What is new
Macro Economy
India Scripts History With General Govt Debt Rising Towards 100% of GDP
- Published on 24 November 2021
- Hits: 2527
(Image Courtesy: taxindiaonline.com)
“India scripts history” tweeted Prime Minister Narendra Modi on 21st October 2021 with hashtag #VaccineCentury. This pertains to India crossing milestone of administering 100 crore doses of covid vaccines.
The country is most likely to script another history that no one wishes for. And Mr. Modi has avoided making any reference to it in his daily sermons with clinical precision.
This is about emerging, alarming prospects of India’s public debt (PD) / general government debt (GGD) touching unsustainable 100% of gross domestic product (GDP). International Monetary Fund (IMF) last month analysed how close is India towards hitting the maiden GGD century. More of this later in this column.
As it is, official PD data is an under-estimate for two reasons. First, central and state governments continue to contrive new variants of off-budget borrowings (OBBs) to avoid their booking in the fiscal deficit. A search for ‘OBBs’ in CAG reports on central and state finances would show how deeply-entrenched is this problem.
Can Modinomics Work Wonders Without Financial Emergency
- Published on 03 May 2020
- Hits: 3549
(Dirty Water From Choked Drainpipe Mirrors Lockdown Economy)
How should Modi Government mobilize resources for the economy’s revival after phased lifting of unprecedented lockdown of Indians?
This issue has assumed special significance due to three reasons: 1) India is exploring all options to take loans from multilateral financial institutions (MFIs) 2) Finance Ministry has purged Indian Revenue Service (IRS) Association’s 44-page report titled Fiscal Options & Response to Covid-19 epidemic from official domain 3) Prospects of Centre ordering Financial Emergency to garner & control resources to manage lockdown-accelerated economic crisis are jaw-dropping.
Take the last first. Financial emergency (FE) has never been invoked in Independent India. It has political, fiscal, monetary and other economic implications that can only be speculated at present.
News reports show that finance ministers (FMs) of opposition parties-ruled States & other leaders voiced grave concern over imminent risk of imposition of FE.
They foresaw FE while addressing a webinar organised by the Gulati Institute of Finance and Taxation on 27th April. They focused on mounting GST compensation dues, state revenue drying up due to lockdown and mounting debt burden on States.
Covid-19 Reshapes Fiscal Domain Across the World
- Published on 07 April 2020
- Hits: 3377
(Edited Image Courtesy: Indian NCDC's Covid-19 Comic for Kids)
Corona virus has infected global economy end to end, triggering generation of fiscal, monetary & public welfare packages.
No wonder then that Covid-19 is sending fiscal consolidation/discipline on sick leave in several countries. European Commission, for instance, has resolved to suspend its fiscal adjustment in European Union to cope with pandemic. This would allow member countries to breach the deficit limit of 3 percent of GDP.
The USA’s $ 2 trillion stimulus law - Coronavirus Aid, Relief, and Economic Security (CARES) Act – is expected to increase the federal deficit by the same amount. According to Brookings’ paper titled ‘Careful or careless? Perspectives on the CARES Act’, “Deficits will have to take a back seat to preventing a Depression and supporting public health”.
In Finland, “automatic stabilizers are expected to increase the fiscal deficit significantly, including through an expansion of the coverage of existing unemployment benefits”, according to International Monetary Fund (IMF)
Brazil is another case in point. It has invoked the escape clause of the constitutional expenditure ceiling to grapple with pandemic.
Covid-19 has derailed revenue mobilisation including tax collection. All tax administrations are thus easing tax compliance/filing norms. Many countries have unveiled fiscal stimulus packages. Several more goodies for specific sectors are in the works at finance ministries across the continents.
Indian Economy Needs Wholesome & Timely Bail-Out
- Published on 20 March 2020
- Hits: 3741
Pandemic-Causing Covid-19 (Image Courtesy: nih.gov)
What is the difference between 2008 recession and unfolding 2020 recession? What is the difference in the magnitude of economic cost for India due to these two slowdowns? Would Modi Government’s fiscal smugness add to the miseries suffered by daily wager earners & temporary workers?
Such issues have to be addressed to understand all elements of unfolding economic crisis & why it is gravest for India.
The September 2008 recession was triggering by Lehman Brothers’ collapse-led global banking failure. It was quickly followed by Swine Flu, which originated in Mexico in April, and became a pandemic in two months. It led to 5-day lockdown of Mexico and moderately affected travel & tourism across the world.
Unlike 2008 recession, the present one was brewing since 2019 as pointed by several entities and economists. The recession has been accelerated by Covid-19 pandemic.
It is far more severe than swine flu or 2003 bird flu. Covid-19 might ultimately turn to be most severe one after the 1918 Spanish flu, which killed 40 million persons & wreaked havoc on global economy.
Both health experts and economists have predicted severe influenza pandemic even before arrival of Swine flu. It is important to recall their studies to get an idea of direct and indirect cost of Covid-19 menace.
It is equally important to recall the cost of fiscal and monetary stimulus unleashed by UPA regime to fight 2008 recession. Such an exercise should help Modi Government shift gears from wait-and-watch to rapid action to arrest & reverse economic meltdown.
Macro Economy