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Tax cuts may impact fiscal deficit, capex: Economists



New Delhi, Sep 20 : As the exuberance of stock market and corporates over the tax cuts settles downs, economists and experts on Friday warned of fiscal slippages due to such reduction that may impact fiscal deficit, capital expenditures and cause higher borrowings.

Though the positive effects of the changes are also not ruled out by them economists also said the cuts may not exactly boost consumption, investment demands in a big way.

“We expect today’s announcement to provide a big boost to business sentiment in the immediate term, with a modest knock on impact on consumption demand, particularly for big ticket items. However, the impact on fresh investment activity may be visible with a lag,” Aditi Nayar, Vice President, Principal Economist told IANS.

“Today’s announcement would complement the expected further repo rate cut in the October 2019 policy review. We continue to expect a 25 bps rate cut in the upcoming MPC review. In light of the likely backended pickup in investment activity and expenditure restraint that would be required, particularly at the state government level, we are not yet revising our FY2020 GDP forecast upward from 6.2 per cent,” she added.

Former chief government statistician Pronob Sen said, “It is certain concern for fiscal deficit of 3.3 per cent which will be under pressure. The tax cuts pushes up for more borrowings due to gap between revenues and expenditure. But if they want to keep the fiscal deficit under control, they have to cut capital expenditure as from revenue side they can cut very little like cutting PM Kisan Card. But in a slowing economy, if you cut capital expenditure, it does raise an alarm.

“It is actually more worrying now with such kind of tax cuts as it is not going to have an expansionary impact immediately but if you cut expenditure it may have an immediate contractionary impact. That will further sink the economy. Inflation may go down further.”

Sen said RBI would now still go for a rate cut but of lesser magnitude. They might still look at 25-35 bps cuts instead of 100 bps cuts as was being talked of.

The Reserve Bank of India’s (RBI) monetary policy committee (MPC) in August lowered its repo rate by an unconventional 35 basis points to 5.4 per cent. He also raised the issue of transmission to the common man from corporates any lower rates.

“It can’t be. This is a tax on profits which come at the end of the year. In order to determine how much you can pass on depends upon your estimate of how much you expect to sell. And thats not easy to work out in advance. There may be some insignificant reduction in price,” N.R. Bhanumurthy, Professor at National Institute of Public Finance and Policy said.

“3.3 per cent of fiscal deficit was never a sacrosanct number. It was given under an assumption of 8 per cent GDP growth and 12 per cent nominal growth both of which have been proved wrong as of now. But it is difficult to predict to what level it may go up as new policy measures are coming at regular intervals almost creating uncertainties and is a situation of ‘work-in-progress’.

“But there is a need for fiscal stimulus when the economy is going through a cyclical and structural slowdown, when the economy needs such fiscal stimulus, worry about fiscal deficit should be kept aside. Now the the cut of corporate taxes, fiscal deficit would widen.

“Tax cut and tax revenues are not linear function. There may be some increase in tax base due to the announcements will increase to some extent tax revenues. If the government has ruled out sovereign borrowings programmes, then an additional 10 billion dollars worth of money has to be generated internally. With the recent government measures, all these have fiscal impact. It now depends how RBI assesses the situation.”

He said today’s corporate tax cut will not lead to any consumption demand but may create some investment demand. One part of demand story is taken care today. For consumption demand to rise, ministries should front-load their expenditures particularly in rural development ministry which has huge allocation on road, housing, MNREGA.

For the current fiscal the fiscal deficit is 3.3 per cent. As per the July 5 Budget, the government’s own capital expenditure (capex) is projected to rise a shade less than 7 per cent in 2019-20 (FY20) to Rs 3.38 trillion. In her maiden Budget presented in July this year, Finance Minister Nirmala Sitharaman had pegged the Union government’s market borrowings to be at Rs 4.48 lakh crore in FY2019-20. According to sources, Centre may scale down FY20 tax aim by Rs 1 lakh crore. The government has kept a direct tax target of Rs 13.35 lakh crore for FY20.

Both the GST and direct collections have been disappointing. As on early September, direct taxes are growing at 5 per cent against a budgeted growth rate of 17.3 per cent, a huge gap there to be flagged off. GST collections are also growing at 6 per cent, against a required growth rate of 15 per cent to achieve the FY20 budget estimates.

Officials say the government needs to collect Rs 1.10 lakh crore to Rs 1.13 lakh crore a month to stay on course on GST collections, which hasn’t been the case at all so far.

While a fiscal slippage now appears inevitable given that the government’s tax collections will fall substantially short of its budget estimates, expenditure cuts may still be required to prevent the fiscal deficit as well as G-sec yields from rising too sharply in FY2020. Additionally, lower central tax collections will impact the state governments’ fiscal situation as well through likely cuts in central tax devolution, and borrowing constraints may necessitate state government expenditure restraint or deferral.

The government has slashed the corporate tax rates to 22 per cent for domestic companies and 15 per cent for new domestic manufacturing companies and other fiscal reliefs in order to promote growth and investment, a new provision has been inserted in the Income-tax Act with effect from FY 2019-20 which allows any domestic company an option to pay income-tax at the rate of 22 per cent subject to condition that they will not avail any exemption/incentive.

The effective tax rate for these companies shall be 25.17 per cent inclusive of surcharge and cess. Also, such companies shall not be required to pay Minimum Alternate Tax. The total revenue foregone for the reduction in corporate tax rate and other relief is estimated at Rs 1,45,000 crore, the Finance Minister had said.


Corona Karma: The Mythology of Illness




A few years ago, my mother had a severe case of shingles, a disease that causes the patient’s nerve endings to become sore from a pathogen that is moderately contagious. Its source is the vestigial presence of the varicella-zoster virus lying dormant in the subject’s body, invariably from a childhood case of chickenpox. I had, of course, researched the illness before I visited my mother, but no sooner had I entered the gated community of apartments where my parents lived then, than I was informed of my mother’s diagnosis. “Mata ka prakop,” the neighbors called it, shaking their heads disapprovingly, from side to side. My mother had invited the wrath of the Goddess.

Every culture has gone through the many stages of making meaning of dreaded diseases. Often the deities devise ways of conveying their displeasure to the people inflicted with an inexplicable phenomenon. This is true not just of “primitive” societies, but of scientifically “advanced” cultures as well. Remember the argument of the 1980s and 90s about AIDS in America, and how it was God’s way of punishing homosexual men for their ungodly ways. It seems every new disease has a karmic connection!

So when we conjecture about how some people may have gotten infected with the Corona virus thus: “kyapata, unke karma honge,” (“who knows, this might be a result of their karma) I am reminded of the “wrath of the Goddess,” meted out to my mother.

My problem with using myths to give meaning, stems from the fact thatevenlong after we have found a vaccine and a cure, the mythicdimensions of the pathogen will remain lodged in our collective unconscious. And when in the future stray instances of the illness flare up, whenwe, as a society, are under stress, vested interests will be able to generate panic and fear among the people by just tapping into our unconscious. Religiosity is a crude instrument of ideology.

In 1978 Susan Sontag, an important cultural critic gave a talk, “Illness as Metaphor,” in which she contrasted tuberculosis and cancer by citing countless examples of the representation of these illnesses in literary, operatic, theatrical, and poetic texts. Tuberculosis, Sontag argued, was the disease of the 19th century, of poverty, poor labour conditions, or a life wasted in leisure or unrealized genius. Cancer by contrast, was the disease of the 20th century, a moral contagion, a hostile takeover bid, that required a militaristic response. Extending this analogy, I want to argue that the Corona virus is shaping up to be the disease of this present century, already saturated with metaphors of geo-politics on the world stage. Here in India, it is a campaign to corralan out of control, leaking, irrepressible pollutant, that must be plugged.

President Donald Trump’s effort at branding the pathogen as the Wuhan or the Chinese virus is being played out as a protracted chess gamebetween two superpowers, with the WHO cast as the adversarial Queen by both sides.

In India, the Corona virus pandemic is being “treated” (no pun intended) as a more virulent and mutated strain of both tuberculosis and cancer. It is an insidious, surreptitious malware that is being countered with predictable software patches deployed in emergencies, but with no long-term strategy for the containment, management, or prospective cure for the patient. People suspected of carrying the virus, are being exiled rather than given refuge in a sanatorium. Economically vulnerable migrant workers are being treated as though they were children playing truant or escaped convicts. Police forces in virtually all the states where these workers are travelling have used tactics of mob control more than the benevolent practices of relief agencies.

I cannot help but wonder if this is not a perverse response to the political agitations that were gaining strength earlier this year. The virus has become a metaphor for out of control people: citizens determined to define citizenship in progressive rather than punitive determinants; and workers of the informal sector responding to a sputtering economy. When markets cannot regulate the demand/supply and price of onions, even the person on the street knows how to read the signs. As in other authoritarian regimes, the lockdown appears designed to function more as a gag order than a prophylactic measure against a pandemic.

When the metaphor of karma is used loosely to explain the apparently random patterns in which the disease is spreading, in a society where cleanliness and uncleanliness are indelible markers of caste, we run the risk of creating a new caste of Corona untouchables. Already the (conspiracy) theory that the virus came to India through the Tablighi Jamaat convention attendees in Nizamuddin, New Delhi, has tinged the virus with a communal hue.

Let us return to the origins to the Corona virus’s journey from bats to humans. How can a virus found in bats find its way into the human eco-system? It is because habitat and biodiversity loss have diminished the spatial distance between humans and wildlife. The Coronus virus is conjectured to have come from people eating “bush meat”. What is bush meat and why do people eat it? It is the meat of small, semi-wild animals that live in the shadows of the urban sprawl and are relatively easy to catch. This meat is less expensive than farm raised poultry and meat. It is also not regulated for hygiene, freshness, and disease. I would never know what the Civet Cat on my plate, ate, where it lived, or how it died. Actually, we don’t even know whether it is cat!

The extraction of natural resources through mining the earth and logging the forests, without any thought to replenishing them, has left vast stretches of the earth barren. The planting of monocultural crops has caused an imbalance in the natural eco-systems that kept a natural balance between harmless and beneficial viruses and other microorganisms. Further, the unchecked growth of urban sprawl and the attendant pollution has compromised the repair work that trees were meant to do.

Is it any wonder that the rage of Mother Earth has been unleashed upon us? “Mata ka prakop,” is punishment for our collective karma.

By: Poonam Arora

Ph.D., has until recently been a professor in the Humanities, focusing on the liberal arts. She is now a Delhi based writer. She can be reached at [email protected] (The views expressed are personal of the author, who retains the copyright)

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Stranded in India and want to fly out? Here’s all you need to know

The stranded individuals making the cut will be flown in the same non-scheduled flights which will be used to bring back stranded Indians from various countries.



Coronaviurs in China Outbreak

New Delhi, May 24 : Six days after the beginning of lockdown 4.0, the Indian government on Sunday came up with new Standard Operating Protocol (SOP) to fly out those who are stranded in India due to the lockdown.

All such individuals have to apply with the Ministry of Civil Aviation or agencies designated by it, to start with. However, the government has made it clear that only those people will be allowed who are either citizens of those countries that they are travelling to or hold a visa of that country for a duration of a year, or are green card or OCI card holders.

Meanwhile, if there is a case of a medical emergency or detain the family, Indians too can travel abroad taking advantage of this window, provided they have a visa for at least six months.

The stranded individuals making the cut will be flown in the same non-scheduled flights which will be used to bring back stranded Indians from various countries.

Meanwhile if any seafarers are keen to take up job opportunities abroad, they too can avail this facility, provided the names are cleared by the Shipping Ministry.

However, even those who qualify will not necessarily be able to be flown out. It ultimately depends on the country they are travelling to and their recent guidelines of admission of foreign passengers. Only if that box is ticked, will the Civil Aviation Ministry confirm their ticket, says the SOP.

Meanwhile, no prize for guessing that the cost of the flight will have to be paid by the passengers because it’s not an evacuation exercise. Also the passengers will be subjected to necessary medical screening before they can board the flight where only asymptomatic travellers will be allowed. While inside, baic health hygiene and precautions like wearing a mask will be compulsory.

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Outraged China asks India to refrain from supporting Taiwan




India China Border Sikkim

New Delhi/Beijing, May 23 : Outraged by the subtle support that the ruling BJP extended to the democratically elected government of Taiwan, the Chinese Communist Party (CCP) regime has asked India to “refrain from such acts.”

On Wednesday, in an unprecedented move, two parliamentarians of the BJP, Meenakshi Lekhi and Rahul Kaswan, ‘virtually attended’ the swearing-in ceremony of Taiwan’s President Tsai Ing-wen and sent her congratulations. Tsai was sworn in for her second term.

As most of the international travel remains suspended due to the coronavirus pandemic which originated in Wuhan city of Hubei province in China, Lekhi and Kaswan were among the 92 dignitaries, including US Secretary of State Mike Pompeo, representing 41 countries, who virtually participated in the ceremony.

Though the Indian government did not officially participate in the event, the presence of two well-known BJP MPs miffed China so much that its Foreign Ministry without naming anyone on the same day objected and hoped everyone would “support the just cause of Chinese people to oppose the secessionist activities for ‘Taiwan independence’ and realise national reunification.”

Now a counsellor (parliament) of the embassy of the People’s Republic of China (PRC) in New Delhi, Liu Bing has registered CCP’s protest against India’s participation in the ceremony by writing to both Lekhi and Kaswan. Liu Bing shared a copy of the letter with the IANS.

In his complaint, Liu called Lekhi and Kaswan’s congratulatory message to President Tsai “utterly wrong” which needs to be “corrected”.

“The one-China principle, enshrined by the UN Charter and its relevant resolutions, is a generally recognized norm in international relations and a general consensus of the international community,” he claimed.

Liu Bing reminded the parliamentarians that “the Indian governments have pledged to adhere to one-China principle since the bilateral ties were established seventy years ago.”

“Any wrong signals” including the message of congratulation to President Tsai, Liu warned, “will encourage those separatists to go even farther on the wrong and dangerous track, which would ultimately undermine the peace and prosperity of the region.”

He strongly urged the BJP parliamentarians to “refrain from such acts and instead do good to support China’s great cause of unification.”

Describing President Tsai as “the locally elected leader in China’s Taiwan Province”, Liu said that “unfortunately, the authority led by her in Taiwan province has refused to accept the ‘1992 consensus’ that both sides of the Taiwan Straits belong to one China and will work together towards national unification.”

“On the contrary, Madam Tsai has never renounced to seek ‘Taiwan Independence’ and kept engaged in separatist activities in one way or the other,” he wrote in the letter.

Since the Communist Party of China gained control of the mainland China in 1949, pushing out the Republic of China (ROC) government to the island state of Taiwan, the political status of Taiwan has remained uncertain. The ROC was replaced by the PRC’s membership at the UN in 1971. The PRC refuses diplomatic ties with countries that recognize Taiwan as an independent state.

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