The Mystery Of The 'Missing' Rs. 1.7 Lakh Crore In India's Budget
NEW DELHI, July 9: Three days after the Union Budget was presented, questions have surfaced over a nearly Rs. 2 lakh crore 'fiscal hole' in India's financial accounts.
The anomaly was first picked up by Rathin Roy, a member of the Prime Minister's Economic Advisory Council. Writing in the Business Standard, he studied both the Economic Survey and the Budget and found that the revenue estimates for 2018-19, in other words how much the government has earned, is a percentage point lower in the Survey than cited in the Budget.
That percentage point amounts to a whopping Rs. 1.7 lakh crore, a massive shortfall in earnings.
The Budget uses what is called the Revised Estimates (RE), a projection of how much the government was expected to earn, while the Economic Survey uses what is known as provisional actuals (PA), an updated, more accurate estimate of government accounts.
The Revised Estimates used in the Budget show earnings of Rs. 17.3 lakh crore in 2018-19, while the updated, provisional accounts in the Economic Survey show that the government has earned far less, Rs. 15.6 lakh crore, a shortfall of Rs. 1.7 lakh crore.
In percentage terms (total revenue as percentage of GDP), the Revised Estimate in the Budget pegs the figure at 9.2 per cent, while the updated number in the Economic Survey shows this as a whole percentage point lower at 8.2 per cent.
This discrepancy is also reflected in government spending. Spending was shown in the Budget at Rs. 24.6 lakh crore in 2018-19, while the more accurate figure in the Economic Survey shows that the government only spent about Rs. 23.1 lakh crore, about Rs. 1.5 lakh crore less.
The source of the shortfall: a drop in tax revenue. While according to the Budget, it was expected that the government would earn about Rs. 14.8 lakh crore from taxes last year, the Economic Survey's more updated figures tell us that they only earned about Rs. 13.2 lakh crore.
Questions sent to the Finance Ministry did not meet with a reply.
Pronab Sen, former Chairman of the National Statistical Commission and India's First Chief Statistician, told NDTV: "This is very much a matter of concern."
"As I make out, the figures in the Economic Survey are much closer to the (actual) figures. The figures in the Budget are way, way higher. Now the problem this causes is if you have to meet your fiscal deficit target, you're going to have dramatic cuts somewhere in the Budget. This really sends the plans of the Ministry haywire", he said.
"If the provisional actual figures are correct, then the only (solution) is to present a new Budget", said Jayati Ghosh, professor of Economics at the Centre for Economic Studies and Planning, School of Social Sciences, JNU.
At Peak Rate of 42.7%, India's Super Rich Will Now Pay More Tax Than Wealthy Americans
NEW DELHI, July 5: India’s super-rich will now shell out more tax than their counterparts in the United States, with the government hiking the surcharge on taxpayers earning more than Rs 5 crore. The individuals in this bracket could be taxed up to 42.7%, more than the 40% tax levied on the super-rich in the US.
In her first budget, finance minister Nirmala Sitharaman raised tax surcharge on high net worth individuals (HNIs) with annual income between Rs 2 crore to Rs 5 crore a year by 3%. The surcharge for those earning more than Rs 5 crore was increased by 7%.
“We have taken several measures in the past to alleviate the tax burden on small and medium income-earners as those having annual income up to Rs 5 lakh are not required to pay any income tax. We are thankful to the taxpayers who play a major role in nation building by paying their taxes,” she added.
“However, in view of rising income levels, those in the highest income brackets, need to contribute more to the nation’s development. I, therefore, propose to enhance surcharge on individuals having taxable income from Rs 2 crore to Rs 5 crore and Rs 5 crore and above so that effective tax rates for these two categories will increase by around 3% and 7%, respectively,” she added.
This surcharge would be over and above their marginal tax, which for the Rs 5 crore+ category is 30 per cent. This comes up to an effective rate of 41.1 percent rate (Rs 30 tax on every Rs 100 earned, plus another 37 percent on Rs 30, which is Rs 11.1). Add to that the various cess, and the peak tax rate comes up to 42.7 percent.
The surcharge on the super-rich would help garner additional income of around Rs 12,000 crore this fiscal on the direct tax side.
In her budget speech, Sitharaman said measures are being worked out to ease filing returns and tax compliance. Taxpayers with an annual turnover of less than Rs 5 crore will have to file only quarterly returns, she said.
India is looking to create its own Davos for bigger global role
NEW DELHI, July 5: India is contemplating organizing an annual global investors’ meet in the country, akin to the World Economic Forum in the alpine resort of Davos, to carve out a bigger global role for itself.
The move will help create a niche for Asia’s third-biggest economy within the international financial system, Finance Minister Nirmala Sitharaman announced in her budget speech on Friday. China -- India’s geopolitical and economic rival -- already has its own version of such a summit, known as the Boao Forum for Asia.
Prime Minister Narendra Modi, who made his Davos debut last year, has used this tack before as the chief minister of the Indian state of Gujarat before becoming the nation’s prime minister in 2014. The biennial Vibrant Gujarat summit, which was followed by other Indian states, helped raise Modi’s profile.
The idea for holding a summit is being mooted at a time the government is looking to attract more investments from overseas as it seeks to spur economic growth and generate more jobs. India also wants to tap investors who can help fund 100 trillion rupees ($1.5 trillion) to build infrastructure over the next five years.
“It is high time India not only gets integrated into global value chain of production of goods and services, but also becomes part of the global financial system to mobilize global savings, mostly institutionalized in pension, insurance and sovereign wealth funds,” said Sitharaman.
India will anchor its ambitions to the National Investment & Infrastructure Fund, Sitharaman said, without elaborating. First announced in 2015, soon after Modi came to power, the NIIF is a quasi-sovereign fund meant to attract financing for new roads, ports, railways and power plants.
KYC norms for FPIs to be eased: Sitharaman
NEW DELHI, July 5: Finance Minister Nirmala Sitharaman on Friday said KYC norms would be eased for foreign portfolio investors and proposed allowing the listing of social enterprises and voluntary organisations to help them raise funds.
Presenting her maiden budget, she also said steps need to be taken to bring capital markets closer to the people and proposed raising the threshold for minimum public shareholding from 25 per cent to 35 per cent.
She said a number of steps would be taken in consultation with the RBI and Sebi to deepen the corporate bond market.
Announcing a number of measures related to capital markets, Sitharaman said investments by FIIs and FPIs in debt securities would be allowed to be transferred and sold to domestic investors in a timely manner and also proposed FPI investment in debt securities issued by NBFCs.
She said a harmonised and hassle-free investment environment needs to be provided to foreign portfolio investors and KYC norms for them would be rationalised and simplified to be made more investment-friendly, without compromising on the integrity of cross-border capital flows.
She said the listing of social enterprises and voluntary organisations would be allowed on a new electronic fund-raising platform, a social stock exchange, to help in raising of funds by those working for social welfare objectives.
Among other proposals, she said NRI portfolio route would be merged with the FPI route for seamless investment in stock markets.
“Inter-operability of RBI depositories and Sebi depositories is necessary for seamless transfer of treasury bills and the government will take necessary measures in this regard in consultation with the RBI and the Sebi,” she said.
Sitharaman said the government is contemplating global investors meet using national infrastructure fund as an anchor to get all three sets of global stakeholders.
Credit Guarantee Enhancement Corp will be set up in 2019-20, action plan to deepen markets for long-term bonds with a specific focus on infra sector to be put in place, she said.
Sitharaman also said Rs 350 crore has been allocated for 2 per cent interest subvention for all GST-registered MSMEs on fresh or incremental loans.
India requires capital of about Rs 20 lakh crore every year, the finance minister added.
Economy to rebound from 5-yr low, grow by 7% in 2019-20, says Economic Survey
NEW DELHI, July 4: India expects economic growth to rebound this year from a five-year low, as political stability aids a pickup in demand and investments.
Real gross domestic product growth for the fiscal year started April 1 is projected at 7%, the Finance Ministry said in its annual Economic Survey report. The upside and downside risks to growth are evenly balanced, with monsoon rainfall seen tipping the scales, it said.
“The political stability in the country should push the animal spirits of the economy, while the higher capacity utilization and uptick in business expectations should increase investment activity,” said the Survey, authored by Chief Economic Adviser Krishnamurthy Subramanian.
The forecast marks an improvement from the 6.8% expansion last year, and is the same as the Reserve Bank of India’s reading, which in June lowered its projection by 20 basis points from 7.2%. A gloomy global outlook spawned by U.S.-China trade tensions also prompted the central bank to cut interest rates three times this year, with the focus now shifting to the government’s budget Friday for measures to support the economy.
The RBI’s easy monetary policy is expected to lower real lending rates, helping boost credit growth and revive investment in the coming months, according to the report on the state of the economy. Further, the narrowing in bad-loans ratio is seen helping boost the capital expenditure cycle.
Oil prices staying well below their 2018 peak is also a positive for consumption, which accounts for about 60% of the gross domestic product, it said.
Still, a rebound in consumption is tied to a recovery in farm sector growth, which in turn depends on rainfall, the survey said. The other downside risks include weaker exports growth and a spillover of the stress in shadow banking sector to this year.
The southwest monsoon, which waters more than half of India’s farmland, has been below average after a delayed started to the season. As much as 69% of the country got deficient rainfall during June 1-July 2 period, according to the weather office.
“Some regions are expected to receive less than normal rains,” the survey said, underlining the risks. “On balance, the prospects of the economy should improve.”
GST collections fall below Rs 1 trillion for first time in FY20
NEW DELHI: After breaching the Rs 1 trillion mark in goods and services tax (GST) collections for two consecutive months, indirect tax mop-up in June fell marginally to Rs 99,936 crore.
However, the average monthly collection for the April-June quarter stood at Rs 1.04 trillion, up by 7% from the corresponding period of last year.
The sluggish momentum in tax collection growth is partly due to the cuts in tax rates, following the GST Council’s decision to moderate rates wherever it found a compelling case. The shortfall from the target could increase the central government’s liability to compensate states on the notional revenue loss under the GST regime—a constitutional commitment agreed upon prior to the indirect tax reform.
The sluggish pace of revenue growth also leaves very little room for the GST Council to cut tax rates in the near future unless revenue collection sees a surge. It also implies that the authorities will now focus on improving compliance by taxpayers using data collected from various sources. Central and state authorities had set a two-year transition period till 30 June 2019 for GST to stabilize.
Speaking on the second anniversary of the GST roll-out, minister of state for finance Anurag Thakur warned businesses against generating fake invoices to evade GST. “The menace of fake invoices needs to be checked as the actions of a few unscrupulous traders make the majority of honest taxpayers uncompetitive and cause loss to government revenue." He added that tax officers will take strict action in all such cases.
GST was launched in a grand ceremony held in the Central Hall of Parliament on the intervening night of 30 June and 1 July 2017.
Earlier in the day, finance minister Nirmala Sitharaman and her predecessor Arun Jaitley took to social media, looking back on the implementation process and promising greater simplification of the federal tax system.
“Today, we mark the second anniversary of the #GST. We are committed to greater simplification of the process. Thanking the @GST_Council, all state governments, union territories, trade and industries for their continued support," Sitharaman said on Twitter.
In a lengthy Facebook post, Jaitley said after the introduction of GST, the assessee base in the last two years has increased by 84%. “The number of assessees covered by the GST were around 65 lakh. Today, they are at 1.20 crores."
Jaitley said 20 states are independently showing more than 14% increase in their revenues, and the compensation fund in their case is not necessary after the first five years, wherein their revenues are protected under law.
Denouncing the critics who argued for a single-slab GST, Jaitley said they must realise that it is possible only in extremely affluent countries, where there are no poor people. “It would be inequitable to apply a single rate in countries where there are a large number of people below the poverty line."
Car sales continue their losing streak in June
NEW DELHI, July 1: The domestic car market yet again posted a disappointing set of numbers as poor buyer sentiments continued to affect retail car demand. Almost every carmaker reported a drop in wholesale volumes in June.
Domestic sales of Maruti Suzuki slipped into the negative for the fourth consecutive month in June recording a drop of 15 percent to 114,861 units as against the same month last year.
The compact segment where Maruti sells models like Wagon R, Swift, Baleno and Dzire fell 12 percent while the utility vehicle segment with models like Ertiga, Brezza witnessed a decline of 8 percent during June.
Hyundai Motor India, the country’s second-largest carmaker, saw a drop of 7 percent in domestic volumes to 42,007 units during June. The drop was on the back of new launches by the company such as Venue and Santro.
Toyota Kirloskar reported a 19 percent fall in domestic sales to 10,603 units during the same month. This is despite the additional supplies of 1,830 units from Maruti Suzuki of the Glanza hatchback (rebadged Baleno).
Raja, Deputy Managing Director, Toyota Kirloskar Motor said, “The industry has been witnessing a continuous decline in domestic sales owing to several factors that have contributed to the weak consumer sentiment. The prevailing economic uncertainty, uncertainty on monsoons, high-interest costs, tight liquidity and also the underlying apprehensions surrounding BS-VI introduction in a few months have steered the slowdown.
Mahindra and Mahindra (M&M), the utility vehicle specialist, recorded a growth of 4 percent in domestic passenger vehicle sales riding on new launches such as XUV300 and Marazzo. The Mumbai-based company clocked sales of 18,826 units during June.
Veejay Ram Nakra, Chief of Sales and Marketing, Automotive Division, M&M said, “The market sentiment continued to remain subdued, especially in the passenger vehicles segment. We are happy to register growth on the back of our three recent product launches. Further, we continued to correct our channel inventory both in the personal and commercial vehicle segments in June 2019.”
Will not charge extra fee for digital transactions, clarifies Paytm
NEW DELHI, July 1: Digital wallet Paytm on Monday refuted reports that it is going to charge users extra amount for digital transactions on its platform.
“We would like to clarify that Paytm app/payment gateway owned by One97 Communications Limited does not charge or levy any convenience/transaction fee from our customers on using any payment method which includes cards, UPI, net-banking and wallet.
“Paytm customers will continue using all the services available on the platform without any fee,” the Noida-headquartered company said in a statement.
It was reported on Sunday said that Paytm is going to allegedly charge 1 per cent on payments via credit cards, 0.9 per cent for debit cards and up to Rs 12-15 through net banking and UPI-based methods.
According to the digital payments company, there have been few merchants like educational institutes or utility service providers who do not absorb credit card charges and expect customers to pay the same.
“In such cases, we recommend our users to pay through their debit cards and UPI to avoid these charges. We would like to reiterate that these charges aren’t levied by Paytm in any scenario,” said the company, adding that it does not have any plans to levy any such fee in the future.