Daily Archives: February 5, 2017

Demonetization and Indian budget 2017 – An introduction!

Demonetization and Indian budget 2017 – An introduction!
-Dr. Abdul Ruff Colachal
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The BJP government in India has unveiled annual budget on February 01, trying for recovery after deadly cash crunch, unleashed by PM Modi by his shock therapy, making people feel badly stranded at a crossroads without cash and not really knowing where exactly to go for getting their own money deposited in banks.

While demonetization forces the people to deposit all their money to banks, especially in rural areas where economy is hidden, Jaitley claimed his budget is focused on increasing rural incomes and boosting infrastructure, besides ushering in long-pending reforms in the financial sector.

Prime Minister Narendra Modi’s surprise decision last November on a night as the results of US presidency poll were pouring in, to scrap high-value banknotes worth 86 percent of India’s cash in circulation has hit consumer demand, disrupted supply chains and hurt capital investments. PM Modi did find some space in international news but he could not equal or outsmart Trump’s grand victory defeating the “official candidate” Hillary. Clinton

As Gujarat CM, Modi had promised a vibrant economy during his 2014 maiden elections to parliament from Varanasi in UP, but India economy has only survived now- let alone becoming a strong one. That is below the target rate of 8 percent or more that Modi needs to create enough jobs for the 1 million young Indians who enter the workforce in India – a nation of 1.3 billion where half the population is below the age of 25.

Indian Finance Minister Arun Jaitley presented his budget as five states are going to assembly polls later this month the outcomes of which could decide the future politics of India as well as political alliances and equation. Arun Jaitley said that the impact on growth from the government’s cash crackdown would wear off soon. “We are seen as an engine of global growth,” Jaitley said as he delivered the opening remarks of his fourth budget.

Budgets are essentially statements on the status of national economy and they are meant to allocate resources for every sector of the nation and specify the sources of resources including taxes needed for developmental projects, etc. Generally the budgets remain as unfulfilled promises and project proposals as a lot of resources are being diverted and siphoned off by many “important” persons for their personal and private purposes, thereby making corruption inevitable at the source.
The budget talked about concessional tax rates being provided to those moving toward non-cash payment mechanisms, and making it mandatory for many Government transactions to move to digital, which again are important steps in this direction. The reduction of personal income tax at the lowest slab to 5 percent is more a gesture of goodwill for those who bore the pain of demonetization, rather than a big reward.

The budget makes clear the intention of the Government to fight black money and digitize the economy. Limiting the amount of cash per transaction to Rs. 3 lakh, reducing the limit of cash donations to trusts/political parties to Rs. 2,000 per person, and coming up with an innovative way of funding political parties (electoral bonds) are all excellent initiatives. The implementation, though, needs to be watched.

Jaitley’s chief economic adviser advocated slashing personal income tax and accelerating cuts in corporate tax rates. He cautioned, however, against pursuing debt-fuelled fiscal expansion. Still, economists are penciling in a federal fiscal deficit of 3.3 percent of GDP for 2017/18. That would be higher than the 3 percent pledged earlier but lower than 3.5 percent that the government has budgeted for the year soon to end.

The BJP budget has been in consistent with the government’s focus over the last two years on “fundamental” growth, rather than subsidies and loan waivers. It focused on increasing rural incomes and boosting infrastructure, besides ushering in long-pending reforms in the financial sector.

The rollout of a nationwide Goods and Services tax (GST), expected in July after years of delays, and could also weigh on economic growth. Countries that have introduced GST in the past have often faced a relative economic slowdown before the benefits of a unified tax regime feed through.

The budge, as well as the government, has not taken into account the suicides of farmers in rural areas, although the budget also provided for an additional Rs.20, 000 crores for the long-term irrigation fund under NABARD. The total allocations to rural, farm, and allied sectors saw a whopping 24 percent hike in outlay at over Rs 1, 87,000 crore.

The impetus given to affordable housing by according it the status of an ‘Infrastructure Industry’ and increasing the area eligible for affordable housing are steps in the right direction, which would ensure that more people in the country can afford to buy their own homes.

Reportedly, assets worth $7.6 trillion are stashed in tax havens across the globe. Jurisdictions known as ‘tax havens’ across the world offer powerful MNCs and rich individuals banking secrecy and the ability to sidestep financial regulations that apply to ordinary people. However, this secrecy sure hurts the public, as profits and wealth go untaxed, countries lose revenue and allocations in budgets shrink. Reportedly, assets worth $7.6 trillion are stashed in tax havens across the globe.

Not only the rich lords hoard black cash in the country, but the cross-border movement of money that is illegally earned, transferred or utilized (through trade manipulation, organized crime and corruption) or tax avoidance by multinational companies also cause over $1 trillion every year to illicit financial flows in developing countries, including India.

Double Taxation Avoidance Agreements (DTAAs) have been misused and exploited in the past, to avoid paying any taxes – resulting in double non-taxation – and re-routing black money through tax havens for investment in India. The General Anti-Avoidance Rules (GAAR) have also been adopted by the government, extends to deny double taxation avoidance benefits if deals in tax havens are found to be avoiding taxes.

The Union Budget has announced a few new laws to address financial crime – one for confiscation of property of economic offenders and another to deal with illicit deposit schemes. India will start exchanging information with other countries, and receive information regarding Indian citizens’ assets abroad starting September 2017, on an automatic and periodic basis.

Still, economists are penciling in a federal fiscal deficit of 3.3 percent of GDP for 2017/18. That would be higher than the 3 percent pledged earlier but lower than 3.5 percent that the government has budgeted for the year soon to end.
While opinions vary on how long the disruptions caused by Modi’s crackdown on untaxed and illicit wealth will last, there is near unanimity among economists that Asia’s third-largest economy needs a helping hand.
The issue of combating blackmoney was not given proper thoughts. The budget speech did not draw attention to a number of initiatives taken by the government in the past few months to curb the menace of tax avoidance.
Government of India should seek to address these loopholes in the norms of international taxation at the national level, while simultaneously support the establishment of a representative and well-resourced global tax body under the auspices of the UN.

Observation

India acclaimed to be a “bright spot” in the world economy, and Finance Minister Arun Jaitley repeated the same as he unveiled his annual budget, adding that the impact on growth from the government’s cash crackdown would wear off soon.

The BJP government’s budget has kept in pace with the economic policy of India for the last many years since the large scale privatization cum divestment program during the Congress reign with Manmohan Singh as finance minister to promote WB and IMF polices, to release the money of the state sectors for use by the private compote lords and global multinational magnets to increase their own wealth instead of taking care of welfare programs of common men.
The BJP budget this year was a usual one and as former finance minister Chidambaram said there are no real high lights. Those who had expected relief for those who suffered as Modi imposed demonetization without adequate preparation too launch his pet financial dream of ending black and other dirty money in the country. Now it is clear that the black money is here to stay no matter what measures the government adopt mainly because they only corporate lords who control the government want all these dirty cash circulation so that they could make more profits- after the objective of all governments – both elected and electionless – serve the cause of the rich and corporate lords and for which, unfortunately, common people vote a party to power.

The worst of the cash crunch is now almost over, leaving behind a shaky nation, and the government expects it to be fully cleared by the end of April. A private manufacturing survey showed business is slowly returning to normal. Still, the finance ministry forecasts that growth could dip to as low as 6.5 percent in the current fiscal year to March, before picking up slightly in the coming fiscal year to between 6.75 and 7.5 percent. That is below the target rate of 8 percent or more that PM Modi needs to create enough jobs for the 1 million young Indians who enter the workforce in India – a nation of 1.3 billion where half the population is below the age of 25.

The BJP which, like the Congress party, promotes the rich and corporate lords to sponsor cricket and IPL type joint sport exercise to keep the people under illusions, pursues the congress policies by keeping in view the goals of World Bank and IMF, denying subsides and freebies to poor and under privileged- thereby they want to remove the poor classes altogether and increase the illegal wealth of the rich. That is basic of capitalism that fuels wars of imperialism for acquiring more resources- now energy resources of West Asia.

The merging of the Railway Budget with the general budget was done seamlessly and was touted as a historic move, ridding us of the colonial era practice of separate budgets. However, the rationale for merging the railway budget with general budget this year as a new experiment has caused confusion as a separate budget for rail steadily raised the facilities and working of the sector, increasing rails and spending more resources year by year. Unlike other transport sectors, railways have achieved great strides over years and rail system today is not what it was say 10 years back. As the largest employment sector railways is also the cheapest mode of transport in India.

The nation expected the finance minister and PM Modi to give details of demonetization efforts of the fo government giving a brief about the amount of blackmoney it should get and what are the new techniques being employed to tackle this grave anti-national mischief by liquor-cricket bosses like Mallya- a BJP MP with links everywhere especially with cricket bosses and other corporate lords. The Modi government refuses to take the people into confidence on demonetization.

Perhaps, the intentions of the government to guide the country onto the path of inclusive growth are clear. While there will always be some misses and hits in the budget, the Modi Government, unlike the Congress and even Vajpayee governments that religiously promoted corruption and blackmoney as their key policy, has shown the political will to fight corruption and black money, which have become strong appendages of our economy.

Taxes the major revenues for the governments but the Modi government is eager to be sympathetic to big business houses with tax rebates. The minister’s roadmap in the FY-2015 budget promised to reduce the corporate tax rate to 25% within four years, even after three years.

In a difficult year, represented by growing global uncertainties, lower economic growth at home and increasing oil and commodity prices, the finance minister has done to sticking to the fundamentals and doing what is good for the economy, rather than for the vote bank.

While avoiding populist measures and focusing on investment activities that have a multiplier effect, Arun has also tried to garner additional resources through higher tax compliance, rather than higher tax rates. In fact, contrary to popular expectation, the definition of long term capital gains for property transactions was brought down to two years from three years.

Post Jayalalithaa Tamil Nadu politics: Chinnamma Sasikala to be new TN CM

Post Jayalalithaa Tamil Nadu politics: Chinnamma Sasikala to be new TN CM
-Dr. Abdul Ruff

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Not known as a possible heir during Jayalalithaa’s life time, Sasikala Natarajan, a close friend also involved in Jaya’s disproportionate assets case, will be the next CM of the state as the AIADMK MLAs who full majority in the state assembly have on February 05 elected her as its leader to enable her to become CM of the state.

After a meeting of AIADMK MLAs, chaired by General Secretary VK Sasikala Natarajan on Sunday, the party announced that they had elected her as Legislative party leader. The incumbent CM O. Pannerselvam has since resigned his post and submitted his resignation to Sasikala. Sasikala would be inaugurated as the chief minister on the 9th, and the swearing in may be before 9 February. Outgoing chief minister O Panneerselvam may well be Tamil Nadu’s next deputy chief minister. The post of the deputy chief minister has been vacant ever since DMK lost power to AIADMK in May 2011. MK Stalin had been the first deputy chief minister of Tamil Nadu

AIADMK confirms the change of guard in the party. The party, while dismissing DMK’s criticism of her being inexperienced, says she knows to run the party. However, whether the new leadership is acceptable to people is a major question.

News reports suggest that it was Panneerselvam himself who proposed the name of Sasikala. The move paves the way for Sasikala to take over as the state’s chief minister.

Sasikala belongs to the dominant Thevar community which also is said to have played a major role in Panneerselvam, who is also from the same community, becoming the stop-gap chief minister whenever Jayalalithaa had to step down and even after her death.

Sasikala assumes power in Tamil Nadu without being an MLA, without fighting any poll so far, without any experience in party and government, however, now most ruling party functionaries have decided to stand by her to save the party and government.

Former AIADMK supremo Jayalalithaa had selected O. Pannerselvam to be her successor to rule when she was in jail and she never used Sasikala to shoulder any responsibility both in party and government not even once in her life time.

 

The news of Sasikala’s elevation as Tamil Nadu chief minister had been doing the rounds ever since she took over as the party chief. The announcement of Sunday’s meeting had triggered speculations that Sasikala would take over reigns from Panneerselvam, but the party had dismissed rumours of any imminent change in the party leadership and said the meeting was to facilitate better communication between the MLAs and the government. AIADMK held a meeting of its MLAs on Sunday, where it was expected that Sasikala, a longtime confidant of the late chief minister Jayalalithaa would take over.

Last month, Thambidurai MP had said that the leadership in both the party and governance should be with the same person, while urging Sasikala to take over as Chief Minister. He had cited the political tussle in Samajwadi Party in Uttar Pradesh to drive home his point that the control of government and party should vest with the same person.

 

Sasikala: A close aide of late Jayalalithaa

Sasikala, 62, had been a close aide of Jayalalithaa for three decades and was always seen as a power centre in AIADMK. She has been taking care of party affairs, although she never held any formal position in the AIADMK before Jayalalithaa’s death.
The ruling party invokes the late chief minister Jayalalithaa, says ‘Chinnamma’ (Sasikala) will follow the footsteps of ‘Amma’ (Jayalalithaa). The party also said that it is happy with her taking over as the chief minister of the state.

Blamed once for Jayalalithaa’s disastrous election loss in 1996, the 60-year-old Sasikala, who was a video library owner before getting close to the late leader, was always considered having a clout in the running of the party. Having accompanied Jayalalithaa to prison when arrested in a disproportionate assets case, Sasikala’s roller-coaster career saw her being expelled for anti-party activities only to be restored in a few months five years ago.

Jayalalithaa’s demise on 5 December was seen as a personal loss for Sasikala who was a permanent resident of Jayalalithaa’s house Veda Nilayam in Poes Garden, even choosing to stay away from her husband.
Experts say if Sasikala is convicted in the disproportionate asset case after becoming the chief minister, she will have to step down from the top post and she would also be barred from contesting elections. The Karnataka government has filed a plea challenging her acquital in the Supreme Court. The verdict is to come soon.
DMK compares Sasikala’s elevation to that of Rabri Devi in 1997. EVKS Elangovan, senior Tamil Nadu Congress leader, calls Sasikala elevation as the chief minister “totally unacceptable”. Congress calls 5 February a “black day”, In response to the growing chorus for Sasikala taking charge as chief minister, DMK Working President MK Stalin on Sunday expressed worries about divisions in the ruling AIADMK after the death of Jayalalithaa and was keen that it should not affect the functioning of the administration. “The people voted for a government to be headed by Ms Jayalalithaa in May 2016 and not for one to be run by Mr. O Panneerselvam or any other person from Ms. Jayalalithaa’s household,” 63-year-old leader told PTI in an interview.

Control mechanism

Sasikala was appointed as General Secretary by AIADMK’s top decision-making body General Council on December 29. She took charge of the post on December 31, pledging to take forward the legacy of Jayalalithaa. In December last year, four state ministers had asked Sasikala to become the Chief Minister, besides AIADMK General Secretary. A resolution to this effect was passed at a meeting of Tirunelveli Urban Jaya Peravai (Forum), led by state AIADMK secretary and revenue minister R B Udhayakumar on December 17.

On Friday, Sasikala had appointed senior leaders, including some former Ministers and a former Mayor, to key party posts. Former Ministers KA Sengottaiyan, S Gokula Indira and B V Ramana, besides ex-Mayor Saidai S Duraisamy were made the AIADMK’s Organisation Secretaries. The appointments also included that of Fisheries Minister D Jayakumar to a key party post. She had also announced removal of Ambattur MLA V Alexander as AIADMK’s MGR Youth Wing Secretary.He will, however, continue as the party’s Tiruvallore (East) District Secretary, Sasikala had said in a statement.

Meanwhile, the Election Commission has sought a response from the AIADMK on a complaint filed by sacked leader Sasikala Pushpa against the election of VK Sasikala as party General Secretary. Sasikala Pushpa had filed a complaint that the election was not as per procedure, official sources in the poll panel. Pushpa had told the Commission that the elevation of Sasikala as the general secretary of the party was carried out in an “undemocratic manner”.

Sasikala took over as the party chief on 30 December last year, after the untimely demise of long-time leader J Jayalalithaa on 5 December. O Panneerselvam took over as the chief minister.

However, the clamor to see Sasikala as the chief minister grew in the coming days. The rumor mill began working overtime after three senior officers were given the marching orders on Friday. One of them is Sheela Balakrishnan, who had been appointed as the adviser to the Tamil Nadu government by Jayalalithaa after she retired as chief secretary and practically ran the government when the late chief minister was hospitalised between September and December 2016. Panneerselvam was acting under instructions from Poes Garden.

Notwithstanding all “necessary” changes taking place in the party and government, the ruling AIADMK faces a serious problem in making the Tamil people accept Chinnamma Sasikala as their Amma Jayalalithaa. .

Speculation is indeed thrilling!

 

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