While agreeing to give urgent hearing in the Aadhaar matter, the apex court refused to modify its earlier order
The union government and state-run oil marketing companies on Tuesday failed to get any relief from the Supreme Court over the unique identification (UID) or Aadhaar number. The apex court, while agreeing to give urgent hearing in the matter refused to modify its earlier order.
On 23rd September, the Supreme Court ruled that Aadhaar is not mandatory to avail essential services from the government. While hearing a public interest litigation (PIL) filed by retired Karnataka High Court judge Justice KS Puttaswamy and advocate Parvesh Khanna questioning the legal sanctity of Aadhaar, the apex court said, "The centre and state governments must not insist on Aadhaar from citizens before providing them essential services."
The apex court will hear the matter on 22nd October.
Meanwhile, the Cabinet clears National Identification Authority of India Bill to provide statutory status to Unique Identification Authority of India (UIDAI) and legal backing to Aadhaar.
If the two neighbours are serious, they must restart the talks and get on with actions
Last week, Pakistan experienced a massive blackout, very similar to the one that India felt last year, due to a fault at HUDCO power plant (1,200 MW capacity). This had a domino effect, tripping off Tarbela and Mangala stations, resulting in total darkness for a few hours in many areas.
Most principal cities like Karachi, Hyderabad, Naswabsha Peshawar, Lahore, Multan, Rawalpindi and Quetta experienced this outage and it took a team of engineers several hours to bring the national grid to normalcy. There were a number other cities and towns that too were affected, with power being restored gradually.
While the power outage was on, there was a great hope and interest being built that the Prime Ministers of India and Pakistan would meet on the sidelines of UN General Assembly. Nawaz Sharif and Manmohan Singh did meet and the talks centred on the urgent and imperative need to reduce tension in the border. Manmohan Singh is reported have sought Nawaz Sharif's assurance that he will take steps to reduce the activities of terror outfits if not eliminate them altogether. In the past, Pakistan had always contended that these were "freedom" fighters. Sharif, being a well established industrialist would do everything he can to promote trade and commerce between the two countries.
It is of interest to note that Nawaz Sharif has the distinction of being the first person in Pakistan to be elected as Prime Minister for the third time. After being extended the Most Favoured Nation (MFN) status to Pakistan, couple of decades ago, India has been waiting for this reciprocity, but Pakistan has so far dilly-dallied on this issue. It is hoped that this time around, Nawaz Sharif will not fail to extend the MFN status to India if he is truly keen to promote trade and industry.
Soon after his take over, at the request of Pakistan, a team of experts from the Indian power ministry travelled to Pakistan to study the possibility for setting up a 220 kV link to supply 500 MW of electricity and gradually increase it to 2,000 MW. In the discussion held in Pakistan, a proposal to set up a grid in two steps was mooted.
Initially, a 220 kV interconnection between Pakistan and India's northern grid be set up for power exchange around 500 MW and in the second phase this could be increased to 2,000 MW upon the operational experience and Pakistani needs.
Regrettably, this interesting development could not move forward due to the lack of spontaneous response from Pakistan and the sudden cancellation of the Pakistani
delegation’s visit to discuss the modalities. Had the delegation visited India as planned, price consideration and the necessary technicalities could have been
cleared and the basic spade work done to move forward.
Apparently, Pakistan called off the visit due to the unexpected tension in the border and no new dates have been proposed, with hardship being experienced by industries and homes in that country.
If the Pakistan delegation had arrived for talks, it would have helped to kill two birds with one stone! NTPC (National Thermal Power Company) which is not producing power to the full capacity because of lack of interest shown by the power industry in India, would have been able to supply the much needed power to the homes and industries in Pakistan. Even now, if expeditiously handled, the 200kV link connecting India's northern grid to Pakistan would enable them to heave a sigh of relief. In other words, Pakistan has given a shock treatment by switching off the power talks, even before it started!
While the Indo-Pak Power trade has not even got off ground, history was being made on Saturday (5 October 2013), when electric power was officially exported to Bangladesh, with Bherama, a remote village, bordering Murshidabad district of West Bengal, receiving the electric power from NTPC the exporter.
Initially, this export trade in electricity will involve supply of 250 MW at a fixed tariff, and Bangladesh has the option to buy 250 MW more from open market in India. A joint venture proposal in setting up a 1,320 MW thermal power plant at Khula is also envisaged.
This event was through video conferencing, with Prime Ministers Manmohan Singh and Sheikha Hasina in Bherama.
It may be recalled that India has invested in Bhutan and also will be importing power from that country.
Digressing for a moment, when the onion prices hit the ceiling in India, and new crops were expected to reach the market by mid September, there was a proposal to obtain a quick supply of onions, from both Pakistan and China. It was hoped that this stop gap arrangement would help stabilise the Indian market and this could be got across the border in truck loads.
Perhaps, the Sino-Pak axis played a small role coupled with hesitancy on the importer's side, and onions from both countries have not come in so far. At least there are no media reports confirming the arrival of onions, and prices reaching dizzy heights! Whatever be the reasons, the ‘onion diplomacy’ with Pakistan appears to have failed.
All these would make one wonder if this sort of mutual mistrust is getting anyone anywhere. If the two neighbours are serious, they must restart the talks and get on with actions.
We have had enough of shock treatments and no tears left for lack of onions to cry.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
The government is struggling to raise indirect taxes, and it will require much larger inflation to get anywhere close to budget estimates, more so when the growth estimates have been downgraded
The ex-food inflation was trending down for some time. There was an increasing clamour for lower rates until Reserve Bank of India (RBI) took liquidity tightening measures in July to stop the rupee from sliding. So, will it be fair to say that markets forced higher interest rates and possibly higher inflation, ex-food, on the Indian economy?
If yes, the corollary question is whether economic forces will let India have low inflation sometime in the near future, assuming, of course, that we wish to grow at over 6%?
We are not about to get into some hyper-mathematical regression analysis of data to come to any conclusion. However, here is an attempt to use some basic data points and commonsense logic to ask simple questions. Let us first take up some tax numbers.
Refer to the chart below.
We all know the Central government fiscal deficit has been going out of control. It has been funded through huge borrowings, which have been helped by the massive Open Market Operations by RBI, amongst other things. The liquidity addition operations has not only helped government maintain some sanity in money markets but also pumped up inflation. The nominal GDP (GDP+inflation) numbers reflects that.
Inflation also helps government on the tax revenue front. Some tax rate hikes (from 2009 levels) along with inflation has led to huge jumps in indirect taxes. So far, corporates/banks have also been able to pass on the cost pressures and maintain profitability. It has helped direct taxes as well.
While core manufacturing inflation slowed down through FY13 and index of industrial production (IIP) numbers were not reflecting any major growth. Excise collections kept good pace. But that was because rates were hiked from 10% to 12%, which may look small but takes collections up by 20% on a standstill basis. The same applies to service tax collections as well.
With no such hikes for FY14 in the first five months, the government is struggling to raise indirect taxes, and it will require much larger inflation to get anywhere close
to budget estimates, more so when the growth estimates have been downgraded.
That has meant that the fiscal deficit has gone haywire, in absolute terms, reaching almost 75% of the full year target by August itself. The other thing is that since nominal GDP is trending lower than estimated, the denominator for the 4.8% of GDP fiscal deficit calculation could be lower, hurting it there as well.
Can the government really afford low, ex-food inflation?
(Let us also keep in mind, 7th Pay Commission and Food Security Bill are not very far into the future!!)
If the government revenues struggle due to low inflation, what about the corporates? Lot of corporates, particularly in the commodity and infrastructure space, are hugely leveraged. Reasons for their present state of affairs could range from mismanagement to fraud to bureaucratic/regulatory overbearance. But the end result is that most of them will find it difficult to participate in further bids or plan new capital expenditure except the routine ones. Even if they are not leveraged, they need to be incentivised through better returns given the risks of doing business in India.
What they will need is higher prices for their end products or services!!
(Land Acquisition Bill only worsens the requirements)
If we really want Indian Railways to be a self-sustaining operation and not become another “Air India” or “BSNL”, clearly the passenger fares and tariffs need to go up, maybe at close to double digits, on a per annum basis, or costs have to come down.
State electricity boards (SEBs) were ultimately forced into taking hefty price hikes. And it still doesn’t look like they are in any kind of self-sustenance mode.
In spite of having raised prices, under recoveries on petro-products are huge and sooner or later they have to go up.
Where is low inflation here?
Ground water levels across the country are witnessing downward trend. There is evidence of “water mafia” in operation, particularly in water short regions or summer times. Sooner or later, water whether for urban, agricultural or industrial consumption will need to be priced properly, directly or indirectly.
If our rivers have to be rescued, increased number of waste treatment plants along with other steps, will be a must. All these will only add to the cost of operating businesses or households. A good monsoon can only postpone problems by a few months, not resolve issues.
There might be other examples with similar setups and which ultimately will require higher funds and correspondingly higher prices for products and services.
Rupee depreciation was market’s way of trying to balance some of these issues besides the obvious ones on the current account deficit front. It forces government to control fiscal profligacy and reduce subsidies. By trying to influence currency markets through some unnatural policy steps, we are only hampering what maybe the market’s balancing act and may worsen the situation.
The government may not like the fact that the balancing act is bringing inflation up. But how else do you get out of a socialistic, subsidy and deficit driven setup that has been created over last few years?
(There could be some argument on how lower oil prices could change lot of things, and there is no denying that. But, as of now, we can just take the current market price as it is and analyse. If lower crude prices follow, we can only be better off)
Our government and quite a few corporates, big and small, are leveraged. Both are needed to shape up to setup things for faster growth in times ahead.
And inflation generally favours the borrowers.
Will the market forces let India have low sustaining inflation any time soon?
Agriculture is not taxed heavily in India. So, low food inflation should not hurt revenues much.
Could low food inflation and reasonable non-food inflation be the ideal mix?
We seem to have exactly the opposite right now!