Scheme for banks not applied as envisaged’

In News

The Centre’s Indradhanush scheme to recapitalise public sector banks (PSBs) based on their performance was not implemented in a manner envisaged, according to a report by the Comptroller and Auditor General of India (CAG).

About CAG report

  • According to the CAG report tabled in Parliament on Friday, as per the scheme, a portion of the recapitalisation was to be based on the bank’ performance. However, this was not followed during disbursal of funds.
  • The parameters used to determine whether banks required capital changed from year to year and in some years the rationale for capitalising banks was not even recorded. The scheme’s target of raising Rs. 1.1 lakh crore from the markets by 2018-19 was not likely to be met.
  • Audit also noticed that in some cases the rationale for distribution of GOI capital among different PSBs (Public Sector Banks) was not on record.
  • Some banks that did not qualify for additional capital as per the decided norms, were infused with capital, and in some cases, banks were infused with more capital than required.

Source : The Hindu

GS III : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment

India Surpasses China the coming decade : Harvard Study

In News

Harvard University’s Center for International Development (CID) conducted a study on growth projections is expected to maintain its lead over the coming decade.

Findings of the study

  • India is particularly well positioned to continue diversifying into new areas, given the capabilities accumulated to date.
  • Export base diversified to include more complex sectors, such as chemicals, vehicles, and certain electronics
  • Economies till 2025 with an average annual growth of 7.7 per cent.
  • The major oil economies are experiencing the pitfalls of their reliance on one resource whereas  India, Indonesia and Vietnam have accumulated new capabilities that allow for more diverse and more complex production.

Other nations

The countries that are expected to be the fastest growing Turkey, Indonesia, Uganda, and Bulgaria are diverse in all political, institutional, geographic and demographic dimensions.


Source : The Hindu

GS III : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment

GST comes into force

India’s biggest tax reform since independence tonight came into force after 17 years of debate, unifying more than a dozen central and state levies.

The Goods and Services Tax (GST) System

In the current system, tax is levied at each stage separately by the Union government and the States at varying rates, on the full value of the goods.

Under the GST system, tax will be levied only on the value added at each stage. It is a single tax (collected at multiple points) with a full set-off for taxes paid earlier in the value chain.Consumer will bear only the GST charged by the last dealer in the supply chain with set-off benefits at all the previous stages. GST is meant to be a unified indirect tax across the country on products and services.

State GST, inter-State transactions  and Central GST

For transactions within a State, there will be two components of GST, Central GST (CGST) and State GST (SGST). In the case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST).

Need for GST

Subsume various indirect taxes levied at different levels, with the idea of reducing red-tape, plugging leakages and paving the way for a transparent indirect tax regime.

Effect of GST

GST is meant to eliminate “tax on tax”, overall tax burden on goods is expected to fall over time.

  • Many essential goods such as unpacked food grains, gur, milk, eggs and salt won’t attract any tax under GST.
  • Prices of vegetables and fruits are likely to rise under the GST regime and services such as eating at restaurants will get more expensive.
  • Some services will get costlier as banking and financial services have been put in the 18 per cent rate slab under GST, from 15 per cent earlier.
  • It is expected that due to reduced cost because of availability of GST credit on items hitherto not available, the price of services will also come down which will benefit the consumers.
  • Alcohol, Petroleum products such as petrol, diesel and aviation turbine fuel have been kept out of GST as of now.

GST in tax evasion

GSTN, will allot universal GST numbers (similar to PAN) to all manufacturers, traders, stockists, wholesalers and retailers. This will simplify the administration of indirect taxes and plug leakages.


Source : Pib, The Hindu, NDTV, CBEC

GS III : Indian Economy

Package to resolve NPAs gets Cabinet nod

New Package

  • The government cleared a package to resolve the persistent rise in non-performing assets that are plaguing public sector banks and denting credit growth.
  • The package, which includes an ordinance to amend the Banking Regulation Act of 1949 to empower the Reserve Bank of India to take more actions to check bad loans, is learnt to have been cleared by the government.
  • The Cabinet has recommended an ordinance which has to first go to the President to secure his assent.

Issue with bad loans

  • Bad loans in the Indian banking system have gone up sharply in the last one year.
  • According to Reserve Bank of India data, gross NPA, as a percentage of gross advances went up to 9.1% in September 2016 from 5.1% in September 2015.
  • The stressed assets moved up from 11.3% to 12.3%.
  • Stressed assets in some of the public sector banks have approached or exceeded 20%.
  • Economic survey of 2016-17 has pointed out the twin balance sheet problem that is, stressed companies on one hand and NPA-laden banks on the other.

Source : The Hindu

GS III : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. 

NITI Aayog moots taxing agriculture income

Government think-tank NITI Aayog has suggested that agriculture income be brought under the purview of personal Income Tax in a bid to curb tax evasion.

Key Facts

  • At the Governing Council meeting, the Aayog reasoned that non-agricultural entities sometimes use the blanket relief to evade taxes.
  • All agricultural income is currently exempted from Income Tax regardless of its size.
  • While the provision is meant to protect farmers, non-agricultural entities sometimes use it to evade taxes by declaring agriculture as the source of their income.
  • This would widen the tax base and more funds could be made available for the social sector schemes.

Background

In assessment year 2014-15, only 3.65 crore individuals filed returns. Of this group, only 1.91 crore individuals or around 1.5% of the population paid any Income Tax at all. So we should endeavour to bring a large number of citizens into the direct tax net even if their tax liabilities are minimal.There were about 225 million households in India of which roughly 2/3rd were in rural India. Rural India, he said, was effectively out of the purview of all personal income taxation.

Source : The Hindu

GS II : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment

 

NITI Aayog third meeting

The third meeting of NITI Aayog’s Governing Council, which deliberate on the 15-year Vision Document to accelerate the country’s economic development.

Outcome of the meeting

  • NITI Aayog set out the new approach which envisages a 15 year long term vision, accompanied by a 7 year strategy and a 3 year action agenda.
  • In 3 year agenda inputs from the states as well as central ministries and subject experts were incorporated in the agenda.
  • The three-year agenda has been divided into seven parts, with each part having a number of specific action points and over 300 specific action points have been identified covering the whole sectors. NITI 3 year Agenda
  • Besides the 3 YEAR agenda seven-year strategy and a 15-year long-term vision that will replace the erstwhile Five-Year Plans for the nation’s planning framework.
  • The 15-year vision document aims to pegs the Indian economy’s growth from Rs 137 lakh crore in 2015-16 to Rs 469 lakh crore by 2031-32 at 2015-16 prices.
  • Projection is based on growth estimate of 8 per cent per annum
  • The vision of ‘New India’ could only be realised if all States work together and speed up capital expenditure and infrastructure creation.

NITI Aayog

  • National Institution for Transforming India is a Government of India policy think-tank established by the Narendra Modi government to replace the Planning Commission which followed the top-down model.
  • The stated aim for NITI Aayog’s creation is to foster involvement and participation in the economic policy-making process by the State Governments of India.
  • The emphasis is on bottom-up approach and make the country to move towards cooperative federalism .
  • The Prime Minister as the Ex-officio chairman and governing council consists of all state Chief Ministers,Lieutenant Governors of union territories,and vice chairman nominated by the Prime Minister.
  • In addition to full members, there are two part-time members and four ex-officio members and a chief executive officer.
  • The temporary members are selected from the leading universities and research institutions.

Source : The Hindu

GS III : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment