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On Feb 1, will it be an interim budget or vote-on-account?



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New Delhi, Jan 28: Will there be an interim budget or a vote-on-account on February 1. While the suspense on who will present it has ended with Piyush Goyal again being given additional charge of the Finance Ministry, with general elections round the corner, intense speculation continues about the final shape of the document he will unveil.

This speculation is about the nature of the upcoming budget — on whether it would be a simple vote-on-account to be passed by Parliament to permit government expenditure in the transition period or whether Goyal will go beyond that by presenting full estimates of both revenue and expenditure as well as policy measures.

While an incoming government has the freedom to change the estimates in the interim budget when it presents the final budget after taking office, outgoing governments in India have generally followed the convention of avoiding major policy announcements or taxation proposals in the interim budget.

Going by recent history, however, interim budgets have been passed thrice since 2000, and according to a market research firm, the upcoming one might be the last opportunity for the BJP-led NDA government to “woo a larger section of the society” by altering both taxes and outlays on schemes.

“After the failed budget promise of enhanced procurement of crops through a revised Minimum Support Price (MSP) formula in 2018-19, announcements made on February 1, 2019 will be the last opportunity for the government to woo a larger section of society through an interim budget, as against a vote-on-account, by altering both taxes and outlays on schemes,” said a report last week by JM Financial Institutional Securities.

With the general elections due in April-May, the government is looking at making available cheap loans and free accidental insurance to small businesses, a segment that bore the brunt of the demonetisation of November 2016, an official source here said, requesting anonymity.

The GST Council doubled the exemption threshold for small businesses from Rs 20 lakh to Rs 40 lakh. Besides, the threshold limit for eligibility under the GST Composition Scheme, which has been raised to Rs 1.5 crore from Rs 1 crore, is due to apply from the 2019-20 fiscal beginning April 1.

Such sops would follow major relief measures taken earlier this month to benefit the micro, small and medium enterprises (MSME) sector, currently plagued by liquidity and other issues.

According to former Jawaharlal Nehru University economics professor Arun Kumar, though it would be unethical to present an interim budget with major policy proposals, there is also the matter of the Presidential address to the Budget Session whereby the government makes its vision statement.

“If the budget proposes populist schemes, it will become difficult for the new government if it is led by another political party to withdraw these,” he explained.

According to noted economist Ashok Desai, who was Chief Consultant to the Finance Ministry (1991-93), the outgoing government cannot make any tax proposals or policy changes.

“With the elections around the corner, what the government can do is make incremental outlays for existing schemes, but cannot announce new schemes,” Desai said.

“In this situation, it is the states which have more liberty in announcing populist schemes through their state budgets,” he added.

Economist Nagesh Kumar felt there is a likelihood of higher outlays being proposed on schemes for the rural sector and small businesses, which “is not necessarily a bad thing” because it would boost consumption demand, especially at a time of slowdown in private investment.



Markets open on positive note



Sensex Nifty Equity

Mumbai, Feb 20: The 30-scrip Sensitive Index (Sensex) on Wednesday opened on a positive note during the morning session of the trade.

The BSE Sensex opened at 35,564.93 before touching a high of 35,581.14 and a low of 35,520.21.

It was trading at 35,528.69 up by 176.08 points or 0.50 per cent from its Tuesday’s close at 35,352.61.

On the other hand, the broader 50-scrip Nifty at the National Stock Exchange (NSE) opened at 10,655.45 after closing at 10,604.35.

The Nifty is trading at 10,656.25 in the morning.


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PF funds’ investment in IL&FS bonds have no government guarantee: Finance Ministry



IL&FS Financial Service

New Delhi, Feb 19 (IANS) The provident and pension fund trusts that invested in the IL&FS bonds now fear loss of money as the debt-ridden company’s bonds are unsecured debt, and the Finance Ministry says superannuated bonds do not carry any government guarantee and all such instruments have to face all market-related risks.

“Since these are investments in bonds, the government does not ensure any guarantee on them as such and if these are invested in stock markets, they carry the market risks as applicable. It is between the bond issuer and bond holders…,” the Finance Ministry said in response to IANS queries.

Thousands of crores of money of more than 15 lakh employees of both public and private sector companies have exposure to IL&FS bonds.

However, queries sent to the EPFO Commissioner and Labour Minister Santosh Gangwar remained unanswered.

Over 50 funds that manage retirement benefits of over 15 lakh employees have exposure to IL&FS. PF trusts of state electricity boards, public sector undertakings (PSUs) and banks are among them. The provident and pension fund trusts have filed intervening applications in the National Company Law Appellate Tribunal (NCLAT) stating that they stand to lose all the money since the bonds are under unsecured debt.

Usually, retirement funds have a low-risk appetite and invest in “AAA” rated bonds (which IL&FS bonds used to be once upon a time) and get assured returns with low interest rates.

The worries of pension and provident fund trusts come from the classification of IL&FS profiling its companies as to which can meet the dues obligations. Many important trust managing funds of PSUs like MMTC, IOC, Hudco, SBI and IDBI are among those filing petitions. From private sector, HUL and Asian Paints are among the petitioners.

IL&FS is currently under resolution process at the National Company Law Tribunal (NCLT). The process will decide under Section 53 of the IBC the order of priority for distribution of proceeds of the process.

The beleaguered company has informed the NCLT that of the 302 entities in the group, 169 are Indian companies, out of which only 22 are emerging as those which can meet all obligations (green), while 10 firms can pay to only secured creditors (Amber). There are 38 companies of IL&FS (red) which cannot meet any obligations of payment, and 120 entities are still being assessed.

These PF and provident funds trusts are worried that if payment is limited to secured creditors, then only financial creditors like banks will receive the dues while unsecured bond-holders will be get any payments.

IL&FS bonds attracted investments by PF trusts as it had the shareholding of SBI and LIC giving its bonds the comfort factor.

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Sachin Bansal invests Rs 650 crore in Ola




Bengaluru, Feb 19 (IANS) Internet entrepreneur and Flipkart co-founder Sachin Bansal has invested Rs 650 crore, or about $92 million, in ride-hailing platform Ola in his personal capacity as investor, the company said in a statement on Tuesday.

This investment is part of Ola’s larger Series J funding round. It is also the largest investment by an individual in Ola to date, it said.

“Ola is one of India’s most promising consumer businesses that is creating deep impact and lasting value for the ecosystem. On one hand, they have emerged as a global force in the mobility space and on the other, they continue to build deeper for various needs of a billion Indians through their platform, becoming a trusted household name today,” Bansal said.

He further said he has known Ola founder Bhavish Aggarwal as entrepreneur and friend over the years and that he has great respect for what he and the team at Ola have built in 8 years.

“We are extremely thrilled to have Sachin onboard Ola as an investor. Sachin is an icon of entrepreneurship and his experience of building one of India’s most respected businesses ground up, is unparalleled,” Ola CEO Bhavish Aggarwal said.

Ola integrates city transportation for customers and drivers onto a mobile technology platform ensuring convenient, transparent, safe and quick service fulfilment, the statement added.

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