Economy
India's fiscal position to stay weaker than peers: Moody's
New Delhi : Ahead of India's budget for the next fiscal, Moody's Investors Service on Tuesday said the country's fiscal position will remain weaker than other emerging economies in the near term even if fiscal consolidation continued on course.
 
"Even if the budgetary consolidation continues, India's fiscal metrics will remain weaker than rating peers in the near term, because of the relatively high level of India's state and central government deficits and debt," Moody's said in a report.
 
"The importance of the upcoming budget lies in its message on the government's fiscal consolidation plans," the American agency said.
 
"But at around 63.8 percent of GDP, India's government debt ratio remains high compared to the median of 49.5 percent for Baa3-rated peers. Without continued fiscal consolidation, India's government finances will continue to compare poorly to peers," it added.
 
The fiscal deficit for 2014-15 touched 4.1 percent of the gross domestic product, while the government has targeted at containing it at 3.9 percent and 3.5 percent of GDP for this fiscal and the next, respectively.
 
"The budget will reveal whether and how the government intends to maintain the trend of modest fiscal deficit reduction of the past few years," the report said.
 
Moody's said the fiscal weakness was partly from structural factors. Lower per-capita incomes of around $1,700 limit the government's tax base and raise pressure for subsidies and development spending.
 
"Moreover, interest payments absorb almost a fifth of Indian government revenues, a consequence of high debt, which we estimate at 63.8 percent of GDP in fiscal 2016, down from 83.1 percent in fiscal 2005. This restricts the government's fiscal flexibility," it said.
 
Noting that the current growth environment complicates fiscal consolidation, Moody's said India's impressive growth rate that outperformed similarly rated sovereigns, was accompanied last year by subdued rural demand owing to poor monsoons, and weak corporate profitability with pricing power staying low.
 
"For instance, despite a robust GDP growth above 7 percent in 2015, rural demand and corporate profitability remained subdued, weighing on tax revenues," it said, adding that government tax revenue growth has cooled.
 
On the basis of trends in revenues and expenditures over the last five years, Moody's said India's fiscal consolidation process remains vulnerable to economic shocks, such as a fall in corporate profits or consumption growth, or an increase in subsidy costs.
 
"Therefore, fiscal improvements are likely to be limited in the near term. Whether they occur over the medium term will depend on the successful implementation of policy measures that expand the revenue base and/or curtail expenditure commitments," Moody's said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Bankers to strike for reinstating Dhanalaxmi Bank officer
Chennai : The All India Bank Officers Confederation (AIBOC) on Monday said it would go on nation-wide strike on February 29 to demand the reinstatement of an official in the Kerala-based Dhanalaxmi Bank.
 
The bank had terminated the services of P.V.Mohanan, general secretary, Dhanlaxmi Bank Officers Organisation without given any reason, AIBOC said on Monday.
 
In a statement issued here, the AIBOC said Mohanan was terminated without any enquiry and alleged this was because he had brought out publicly certain irregularities by a bank board member.
 
After a series of agitation by the employees, an agreement was arrived to maintain the status quo as prevailed before the termination of Mohanan, AIBOC said.
 
"But reinstatement was not ensured by the management. Hence All India Bank Officers' Confederation decided to go on all India strike covering all the banks in the country on February 29," the statement said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Process and likely focus areas of the Budget 2016
The budget is an important document that decides the course of the fiscal policy of the government over the coming year. This year seems to be no different with the halwa ceremony flagging off the printing of the budget documents on February 19.
 
Another unique feature of this year’s budget is that some of the key officials have communicated through a series of videos that aim to demystify the budgetary process. These videos also give a flavor about the essential features of the upcoming budget to be presented by FM Jaitley on February 29. 
 
The key officials that have spoken before the budget announcement include the finance minister, the minister of state for finance, and the revenue and the economic affairs secretaries - and all have made some crucial points relating to the budget 2016. 
 
The finance minister, in his interactions, had mentioned the use of technology to the advantage of all taxpayers. Already some 1.4 crore people have been notified of the tax refunds through the technology platforms and their refunds have been processed through the same medium. Roughly 90 percent of the tax filings are done online, and this is where the power of technology is making the tax process smooth and efficient. 
 
The minister of state for finance, in his interaction, has mentioned that the budget will aim to reduce poverty, provide prosperity to farmers, help in job creation for the young people of the country and provide a better quality of life to all citizens. He also expressed his belief that India will continue to be a beacon of growth and stability in a very turbulent global environment 
 
The economic affairs secretary tried to demystify the budget process and mentioned that it is a long-term process as opposed to the common conception. It generally starts in September with a detailed circular being issued to all the ministries. Post this, in November and December, the Department of Expenditure holds meetings with various ministries about the requirements in the current and the next years. 
 
At the beginning of January, the Department of Revenue makes its forecasts for the current year and the next year. There are the revised estimates for the current year and the budget estimates for the next year. Post this once the revenue and expenditure proposals converge, the finance minister holds consultations with various stakeholders and proposals are concretized at the end of January. Decisions are then taken and post this followed by printing of budget documents. 
 
The economic affairs secretary also alluded to the fiscal deficit and how the government is looking at it. He too was upbeat about India’s performance amid global turbulence and said that budget has to focus on growth as it leads to job creation and economic development. 
 
The revenue secretary, in his interaction, mentioned taxation and the broad structure of the budget. He stated that the total tax revenue projection is Rs.14.4 lakh crore. The income tax revenue is close to about Rs.7.9 lakh crore and the indirect tax revenue is close to Rs.6.5 lakh crore. 
 
Within the income tax, there are two components - the corporate income tax and the personal income tax. The corporate income tax is around 59 percent while the personal income tax is around 41 percent. 
 
On the indirect side, there are three major components: excise duties, customs and service tax. Normally these are roughly the same contribution, but this year, due to the oil duty, the excise duties are close to 39 percent while the other two form the remaining indirect taxes. 
 
The service tax structure is diversified, which is a good thing. The direct side seems as having a shortfall of about Rs.40,000 crore as corporate earnings have been low but this will be compensated by the indirect side which is buoyant. The revenue secretary also alluded to ways and means to reduce the litigation that has been seen as a perennial problem for India's corporate sector. 
 
In the week ahead, a lot of haze will get cleared on the issues pertaining to the budget. The new media strategy seems to be a good initiative leading up to the budget. Overall the stage is set for a historic budget. It is also hoped that the government succeeds in the balancing act when Finance Minister Arun Jaitley presents the budget in the Lok Sabha at 11 a.m. on February 29. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

Anand Vaidya

1 year ago

There is no need to proof-read an article before publishing. Falling Standards? I quote:

"The finance minister, in his interactions, had mentioned the use of technology to the advantage of all taxpayers. Already some 1.4 crore people have been notified of the budget refunds through the technology platforms and their refunds have been processed through the same medium. Roughly 90 percent of the budget filings are done online, and this is where the power of technology is making the tax process smooth and efficient. "

REPLY

MDT

In Reply to Anand Vaidya 1 year ago

Dear Sir,
This is a copy from a news agency, which is used without any editing at our end.
Anyway, we made necessary changes in the copy.
MDT

MG Warrier

1 year ago

The effort to make processes transparent is a positive feature. As I have already mentioned elsewhere, this year more people have given suggestions.

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