 83.8 pc, while prices for light heating oil more than doubled. Among food products, prices of edible fats and oils, as well as dairy products and eggs, recorded the sharpest surges of 44.5 pc and 26.8 pc, respectively.
To cushion the impact of high inflation on businesses and consumers, the German government recently announced relief measures worth 65 billion euros, bringing total inflation measures to 95 billion euros.
The package also includes a one-time payment to enable households to pay their heating bills during the winter.
Minister of Finance Christian Lindner warned last week that high inflation levels were an “impoverishment program for families in the middle of society”.
81.50 can be lowest for Re as $ index trend is bullish
Domestically, India’s performance has been good when it comes to consumption of make and buy in India products, and rupee has had good support
Jateen Trivedi, VP Research Analyst at LKP Securities, has said that 81.50 can be the lowest point for rupee as the dollar index trend has been bullish.
In the last three months, the dollar has been moving higher from $102 to $110 and the rupee falling from 78.00 to 80.00. If it continues the bullish momentum, the dollar can touch zones of $115 and the rupee at the same time can be near 81.50-82.00.
Excerpts from the interview:
What are you views on RBI Governor saying that rupee has held its own and moved in an orderly manner despite sharp depreciation in other currencies?
The main cause for rupee’s fall has been the strong performance of dollar against the whole basket of currencies which have dropped 8-13 per cent with respect to EUR, JPY, GBP, hence rupee has also been feeling the heat as dollar index has scaled to 20-year high as the base currency touched $110.
Domestically, India’s performance has been good when it comes to consumption of make and buy in India products. It is the exports which have been hampered with IT and Pharma feeling the heat as demand has slumped after unlocking, hence imports have continued and exports have seen a down trend. Domestically, rupee has had good support.
We have seen that RBI has intervened in the forex market to defend rupee. How do you see the intervention going forward?
Intervention has been seen near the 80.00-mark as RBI has tried to keep rupee not going below 80.00, which also has been supported by crude prices which have fallen majorly from $120 to $85 in Nymex in a span of three months. Hence the fall in rupee has been slow and RBI intervention might get slow once prices start to settle above 79.50. Aggressive intervention might only be a case if rupee falls beyond 80.00 as RBI would not want to draw down on forex reserves.
Does RBI defending rupee to such an extent make any sense? What are your thoughts?
It made sense in an environment where crude prices were also on a boil, but since the prices of Crude have come down, it will be seen that RBI will be participating less in rupee buying/dollar selling. The central bank has been clear in its measures that RBI is ok with slow-paced fall in currency rather quick rise in rupee by selling major forex reserves.
What would be the rupee’s lowest point against the dollar in the next three months?
81.50 can be the lowest point as the dollar index trend has been bullish. In the last three months, the dollar has been moving higher from $102 to $110 and the rupee falling from 78.00 to 80.00. If it continues the bullish momentum, the dollar can touch zones of $115 and the rupee at the same time can be near 81.50-82.00.
What are the domestic factors that you think will put pressure on the rupee in the coming months?
DIIs have been buyers into capital markets which has helped the rupee. If DIIs start booking their profits, then we can see pressure on rupee. Along with that, the southern part of the country has seen major floods damaging crops, which can add pressure on inflation that in turn will add more pressure on rupee. Hence crop arrival numbers will be keenly watched by rupee traders. Negative crude prices and dollar price rising can play major role on rupee’s movement in the coming months.
What could be the remedy to ease that pressure?
There is not much that can be done to arrest the fall of rupee, as most of it has come on the back of global geo-political issues and sharp surge of dollar, adding pressure on global currencies. The RBI can only slow the pace of the fall in rupee, which has been its stance in the current year and we can see that continuing. •IANS
The economic growth of India is unstoppable
India Inc is booming, but it has to surmount challenges pertinent to the continuation of its stellar economic performance – how best to attract and retain talent with the prerequisite skills to drive further progress and growth.
With the stabilisation of the COVID-19 situation, India’s economy has made an impressive recovery and is charging ahead to meet its goals for the future. The RGF International Recruitment 2022 Salary Watch: India report shares perspectives on how India’s growth plans and healthy investment portfolios, along with the ongoing digital transformation initiatives and broad adoption of new technologies across various sectors, have contributed to the upward trends in demand for talent and salary increments commensurate with their skills and experience.
Demand for talent in the Industrial Manufacturing sector has been driven up by the Industry 4.0 revolution and the Indian government’s enthusiastic growth trajectory for its electric vehicles (EV) industry. As such, employers are willing to offer talent, particularly in the battery development and automation fields, an average salary increase of 9 per cent.
Those performing senior roles in R&D, Application Engineering and Sales & Marketing have received record salary increments of up to 20 per cent, as compared to 2021.
The Consumer Goods sector accounts for a sizeable slice of India’s GDP, and robust annual growth is expected over the next decade. The rebound in the retail industry, explosive growth in e-commerce and ongoing digital transformation of retail companies have contributed towards the average salary increase of 12 per cent for talent with the prerequisite skills. Those in senior roles with digital capabilities (eg: E-commerce Director/ Manager, Digitalisation Director) are able to command salary increments of up to 15 per cent.
The increased use of digital technologies in the Healthcare & Life Sciences sector, spurred by the pandemic, government policies and investments, has pushed up the market value of telemedicine and digital care solutions to unprecedented levels.
Consequently, the sector is seeing spikes in demand for healthcare talent, particularly in these fields, as well as salary increments averaging 9 per cent. The expanding Medical Devices manufacturing division is also seeing increased demand for talent, particularly in the Production and Operations fields, and an average salary increase of 14.9 per cent, as compared to 2021.
Companies in the Corporate Services sector are seeing a surge in new work orders. This boost in business, along with the accelerated adoption of digital processes as efficiency-improvement measures, have led to the increased demand for talent, particularly human resource personnel with skills in digital tools and IT software, as well as an average salary increase of 15 per cent.
The landscape of India’s Technology sector is being rapidly transformed by the accelerated adoption of frontier technologies like IoT, AI, blockchain, data security, cybersecurity and 5G. Being a “digital talent nation”,
TERRORISTS KILL ANOTHER PANDIT, INJURE BROTHER
A Kashmiri Pandit was shot dead and his brother injured after terrorists fired at them at an apple orchard in Jammu and Kashmir’s Shopian district. The incident took place in the Chotipora area. The deceased has been identified as Sunil Kumar Bhat. His brother Pintu has sustained injuries. Security force personnel have been deployed in the area after the incident. Police sources said the militants fired at Sunil Kumar, son of Arjun Nath, and his brother Pitambar alias Pinto in the Chotigam village of Shopian district. “Sunil Kumar died on the spot while his brother Pitambar alias Pinto was shifted to hospital.
“ The area has been cordoned offf and reinforcements have been rushed to the village to nab the assassins,” sources said. Reports said that both the brothers were non-migrants and were living in their ancestral village when the killers struck. Jammu and Kashmir Lt Governor Manoj Sinha condemned the killing of a Kashmiri Pandit by terrorists in South Kashmir’s Shopian district. In a tweet the L-G said the terrorists responsible for the act won’t be spared. “Pained beyond words on despicable terror attack on civilians in Shopian. My thoughts are with the family of Sunil Kumar. Praying for speedy recovery of injured.
The attack deserves strongest condemnation from everyone. Terrorists responsible for barbaric act will not be spared,” office of the L-G J&K tweeted. “Terrorists fired upon civilians in an apple orchard in Chotipora area of Shopian. One person died and one injured. Both belong to minority community. Injured person has been shifted to hospital. Area cordoned off,” police said. Meanwhile, additional police parties have reached the spot and an operation has been started to nab the attackers. Leaders cutting across party lines unequivocally condemned the killing of a Kashmiri Pandit on Tuesday by terrorists in South Kashmir’s Shopian district. Jammu and Kashmir BJP president Ravinder Raina said, “Coward Pakistani terrorists targetted minority Hindus. Two brothers — Kashmiri Hindus — Sunil Kumar and Pintu were targeted by coward Pakistani terrorists.
Afghan women’s lives have changed unrecognisably
A year on from the Taliban takeover of Afghanistan, senior UN official Ramiz Alakbarov, who is the Resident Coordinator in the country, described his fears for girls’ lives and called for women to play a full role in reviving the Afghan economy. Rights groups say that the Taliban have broken multiple pledges to respect human rights and women’s rights since taking over Afghanistan a year ago. After capturing Kabul in August last year, Taliban authorities have imposed severe restrictions on women’s and girls’ rights. “Shortly before the Taliban takeover in 2021, I visited an orphanage in Kunduz, a city in the north of Afghanistan.
I was heartbroken when I spoke with a young girl there who had lost her entire family the day before, following intense fighting between the Afghan National Security Forces and the Taliban,” said Ramiz Alakbarov, Deputy Special Representative for Afghanistan with the United Nations Assistance Mission in Afghanistan (UNAMA). Since then, Alakbarov said these challenges have grown exponentially and efforts to build a stable future for children like the ones I met last year in Kunduz have become more demanding. “From hunger to chronic poverty, the scale of suffering in Afghanistan continues to rise across many areas since the Taliban advanced on Kabul last summer,” he said. Over half of the country’s population now live below the poverty line.
Nearly 23 million people are food insecure, many of them severely so, and more than two million children are suffering from malnutrition. In June 2022, a 5.9 magnitude earthquake struck the central region of Afghanistan, killing over 1,000 people and pushing already vulnerable communities to the brink. “I am especially worried about Afghan women and girls, whose lives have changed unrecognizably since the Taliban returned to power last summer. Since 15 August 2021, we have seen a significant rolling back of their economic, political, and social rights and a worrying escalation in restrictive gender policies and behaviours,” he said. Without the right to education, work and freedom of movement, women now find themselves increasingly relegated to the margins, he added. According to a new analysis by UNICEF, keeping girls out of secondary school costs Afghanistan 2.5 per cent of its annual GDP.
If the current cohort of three million girls were able to complete their secondary education and participate in the job market, girls and women would contribute at least USD 5.4 billion to Afghanistan’s economy, the UN agency said. UNICEF’s estimates do not take into account the non-financial impacts of denying girls access to education, such as upcoming shortages of female teachers, doctors and nurses, the ensuing impact on decreasing attendance for girls in primary school and increasing health costs related to adolescent pregnancy. The estimates also do not account for the broader benefits of education, including overall educational attainment, reduced child marriage and reduced infant mortality,
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