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Hard Facts Don’t Justify Need For Overseas Sovereign Bonds
- Published on 10 August 2019
Image courtesy: nseindia.com
The Government’s Johnny-come-lately plan to enter global sovereign debt market (SDM) has stirred a lively debate.
Is it an attempt to create new link to converge resource pools for managing fiscal deficit (FD) and current account deficit (CAD)? If not, then what is the big deal in appearing on a platform on which many developing countries such as Maldives and Benin have already made their mark?
Are there not better alternatives to reduce cost of servicing government debt, thereby making easy FD management? Is indirect, regular tapping of global debt market through Government enterprises such as EXIM Bank, State Bank of India, Power Finance Corporation not aiding management of twin deficits?
Is the Government geared to make full disclosures to foreign regulators for seeking approval of maiden overseas bond offer?
Before taking up such questions, recall what Finance Minister Nirmala Sitharaman stated in her maiden budget speech on 5th July. She said: “India’s sovereign external debt to GDP is among the lowest globally at less than 5%. The Government would start raising a part of its gross borrowing programme in external markets in external currencies. This will also have beneficial impact on demand situation for the government securities in domestic market”.
This sounds over-simplistic.It does not give correct picture of underlying challenges in managing macro-economy.
Article 370 Reform So Simple & Beautiful as Visualized by Nanda
- Published on 06 August 2019
(Image Courtesy:jktdc.co.in)
“If it is the intention to amend, the process of amendment is simpler. The process are provided in Article 370. I think it was beautifully conceived. The normal process of amendment is subject to stringent conditions. The process of amending, made available to article 370, are very simple,” stated Gulzarilal Nanda, Union Home Minister on 5th December 1964.
Replying to a debate on a private member’s bill to abrogate article 370 in Lok Sabha, Mr. Nanda explained: “I do not think it is necessary to bring in an amending Bill for amending the Constitution - I do not think it is necessary, if ever it were, it will have to be a very different kind of thing”.
He added: “Article 370, whether you keep it or not, has been completely emptied of its contents. Nothing has been left in it. We can regulate, we can do it in one day, in ten days, ten months. That is entirely for us to consider”.
Mr. Nanda, who twice served as Interim Prime Minister, also explained the way to exorcise Satan of Disunity from the Indian Constitution.
No one has had the courage to act on roadmap laid down by Mr. Nanda, a congressman to the core. It was left to Home Minister, Amit Shah, to do “a very different kind of thing”, to borrow late Nanda’s words.
Before explaining constitutional compliance of Mr. Shah’s initiatives to reform & enliven Kashmir, reckon the fact Mr. Nanda was merely articulating what Prime Minister Jawaharlal Nehru’s stand on Article 370. It was temporary and of transitional value as specified in the Constitution.
Make Fiscal Discipline Enforceable & Independently Verifiable
- Published on 20 July 2019
(Edited Image from RBI's Financial Primer - Money Kumar & Monetary Policy)
The Finance Ministry should introspect over fiscal opacity that figured other day in the deliberations between two constitutional bodies.
Three days after the presentation of Union Budget, fifteenth Finance Commission (FFC) Chaired by N.K. Singh met Comptroller & Auditor General of India (CAG) Rajiv Mehrishi along with other CAG officials.
They discussed lack of underlying conceptual framework on fiscal transparency and under-reporting of deficit and debt. Another key issue that figured in talks was “Potential risks of absence of revenue deficit as a target”, according to FFC release.
FFC & CAG also discussed quality of capital expenditure; asset accounting; expenditure management and impact of GST on revenue.
As put by the release, “the issue of fiscal transparency in the fiscal reporting of the Union and State Governments was discussed especially in the light of increasing trend of off-budget and extra-budgetary resource raising by the governments. CAG highlighted the fiscal risks due to non-transparency”.
It adds: “International standards and amended FRBM Act, 2003 prescribes the inclusion of such off-budget resources to be included in the definition of debt. However, its completeness and reliability in the present form has been a concern for the CAG”.
FFC & CAG would again meet soon to carry forward their discussion. Both are bound to raise concerns on fiscal deficiencies in their respective reports in the coming months.
Dr. Rathin Roy, Director and CEO, National Institute of Public Finance and Policy (NIPFP) has already flagged fiscal concerns immediately after the presentation of the budget.
In his column titled 'A silent fiscal crisis?' published by a leading business daily, he started with the observation: “This year’s Budget speech was the first I have seen that, in my memory, has no paragraphs on the fiscal situation which, along with the tax proposals, is at the core of any Budget”.
India’s fiscal issues are also expected to come under scrutiny from outside quarters too. International Monetary Fund (IMF) is expected to take a call on these in the near future. This would happen when it considers annual IMF staff report on India sometime during the next four weeks.
BEPS’s Verifiable Impact on Global Economy Difficult to Capture
- Published on 10 July 2019
(Edited Image Courtesy: OECD)
“Our action has had a very concrete impact. First, you and other countries in the world have recovered taxes which had been defrauded for too long,” says a report from Organisation for Economic Co-operation and Development’s (OECD) Secretary General (SG), Angel Gurría.
The report on OECD/G20’s Base Erosion and Profit Shifting (BEPS) & related projects, submitted last month to The G20 Finance Ministers and Central Bank Governors, adds: “The very high profile of our work against tax fraud and tax avoidance has brought tax matters to the boardrooms and is having a massive impact”.
Have BEPS & related projects indeed delivered dazzling results? OECD, the projects proponent, would like the world to believe so.
G20 has, however, avoided endorsing success story as detailed out by SG’s report. International Monetary Fund (IMF) has also avoided optimism over BEPS outcome. It is here pertinent to cite IMF’s G-20 Surveillance Note issued last month.
As put by the Note, “There is an urgent need for a cooperative multilateral approach to reform the current system of international corporate taxation to address tax competition and reign in prevalent profit shifting by multinationals”.