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Oppn during UPA years and SC judgments must share responsibility for current economic mess

Government must recognise that fear and enterprise don’t go together. Keep the ED and the CBI at bay and ensure that income tax authorities act within the law. Enterprise alone can help fuel our economy. Otherwise the Ides of March are not far away.

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kapil sibal

The machinations to form and topple governments may be a priority for grabbing and sustaining political supremacy. However, with the economy tumbling for six straight quarters and GDP growth at 4.5 per cent (July-September quarter), we are in trouble. Tax receipts in Q2 (April-October) at Rs 6.83 lakh crore, with an expenditure of Rs16.55 lakh crore are worrying.

The output of eight core industries in October contracted by 5.8 per cent compared to October 2018 with six of the eight sectors witnessing negative growth. Coal production fell by 17.6 per cent, crude output by 5.1 per cent, steel production by 1.6 per cent, natural gas by 5.7 per cent, cement by 7.7 per cent and electricity consumption by 12.4 per cent.

Various international agencies have cut down their GDP predictions for the current financial year by 1.5 per cent on an average. The RBI, too, on December 6 lowered the growth estimate to 5 per cent in 2019-20 from 6.1 per cent. What is required is not patience, as the finance minister persuades us to believe, but urgent prescriptions to address structural issues.

What are these issues? First, the wheels of economic growth are undergoing qualitative changes. Automation and artificial intelligence are replacing manpower. Consequently, Indian industry is bound to suffer. While the adoption of both AI and automation by domestic industry is inevitable, it will also lead to a substantial loss of jobs. In recent years, we have seen job losses in IT and other labour-intensive sectors, which have in the past fueled growth.

Second, it is imperative for our labour force to acquire skills to meet the needs of the fourth industrial revolution. To do that, we need to affect structural changes in our education system as children move from school to higher education.

Instead, the Ministry of Human Resource Development is more concerned with changing the way we look at our past than reflecting upon the needs of the future. One might resurrect the heroes of the past but what we need is to put in place an environment to discover and encourage our heroes of the future. Unless we create an ecosystem in which our graduating students acquire the skills to meet the demands of the economy, we will not get the appropriate labour force required by industry.

Third, the contribution of both the Opposition during the UPA years as well as judgments of the Supreme Court to the economic mess that we find ourselves in. The C&AG’s preposterous theory of presumptive loss in telecom latched on to by the then Opposition, resulted in a judgment cancelling telecom licences, which killed the goose that laid the golden eggs. Subsequent auctions of spectrum resulted in high bids. The revenue earnings of telecom operators were insufficient to discharge the debt to banks for loans taken to buy spectrum.

Little was left for investment in infrastructure for mobile telecom efficiency. The result is, today, the sector which was efficient and highly competitive is reeling with a debt of close to Rs 8 lakh crore. Soon, the telecom sector may see the emergence of a duopoly. The telecom sector would have thrived but for the legacy of unsustainable prescriptions forced upon it. Auction money was viewed as a source of revenue to enrich the treasury rather than ploughing it back into the sector for investments in infrastructure.

The story of another sector, coal, is even more depressing. The SC, in an allegedly historic judgment, set aside all coal allocations since the early ’90s. The government, upon such cancellations, assured the Court that coal production will see a new sunrise with the auction of coal mines. The result was the opposite. The auctioned coal mines had no takers and those who participated in the auction, preferred to have their securities encashed rather than pay the balance amount for the auctioned mines. Consequently, the import of coal has increased at an alarming pace, adding to cost since coal is the raw material for several industries.

Coal India has not been able to meet the increasing demands of our emerging economy. Coal is the life blood of every industry including power, steel, and cement. As a result of these auctions and the SC judgment, the power sector is in the doldrums. The NPAs of banks reaching more than Rs 10 lakh crore is partly the result of the mindless protests by the Opposition and the SC judgments.

Fourth, is the crisis in agriculture as we promise to double farmers’ income — a daunting task with agricultural growth at 2 per cent per annum. We need innovative policies in agriculture. Use of technology to increase productivity per acre, rational policies to reduce the mindless exploitation of groundwater and remunerative returns for the farmer are imperatives. The plight of indebted marginal farmers too must be addressed.

Crucial sectors of the economy that generate employment are in decline. Thirty million of the 100 million employed in the textile industry, our second largest employer, for a variety of reasons both domestic and global, have lost their jobs. Close to 3.5 lakh workers in the automobile industry have been laid off as auto sales have slumped to a two-decade low. With increasing incidents of lynching, the leather industry is facing challenges with local units closing down.

The cumulative effect of all the above coupled with the mindless decision of demonetisation followed by the implementation of a flawed GST made matters worse. These decisions paralysed the economy. The result: Economic growth is eluding us. Tax breaks for industry already flushed with cash will see no immediate outcomes. The key is to boost incomes of those at the bottom of the pyramid.

Finally, government must recognise that fear and enterprise don’t go together. Keep the ED and the CBI at bay and ensure that income tax authorities act within the law. Enterprise alone can help fuel our economy. Otherwise the Ides of March are not far away.

This article is originally published on on December 12, 2019 The Indian Express. The writer, a senior Congress leader, is a former Union minister.

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India a $5 trillion economy by 2025 unrealistic: Montek Singh Ahluwalia

He also cautions against “strong centralised governments”, a scenario that is now unfolding in India.

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Montek Singh Ahluwaia

New Delhi, Feb 15 : Prime Minister Narendra Modi’s dream of India rising to a $5 trillion economy by 2025 is unrealistic though it will happen at some time, says Montek Singh Ahluwalia, a former Deputy Chairman of the Planning Commission and whose document prepared in 1990 largely influenced the economic reforms unveiled the next year, in his book “Backstage – The Story Behind India’s High Growth Years”. He is also extremely harsh on “two major policy mistakes” of the present government — demonetisation and the hasty implementation of GST.

To become a $5 trillion economy “calls for an average growth rate of about 9 per cent in real terms over the six-year period from 2019-20 to 2024-25. With growth below 5 per cent in 2019-20, and only a slow recovery expected next year, achieving an average of 9 per cent for the period as a whole is simply not credible. We will certainly get to $5 trillion, but it will be a few years later,” Ahluwalia writes.

“A more realistic target would be to try to reach a growth rate of around 8 per cent per year as quickly as possible. This is certainly necessary if we want to continue to reduce poverty and generate the employment needed to satisfy our young and aspirational labour force. Is 8 per cent growth feasible? India did achieve GDP growth of 8.5 per cent in the first seven years of the UPA, but a return to that growth rate is easier said than done,” Ahluwalia warns.

India’s growth was at 6.8 per cent in 2018-19 and dropped to 5 per cent in 2019-20. It is expected to “strongly rebound” to 6-6.5 per cent in 2020-21 the Economic Survey tabled in Parliament on January 31 said.

Demonetisation, Ahluwalia writes, “came as a complete surprise when the government on 8 November 2016 announced that all currency notes of denominations Rs 1,000 and Rs 500, accounting for 86 per cent of the value of currency with the public, were no longer legal tender. Holders of these notes were given up to 31 December to take the notes to banks to convert them into new notes. The decision was originally presented as a decisive attack on black money and corruption, but as that particular justification seemed difficult to sustain, several other justifications were advanced.”

“Raghuram Rajan, who was then governor of the RBI, was consulted informally about a possible demonetization and he had advised that any long-term benefits would not be worth the short-term costs. In any case, he counselled that if the government was determined to demonetise, there should be careful planning to ensure adequate supply of new notes. In fact, demonetisation was hastily announced a couple of months after Raghu’s term as governor came to an end.”

Rajan’s fears were “amply vindicated. People rushed to banks to exchange their holdings of old notes for new notes, but as there was a shortage of new notes, amounts handed over to banks could only be credited to their bank accounts, from which cash withdrawals were permitted on a restricted basis until the supply of new notes could catch up with demand. The shortage of cash disrupted agricultural markets and operations in the informal sector, both of which are highly cash-dependent”, Ahluwalia writes.

Eight months later, “the economy received a second jolt when the GST was introduced in July 2017. Unlike demonetization, which had very little support from professional economists, the GST was universally regarded as a major reform of the indirect tax system. It was expected to generate larger revenues, and also simplify the system but it failed on both counts because of a flawed design and poor implementation.”

Also, “frequent changes in the rates added to the confusion, giving the signal that rates could be adjusted through lobbying, which goes completely contrary to the signal of stability that GST should normally convey”, Ahluwalia maintains.

He also cautions against “strong centralised governments”, a scenario that is now unfolding in India.

“Strong centralised governments have some advantages but they also have a major disadvantage: the failure to provide room for different views. This reduces the likelihood that policy mistakes will be acknowledged and corrected.

“Manmohan Singh recognised the importance of encouraging free expression of views and descent in a liberal democracy. We are now about to go through a different experience with a government enjoying a strong majority and also one which was expected to rely on much greater centralisation of power in the PMO,” Ahluwalia maintains.

Ahluwalia concludes that India’s “transition to high growth was not a chance development. It was achieved by deliberate policy steps taken by those who had conviction and belief in the need for change. Changing policies in a country as complex as India has to go much beyond making declarations of intent. It needs an open society where businessmen and other stakeholders are free to criticize the government and draw attention to whatever is not working. It needs a team of technically skilled professionals with the ability to understand economic issues offering honest advice to the political class. It also needs a political class that can combine the unavoidable compulsions of adversarial politics with working towards building consensus on the broad direction of economic policy”.

“Good economics may not seem to be good politics in the short run, but wise political leaders will realise that it is almost always the best politics in the long run. How to marry the two is, in some sense, the real test of political leadership. I remain an unrelenting optimist that our political system can resolve this conflict and that the India story of high growth and development will therefore continue. India can and must return to its high growth years-our younger generation deserves nothing less.”

(Vishnu Makhijani can be reached at [email protected])

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Who is to blame for growing man-animal conflict in Kashmir?

Srinagar city has an entire range of Zabarwan hills those have been declared as protected areas for wildlife species.

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Zabarwan hills

As humankind continues to breach nature’s borders to encroach into the habitat of wildlife species, more and more incidents of man-animal conflict are occurring across the Kashmir Valley.

Just two days back, a leopard and a mother bear with cubs were rescued in time by the officials of the wildlife protection department from a heavily populated area of south Kashmir.

“After rescue, these animals were set free in the forest area so that they return to their natural territory”, said an official of the wildlife protection department.

Ironically, instead of helping the rescue effort, dozens of locals were seen clicking mobile phone pictures of these wild animals as they remained dazed after being surrounded by so many people.

Environmentalists say the problem is much bigger and of greater consequence than it appears to the common man.

“Fast growing human population has pushed the boundaries of the wild animals far deeper into the forests and other habitats of these species.

“Look at any forest area of the Valley and you will find that humans have done serious encroachments there. Felling forests for timber and fuel, or claiming forest land for cultivation is a common phenomenon in J&K.

“This forces the wildlife species to move down into populated areas for food and sometimes in sheer bewilderment and fear”, said a local environmentalist.

Another important reason for man-animal conflict is the increasing numbers of wildlife species because poaching and unauthorised killing of animals for fur etc has almost stopped due to the presence of the security forces in forest areas.

“Poachers hardly dare to venture into the forests. Security forces deployed on counter insurgency duties dominate forest areas to check infiltration of militants. This has discouraged poaching and hunting in these forests”, said a police officer.

Srinagar city has an entire range of Zabarwan hills those have been declared as protected areas for wildlife species.

Areas overlooking the Raj Bhawan, hotel Lalit, Hari Niwas guest house and even the entire high security Gupkar Road and the Boulevard are protected areas.

There are leopards, bears, jackals, partridges and dozens of other wildlife species in these areas.

In addition to this, Dachigam national park is situated barely 14 Kilometres from city centre Lal Chowk in Srinagar.

Dachigam is home to ‘Hangul’, a sub-species of red deer found only in Kashmir and nowhere else in the World.

As construction of houses etc continues in areas surrounding the Dachigam national park, this has caused stress on various species living inside the park.

A government sheep farm which existed inside the park for decades was re-located two years back to avoid competition between sheep and other grazers among the wildlife species.

“There are pastures those overlap into the Dachigam park and flocks of sheep, goats and cattle are taken up into these pastures by nomadic goatherds during the summer months.

“This is another grey area that needs immediate attention to ensure that the population of Hangul and other species remains unaffected”, said Bashir Ahmad, a veterinarian who headed the sheep farm inside the national park for three years in the past.

Thousands of migratory birds come each year to spend the winter months in bird reserves and other lakes and water bodies of the Valley.

Vast areas of these bird reserves like the Hokarsar, Mirgund, Hygam and Shallabugh have been encroached as houses and other structures including shops and godowns have come up in these areas.

This has shrunk the areas of these bird reserves forcing the migratory birds to inhabit unprotected water bodies where poachers kill these birds.

In a nutshell, the man-animal conflict in Kashmir is the handiwork of human beings whose greed for land and space has obliterated the fine ecological borderline because of which the two had peacefully coexisted for centuries.

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Centre to raise Rs 46K cr as late GST payment interest

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GST

New Delhi, Feb 12 : The government has discovered a new revenue stream to make up for the shortfall in GST collection and is looking to collect Rs 46,000 crore as interest on late payment of tax.

Tax experts disputed the number saying government had promised to hand-hold the taxpayers at the time of migration to the new indirect tax regime by waiving off interest and penalties for filing their tax returns. Further, it has now resorted to extremely harsh measures to boost its tax kitty.

Moreover, the levying of interest would trigger huge litigations with taxpayers challenging the demand.

A.K. Pandey, Special Secretary and Member, Central Board of Indirect Taxes and Customs in a letter to all the principal chief commissioners and central tax commissioners has said that the law cast liability on the taxpayers to assess and pay the interest on delayed payment of tax.

“Further, interest payable on such delayed payment of tax can be recovered under the provisions of section 79 of the CGST Act read with section 75 (12) which provides for various methods by which the proper officer shall proceed to recover any amount which is payable to the government,” Pandey said in his letter seen by IANS.

As per the letter, the Principal ADG (systems) on Feb 1, 2020 generated and shared the GSTIN wise list of the registered persons who have not discharged the due interest liability while filing their GSTR 3B returns belatedly. On perusal of said report, it was observed that the interest amounting to Rs 45,996 crores remains unpaid to the government on account of delayed payment of tax.

The report has been shared on SFTP portal for initiating the process of recovery of such unpaid interest as per the provisions of section 79 read with section 75 (12) of the CGST Act.

But, in the meantime, doubts have been raised by the field formations whether the interest has to be paid on the gross tax liability or on the net cash liability.

“In this regard, the provisions of Section of Section 50 are very clear that interest liability is required to be paid on the tax liability that is paid belatedly, either through cash or through utilization of input tax credit (ITC). In other words, interest is required to be paid on total tax amount of tax liability as shown in Form GSTR 3B,” the CBIC letter said.

“In view of the above, you are requested to look into the issue personally and to urge field formations under your jurisdiction for making recovery of applicable interest from identified taxpayers and to furnish weekly report of GSTIN wise recovery of interest made in this regard,” it directed.

Rajat Mohan, Senior Partner, AMRG & Associates said that that the move is against the taxpayers who had been promised hand-holding and support at the time of roll-out of the GST.

“It is demotivating for the taxpayers. If at all, the government wants to levy interest on delayed payment of tax it should be on net tax liability and not the gross tax liability,” he said.

A senior state GST officer said that the letter had been received but expressed reservations over the way the amount of interest on late payment of tax has been arrived.

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