by admin | May 25, 2021 | News, Politics
Sushil Modi
New Delhi : Even if petroleum products are brought under Goods and Service Tax regime, central and state governments will be free to levy taxes over and above the GST slabs, Bihar’s Deputy Chief Minister Sushil Modi said on Thursday.
“… I want to clarify one thing — in whichever country the petroleum products are part of the GST, they are in the highest tax slab, and the states and Centre are free to levy taxes over and above the GST rates. It is the case everywhere in the world,” said Modi, who is the Bihar Finance Minister and a member of the GST Council.
“People feel if petroleum products come under the GST, the highest tax will be 28 per cent. But since 40 per cent of the state and central revenues come from petroleum products, they will have the liberty to levy taxes over and above the GST rate,” Modi said at FICCI Annual General Meeting here.
He said the GST Council was discussing the issue of bringing electricity, real estate, and petroleum under the GST ambit in coming days.
The Bihar Deputy Chief Minister said that whenever the GST Council decided, petroleum products would become a part of the GST without any need for a constitutional amendment.
He said that revenue from petroleum products would not get reduced under the GST but “it would be around the same amount of taxation”.
“Yet, if they come under the GST, it will benefit the industry and the people,” Modi said.
—IANS
by admin | May 25, 2021 | Interviews
Chief Statistician T.C.A. Anant
By Vishav & Biswajit Choudhary,
New Delhi : The factors responsible for a five-quarter slump in the growth rate, including the adverse effects of demonetisation and GST implementation, have played out and the Indian economy is now poised to take an upward trajectory in the coming quarters, says the government’s Chief Statistician.
He also feels that concerns over slow agricultural growth and inflation were “over-blown” and that the current fiscal would “certainly end with inflation below four per cent”.
Although refusing to forecast the GDP growth rate for the complete fiscal, Chief Statistician T.C.A. Anant says the likely direction was going to be upward.
“If one considers the factors which led to a decline in GDP till the fourth quarter of the last fiscal and the first quarter this fiscal, it would be possible to argue that those factors have worked their way out and we should, therefore, see an improvement in growth,” Anant told IANS in an interview.
The first factor, Anant said, had to do with global commodity prices. These had crashed in 2014-15, resulting in lower input costs that boosted growth rates in 2014-15 and 2015-16. But once the commodity prices recovered they pulled down growth rates, as reflected in the slowdown in the last five quarters.
“Now, the general reading of market experts is that they are likely to stay at this level. If that expectation is maintained, then on this ground, I don’t expect to see any further changes or influence (on GDP calculation) from this source,” he said.
Last week, the CSO released the nation’s GDP for the quarter ending September, which showed a break in the slump of the five quarters, a rise in the manufacturing sector’s output and the economy poised to take an upward path in the coming quarters.
Anant added that there were also several domestic factors at play, including the crisis in the real-estate sector which saw very rapid growth in the high-growth period, and somewhat linked to it, the non-performing assets (NPA) situation.
“The government sought to address this problem through creating a new governance regime for the real estate sector. This regime is now in place and its adoption is under process. In so far as the real estate sector is concerned, the expectation is that as and when the adoption process becomes more complete, we will expect to see a revival in the sector,” he explained.
Regarding the NPA crisis, “which is causing a certain degree of drag in so far as private investment is concerned”, Anant said the process of creation of NPAs, or assets which turned bad, was now over to a certain extent and the economy was in the phase of trying to resolve the issue.
“In addition, during 2016-17, there were short-run effects caused by currency replacement where old notes were de-notified and a replacement process was put in place which led to a temporary shortage of cash. That cash replacement was pretty much complete before the end of the fourth quarter of last year.”
“The fourth major structural change which influenced the decline in growth rate up to the first quarter was the fact that the government decided to introduce the GST. This also created a natural disruption, particularly in manufacturing companies which were faced with the difficulty of the treatment of goods produced prior to GST and were, in their judgment, supposed to be sold after GST came in,” Anant elaborated.
He said this uncertainty led manufacturing companies to first pull down production and then get rid of inventories, all of which came to an end on July 1.
“If you look at all of these events as causation to the declining story which we see in place from the last five quarters, given the sort of responses which have been put in place to them, the belief is that you should now see an upward trajectory.”
“All of these have, so to speak, played out. Or at least the negative elements of these have played out. Their positive elements are still being played out. So if you put all of that together, the likely direction is going to be upward… The growth should improve. But how much is very hard to quantify,” Anant said.
Though the Reserve Bank of India (RBI) adopted a neutral stance on the policy rates earlier this week citing pressure on prices as one of the main reasons, Anant dismissed the concern over inflation.
“We are at a much lower level of inflation than we have ever been any time in the past… In fact, my judgment personally would be that we are going to end the financial year certainly below four per cent.
“The reason why I expect inflation to fall is because one of the factors which has led to prices rising in the last couple of months is food and we are now in the seasonal part where food prices tend to traditionally soften. So chances are that you would probably see the overall effect, even if it rises a bit, would not exceed four per cent. That’s my judgment,” Anant said.
On the slowdown in agricultural growth, the Chief Statistician said while there was a concern, it was over-blown. While there still is considerable dependence on the monsoon, agriculture had become a lot more robust, he said.
“In fact, if you look at our data, our output figures show much less volatility than moisture data, or monsoon data.
“This year’s production relative to last year is slightly lower. But if you look at it in a long-term perspective, this year’s production is substantially better than not just the previous two years — which you can say were drought years — but (also in terms of a) long time series, it is better than the best which was achieved any time in the past, even four or five years ago, when you had very good monsoon,” Anant said.
(Vishav can be contacted at vishav@ians.in and Biswajit Choudhury at biswajit.c@ians.in )
—IANS
by admin | May 25, 2021 | Opinions
By Amit Kapoor & Chirag Yadav,
In a massive relief to Indian exporters, the government announced liberal incentives of Rs 8,450 crore ($1.3 billion) in its mid-term review of the five-year foreign trade policy (FTP) that was rolled out in 2015 and aimed at increasing the export of goods and services to $900 billion by 2020. Exports, meanwhile, declined from $468 billion to $437 billion between 2014-15 and 2016-17.
In fact, India’s external trade performance has grown to be so acute that the current account deficit in the first quarter of the current fiscal year reached a four-year high of 2.6 percent.
What is more worrisome is that this trend is continuing despite favourable trade conditions in the global markets. Only domestic factors can explain the widening trade deficit. Clearly, the uncertainty surrounding the implementation of the Goods and Services tax (GST) has had a major role to play. Data due this month will show whether the situation has improved in the second quarter.
However, the chances of any significant improvement remain bleak as issues in processing of refunds to exporters under GST has been affecting trading activities. Therefore, the sops given in the mid-term review should help in pumping up exports to an extent.
Basically, labour-intensive sectors under the Merchandise Exports from India Scheme and Services Export from India Scheme, which were introduced in the FTP, were given an incentive raise of two percent each. Under the scheme, exporters are granted credit scrips based on the said percentage of the total value of their exports. These scrips can be used for payment of duties on procurement of further inputs. Additional incentives of two percent are expected to boost the subdued export activity of the last few quarters.
However, even though such an incentive was crucial in the short run given the circumstances, it always remains pertinent to ask if we are doing enough. After all, no country in history has sustained a growth rate of seven per cent without an export growth of 15 per cent or more and, according to World Bank data, Indian export growth of goods and services has not even crossed 10 per cent since 2011. Therefore, there seem to be larger structural issues at work that are impeding the growth of India’s external sector.
In order to further reinforce this fact, we can look into the long-term trends of India’s leading export sectors — gems and jewellery, leather and textile. It is quite disconcerting to realise that India’s comparative advantage in all of these sectors is nowhere close to that at the turn of the century. Moreover, all of these sectors are highly labour-intensive and losing comparative advantage in them is quite inimical to the economy’s employment-generating capacity.
A common argument made to improve India’s trade competitiveness is that the rupee is strong and needs to be depreciated to make exports competitive in the world markets. However, this argument falls flat in the face of recent trends in both the exchange rate and the real effective exchange rate over the last few months. Both of these indices have remained stable in the last fiscal and, in fact, fell slightly in August while exports continued to show a downward trend. There was not much strength in the argument anyway, since export competitiveness is not defined by currency but by productivity of the workforce.
Indian policymakers need to recognise that the trade challenge for India is structural in nature and cannot be done away with quick-fix solutions. Cost incentives are an acceptable approach to deal with immediate challenges like the impact of GST, but they need to be supplemented with more long-term solutions. An effective measure could be to identify sectors where India has a comparative advantage and work towards making it competitive.
This implies helping them with action research for market development and providing R&D support. Such an approach will allow producers to innovate and beget productivity gains. Second, India’s poor logistical network is also a factor of concern. Since India is over-dependent on its road networks, the logistics cost as a percentage of GDP amount to almost 13-14 per cent as compared to 7-8 per cent in developed countries.
Third, India’s trade agreements with other nations are largely deficient in nature. The country’s top exports face tariff and non-tariff barriers in developing economies and various kinds of non-tariff barriers in developed ones. Moreover, most of its free trade and preferential trade agreements are ill-conceived in nature.
The India-Japan CEPA is a case in point. India has failed to make any gains out of it simply because it is too cumbersome. For instance, Japan allows duty-free import of Indian apparels only if the sourcing of raw materials is done from either of the two countries with an exception of seven per cent content by weight that can be sourced from a third country. The South Asian Free Trade Agreement, which was signed for geo-political reasons rather than commercial ones, is another example.
Multiple issues ail the export sector of the Indian economy, a lot of which go beyond the scope of the FTP. The government should now delve into these structural aspects of trade policy before India loses any more of its comparative advantage to world markets. Now that China is slowly losing its status as the world’s manufacturing hub, the time has never been so ripe.
(Amit Kapoor is chair, Institute for Competitiveness, India. The views expressed are personal. He can be contacted at amit.kapoor@competitiveness.in and tweets @kautiliya. Chirag Yadav is senior researcher, Institute for Competitiveness)
—IANS
by admin | May 25, 2021 | Economy, Markets, News
By Porisma P. Gogoi,
New Delhi : Amid speculation about a Goods and Services Tax (GST) rate cut on white goods, industry stakeholders said a move from 28 per cent to a lower tax slab is essential for the health of the consumer electronics sector that has seen “single-digit or almost flat” growth in the past four quarters.
Stakeholders are optimistic that lower tax will not only give a boost to sales and manufacturing but also lead to an upgradation of consumers’ choice of consumer appliances.
“We have been recommending that GST rates should go down from 28 per cent to 18 per cent, further brought down to may be 12 per cent for energy-efficient products,” said Kamal Nandi, Vice President of the Consumer Electronics and Appliances Manufacturers Association (CEAMA).
Nandi said incentives should be given to people to move into energy-efficient four-star or five-star-rated products category, which in turn will help the government to save energy.
“A move from 28 per cent to a lower tax slab will be a welcome move and we definitely look forward to this as early as possible. The industry desperately needs this correction in the GST slab,” he added.
Overall demand for consumer appliances will go up, which in turn will help the industry, asserted Nandi.
“The industry over the last four quarters is in a single-digit growth or almost flat, except for one month of June where we saw a huge spike in demand on pre-GST sales. Other than that, the industry is not growing,” Nandi told IANS.
The consumer durables market is split into two broad categories of consumer electronics (brown goods) and consumer appliances (white goods). In July, GST was introduced on consumer goods with a tax rate of 28 per cent.
Air conditioners (ACs), refrigerators, washing machines, sewing machines, electric fans and other domestic goods all fall under the white goods category.
According to an India Brand Equity Foundation report, the refrigerators segment makes up 31 per cent of the consumer appliances market, while the Indian ACs market size by volume accounted for sales of 10 million units in 2015.
“Currently the market size of washing machine is around five million units, which is expected to grow 10-12 per cent in FY18,” the report said.
An expert on indirect taxation from the Confederation of Indian Industry (CII), who did not want to be named, told IANS that GST as a whole had allowed seamless input tax credit and overall goods had become cheaper by 3-4 per cent in general. He said if rates come down from 28 per cent, the products would become even more affordable.
Ashish Gupta, Managing Partner, Vijay Sales, said with lower tax rates, consumers’ choice of electronic appliances will upgrade to bigger products.
“Eventually, if it (GST rate) is lowered, it will help in increasing numbers because goods will become more affordable. It will help to boost sales, numbers will definitely go up,” Gupta told IANS.
“Also, we will see more upgrades. For example, if a consumer is going for a 250 litre appliance, he will be able to go for a 300 litre one. So that is another benefit that we will see,” Gupta said.
(Porisma P. Gogoi can be contacted at porisma.g@ians.in)
—IANS
by admin | May 25, 2021 | Economy, Markets, News, Politics
Manmohan Singh
Surat : Former Prime Minister Manmohan Singh on Saturday said it was too early to conclude that the economic slowdown has reversed as the 6.3 per cent growth rate in the July-September quarter did not take into account the small and medium sector which suffered huge losses in the aftermath of demonetisation and hasty implementation of GST.
He welcomed the 6.3 per cent growth rate in the July-September quarter but cautioned that it was too early to conclude that the economy has recovered.
“(It) is too early to conclude that this represents a reversal of the declining trend observed in the previous five quarters. Some economists believe that the CSO which released the figures has not adequately captured the impact of demonetisation and GST on the informal sector that accounts for about 30 per cent of the economy,” Singh said addressing professionals and businessmen here in the election-bound state.
He quoted renowned economist Govinda Rao identifying a “problem” with the calculation of manufacturing growth based on corporate results.
“This doesn’t take into account the small and medium sector which suffered the most after demonetisation and the launch of GST. A couple of big worries remain. Farm sector growth fell to 1.7 per cent from 2.3 per cent in the previous quarter and 4.1 per cent in the same quarter last year,” Singh said, citing Rao.
He said that after farming, job losses have been the most in the construction sector.
Singh criticised the BJP government’s economic policies, particularly the “coercive steps” of note ban and the Goods and Services Tax (GST) that cost the nation hugely and “broke the back of businesses”.
“We saw the impact of demonetisation on the economy when the GDP growth dropped to 5.7 per cent in the first quarter of 2017-18 under the new calculations. Even this is bound to be a gross underestimate as the pain of the informal sector is not adequately captured in the GDP calculation.
“Every one per cent loss of our GDP growth rate annually costs our nation Rs 1.5 lakh crore. Think of the human impact from the lost growth — the lost jobs, the youth whose opportunities have vanished, the businesses who had to shut down and the entrepreneurs whose drive to succeed has turned into discouraged disappointment.”
Singh said that the decline in farming and construction sectors was despite the fact that the government had front loaded its spending on projects, “forcing up our fiscal deficit to a high of 96.1 per cent of the Rs 546,432 crore target set for the full year”.
“This means that private spending on construction has been very dismal… Thus there is still considerable uncertainty about the growth of GDP. The RBI forecasts that growth in 2017-19 will pick up to 6.7 per cent. However, even if growth reaches 6.7 per cent in 2017-18, Modiji’s four year average growth rate will be only 7.1 per cent.
“To equal the UPA’s 10 year average, the economy will have to grow at 10.6 per cent in the fifth year. I would be happy if this were to happen, but frankly I do not think it will.”
The former Prime Minister said while Modi claimed to understand Gujarat and the poor “more than anybody else”, how was it that “he never understood the pain his decisions unleashed”.
He hailed the people of Surat city, renowned world over for the diamond and the textile industries, and said it was one of the worst sufferers of note ban and GST.
“It is no wonder that Surat voiced the biggest protests in India against this injustice by the NDA government. You after all come from the land of two great souls — Mahatma Gandhi and Sardar Patel. When the Mahatma decided to protest against the unjust British tax on salt, he did it from your backyard in Dandi. Standing up for injustice is in your blood and you raised your voice against the shoddy implementation of GST,” he said.
—IANS
