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Economic survey 2018: A combo of cherry picked data

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Economic Survey

Instead of giving a true picture of the Indian Economy, the BJP Govt at centre has resorted to highlight only those facts that present itself in a good light. It is a shame that the Centre has wasted this golden opportunity to talk about the growing problems the country is facing.

It is apparent that with the release of the Economic Survey of 2017-18, the govt. has cherry-picked data to paint itself in a good light. It has cleverly hidden its wrongdoings and various primary indicators which may show the downward trend in economy.

The report fails to mention of the crisis which Indian farmers are currently facing. BJP has almost forgotten its promise of hiking the Minimum Support Price (MSP) by 50%, and it was not even mentioned in the Survey.

The agriculture sector is going through one of its worst phases as the growth has fallen to paltry 2.1%.The MSME sector has not recovered from the twin shocks of demonetisation and GST and there seems to be no light at the end of tunnel.

The most important question that begs to be questioned is how Modi government plans to achieve its impossible target of doubling the farmer incomes by 2022. The survey’s policy prescription doesn’t explain as how it could be done, instead it merely goes on to state that “radical follow-up action” is needed if its “laudable objective of addressing agricultural stress” is to be addressed.

The economic Survey also skips the important facts regarding the fiscal deficit. The ground reality is that the Govt has totally failed to contain the fiscal deficit which overshot the target and it is expected to reach a sky-high level of 3.5%. It is very strange that the Govt failed to rein in the deficit in last 44 months, despite getting the windfall of low international crude prices and astronomically high indirect taxes.

Exports sector which was performing so well has gone in a free fall and have reached its lowest levels but the government seems oblivious of this fact and continues to make tall promises on Make in India. As a matter of fact schemes such as Make in India and other similar schemes are complete disaster and are even contributing to the nation’s unemployment crisis.

The story is no different for other flagship schemes like Digital India, Startup India and Smart Cities as most of them are just high sounding names and were only meant to create media hype. The report has candidly accepted that it lacks fund for key sector like education where it spent a measly 0.47% of GDP in FY 2017-18.

 The survey grudgingly admits that in a developing economy like India, there isn’t enough fiscal space to “increase the expenditure on critical social infrastructure like education and health in India”. Therefore, it points out that over the last four years, expenditure on social services has largely stayed the same.

 The fresh investments are at its lowest in last 10 years and the GDP is likely to grow at only 6.5%, the lowest in last 4 years. One of the most important indicators of economy is Gross Capital Formation (GCP) which is the percentage of investments out of the total GDP every year. The GCP has gone down below 27% which is at its lowest level in last 13 years.

The entire banking sector is in crisis on account of Non-Performing Assets (NPAs) which has reached an alarming level of 9.5 lakh crore. The key industries like Telecom, IT, Power and Construction which generate maximum employment are still under the strain of ill thought and hastily implemented GST.

The Economic Survey tabled in Parliament highlighted that demonetisation and the GST that was rolled out has added more taxpayers but this addition will not move the revenue needle anytime soon. So, the combination of demonetisation and GST has added about 1.8 million new tax payers to the net but this relatively small number is unlikely to bring in much additional revenue because most of them reported an average income, in many cases, close to the income tax threshold of Rs. 2.5 lakhs, limiting the early revenue impact.

We can say that combination of demonetisation and GST added 1.8 million new taxpayers to the net which is roughly 0.15% of the total population but most of them are at the bottom range of the tax threshold which means that even if they pay taxes, it will not have much of an impact on total revenues.

The survey further claims that the roll-out of India’s GST has resulted in a “50% increase in unique indirect taxpayers under the GST compared with the pre-GST system”. This translates into a substantial “3.4 million new indirect taxpayers”.

If we talk about the case of new enterprises entering the GST system, the survey also notes most of these firms aren’t engaged in business-to-consumer transactions, but instead do transactions in what is known as the business-to-business (B2B) sector and exports. It also acknowledges the poor implementation of the new tax system noting that “uncertainty will not be definitively lifted until the GST stabilises later this year”.

The Economic Survey also uses latest GST data to examine the state of formal employment in the country and points out that India may have been under-estimating this all along. In short, it notes, nearly 30% of India’s non-farm workforce which is 240 million, have some form of social security coverage through EPFO/ESIC and nearly 50% of that non-farm workforce is currently employed in firms that now pay taxes.

By examining the state of formal employment through payroll reporting, the chief economic adviser has ever so slightly waded into a recent debate over the creation of jobs in India. According to a recent study, which looked into the EPFO database, it was inferred that this amounted to an equal number of new jobs being created. The Economic Survey makes no such claims, apart from saying India may have been under-counting the state of formal employment in the country. This leaves the overall survey’s analysis on job creation wanting.

However, to his credit, CEA Subramanian notes that the India’s policy agenda for the next few years absolutely has to include “finding good jobs for the young and burgeoning workforce” and also points out that the real estate and construction sector “will create over 15 million jobs over the next five years.”

Nevertheless, the state of formal employment in the country doesn’t tell us enough about the rate of new job creation and how it stands up against the rate of new skilled additions to the Indian workforce every year.

On other equally important areas which may turn around India, the Economic Survey remains mute. For instance, on the issue of agricultural growth and stagnant farm incomes, the Economic Survey describes the problem but doesn’t delve in deep. At best, the Economic Survey 2018 is a feeble attempt of Chief Economic Advisor to bail out this Govt which has failed to perform on every major economic indicator.

Chandrakent

By Chanderkent

Disclaimer: views are personal

 

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Who is Murari Lal Jalan, the ‘mysterious’ buyer of Jet Airways?

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Jet Airways

New Delhi: The consortium of Kalrock Capital and Murari Lal Jalan won the bid to revive Jet Airways but not much is known about how Jalan made his riches and how he plans to revive the airline.

According to a report in Marketfeed: “According to many in the business world, Murari Lal Jalan is a very mysterious man. There is not much information about how he was able to create all his wealth.”

“He has always kept a very low profile, and is not popular among the business communities in India or abroad. Totally inexperienced in the field, he has confused a lot of people as to how he was able to enter into the airline industry,” it said.

In the 1980s, Jalan started working at his family’s paper trading business in Kolkata. He also worked as a trader for JK Paper and Ballarpur Industries, which were once big paper manufacturing companies.

In 2003, he wanted to expand his paper business, and acquired Kolkata-based Kanoi Paper and Industries. He renamed it Agio Paper, and it currently has a manufacturing facility in Bilaspur (Chattisgarh).

However, in 2010, the paper company faced a lawsuit from government agencies, for pollution-related issues, and its production activities have been suspended since then, as per the report. “So almost his whole career, his focus was on the paper industry and even that did not end well either,” it said.

Jalan then began plans to enter the real estate and healthcare sector.

“In 2015, he approached Dr. Naresh Trehan and Associates Health Services. He went on to acquire a stake in the company for Rs 75 crore, through a secondary share sale transaction. A secondary sale means that Jalan bought-out the shares from an existing stockholder. Around the same time as the acquisition, Dr. Trehan’s Medanta Hospital had plans to establish a hospital in Dubai, with the help of Jalan. Unfortunately, this plan was not implemented,” Marketfeed reported.

Once Jalan moved his base to the UAE, he quickly expanded to sectors such as real estate, mining, fast-moving consumer goods, and construction. He was chairman of the Agio Image group, which sold and distributed photographic and consumer products of well-known companies such as Sony, Panasonic, and Konica.

He also established a real estate development company, MJ Developers. The firm has its headquarters in Dubai, but its main businesses span over countries such as Russia, Brazil, and India. MJ Developers is currently engaged in developing residential and commercial properties in Uzbekistan.

Jalan had partnered with his own family relatives to set up Patanjali India Distribution Ltd. The report says that documents from the Ministry of Corporate Affairs state that this company would be involved in trading, export, distribution, and marketing of milk products and health foods. The list of products also included herbal medicines and ayurvedic cosmetic items.

“Regardless of these claims, the company never opened, and the founders never looked back on it. We do know that Patanjali Ayurved is owned by the yoga guru, Baba Ramdev. However, it is not clear whether the two companies are linked in some way,” the report said.

Some may question as to why there was a sudden need for Jalan to enter into the airline field. Many have suspicions whether this deal would really help the airline to bring back its former glory, the report said.

Jalan, however, said: “Jet Airways is a renowned Indian aviation company with a strong legacy. The aviation sector underwent substantial correction on account of Covid-19 and created an opportune time to enter the sector. Our vision for Jet Airways is to operate the carrier as a full-service airline, both domestic and international.”

But, as per the report: “The point to be noted here is that Jalan has no expertise in this particular sector. However, the management team of Kalrock does have the essential experience from cargo and logistics management through past deals.”

“But now, a major doubt remains to be answered – how was Jalan able to create all this wealth and expand his business to such a large magnitude? We have seen that his initial business in the paper manufacturing industry had failed. Also, when Jalan moved to the UAE, he was not able to contribute effectively towards the implementation of projects in the healthcare sector. He created a company in India that was never launched. Moreover, the fact that most business people don’t know about him, makes everything all the more suspicious. All these facts make us feel very unsure and doubtful about his new deal with Jet Airways,” it said.

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Will work with JPC to set record straight on data privacy: Amazon

Google and Paytm too have been asked to appear before the committee on October 29.

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Jeff Bezos Amazon CEO

New Delhi: Amazon, which has refused to appear before a joint parliamentary committee (JPC) next week, said on Friday that its position on the Personal Data Protection Bill 2019 has been “misconstrued” and the e-commerce giant would work with “the JPC to set the record straight”.

The online retail giant is scheduled to appear before the committee on October 28.

In a statement shared with IANS, an Amazon spokesperson said that they have the utmost respect and regard for the important work being done by the JPC on the PDP Bill.

“We have already offered our written submissions for consideration of this august committee. We will continue to engage in any way the JPC considers fit,” the spokesperson said.

“The inability of our experts to travel from overseas due to travel restrictions and depose before the JPC during the ongoing pandemic may have been misconstrued and led to a misunderstanding,” the spokesperson added.

Sources suggest that the committee, which has 20 members from the Lok Sabha and 10 from the Rajya Sabha, is of the unanimous opinion that if Amazon representatives indeed fail to show up on October 28, “appropriate actions” can be initiated against the US business giant.

However, there is no clarity so far, as far as the nature of “appropriate actions” is concerned.

Apart from Amazon, companies such as Twitter and Facebook have also been summoned.

Google and Paytm too have been asked to appear before the committee on October 29.

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Urgent need to rationalise weights under retail inflation: Report

“Clearly, the inflation numbers based on a broken CPI methodology hides more things than it reveals and RBI will be constrained in its policy decisions, an irony in itself!”

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Inflation

New Delhi, Oct 23 : There is an urgent need to rationalise the weights under retail inflation, a SBI Ecowrap report said on Friday.

According to the report, inflation numbers based on a broken CPI methodology hides more things than it reveals.

Consequently, the headline inflation constrains the RBI in its policy decisions.

“With the recent changes in CPI (IW), we again raise questions on the validity of continuing with existing weights in Headline CPI,” the report said.

The weighting pattern of food items in CPI, at 45.86 per cent, is based on 2011-12 Consumer Expenditure Survey (CES).

This is significantly different from the share of food and beverages (30 per cent) in the ‘Private Final Consumption Expenditure’ published by the National Account Statistics (NAS).

“Against such a backdrop, we again reiterate there is urgent need to rationalise the weights under CPI,” the report said.

“If we provisionally calculate the new CPI by looking at revised weights of CPI (IW) with 2016 as the base and logically assuming the same trend in CPI, we find that the weights of food in CPI could decline by at least as much as 6 per cent, thus shaving of 50 basis points from current headline CPI at 7.34 per cent.”

Such rebasing of CPI, the report pointed out, also finds mention in MPC minutes.

“However, the weights of services could jump by at least 7 per cent through the postulated increase in service consumption pushing up the weighted contribution of miscellaneous inflation by 42 basis points,” the Ecowrap said.

“Thus, the overall impact will depend on the strength of food and services, though the bottomline is the revised hypothetical CPI is more representative of demand pressures as weights of services and food could be almost in equal proportion.”

However, the report cited that CPI is drawn from “CES and such survey is still pending since 2017”.

“Adding to woes, the Oct’ 20 CPI inflation will be more than 7 per cent due to unexpected rains in major part of the country,” it said.

“Clearly, the inflation numbers based on a broken CPI methodology hides more things than it reveals and RBI will be constrained in its policy decisions, an irony in itself!”

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