Connect with us

Business

‘Sheer nonsense’ to compare household with government budgets: Niti Aayog

Published

on

IST


Mumbai :Decrying the economic orthodoxy in India handed down from Europe of cutting fiscal deficits to balance budgets, Niti Aayog vice-chairman Rajiv Kumar called for new definitions to be adopted for government expenditure and described as fallacious comparisons between household and national budgets.
Speaking at industry chamber CII’s Annual Session 2018 in New Delhi, Kumar also said Niti Aayog, which has replaced the erstwhile Planning Commission, is currently working to design performance and outcome-based parameters for all budget items to improve efficiency of public expenditure.
“I strongly believe that macro policy has to be counter-cyclical. When private investment is weak and jobs are needed, then the government has to step in (with investment),” said Kumar at a session titled “The Fiscal Conundrum”.
“It is sheer nonsense to compare household with government budgets, a trend that was started with (former British Prime Minister) Margaret Thatcher,” he said, explaining that the whole is always much more than the mere sum of individual parts.
“We need to think of the fiscal situation of the country as a whole and for all the levels of government including the local,” he said, adding, however, that it was important to maintain a “delicate fiscal balance” and governments should not engage in populist measures.
“There is no reason for fiscal populism. It is to rein in politicians and governments taking populist measures that the FRBM (Fiscal Responsibility and Budget Management) Act, 2003, came along,” Kumar said.
Presenting his last full Budget in February before the general elections early in 2019, finance minister Arun Jaitley made a significant announcement of fiscal slippage with implications for pushing inflation, revising upwards the government’s fiscal deficit target for 2017-18 to 3.5 per cent of the GDP, or the equivalent of Rs 5.95 lakh crore.
The higher target came in place of the 3.2 per cent — or Rs 5.46 lakh crore — for the current fiscal announced earlier. In the Budget, Jaitley also announced that the minimum support price (MSP) for notified kharif crops will be 1.5 times the input cost, and also stepped up total budgetary allocation for the sector for next fiscal by about 5 per cent.
Criticising the “fetish” of fiscal deficit, the Niti Aayog vice-chairman said he preferred, instead, to use the measure of revenue deficit and that government borrowing for investment whose returns would be higher than the interest paid is a good thing.
“Let us come up with new definitions, rather than ideology and stick with rules and regulations that are outdated,” he said. “Education and health are now defined as revenue expenditure… Let us put all these under capital expenditure… all these are productivity enhancing, with education one is creating human capital.”
“With a view to improve efficiency of public expenditure and public sector performance, the Niti Aayog is working to create performance and outcome-based measures for all budget line items,” he added.
Emeritus professor of Economics at Jawaharlal Nehru University, Deepak Nayyar pointed out that currently investment in India as a proportion to GDP was 6 per cent lower at a time of sluggish private investment than some years back and that the “fiscal space” of the states was limited by the fact that they need RBI permission to borrow.


Comments

Business

India to surpass China to become 2nd largest oil demand centre in 2019

Press Trust of India

Published

on

New Delhi: India will surpass China to become the second largest oil demand growth centre globally in 2019 on back of buoyant auto fuel and LPG consumption, research and consultancy group Wood Mackenzie said on Tuesday.

In a report, Wood Mackenzie said India’s oil demand growth recovered strongly in 2018, overcoming the aftermath of the implementation of Goods and Services Tax (GST) and demonetisation, and contributed 14 per cent of the global demand growth or 2,45,000 barrels per day.

“We forecast oil demand to grow at the same level in 2019. This will result in India becoming the second largest demand growth centre globally in 2019, behind the US but ahead of China. Transport fuels – gasoline and diesel – and residential LPG will continue to be the two main drivers of oil demand growth,” it said.

 

According to the US Energy Information Administration (EIA), India is currently ranked behind the United States and China as the world’s third-largest oil consumer. It consumed 206.2 million tonnes (over 4 million bpd) in the 2017-18 fiscal year.

During April-December, consumption of petroleum products has been 157.4 million tonnes, up 2.5 per cent over year-ago period.

Last August, oil cartel OPEC projected India’s oil demand to rise by 5.8 million barrels per day (bpd) by 2040, accounting for about 40 per cent of the overall increase in global demand during the period.

Mackenzie said diesel, the most consumed fuel in the country, is projected to grow by 6.4 per cent or 1,12,000 bpd year-on-year in 2019 compared with 93,000 bpd in 2018.

This was because of “buoyant commercial vehicle sales facilitated by sustained infrastructure growth, and increasing demand from the construction, logistics, e-commerce and consumer goods sectors,” it said.

Also, the push will come from a demand-based approach instead of a tax-based approach in the logistics sector, following the implementation of the GST, which has led to the removal of inter-state taxes. “This is a structural shift, resulting in increased demand for heavy and medium-duty trucks to achieve economies of scale and operational efficiency.”

More importantly, general elections in May will lead to increased travel activity for campaigning and implementation of infrastructure projects, which will bolster demand in the first half of 2019, Mackenzie said.

 

“Key risks ensue as crude price volatility is expected to persist. Historically, short-term gasoline demand has been relatively inelastic to retail prices in developing economies such as India. Even though higher retail prices affect consumer sentiment for new vehicle purchases, we believe this trend will continue with income effects driving the demand, subduing the price effects,” it said.

LPG demand growth will remain robust in 2019 at 5 per cent (40,000 bpd) although it is lower than the 56,000 bpd growth achieved in 2018. “The number of new household LPG customers continued to surge, driven by the Ujjwala scheme to promote clean cooking fuel in rural areas. That said, there is a largely untapped market, as around 50 million households remain deprived of LPG,” it said.

On the use of electric vehicles, it said only 2,60,000 EVs have hit Indian roads, majority being two-wheelers.

“Electric car sales, for instance, declined by 40 per cent to a mere 1,200 units in the financial year 2018 over the financial year 2017, while electric two-wheeler sales rose 138 per cent to 54,800 units during the same period. In contrast, China had a stock of 1.8 million EVs and 258 million e-bikes at the end of 2018,” it said.

This year, it said, will be an important year as the final version of the National Auto Policy and the second phase of the FAME scheme will be released.

“The question is the timing – will it be before or after the elections? Will the Modi government change tack if it is not re-elected? Will this ambiguity continues to deter wider adoption? Automakers seem to have realised that EV adoption is not a question of ‘if’. For instance, Maruti Suzuki, the largest automaker in India, will launch an electric version of one of its best-selling entry-segment cars – the Wagon R – in Q1 2019,” Mackenzie said.

Another key challenge will be stakeholder management and coordination across the different ministries, government bodies and industry participants while the policy is formalised.

Stating that two-wheelers will dominate the electric mobility landscape in the personal transport sector, it said India offers huge potential for automakers as car ownership levels are very low (23 per 1,000 capita).

Rising income levels will increase car ownership and most global automakers are closely watching this lucrative market. At the same time, two-wheelers should not be ignored – with current ownership six times larger than four-wheelers.

“We believe that two-wheelers are the more effective option given their utility in intra-city travel, less need for public charging infrastructure and availability of battery technology. Two-wheelers will eventually leapfrog four-wheelers towards the goal of a greener and sustainable mobility future,” it added.

 

Continue Reading

Business

Sensex snaps 5-day winning streak on weak global cues, profit-booking

Press Trust of India

Published

on

Mumbai: The domestic equity market took a breather on Tuesday after a five-day rising spree as investors booked profits in metal, financials and auto counters, amid weak cues from international markets after IMF lowered its global growth projections for 2019 and 2020.

The 30-share BSE Sensex dropped 134.32 points to end at 36,444.64, while the broader NSE Nifty finished 39.10 points lower at 10,922.75.

Participants were seen taking money off the table after the recent rally, even as the wider sentiment remained positive, underpinned by better-than-expected Q3 earnings by several bluechips.

 

The BSE Sensex, after resuming higher at 36,649.92, advanced to 36,650.47 on buying by domestic institutional investors (DIIs) as well as retail participants. However, market quickly slipped into the negative zone as investors chose lock in gains in recent outperformers, dragging down the key benchmark to a low of 36,282.93 before ending at 36,444.64 down 134.32 points, or 0.37 per cent.

The gauge had rallied over 725 points in the previous five sessions. Likewise, the 50-stock NSE barometer Nifty finished 39.10 points, or 0.36 per cent, down at 10,922.75 after hitting the day’s high of 10,949.80 and a low of 10,864.15.

Brokers said investors turned cautious and preferred to log profits in recent gainers, dragging down key indices.

“The market tracked other Asian markets following IMF’s weak forecasts of global growth prospects,” said Paras Bothra, President, Equity Research, Ashika Group.

“While India’s economic forecasts were retained, concerns were raised over the difficulties in containing the fiscal deficit. Continued weakness in the rupee favoured IT and Pharma stocks while majority of other sectors were under pressure,” he added.

The IMF lowered its global growth projections for 2019 and 2020 to 3.5 per cent and 3.6 per cent respectively, citing slowdown in several advanced economies around the world more rapidly than previously anticipated.

Meanwhile, India is projected to grow at 7.5 per cent in 2019 and 7.7 per cent in 2020, an impressive over one percentage point ahead of China’s estimated growth of 6.2 per cent in these two years, the IMF said Monday, attributing the pick up to the lower oil prices and a slower pace of monetary tightening.

The International Monetary Fund in its January World Economy Outlook update on Monday said India would remain the fastest growing major economies of the world.

 

Foreign portfolio investors (FPIs) continued their selling activity on domestic bourses here. They sold shares worth a net Rs 299.79 crore, while domestic institutional investors (DIIs) made purchases to the tune of Rs 520.80 crore on Monday, provisional data showed.

Continue Reading

Business

Gold extends gains on jewellers’ buying

Press Trust of India

Published

on

New Delhi: Gold firmed up by Rs 125 to Rs 33,325 per 10 grams on Tuesday, largely on the back of sustained wedding season buying by jewellers even as it weakened to near three-week lows overseas.

Silver, however, turned weak due to reduced offtake by coin makers and consuming industries and lost Rs 250 to Rs 39,850 per kg.

Persistent buying by local jewellers, triggered by the ongoing wedding season, kept gold prices higher, bullion traders said.

 

Globally, gold fell 0.13 per cent to USD 1,278.90 an ounce in New York as a firmer dollar made bullion more expensive for buyers using other currencies. Silver also eased by 0.46 per cent to USD 15.26 an ounce.

In the national capital, gold of 99.9 per cent and 99.5 per cent purity advanced by Rs 125 each to Rs 33,325 and Rs 32,175 per 10 grams, respectively.

The yellow metal had gained Rs 40 on Monday. Sovereign, however, remained unaltered at Rs 25,500 per piece of eight grams on scattered enquiries.

In contrast, silver ready prices dropped by Rs 250 to Rs 39,850 per kg and weekly-based delivery slipped by Rs 264 to Rs 38,876 per kg.

Silver coins, however, were unchanged at Rs 77,000 for buying and Rs 78,000 for selling of 100 pieces.

 

 

Continue Reading

Subscribe to The Kashmir Monitor via Email

Enter your email address to subscribe to The Kashmir Monitor and receive notifications of new stories by email.

Join 980,511 other subscribers

Archives

January 2019
M T W T F S S
« Dec    
 123456
78910111213
14151617181920
21222324252627
28293031  
Advertisement