GDP, Dec’20 Quarter – Too Little To Celebrate…

GDP (Gross Domestic Product) for quarter ended Dec’20 (Q3’FY21) recorded a marginal growth of 0.4% as per the data released by MOSPI (Ministry of Statistics and Programme Implementation) today. Even though the growth, after two quarters of decline of 24.4% and 7.3%, is a relief, it looks quite tentative. For one, this is lower than the general estimates of clocking 1-1.5%. Second, it was propped up by increase in government spending, without which, it would have again contracted. And most importantly, some important sectors continue to remain in the negative zone – leading to K shaped recovery – which can pull down other sectors if persists for long. The highlight of the quarter is strong pickup in financial & other services and construction, both of which grew at 6%+ after decline of over 7% in Q2’21. Here is a brief analysis of GDP and its constituents. Continue reading GDP, Dec’20 Quarter – Too Little To Celebrate…

Power Distribution Companies – The Elephant In The Room

Chairman of the Fifteen Finance Commission called state distribution companies (discoms), “The Elephant in the room”, in an interview recently. Indeed, discoms are in a dire state, operating with AT&C (aggregate transmission & commercial) losses of over 22% and accumulated losses of close to Rs 4 lakh crore. To improve their viability, the Finance Minister … Continue reading Power Distribution Companies – The Elephant In The Room
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Food Corporation of India – Managing Inefficiencies

FCI (Food Corporation of India) must be heaving a sigh of relief with revised allocation of Rs 3.44 lakh crore during FY21 as subsidy against initial allocation of Rs 78,000 crore made in Feb’20. This would not only help it meet this year’s revenue gap but also clear part of its past overdues. The financial … Continue reading Food Corporation of India – Managing Inefficiencies
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Corporate Tax Exemptions – Desirable or Not?

The Finance Commission has expressed concern about the low tax/GDP ratio in India and has discussed in detail, ways to reduce this. Other than low tax base, significant amount of tax revenue is lost through invocation of large number of tax exemptions companies receive. (As an effort to plug this, the Finance Minister added an … Continue reading Corporate Tax Exemptions – Desirable or Not?
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Finance Commission Report – Understanding the Formula for Devolution to States

The report of 15th Finance Commission (FC), constituted every five years, was tabled in the parliament on the day of the budget. The Finance Commission is an important constitutional body which determines the flow of revenue from centre to states and more importantly, fix a formula for the distribution of total pie among different states. Role of the commission is critical as most of the taxes are levied at the national level and states’ own tax revenue is less than half of their expenditure. The devolution forms the bedrock of India’s federal structure, giving states financial independence. Here is a look at how the commission arrives at the division and other details. Continue reading Finance Commission Report – Understanding the Formula for Devolution to States

Budget – Deficit Terminologies, Trends And Sources of Finance

The budget has sharply revised fiscal deficit (FD) for FY21, up from 3.5% in budget estimates (BE) to as high as 9.5%. Other than FD, budget also looks at other deficit numbers such as revenue deficit, primary deficit and effective revenue deficit. So, what all are these deficits and their importance?? Here is a brief look. … Continue reading Budget – Deficit Terminologies, Trends And Sources of Finance
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Budget – Revenue & Expenditure Analysis (Part II)

Against total receipt of Rs 19.8 lakh crore, government is projected to spend nearly Rs 34.8 lakh crore in FY22. Other than interest payments, broad areas which account for maximum expenditure are Defence, Subsidies and rural & agriculture sector. Here is a look at the details of various government expenses. Government’s expenditure classification is more … Continue reading Budget – Revenue & Expenditure Analysis (Part II)
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Buget 2021-22 – Not A ‘Never Before’ Budget

The budget for the year 2021-22, presented in the Parliament today, wasn’t quite the ‘never before’ budget as stated by the Finance Minister a few days back. To qualify for that, the minister should have found innovative ways to raise resources or ways to reduce expenditure while managing the same outcome. Or even, any path-breaking initiative to comprehensively monitor, review and audit all major government schemes and progressively reduce allocation on ineffective schemes. Yet, the budget has soothed nerves by not imposing any additional tax or Covid cess which gets reflected in the stock market movement. Here is a look at some of the highlights. Continue reading Buget 2021-22 – Not A ‘Never Before’ Budget