India’s Consumer Price Inflation remains record low.

As expected the Consumer Price Index for the month of January 2017 touched a new low. The CPI for January 2017 was 132.4 down 0.4 points from that of December 2016. Rate of CPI inflation in January was 3.17% much less than 5.69% seen in January 2016.
According to Deepak Talwar of DTA Consulting the primary reason for the fall in CPI has been sharp fall in food prices.”
Consumer Food Price Index (CPFI) rose just be 0.56% in January 2017 compared to 6.85% rise in January 2016.
“The effect of demonetisation”, said Deepak Talwar, “resulted in fall in perishable food items. Evidently deprived of liquidity middle men could not store food products which led to distress sale by farmers.”
But non-food non-fuel core inflation was up. In addition crude oil prices increased due to production cut by producing nations.
Quoting analysis by DTA Consulting its principal Deepak Talwar said, “In view of the hardening core inflation and upward pressure on oil prices Reserve Bank of India decided to leave policy rates unchanged.”
Evidently the commercial banks, flush with deposits, post demonetisation, will have to cut loan rates in order to attract borrowers. “Even RBI Governor is asking banks to pass on the benefits of earlier policy rate cuts to borrowers”, said Deepak Talwar.

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REASONS TO CHEER THE NEW RAILWAY BUDGET

The first combined Budget of Independent India, spelt out a brand new template for Indian Railways. Transport integration and making the railways a competitive mode of commuting really headlined the announcements.
The budget has allocated Rs. 1,31,000 crores to Indian railways for this year with a focus on four major areas; passenger safety, capital and development works, cleanliness and finance and accounting reforms.

A ‘Rashtriya Rail Sanraksha Kosh’ for passenger safety, will be created with a corpus of Rs.1 lakh crores over a period of 5 years, to be funded by seed capital from the Government, Railways’ own revenues and other sources. Expert international assistance will be harnessed to improve safety preparedness and maintenance practices.

Talking about the proposed steps for modernization and upgradation of identified corridors, the Finance Minister said that Railway lines of 3,500 kms would be commissioned in 2017-18. and steps would be taken to launch dedicated trains for tourism and pilgrimage. In the next 3 years, the throughput is proposed to be enhanced by 10%. Further, the Minister added that Railways have set-up joint ventures with 9 State Governments and 70 projects have been identified for construction and development.
According to DTA Consulting principal Deepak Talwar “The move to make Indian Railways both competitive with other modes of transport and integrating it into the larger federal scheme is a very bold move as it will herald a new era in connectivity across the length and breadth of India for both goods and people”
At least 25 stations are expected to be awarded during 2017-18 for redevelopment and 500 stations will be made differently abled friendly by providing lifts and escalators. It is also proposed to feed about 7,000 stations with solar power in the medium term, of which, a beginning has already been made in 300 stations. Works will be taken-up for 2,000 railway stations as part of 1000 MW solar mission.

By 2019, all coaches of Indian Railways will be fitted with bio toilets. Pilot plants for environment friendly disposal of solid waste and conversion of biodegradable waste to energy are being set-up at New Delhi and Jaipur Railway Stations and five more such Solid waste management plants are now being taken-up.

Some other steps to be introduced include:
• End to end integrated transport solutions for select commodities through partnership with logistics players, who would provide both front and back end connectivity. Rolling stocks and practices will be customized to transport perishable goods, especially agricultural products.
• Competitive ticket booking facility to the public at large. Service charge on e-tickets booked through IRCTC has been withdrawn.
• As part of accounting reforms, accrual based financial statements will be rolled-out by March 2019. The aim is to improve the Operating Ratio of the Railways. Tariffs of Railways would be fixed, taking into consideration costs, quality of service, social obligations and competition from other forms of transport.
• A new Metro Rail Policy will be announced with focus on innovative models of implementation and financing, as well as standardization and indigenization of hardware and software. This will open-up new job opportunities for our youth. A new Metro Rail Act will be enacted by rationalizing the existing laws. This will facilitate greater private participation and investment in construction and operation.

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UNION BUDGET: DISINVESTMENT TARGET AT RS 72,500 CRORE, BANKS GET A BOOST

The Budget has provided Rs 10,000 crore for recapitalisation of banks in 2017-18. But what is reassuring is the FM’s statement that need based additional allocation would also be considered, emphasising focus on the resolution of stressed legacy accounts.

The Government also announced several Public Sector Undertaking (PSU) reforms, like revised mechanisms and procedures to ensure time bound listing of identified Central Public Sector Enterprises or CPSEs on the stock exchanges. This will foster greater public accountability and unlock the true value of these companies.
Additionally, CPSEs will be integrated across sectors through consolidation, mergers and acquisitions. This will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders. DTA Consulting principal Deepak Talwar hailed this decision, “This is a much delayed and much needed step.”
Sectors such as oil and gas, the Finance Minister indicated is a focus area. Here, the Government proposes to create an integrated public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies.
The budget also announced that 3 Rail Public Sector Enterprises (PSEs) like IRCTC, IRFC and IRCON would be listed in the stock markets. The Finance Minister said that the Exchange Trade Fund (ETF), comprising shares of ten CPSEs, has received overwhelming response in the recent Further Fund Offering (FFO). The Government will continue to use ETF as a vehicle for further disinvestment of shares. Accordingly, a new ETF with diversified CPSE stocks and other Government holdings will be launched in 2017-18.
Dealing with the markets, high net worth NBFCs can also now participate in IPOs just like the banks and insurance companies. Systemically important NBFCs regulated by RBI and above a certain net worth would be categorised as Qualified Institutional Buyers (QIBs) by SEBI at par with the banks and insurance companies, making them eligible for participation in IPOs with specifically earmarked allocations. This will strengthen the IPO market and channelize more investments.

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BUDGET PUSHES FOR EASE OF DOING BUSINESS

Giving an impetuous to the Prime Minister’s primary focus to make India an attractive investment destination, the Union budget made a case for removing bureaucratic bottlenecks that held back foreign entities from setting up here.
The one major announcement being that the Foreign Investment Promotion Board (FIPB) will be phased-out in the next fiscal. Stating that the Government has already undertaken substantive reforms in FDI policy in the last two years and more than 90% of the total FDI inflows are now through the automatic route, the Finance Minister in his budget speech said that the FIPB has successfully implemented e-filing and online processing of FDI applications and has now reached a stage where it can be phased out. Therefore, FIPB will be abolished in 2017-18.
According to policy analyst Deepak Talwar from DTA Consulting, “The ‘Ease of Doing Business’ in any country is not merely about regulations/laws, but also a factor of the bureaucratic dispensation, and with the FIPB being phased out, this will have far reaching consequences for creating a business-friendly environment to meet consumer demand.”
Several other measures were proposed to carry on the Government focus on easing business conditions in the country.
1. The threshold limit for audit of business entities that opt for presumptive income scheme has been raised from Rs. 1 crore to Rs. 2 crore.
2. Similarly, the threshold for the maintenance of books for individuals and HUF is now increased from turnover of Rs. 10 lakhs to Rs. 25 lakhs or income from Rs. 1.2 lakhs to Rs. 2.5 lakhs.
3. Foreign Portfolio Investor (FPI) Category I & II will be exempt from indirect transfer provision under the IT Act. Besides, indirect transfer provision shall not apply in case of redemption of shares or interests outside India as a result of or arising out of redemption or sale of investment in India which is chargeable to tax in India. This will remove apprehensions over taxation upon transfer of stake of investors of India-based funds located abroad but investing in India-based companies.
4. Professionals with receipt up to Rs. 50 lakhs p.a. can pay advance tax towards presumptive taxation in one instalment instead of four.
5. In effort to improve the ease of doing business, the Finance Minister said the process of registration of financial market intermediaries like mutual funds, brokers, portfolio managers, etc. will be made fully online by SEBI. Steps will be taken for linking of individual demat accounts with Aadhar.

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BUDGET 2017 TACKLES CORRUPTION AND REWARDS HONEST TAX PAYERS

Taking a cue from the aftermath of demonetisation, the Finance Minister while presenting the Union budget admitted, that the present tax burden on honest tax payers and salaried employees is unfair.
A crack down on the dishonest and the corrupt and rewarding the honest tax payers, therefore became a centrepiece of the Budget which proposed a slew of measures. For example:
1) If an accountant or merchant banker or registered valuer, furnished incorrect information in a report or certificate, he or she shall be liable to a penalty of Rs 10000 for every such default.
2) A grant of interest in case of refund of excess payment of TDS. At the same time, to ensure timely filing of returns of income, a fee will be levied in case of delay in filing the return.
3) The Government is trying to also broaden the personal income tax next and in this direction reduced the Income Tax rate from 10 to 5 per cent for small taxpayers. At the same time, it imposed a 10% surcharge on taxable income of Rs 5 million.
4) Another proposal is that no person shall receive payment or aggregate of payments of an amount of Rs 3 lakh or more from a person in a day, or in respect of a single transaction, or in respect of transactions relating to one event or occasion except by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account. Contravention of this provision will invite penalty.
Says DTA Consulting principal Deepak Talwar “The push towards greater transparency and tax compliance if implemented well, will ultimately result in improving the economic infrastructure of the country.”
Pointing out that there is an urgent need to protect the poor and gullible investors from dubious deposit schemes, operated by unscrupulous entities, the Finance Minister said that a draft bill to curtail the menace of illicit deposit schemes has been placed in the public domain and will be introduced in parliament shortly after its finalisation.
This Act will be amended in consultation with various stakeholders, as part of our ‘Clean India’ agenda, he added.

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THE POSITIVE IMPACT OF THE UNION BUDGET

The much-awaited Union Budget for 2017-18 turned out to be less exciting and more pragmatic. As expected the budget deferred any major changes on indirect taxes to a later date, when GST will be introduced, instead making only cosmetic changes to direct tax rates.
The overall focus continued to be on the ease of doing business and an increase in the GDP growth rate.
The two headline grabbing steps announced in the budget are: (a) Reform of electoral funding of political parties and (b)Disbanding of FIPB, the body clearing foreign investment proposals, with the latter impacting potential foreign investors.

The budget was placed in the back drop of sudden cancellation of two high value currency notes in November last year and the resultant adverse impact on GDP growth rate in the short term. However, the remonetisation of currency that were withdrawn from circulation has now nearly complete. The adverse effect, as per the budget, will not affect the economy in the financial year 2017-18.
Policy analyst Deepak Talwar from DTA Consulting stated that the “Overall the budget had a positive impact on the capital markets and seemed to lend credence to the Government’s fiscal objectives, as well as its desire to keep GDP growth rate highest among the large global economies.”
In addition, the agreement reached on the contentious issues over introduction of GST will help the economy during the year.

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RBI decides to remain cautious, leaves rates unchanged.

In the sixth and final bimonthly monetary policy for 2016-17, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) changed its stance from accommodative to neutral. The policy rates, therefore, were kept unchanged. RBI decided to wait and assess how the transitory effect of demonetisation on inflation and output gap play out.
Deepak Talwar, Principal of DTA Consulting said, “A rate cut at this juncture would have perhaps acted merely as sentiment booster for investors but would not have been a necessary or sufficient incentive to turn more bullish than what it is now.”
“A rate cut would not have changed anything fundamentally for the borrowers,” said Mr. Talwar.
Interest rates, Deepak Talwar pointed out, have moved lower with banks passing on the benefits of previous rate cuts by RBI. “Flushed with funds after demonetisation”, said Principal of DTA Consulting, “banks reduced interest rates. RBI action on policy rate was, therefore, not expected.”
Repo rate, the key policy rate used by RBI, remains unchanged at 6.25%, Bank Rate and Marginal Standing Facility rates at 6.75%.
According to Deepak Talwar RBI was judicious in its assessment of the economy. Taking into account the short term problems the economy faced after demonetisation RBI reduced GVA growth forecast for fiscal 2016-17 to 6.9% , nearly one percent less than 7.8% predicted by India’s Central Statistics Office last year. However in view of the success in remonetising and keeping into account the pickup in manufacturing sector activity RBI predicted growth rate of 7.4% during 2017-18. “This is a fair assessment”, said Deepak Talwar.
MPC of RBI flagged certain issues for turning neutral from accommodative in its policy stance.
First and critical most is the fact that prices now remain sticky with further downward move looking unlikely. The lower food prices due to seasonal factors and also some distress sale of perishables due to demonetisation kept CPI at less than 5% for the quarter but this is not expected to last long.
Second, the global commodity prices are firming up due to expected boost of infra spending in USA and also reduction in oil production causing rise in crude prices. The Indian economy will face price pressure in coming months.
Third and no less critical is uncertain global scenario. The complex political development and protectionist tendencies seen might impact the Indian economy adversely. There may be pressure on rupee exchange rate also.
“RBI was justified in maintaining caution in view of these factors”, felt Talwar. “However for the Indian economy there are several positive factors as well”, said Principal of DTA Consulting.
The remonetisation process has put back liquidity to the consumers. This will increase discretionary spending. “Service sector which suffered due to demonetisation, will get boosted”, said Talwar.
Secondly demonetisation brought in liquidity to the banking system which made banks reduce lending rates. “What RBI rate cuts earlier could not do, demonetisation did at last”, commented Talwar.
Third and no less important is the Union Budget 2017-18 stepped up capital expenditure, provided support to affordable housing and also rural economy. The GVA in 2017-18 is expected to receive a boost. RBI predicted a 7.4% growth rate in the next financial year, 0.5% more than the estimated growth rate of 6.9% in 2016-17.
“Economy can no longer bank of monetary policy to stimulate growth. A lot will now depend on administrative efficiency and introduction of GST”, summed up Deepak Talwar.

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Indian Economy recovering from Demonetisation

The Nikkei Purchasing Managers’ Index for the month of January 2017 shows slow recovery of the Indian economy from the high value currency note cancellation impact of November 2016. While the economy has not yet recovered fully from the adverse effect of currency ban but the very fact that it is on a recovery mode gives the impression that remonetisation effort has proved effective.

The Nikkei Manufacturing PMI in India rose to 50.4 in January of 2017 from 49.6 in December. This is marginally higher than the market consensus expectation of 50.2. As revealed by a survey of 500 manufacturing companies output and new orders went up and buying activity increased amid improving business confidence. Meantime, new export orders fell slightly. As regards new job creation the scenario remained negative with companies failing to generate jobs. Backlogs rose at a faster pace and input cost inflation climbed to its highest mark since August 2014 while output charges were raised for the eleventh successive month. Manufacturing PMI in India averaged 51.87 from 2012 until 2017, reaching an all-time high of 55 in June of 2012 and a record low of 48.50 in August of 2013. Clearly India is long way off from the record level of Manufacturing PMI reached in 2012 though it is close to the level of world PMI of 50.9.

The Nikkei Services PMI in India, though improved from the level seen in December 2016, continued to remain on contraction mode. It came in at 48.7 in January of 2017, up from 46.8 in December. It was the third straight month of contraction but the smallest in the current sequence of decline. Output fell the least in three months and new orders decreased less than in a month earlier while employment rose marginally amid improving business sentiment. Meantime, work-in-hand increased for the eighth straight month. Input cost inflation slowed marginally, whereas average selling prices decreased again.

Services PMI in India averaged 51.47 Index Points from 2012 until 2017, reaching an all-time high of 57.50 Index Points in January of 2013 and a record low of 44.60 Index Points in September of 2013. The services sector needs to be boosted further in order to at least recover the lost average ground due to the November note ban. Indian service sector PMI is much lower than the world service PMI of 52.80 seen in January.

Our Principal Deepak Talwar felt that “the slowdown caused by demonetisation seems to have stopped, though it requires continued effort to get growth back to the level prevailing before the note ban. This is reflected in the higher business confidence index of 57.20 in January 2017 as against an index of 54.10 in December 2016.” Deepak Talwar further stated, “With index for industrial production rising by 5.7% against a fall of 1.8% in the previous month, services, too, will soon pick up as a consequence.”

The Nikkei India Manufacturing Purchasing Managers’ Index measures the performance of the manufacturing sector and is derived from a survey of 500 manufacturing companies. The Manufacturing Purchasing Managers Index is based on five individual indexes with the following weights: New Orders (30 percent), Output (25 percent), Employment (20 percent), Suppliers’ Delivery Times (15 percent) and Stock of Items Purchased (10 percent), with the Delivery Times index inverted so that it moves in a comparable direction. A reading above 50 indicates an expansion of the manufacturing sector compared to the previous month; below 50 represents a contraction; while 50 indicates no change.

The Nikkei India Services PMI (Purchasing Managers’ Index) is based on data compiled from monthly replies to questionnaires sent to purchasing executives in around 350 private service sector companies. The index tracks variables such as sales, employment, inventories and prices. A reading above 50 indicates that the services sector is generally expanding; below 50 indicates that it is generally declining.

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UNION BUDGET 2017-18 IN BRIEF

The much awaited Union Budget for 2017-18 turned out to be less exciting than what many thought it would be. As expected the budget proposals left any major changes in indirect tax to be decided at a later date when GST will be introduced and made some cosmetic changes in direct tax rates. The overall focus continued to be ease of doing business with increase GDP growth rate. The two headline grabbing steps announced in the budget are: (a) Reform of electoral funding of political parties and (b)Disbanding of FIPB, the body clearing foreign investment proposals, with the later impacting potential foreign investors.
The budget was placed in the back drop of sudden cancellation of two high value currency notes in November last year and the resultant adverse impact on GDP growth rate in the short term. However the remonetisation of currency that were withdrawn from circulation has now nearly complete. The adverse effect, according to the budget, will not affect the economy in the financial year 2017-18. In addition, the agreement reached on the contentious issues over introduction of GST will help the economy during the year.
Action on corrupt
Taking off from the demonetisation move the budget accepted the premise that the present tax burden is unfair on the honest tax payers and salaried employees. In order to crack down against the dishonest and the corrupt, the Budget proposed that if an accountant or a merchant banker or a registered valuer, furnishes incorrect information in a report or certificate, he shall be liable to a penalty of Rs 10000 for each such default. The budget also proposed to provide for grant of interest in case of refund of excess payment of TDS. At the same time, to ensure timely filing of returns of income, a fee will be levied in case of delay in filing the return.

The Government is trying to bring within the tax-net more people who are evading taxes. In this direction, the budget has reduced the Income Tax rate from 10 to 5 per cent for small taxpayers. But it has imposed a 10% surcharge on taxable income of Rs 5 million.

Another proposal is that no person shall receive payment or aggregate of payments of an amount of Rs 3 lakh or more from a person in a day, or in respect of a single transaction, or in respect of transactions relating to one event or occasion except by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account. This restriction shall not apply to Government, banks or certain other categories as notified by the Central Government. Contravention of this provision will invite penalty.

Pointing out that there is an urgent need to protect the poor and gullible investors from dubious deposit schemes, operated by unscrupulous entities, the Finance Minister said that a draft bill to curtail the menace of illicit deposit schemes has been placed in the public domain and will be introduced in parliament shortly after its finalisation. This Act will be amended in consultation with various stakeholders, as part of our ‘Clean India’ agenda, he added.

Ease of doing business

The Foreign Investment Promotion Board (FIPB) will be phased-out in the next fiscal. Stating that the Government has already undertaken substantive reforms in FDI policy in the last two years and more than 90% of the total FDI inflows are now through the automatic route, FM said that the FIPB has successfully implemented e-filing and online processing of FDI applications and now reached a stage where FIPB can be phased out. Therefore, FIPB will be abolished in 2017-18.
Several measures were proposed in order to carry on the Government focus on easing business conditions in the country. The threshold limit for audit of business entities that opt for presumptive income scheme has been raised from Rs. 1 crore to Rs. 2 crore. Similarly, the threshold for the maintenance of books for individuals and HUF is now increased from turnover of Rs. 10 lakhs to Rs. 25 lakhs or income from Rs. 1.2 lakhs to Rs. 2.5 lakhs.
Foreign Portfolio Investor (FPI) Category I & II will be exempt from indirect transfer provision under the IT Act. Besides, indirect transfer provision shall not apply in case of redemption of shares or interests outside India as a result of or arising out of redemption or sale of investment in India which is chargeable to tax in India. This will remove apprehensions over taxation upon transfer of stake of investors of India-based funds located abroad but investing in India-based companies.
Individual insurance agents will be exempted from the TDS provision of 5% being deducted from commission payable after filing a self-declaration that their income is below taxable limit. Professionals with receipt up to Rs. 50 lakhs p.a. can pay advance tax towards presumptive taxation in one instalment instead of four.
In order to allow the people to claim the refund expeditiously, the Finance Minister said that the time period for revising a tax return is being reduced to 12 months from completion of financial year, at par with the time period for filing of return. Also the time for completion of scrutiny assessments is being compressed further from 21 months to 18 months for Assessment Year 2018-19 and further to 12 months for Assessment Year 2019-20 and thereafter, he added.
The Finance Minister proposed to restrict the scope of domestic transfer pricing only if one of the entities involved in related party transaction enjoys specified profit-linked deduction. This will reduce the compliance burden for domestic companies since the number of entities being covered under domestic pricing had gone up substantially resulting in longer scrutiny.
In effort to improve the ease of doing business, the Finance Minister said the process of registration of financial market intermediaries like mutual funds, brokers, portfolio managers, etc. will be made fully online by SEBI. Steps will be taken for linking of individual demat accounts with Aadhar.

Labour Law
For fostering a conducive labour environment wherein labour rights are protected and harmonious labour relations lead to higher productivity the Government will undertake legislative reforms to simplify, rationalize and amalgamate the existing labour laws into 4 Codes on (i) wages; (ii) industrial relations; (iii) social security and welfare; and (iv) safety and working conditions.
Model Shops and Establishment Bill 2016 has been circulated to all States for consideration and adoption. This would open-up additional avenues for employment of women. The amendment made to the Payment of Wages Act, is another initiative of our Government for the benefit of the labour and ease of doing business.

Financial sector and disinvestment

Easing the stressed legacy accounts of banks, the budget earmarked Rs. 10,000 crores for recapitalisation of Banks in 2017-18. The Government assured that need based additional allocation would also be considered emphasising focus on resolution of stressed legacy accounts.
The Government will put in place a revised mechanism and procedure to ensure time bound listing of identified CPSEs on stock exchanges. This will foster greater public accountability and unlock the true value of these companies.
CPSEs will be integrated across the value chain of an industry through consolidation, mergers and acquisitions. By these methods it will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders. Our principal Deepak Talwar hailed this decision, “This is a much delayed and much needed step.” The Finance Minister indicated that there were possibilities of such restructuring in the oil and gas sector. The Government proposes to create an integrated public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies.
The Finance Minister said that the Exchange Trade Fund (ETF), comprising shares of ten CPSEs, has received overwhelming response in the recent Further Fund Offering (FFO). The Government will continue to use ETF as a vehicle for further disinvestment of shares. Accordingly, a new ETF with diversified CPSE stocks and other Government holdings will be launched in 2017-18.

The budget announced that the shares of Railway Public Sector Enterprises (PSEs) like IRCTC, IRFC and IRCON would be listed in stock exchanges.
Dealing with the markets, high net worth NBFCs can also now participate in IPOs just like the banks and insurance companies. Systemically important NBFCs regulated by RBI and above a certain net worth would be categorised as Qualified Institutional Buyers (QIBs) by SEBI at par with the banks and insurance companies, making them eligible for participation in IPOs with specifically earmarked allocations. This will strengthen the IPO market and channelize more investments.
Railway Budget
In the first combined Budget of Independent India, that includes Railways, the Government pegged total Capital And Development Expenditure of Railways at Rs. 1,31,000 crores.
The Railways will focus on four major areas, passenger safety, capital and development works, cleanliness and finance and accounting reforms.
For passenger safety, a ‘Rashtriya Rail Sanraksha Kosh’ will be created with a corpus of Rs.1 lakh crores over a period of 5 years, to be funded by seed capital from the Government, Railways’ own revenues and other sources. Expert international assistance will be harnessed to improve safety preparedness and maintenance practices.
Talking about the proposed steps for modernization and upgradation of identified corridors, the FM said that Railway lines of 3,500 kms would be commissioned in 2017-18. and steps would be taken to launch dedicated trains for tourism and pilgrimage. In the next 3 years, the throughput is proposed to be enhanced by 10%. Further, the Minister added that Railways have set-up joint ventures with 9 State Governments and 70 projects have been identified for construction and development.
At least 25 stations are expected to be awarded during 2017-18 for redevelopment and 500 stations will be made differently abled friendly by providing lifts and escalators. It is also proposed to feed about 7,000 stations with solar power in the medium term, of which, a beginning has already been made in 300 stations. Works will be taken-up for 2,000 railway stations as part of 1000 MW solar mission.
By 2019, all coaches of Indian Railways will be fitted with bio toilets. Pilot plants for environment friendly disposal of solid waste and conversion of biodegradable waste to energy are being set-up at New Delhi and Jaipur Railway Stations and five more such Solid waste management plants are now being taken-up.
Some other steps to be introduced include:

  • End to end integrated transport solutions for select commodities through partnership with logistics players, who would provide both front and back end connectivity. Rolling stocks and practices will be customized to transport perishable goods, especially agricultural products.
  • Competitive ticket booking facility to the public at large. Service charge on e-tickets booked through IRCTC has been withdrawn.
  • As part of accounting reforms, accrual based financial statements will be rolled-out by March 2019. The aim is to improve the Operating Ratio of the Railways. Tariffs of Railways would be fixed, taking into consideration costs, quality of service, social obligations and competition from other forms of transport.
  • A new Metro Rail Policy will be announced with focus on innovative models of implementation and financing, as well as standardization and indigenization of hardware and software. This will open-up new job opportunities for our youth. A new Metro Rail Act will be enacted by rationalizing the existing laws. This will facilitate greater private participation and investment in construction and operation.

Our Principal Deepak Talwar stated that “Overall the budget had a positive impact on the capital markets and seemed to lend credence to the Government’s fiscal objectives, as well as its desire to keep GDP growth rate highest among the large global economies.”

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Economic Survey 2016-17 – Challenges Ahead

In its annual Economic Survey for the current fiscal year(2016-17) the Government accepted that the cancellation of high value notes from circulation on November 8th would result in a sharp drop in GDP growth rate to 6.5 % from a projected 7.5% earlier. In fact the advance estimate of the Central Statistics Office put the GDP growth rate to 7.1% based on the data as obtained in the first seven/eight months of the year. The Survey accepted the short-term costs of note ban pulling down the growth rate and said that follow up actions were necessary to realise the potential for long-term benefits of the move.

The follow up actions include: fast, demand-driven, remonetisation; further tax reforms, including bringing land and real estate into the GST, reducing tax rates and stamp duties; and acting to allay anxieties about over-zealous tax administration. These actions would allow growth to return to trend in 2017-18, possibly making it the fastest-growing major economy in the world, following a temporary dip in 2016-17. Based on the administrative success of introducing these measures growth rate for 2017-18 would be between 6.75% and 7.5%. India is likely to emerge as the fastest growing large economy in the world.

The year under review saw a lower gross fixed capital formation – fixed investment to GDP ratio at current prices is estimated lower at 26.6% in 2016-17, against 29.3% in 2015-16. Growth rate of the industrial sector is placed at 5.2% in the year under review, lower than 7.4% seen in the previous fiscal year of 2015-16.

Agriculture sector had brought some relief to the slower industrial output growth. Good monsoon helped agriculture to record 4.1% growth in 2016-17 as opposed to a mere 1.2% seen in 2015-16. The effect of note cancellation has not affected sowing of Rabi crops. Total coverage under the Rabi crops has been 5.9% higher than seen in the same period last year. Area under wheat has been higher by 7.1% and the same under gram is 10.6% higher. These two are the two most important Rabi crops in the country.

The economy withstood price pressure with headline inflation as measured by Consumer Price Index (CPI) averaging around 5% during the year. The whole sale price index (WPI) averaged 2.9% during April-December 2016. Steady price line is an encouraging factor for the Indian economy.

The decline in trade deficit during April-December 2016-17 was due more to decline in imports by 7.4%. This also illustrates the slowdown in the economic growth particularly that of the industrial sector. Exports grew at a marginal 0.7%. India’s current account deficit (CAD) narrowed to 0.3% of GDP in the first half of 2016-17 against 1.5% in the same period in 2015-16.

The Economic Survey 2016-17 accepted that the year was marked by two major domestic policy developments

  • The passage of the Constitutional Amendment, paving the way for implementing the transformational Goods and Services Tax (GST),
  • The action to demonetize the two highest denomination notes.

The GST will create a common Indian market, improve tax compliance and governance, and boost investment and growth; it is also a bold new experiment in the governance of India’s cooperative federalism.

The Survey pointed out the external challenges facing the economy. While in the short-run, world GDP growth is expected to increase because of a fiscal stimulus in the United States but there are considerable risks like higher oil prices, and eruption of trade tensions from sharp currency movements, especially involving the Chinese yuan, and from geo-political factors. Another serious medium-term risk is an upsurge in protectionism that could affect India’s exports.

The major short term macro-economic challenge is to re-establish private investment and exports as the major drivers of growth and reduce reliance on Government and private consumption. Indian economy suffers from the two problems, both being legacy of the years surrounding the Global Financial Crisis – these are: over-indebted corporates and bad-loan-encumbered public sector banks.
It also accepted the existence of three long-standing challenges:

  • Inefficient redistribution,
  • Ambivalence about the private sector and property rights,
  • Improving but still-challenged state capacity.  

Universal Basic Income, according to the Survey, is an idea whose time has come.

The Economic Survey advocated the concept of Universal Basic Income (UBI) as an alternative to the various social welfare schemes in an effort to reduce poverty. It mentioned benefits and costs of the UBI scheme. The Survey says the UBI, based on the principles of universality, unconditionality and agency, is a conceptually appealing idea but faces a number of implementation challenges, like the risk that it would become an add-on to, rather than a replacement of, current anti-poverty and social programmes, which would make it fiscally unaffordable.

Based on a survey on misallocation of resources for the six largest Central Sector and Centrally Sponsored Sub-Schemes (except PDS and fertilizer subsidy) across districts, the Economic Survey points out that the districts where the needs are greatest are precisely the ones where State capacity is the weakest. This suggests that a more efficient way to help the poor would be to provide them resources directly, through a UBI. But that depends on direct benefit transfer through bank accounts and co-operation and active participation of states with sharing of costs.

The Survey says that a UBI that reduces poverty to 0.5 percent would cost between 4-5 percent of GDP, assuming that those in the top 25 percent income bracket do not participate. On the other hand, the existing middle class subsidies and food, petroleum and fertilizer subsidies cost about 3 percent of GDP. The Survey concludes that the UBI is a powerful idea whose time even if not ripe for implementation, is ripe for serious discussion.

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