Subsidy and GDP
This refers to your edit Investment,not subsidy(ET Jan,26).It is shocking to observe that the subsidy under various heads had touched a staggering figure of Rs,2,19,582 crore ie from 1.4% of GDP in 1999-2000 to 4.1% of GDP in 2008-09.
The subsidy to help the poorest of poor is understandable and needs to be provided and met provided the benefit reaches the beneficiaries directly and without any leakage . Other than food subsidy,all other subsidies presently extended need a re look and deserve to be taken out of budgetary provisions and investments to that extend need to be augmented in the same areas to improve the production,reduce the cost and benefit the consumers and producers alike.
As rightly indicated reforms in the area of investment and subsidy are the only way out to improve the situation and reduce the budgetary expenditure towards subsidies. The benefits that accrue to the economy in general and the weakest sections of the society in particular should be the considerations in arriving at the subsidy and cost to the exchequer. Perhaps food subsidy and kerosene subsidy which are intended for the people below BPL can continue for some more time till the inclusive growth become a reality.Even in these areas transparency in accounting is essential and transfer of benefits directly will bring in tangible benefits.The data relating to people below BPL need to be realistically arrived at so that there is no scope for any leakage.
Dr.T.V.Gopalakrishnan
Friday, January 29, 2010
Bad Loans
Bad Loans.
This refers to your Edit 'Elementary Watson',Easy Money ,Bad loans (ET dt,28/01/10). The observation that easy money made available by the banks to borrowers to go in for non viable business ventures is also a reason, among other things, for the increase observed in the Gross non-performing assets of banks is hard to digest. On the contrary, Non performing loans generally arise largely on account of high interest rates when banks are tempted to lend ignoring the risks and viability of projects. The present increase in NPAs is largely on account of economic slow down.
NPA s are inevitable in banking business as banks deal in money and with human resources entangled in business and economic activities which are part of fast changing business cycles. The only permanent solution to contain formation of NPAs and minimise the damages that they can cause to all stake holders of banks including borrowers is to have a fund built up within the banks by making the borrowers to contribute based on their performance rating. The banks and if necessary the Regulator and the Government can also contribute towards this fund which will emerge as a cushion to discipline borrowers and at the same time strengthen the banks' balance sheet. The Government can avoid contributing to the capital of banks which they often do.
The problem of NPAs has been there since the evolution of banking and the solution for it has to come from bankers and the borrowers themselves.
Dr.T.V.Gopalakrishnan
This appeared in ET,30/01/10 (edited version)
This refers to your Edit 'Elementary Watson',Easy Money ,Bad loans (ET dt,28/01/10). The observation that easy money made available by the banks to borrowers to go in for non viable business ventures is also a reason, among other things, for the increase observed in the Gross non-performing assets of banks is hard to digest. On the contrary, Non performing loans generally arise largely on account of high interest rates when banks are tempted to lend ignoring the risks and viability of projects. The present increase in NPAs is largely on account of economic slow down.
NPA s are inevitable in banking business as banks deal in money and with human resources entangled in business and economic activities which are part of fast changing business cycles. The only permanent solution to contain formation of NPAs and minimise the damages that they can cause to all stake holders of banks including borrowers is to have a fund built up within the banks by making the borrowers to contribute based on their performance rating. The banks and if necessary the Regulator and the Government can also contribute towards this fund which will emerge as a cushion to discipline borrowers and at the same time strengthen the banks' balance sheet. The Government can avoid contributing to the capital of banks which they often do.
The problem of NPAs has been there since the evolution of banking and the solution for it has to come from bankers and the borrowers themselves.
Dr.T.V.Gopalakrishnan
This appeared in ET,30/01/10 (edited version)
Monday, January 25, 2010
Budget boost to growth
Budget boost to growth
The Finance Minister has to create an environment where tax
Compliance is easy, avoidance is difficult and evasion is impossible
This year’s annual budget proposed to be presented on 26th Feb, 2010 assumes greater importance than usual as the economy shows signs of recovery and requires further boost to register double digit growth.
The Finance minister faces a formidable challenge as he has to initiate measures to exit the stimulus package liberally introduced in 2007-08 to save the economy from the disaster caused due to international financial crises triggered by sub-mortgage crisis in US financial system and at the same time find new innovative measures to give a stimulus to the economy to perform better in the midst of raising inflationary pressures, ever widening fiscal deficit and expectations and aspirations of people suffering from acute poverty, illiteracy and large scale unemployment. The task is stupendous, but manageable provided he introduces some harsh and simple measures through the budget.
Pending implementation of Direct Tax code proposals, FM can consider simplifying the direct tax administration particularly income tax. The middle class and the rich in the economy have multiplied manifold over a period and it is doubtful whether all are brought under the tax net.
Traders, dealers, brokers, small business people, contractors of different categories and self employed people including professionals earn a lot and may or may not have PAN numbers ,may be filing or may not be filing returns or may be paying or may not be paying income tax or may be paying less tax than what is due.
The FM has to necessarily create an environment where tax compliance is easy, avoidance is difficult and evasion is impossible. The following measures if introduced can create such an environment gradually if not in the immediate future.
Ensure that no individual or family remains without a bank account. Financial inclusion being talked about/ attempted so far has sought to give the poor access to savings and minimum credit facilities, but the real Financial inclusion is to ensure that no one in the economy irrespective of his economic or social status remains without a bank account.
Self employed people including retailers engaged in varieties of activities such as scrap dealers, furniture merchants, contractors vendors ,etc, do not seem to have bank accounts or even if they have one they prefer to deal in cash only. Reluctance to receive cheque or draft in urban/metropolitan centre is very common and many seem to be scared to have the funds credited to bank accounts. The banking habit even among literate and well to do people is not wide- spread.
Dr.T.V.Gopalakrishnan
This appeared in The Hindu-Business Line Dt 26/01/10
The Finance Minister has to create an environment where tax
Compliance is easy, avoidance is difficult and evasion is impossible
This year’s annual budget proposed to be presented on 26th Feb, 2010 assumes greater importance than usual as the economy shows signs of recovery and requires further boost to register double digit growth.
The Finance minister faces a formidable challenge as he has to initiate measures to exit the stimulus package liberally introduced in 2007-08 to save the economy from the disaster caused due to international financial crises triggered by sub-mortgage crisis in US financial system and at the same time find new innovative measures to give a stimulus to the economy to perform better in the midst of raising inflationary pressures, ever widening fiscal deficit and expectations and aspirations of people suffering from acute poverty, illiteracy and large scale unemployment. The task is stupendous, but manageable provided he introduces some harsh and simple measures through the budget.
Pending implementation of Direct Tax code proposals, FM can consider simplifying the direct tax administration particularly income tax. The middle class and the rich in the economy have multiplied manifold over a period and it is doubtful whether all are brought under the tax net.
Traders, dealers, brokers, small business people, contractors of different categories and self employed people including professionals earn a lot and may or may not have PAN numbers ,may be filing or may not be filing returns or may be paying or may not be paying income tax or may be paying less tax than what is due.
The FM has to necessarily create an environment where tax compliance is easy, avoidance is difficult and evasion is impossible. The following measures if introduced can create such an environment gradually if not in the immediate future.
Ensure that no individual or family remains without a bank account. Financial inclusion being talked about/ attempted so far has sought to give the poor access to savings and minimum credit facilities, but the real Financial inclusion is to ensure that no one in the economy irrespective of his economic or social status remains without a bank account.
Self employed people including retailers engaged in varieties of activities such as scrap dealers, furniture merchants, contractors vendors ,etc, do not seem to have bank accounts or even if they have one they prefer to deal in cash only. Reluctance to receive cheque or draft in urban/metropolitan centre is very common and many seem to be scared to have the funds credited to bank accounts. The banking habit even among literate and well to do people is not wide- spread.
Dr.T.V.Gopalakrishnan
This appeared in The Hindu-Business Line Dt 26/01/10
Monday, January 11, 2010
Right Compensation
This refers to your edit "Be pragmatic, SEBI (ET,31/12/09).As rightly indicated,SEBI has to ensure that Perpetrators of Fraud do not go scot free and make money exploting the illiteracy of investors or the system and procedure for IPOs prescribed by SEBI.
It needs to be made compulsory for all companies going for IPOs to keep a minimum margin say 0.05 % out of the subscription money towards The Investor Protection Fund and in case the company does not adhere to the prescibed standards of SEBI , the investors should be compensated. The compensation should not exceed the subscrition money.
Dr.T.V.Gopalakrishnan
(This appeared in ET Dt,2/01/10
This refers to your edit "Be pragmatic, SEBI (ET,31/12/09).As rightly indicated,SEBI has to ensure that Perpetrators of Fraud do not go scot free and make money exploting the illiteracy of investors or the system and procedure for IPOs prescribed by SEBI.
It needs to be made compulsory for all companies going for IPOs to keep a minimum margin say 0.05 % out of the subscription money towards The Investor Protection Fund and in case the company does not adhere to the prescibed standards of SEBI , the investors should be compensated. The compensation should not exceed the subscrition money.
Dr.T.V.Gopalakrishnan
(This appeared in ET Dt,2/01/10
This refers to your edit Mittal's Frustrations (Et,Jan9,2010). The problems investors facing in India have been well brought out and solutions suggested therein .But the mindset and administrative hurdles continue to remain a major stumbling block as the reforms in vogue since 1991 in the economy have not touched the bureaucracy and the land management.
It is high time to have professionals with a pro active mindset to understand issues and arrive at solutions early to attract investments and facilitate fast economic progress. India has vast resources of land, labour and raw materials and entrepreneurs.the best and easy solution to attract huge investments in India and achieve the economic growth targetted at double digits is to have Land Bank both at central and state levels and make it avalable for investors.
Dr.T.V.Gopalakrishnan
(This appeared in ET dt,11/01/10)
It is high time to have professionals with a pro active mindset to understand issues and arrive at solutions early to attract investments and facilitate fast economic progress. India has vast resources of land, labour and raw materials and entrepreneurs.the best and easy solution to attract huge investments in India and achieve the economic growth targetted at double digits is to have Land Bank both at central and state levels and make it avalable for investors.
Dr.T.V.Gopalakrishnan
(This appeared in ET dt,11/01/10)
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