What lower GDP means for you and me | WeForNews | Latest News, Blogs What lower GDP means for you and me – WeForNews | Latest News, Blogs
Connect with us

Blog

What lower GDP means for you and me

Published

on

GDP means for you and me

New Delhi, Aug 30 (IANS) While a decline in GDP affects the poor worse as India is one of the most unequal societies, it hits your wallet each time a slowdown is recorded. It takes toll on average income of the people and signals a squeeze on job opportunities.

Illustrating the impact of lower GDP growth, R. Nagraj, professor of economics at Indira Gandhi Institute of Development Research, said that given per capita monthly income of Rs 10,534 in 2018-19, an annual GDP growth of 5% means that the per capita income will go up by Rs 526 in FY20.

“Instead, if per capita monthly income grows at 4%, then the income growth will be only Rs 421. This means a 1% reduction in the growth rate has reduced per capita monthly income growth by Rs 105. In other words, a decline in the annual GDP growth rate from 5% to 4% would mean getting Rs 105 less per month,” he said.

Taken on an annual basis, the total loss to a person would be 1,260 in a year.

It may be noted that the GDP has been slowing down quarter after quarter reaching 5% in April-June period of FY20 from 8% during Q1 of 2018-19. Most economic research firms have lowered their GDP forecast for full financial year.

Cutting down FY20 GDP growth to 6.7% (six-year low) from its earlier forecast of 7.3%, India Ratings and Research (Ind-Ra) on August 28 said the current fiscal would be the third consecutive year of subdued growth.

Moody’s Investors Service sees India growing at 6.4% in FY20 as domestic and external headwinds would persist over the year.

Aditi Nayar, Principal Economist, ICRA, said the pace of expansion of GDP and GVA in Q1 FY2020 was resoundingly lower than forecast, driven by a collapse in manufacturing GVA growth, even as the performance of most of the other sectors was largely along expected lines.

Explaining the impact of lower GDP on common man, senior economist Nagraj said that lower GDP means a proportionate decline in per capita income. Further, given high inequality in the economy, it is very likely that the poor will suffer more from the decline in the GDP growth rate than the rich.

“Correspondingly, the number of people below poverty line could rise. A decline in the GDP growth rate could mean a decline in the employment rate,” he said.

The GDP at constant (2011-12) prices in Q1 of 2019-20 is estimated at Rs 35.85 lakh crore, as against Rs 34.14 lakh crore in Q1 of 2018-19, showing a growth rate of 5%.

Blog

Research and development activity to get hit as WD benefit to cease from FY21

According to experts, R&D activity is a key proponent of the ‘Make in India’ strategy and to further expand the manufacturing sector in the country.

Published

on

By

Research and development activity

New Delhi, Feb 19 : India Inc’s R&D activity might get adversely impacted as weighted deduction (WD) benefits, including those on capital expenses, stand withdrawn from the next fiscal.

Till now, the Income Tax Act allowed for weighted deduction for all R&D activities.

However, four years back a sunset provision was introduced in the Budget on the availability of weighted deduction from April 1, 2020.

This deadline was expected to have been extended in this year’s Budget. However, that did not happen.

“The weighted deduction was a key reason for entities to invest in R&D infra. This withdrawal will impact future investments in this area,” said Amarjeet Singh, Senior Partner, International Tax and Regulatory, KPMG in India.

According to experts, R&D activity is a key proponent of the ‘Make in India’ strategy and to further expand the manufacturing sector in the country.

Besides, R&D investments into India have grown with many MNCs establishing their research bases here.

“The ‘Make in India’ programme has got the booster of a reduced tax rate. Similarly, had the government continued with the weighted deduction for R&D, it would have surely ensured that India marched ahead both in manufacturing and in the corresponding R&D,” said Gukul Chaudhri, Partner, Deloitte India.

“So, while India may not lose its tag as the R&D lab of the world, the availability of weighted deduction would have ensured that India continued as one of the most attractive destinations for R&D in the world,” Chaudhri added.

The Finance Act, 2016, restricted the availability of expenditure incurred on scientific research to 150 per cent from April 1, 2017, and no weighted deduction from April 1, 2020.

“Globally, most countries are encouraging R&D activity as it generates new ‘intellectual property’ (IP), which in turn creates sustainable revenues. Such IP or new product gives rise to a new industry and other supporting activities,” said Samir Kanabar, Partner, Tax and Regulatory Services, Ernst & Young.

“In India, several sectors like auto, pharma etc. have invested substantially in R&D facilities to develop new IPs, patents and hence, a new tax regime to boost R&D was a major expectation,” Kanabar added.

However, Suman Chowdhury, President, Ratings, Acuite Ratings and Research, said that the reduction in weighted tax deduction will not have any significant effect on India Inc’s R&D activity.

“India’s R&D activity has held steady at 0.7 per cent of GDP over 5 years and no visible signs of positive outcomes were seen emanating from private enterprises despite such benefits,” Chowdhury said.

“Nevertheless, corporates now enjoy a reduced effective corporate tax structure, which should more than compensate for the loss, at least for the manufacturing sector. Service oriented enterprises, whose business model thrives on innovation, do not require incentives to do R&D in our opinion,” Chowdhury added.

(Rohit Vaid can be contacted at [email protected])

Continue Reading

Blog

AGR risk for GAIL, OIL and Powergrid stays: Fitch

Published

on

By

New Delhi, Feb 19 : India’s telecom-related regulatory dispute still is event risk for GAIL, OIL and Powergrid, Fitch Ratings said on wednesday.

Fitch Ratings continues to treat any payments that three India-based companies – GAIL (India) Limited (BBB-/Stable), Oil India Limited (BBB-/Stable) and Power Grid Corporation of India Ltd (BBB-/Stable) – may have to make under a demand notice from the Department of Telecom as an event risk for the companies’ ratings.

Fitch is not taking immediate rating action on the three companies, as the Supreme Court of India allowed the companies to withdraw their clarification applications on February 14, 2020, and resolve their dispute with Department of Telecom outside the court.

This is in stark contrast to the court’s decision to demand immediate payments from the telecom companies that are also involved in the dispute, Fitch added.

“We expect the three companies to eventually resolve the dispute, although resolution timing is uncertain. A speedy solution is important to prevent disrupting the companies’ investment plans and damaging their performance. The three companies are considering an appeal against the demand notices. We understand that they have the option to resolve the matter through alternate dispute-resolution mechanisms available to state-owned enterprises. This is in addition to the legal options available to telecom license holders in general,” it said.

The Department of Telecom has issued demand notices to GAIL, OIL and POWERGRID for Rs 1,831 billion, Rs 480 billion and Rs 220 billion, respectively.

The notices include license fees on non-telecom revenue and additional interest and penalties on the license fees. However, the three companies’ telecom-related revenue is insignificant, at around Rs 0.5 billion, Rs 0.01 billion and Rs 23 billion, respectively, for the same time period as the demand notices.

The three companies have created telecom infrastructure for internal use and have obtained national long distance and Internet service provider licenses to rent out spare capacity. They maintain that their licenses differ from the unified access licenses held by telecom companies, hence, the court’s decision on adjusted gross revenue for telecom companies does not apply to them.

Continue Reading

Blog

Kanpur tanneries asked to shut down again

Aftab Alam, a leather exporter, said the closure order would not only damage the business image of tanneries but would affect leather export too.

Published

on

By

UP tanneries Business

Kanpur, Feb 17 : The Regional Pollution Control Board of Uttar Pradesh has ordered 248 tanneries in Jajmau area of Kanpur to stop their operations from February 19 till further orders, without assigning any reason.

The tanneries, which remained closed for a period of 13 months on the charge of polluting Ganga, were allowed to start production on December 20 for two months only.

S.B. Franklin, regional pollution control board officer, said the time limit of two months is expiring on February 19.

Feroz Alam of Small Tanners’ Association said that on December 20 last year, the government, while granting permission to run the units with half capacity, had also stated that the tanners would be allowed to run their units till next year if they followed the necessary norms and standards fixed by the pollution control board.

He said, “During the last two months, not a single notice was issued to any tannery by the regional pollution control board because the tanneries did not flout the norms set by it.”

He said that the UP Pollution Control Board (UPPCB) had not given any reason for the closure order now.

Aftab Alam, a leather exporter, said the closure order would not only damage the business image of tanneries but would affect leather export too.

He said the tanneries which have got orders from foreign companies would suffer if they failed to supply the goods in time.

The tanners would also face problems in getting new orders in future, he added.

Continue Reading
Advertisement

Most Popular