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Nirmala Sitharaman unveils Rs 102 lakh crore infrastructure bonanza

NEW DELHI, Dec 31: The Modi government is planning a staggering amount of Rs 102 lakh crore in infrastructure projects to propel India to the elite league of $5 trillion economy by 2025, said Union Finance Minister Nirmala Sitharaman.

Ahead of Budget 2020, the central government has also unveiled a first-of-its-kind National Infrastructure Pipeline for better understanding of nitty-gritty of the infrastructure projects in India. Sitharaman said that Modi in his Independence Day speech 2019 highlighted that Rs 100 lakh crore would be invested on infrastructure over the next 5 years.

The central government has started a National Infrastructure Pipeline for the first time in India. Energy projects worth around Rs 25 lakh crore are in the pipeline, says Nirmala Sitharaman.

The central government has proposed around Rs 14 lakh crore railway projects and nearly Rs 20 lakh crore road projects under this mega infrastructure push.

India is witnessing growth in civil aviation infrastructure. Continuing that, Rs 2.5 lakh crore will be invested in projects pertaining to airports and ports, FM Sitharaman said.

Infrastructure projects involving mobility ones in India get a big push as over Rs 16 lakh crore will be invested, FM Sitharaman said.

Digital India gets a massive boost. Around Rs 3.2 lakh crore will be invested in digital infra projects.

The Central government has kept its focus on rural, irrigation, Agri and food processing projects as FM Sitharaman announced that Rs 16 lakh crore will be invested in these sectors.

Divulging details on the source of funds, FM Sitharaman said that the private sector will share around 22-25 per cent of the total investments. Rest will be borne by both the Central and state governments.

Listing out the Modi government’s spending on the infra projects since it assumed power in 2014, FM Sitharamman said Rs 51 lakh crore was spent in the last six years. The Finance Minister said that around 5-6 per cent of GDP has been spent on infra projects.

India facing ‘Great Slowdown’, headed to ICU: NDA govt’s first CEA Subramanian

NEW DELHI, Dec 18: India is facing a “Great Slowdown” with its economy headed for intensive care unit primarily due to a “second wave” of the twin balance sheet crisis at banks, former Chief Economic Adviser Arvind Subramanian has said.

Subramanian, who was Modi government’s first chief economic adviser but quit in August last year, in new paper co-authored with the former head of the International Monetary Fund’s India office Josh Felman said India is facing a “Four Balance Sheet” challenge -- comprising banks, infrastructure, plus NBFCs and real estate companies -- and is trapped in an adverse interest growth dynamic.

“Clearly, this is not an ordinary slowdown. It is India’s Great Slowdown, where the economy seems headed for the intensive care unit,” he wrote in a draft working paper of the Harvard University’s Centre for International Development.

Subramanian had flagged the twin balance sheet (TBS) problem - debt accumulated by private corporates becoming non-performing assets (NPA) of banks - back in December 2014, while he was CEA to the Narendra Modi government.

In his new paper, he has made a distinction between the original TBS and “TBS-2”.

TBS-1 was about bank loans made to steel, power, and infrastructure sector companies during the investment boom of 2004-11 turning bad. TBS-2 is largely a post-demonetization phenomenon, involving non-banking financial companies (NBFCs) and real estate firms.

“Since the Global Financial Crisis, India’s long-term growth has slowed as the two engines propelling rapid growth -- investment and exports -- sputtered. Today, the other engine -- consumption -- has also stalled. As a result, growth has plummeted precipitously over the past few quarters,” he wrote.

India’s GDP growth in the July-September quarter slowed to a six-year low of 4.5 per cent. This was the sixth consecutive quarter when the growth rate had fallen.

“Indeed, the economy seems locked in a downward spiral,” he said. “Best capturing this stark reality is the astonishingly high interest-growth differential. The corporate cost of borrowing now exceeds the GDP growth rate by more than 4 percentage points, meaning that interest on the debt is accumulating far faster than the revenues that companies are generating.”

This, he said, has caused “a resurgence in the amount of stressed debt, a second wave of the Balance Sheet Crisis”.

If this process is left unchecked, the economy will continue to spiral downward, as stress reduces growth, which then intensifies the stress, he said.

“Clearly, action must be taken to stabilize the economy and get it back on the path of rapid growth,” he said. “But in the current circumstances, the standard macroeconomic tools are not very useful. There are actions that the government cannot do (further significant fiscal stimulus); must not do (reducing personal income tax rates or raising GST rates); can do with only limited effectiveness (easing monetary policy).”

According to Subramanian, first major action -- almost a pre-condition for righting the economy -- could be a Data Big Bang, which instill confidence and produce a reliable basis for policy making.

“This must comprise the publication of unreleased reports together with a strategy for improving official statistics in at least three areas: the real sector (GDP, consumption, and employment), fiscal accounts, and stressed assets in the banking system,” he said.

Next, a new asset quality review to cover banks and NBFCs must be conducted. Also changes to the Insolvency and Bankruptcy Code (IBC) be made to ensure that participants actually have incentives to solve the problem.

He also advocated the creation of two executive-led public sector asset restructuring companies (bad banks), one each for the real estate and power sectors, while at the same time strengthening oversight, especially of NBFCs. Recapitalization of banks should be linked to resolution and reforms such as shrinking public sector banking should be undertaken.

“There is, of course, a reason why these policies have not been implemented before. They are politically difficult and other, easier alternatives have seemed more attractive. But, the government currently has a tremendous amount of political capital. And by now all the alternatives have been tried and found wanting. So, finally, after a long and difficult decade, the government has both the opportunity and the clear need to resolve the Four Balance Sheet (FBS) problem,” he said.

Dwelling into the current problem facing the economy, he said, after demonetization, considerable amounts of cash made their way to banks, who on-lent a major part of that to NBFCs. The NBFCs, in turn, channelled this money to the real estate sector. By 2017-18, NBFCs were accounting for roughly half of the estimated Rs 5 lakh crore of outstanding real estate loans.

The collapse of IL&FS in September 2018 was a “seismic event” not only because of the Rs 90,000 crore-plus debts of the infrastructure-cum-lending behemoth, but also its “prompting markets to wake up and reassess the entire NBFC sector,” he said.

What the markets discovered was profoundly disturbing. A lot of NBFC lending in the recent period was concentrated in one particular industry -- real estate -- which itself was in a precarious situation.

The current slowdown, the paper says, is worrisome not just because GDP growth has slowed down to 4.5 per cent in the second quarter of 2019-20. Even more distressing is the disaggregated data.

“The growth of consumer goods production has virtually ground to a halt; production of investment goods is falling. Indicators of exports, imports, and government revenues are all close to negative territory,” it said. “These indicators suggest the economy’s illness is severe, unusually so. In fact, if one compares the indicators for the first seven months of this year with two previous episodes, the current slowdown seems closer to the 1991 slowdown than the 2000-02 recession.” Electricity generation figures suggest an even grimmer diagnosis: growth is feeble, worse than it was in 1991 or indeed at any other point in the past three decades, it added.

India’s real estate, construction industries in deep trouble: Raghuram Rajan

MUMBAI, Dec 7: India’s real estate, construction and infrastructure industries are in “deep trouble,” and non-bank finance companies which lend to these sectors should have their asset quality reviewed, former Reserve Bank of India Governor Raghuram Rajan said.

There is also “significant distress in rural areas,” Rajan wrote in an opinion piece in India Today magazine. He said India is in a growth recession, defined as an economy growing at a slow pace and where unemployment is rising.

India’s GDP growth slowed to 4.5% in the quarter ended September, a six-year low. A crisis among shadow lenders and a build-up of bad loans at banks have curbed lending in the economy.

The Reserve Bank of India should carry out an asset quality review of the non-bank finance companies, Rajan said. The central bank closely monitors the top fifty non-bank financiers, which account for about 75% of total assets in the shadow banking sector, Governor Shaktikanta Das said in a press conference on Thursday.

“We have a fairly good idea of where the vulnerabilities lie,” said Das, reiterating that the central bank won’t allow any large or systematically important non-bank lender to collapse.

20% increase in processing Income Tax refund returns this year: CBDT

NEW DELHI, Dec 3: The Central Board of Direct Taxes (CBDT) has said that there has been a 20% increase in processing of refund returns with the Centralized Processing Center (CPC) of the Income Tax Department at the forefront of the strategy to ensure highest priority to issue of refunds in an automated manner.

“The CPC processed 2.10 crore refund returns for current AY2019-20 as on November 28, 2019, compared to 1.75 crore AY2018-19 refund returns for the same period in FY2018-19, an increase of 20%,” it said in a statement.

“The expeditious issue of refunds in this year demonstrated its commitment to faster and more efficient taxpayer service,” it said.

The total amount of refunds issued in FY 2019-20 till November 28, 2019 was Rs 1,46,272.8 crore as compared to Rs 1,19,164.7 crore in same period previous year (increase of 22.7%)

There has also been a 20% increase in total number of returns processed with the CPC processing 4.70 crore returns during FY2019-20 as on November 28, 2019, while for the same period in FY2018-19 the figure was 3.91 crore, the statement said.

It said, “The CPC has also issued faster refunds 43 lakh more refunds issued within 30 days in FY2019-20 compared to previous year which translates to an increase of over 42%.”

In FY2019-20 of the 2.10 crore refund ITRs processed, 68% of refunds were issued within 30 days from the date of e-verification of ITR as compared to 57% for the same period in FY 2018-19.

“All 2.28 crore refunds issued by CPC has been directly credited to the taxpayers’ bank accounts by ECS, eliminating paper cheque and ensuring faster, accurate and safer credit.”

According to the statement, the number of verified refund ITRs pending as on November 29, 2019 is 20.76 lakh and are currently being processed [2.10 crore refund ITRs (91%) have already been processed].

Not only were 20% higher number of refunds processed for the current AY2019-20, the pendency of refunds for verified ITRs has been reduced by 36% from 31.97 lakh last year at the same time to 20.76 lakh this year as on November 29. The rest of the refunds are being processed.

It said the Department has issued several reminders to taxpayers to e-Verify their ITRs so that any ITR with refund claim can be taken up for processing.

The CBDT said in this financial year, CPC has proactively re-issued 22.30 lakh refunds by ECS to taxpayers that had previously failed due to address not found, bank account closed etc whenever fresh bank account number for current year was found to be valid.

The CBDT said it expects that these measures will facilitate the taxpayer towards better voluntary compliance and improve their confidence in the tax administration.

 

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Growth down, but there won’t be recession ever: Sitharaman
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Growth down, but there won’t be recession ever: Sitharaman
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