Indian Union Budget 2021-22: Officially, India’s much-awaited annual exercise of presenting its ‘Never Before like Union Budget’ for 2021-22 is scheduled on February 1, 2021. In strict accounting jargon, it is an ‘Annual Financial Statement – AFS’ of the Union Government’s total income earned from taxes levying, directly and indirectly, say income tax, customs duty, cesses, surcharges, etc. and preparation of the roadmap to spent that amount in the particular financial year. Key objectives of the Budget are – reduce poverty and unemployment, efficient allocation of available resources, reduce wealth and income disparity in the society, ensure economic growth, keep a tab on essential commodities prices, change or bring in suitable changes in ‘Tax Rates’, and other economy-related decisions. Due to ‘Never Seen’ economic disruptions caused by pandemic worldwide, India’s economy contracted at a slower 7.5% in the July-September quarter and 23.90% in the April-June quarter.
Expectations from the Union Budget 2021
The pandemic that has wreaked havoc on the global economy and India is no exception. This year i.e. 2020, the lockdown harshly jammed revenue collections of the central and state governments. Resumption of various economic activities after the lockdown restrictions and hikes in state excise duties on liquor aided the economy’s slow recovery and revenue generation of the economy. After the pandemic, the economy has seen major ups and downs, that is the reason everyone’s expectations from the upcoming union budget are very high, especially the small taxpayers and salaried employees. Some of the few expectations are mentioned as follows:
This has been an exceptional year for businesses as well as for mankind. The focus of the Budget will be to boost employment and outgrowth manufacturing activity through various schemes. Numerous incentives, subsidies, easier credit access, and other benefits must be enshrined in the Budget to handle the loss caused by the pandemic. Everyone is also looking at the banking sector to easy credit policies and allow businesses to thrive. It is also expected that the government would refrain from changing the basic structure of tax rate to give more stability to the entire system.
Source: The Financial Express
From being a Budget that 'India has never seen in over a hundred years' to being completely paperless, the Budget 2021 will definitely be a historic one. While the 2020 Budget had also brought in key reforms like new residency rules, abolishing dividend distribution tax, introducing new provisions regarding tax collection at source etc, the Covid stimulus ended up overshadowing these key reforms.
Now that the end of the pandemic is in sight, all eyes are now on the upcoming Budget in the hope of some much-wanted reliefs and incentives. Therefore, let us look at some crucial expectations that the taxpayers have from the upcoming Budget:
Corporate tax reliefs
With corporate taxes rates reduced to 22% for companies and 15% for manufacturing firms before the pandemic, any further tax cuts for the corporates seem unlikely. However, in order to help firms cope up with the losses suffered during the lockdown, investment-based reliefs and flexibility in adjusting previous year losses can be expected.
Insurance penetration
Insurance penetration in India has been very low. The pandemic and high medical costs related to it have led to an increased awareness about the importance of insurance. Perhaps, this is an opportune time for the insurance sector to increase its foothold.
One way to incentivize more people to opt for insurance (life insurance as well as health insurance) is by increasing the consequential tax deduction limits. Corporates can also be given incentives in the form of higher tax benefits if they opt for group medical insurances/preventive health checks for their employees.
Residential status
Due to the nationwide lockdown and a complete halt of aviation services, many non-residents exceeded their stay in India and have crossed the threshold to be categorised as residents for the purpose of the Income Tax Act. In this regard, the Central Board of Direct Taxes had issued relaxations to disregard the period of involuntary stay by such non-residents for determining the tax residency of individuals.
However, this was only pertaining to assessment year 2020-21. Furthermore, there is still no clarity with respect to the 'Place of Effective Management' test or the risk of 'Permanent Establishment' exposure that may become applicable to some entities due to their employees being physically present in India. Therefore, the Government may consider introducing appropriate reliefs in this regard.
Stressed industries & sectors
Due to the nationwide lockdown, several industries like aviation, tourism, food & beverages, etc., have incurred significant losses due to there being virtually no demand. Moreover, the recovery time for these industries will also be longer compared to other industries which have already achieved pre-Covid level demands.
Therefore, in order to provide relief to these industries/sectors, the government may consider extending their 8-year loss-carrying-forward window as these industries/sectors will have minimal income levels in this financial year and also in the upcoming financial year until they recover completely.
Disparity in taxation of dividend income
While the 2020 Budget abolished the dividend distribution tax, the classical system of taxing dividend has created an unwarranted disparity between the income tax paid by residents and non-residents on such dividend income. The tax rate on dividend income earned by the non-residents is 20% which can be further reduced to 5% — 15% in case the non-resident is from a country with which India has signed a tax treaty providing for such a beneficial rate.
The tax rate on the same dividend income for residents can be as high as 35.88% (inclusive of applicable surcharges and cess). Therefore, the government should introduce a flat rate of tax applicable on dividend income.
Weighted tax reliefs for research and development
In the current financial year many Indian companies have incurred significant expenses in research and development activities to develop a cure for Covid. The pandemic has been an eye-opener with respect to the importance of such research and development activities and how such companies end up being the backbone of the country during these trying times.
Therefore, the government should consider weighted deductions for scientific research and development expenditure, especially the research and development expenditure in relation to development of vaccines/cures for diseases.
Real estate sector reliefs
Amid an already slow real estate market, the pandemic and the nationwide lockdown led to a substantial fall in the fair market values of property. However, the stamp duty value/circle rates of such properties have remained the same. Consequently, even if the properties are sold at the reduced fair market value, the tax on such sale ends up being calculated on the stamp duty value of the property by virtue of anti-abuse provisions under the Income Tax Act.
Therefore, the government should consider introducing appropriate amendments in such a manner that taxes will be calculated on such reduced fair market value.
Vivad se Vishwas scheme
One of highlights of the 2020 Budget was the introduction of the Vivad Se Vishwas Scheme through which the government aimed to increase their tax revenues by offering to settle cases upon payment of 100% of such disputed tax, leading to a saving of interest and penalty. However, due to the pandemic, participation in this scheme has not been as high as would have been if there was no pandemic. Thus, the government may consider extending this scheme so that more taxpayers can avail the benefit of this scheme.
While there are numerous expectations from the Budget 2021, it is also important to note that the government has been providing various reliefs and stimuli to keep the economy afloat during the pandemic. This has resulted in a significant increase in government expenditures.
This puts the government in a fix regarding the upcoming Budget — on the one hand it faces the challenge of providing various reliefs to the taxpayers, but on the other it must also ensure that its revenues do not take a hit due to lower tax collection.
All in all, it will be interesting to see how the government tackles all these issues and still makes it a Budget India has not seen in the last 100 years.
Source: The Economic Times
A U.S. lobby group which represents firms including Amazon.com and Walmart has urged India not to tighten foreign investment rules for e-commerce companies again, according to a letter seen by Reuters.
India is considering revising the rules after traders in the country accused Amazon's Indian division and Walmart's Flipkart of creating complex structures to bypass investment regulations, Reuters reported this month.
The U.S. companies deny any wrongdoing. India only allows foreign e-commerce players to operate as a marketplace to connect buyers and sellers but local traders say the U.S. giants promote select sellers and offer deep discounts, which hurts business for smaller local retailers.
In 2018, India changed its foreign direct investment (FDI) rules to deter foreign firms offering products from sellers in which they have an equity stake.
The government is now considering tightening those rules again to include sellers in which a foreign e-commerce firm holds an indirect stake through its parent, Reuters reported.
Such a change could hurt Amazon as it holds indirect stakes in two of its biggest online sellers in India, Cloudtail and Appario.
Citing the Reuters story in a Jan. 28 letter, the U.S.-India Business Council (USIBC), part of the U.S. Chamber of Commerce, urged the Indian government not to make any more material restrictive changes to e-commerce investment rules.
"Any further changes in FDI rules would limit e-commerce firms from leveraging their scale," USIBC said in the letter seen by Reuters.
USIBC also asked India's Department for Promotion of Industry and Internal Trade (DPIIT) to engage in substantive consultation with companies on e-commerce regulation.
USIBC and DPIIT did not respond to a request for comment.
After the Reuters story was published last week, the Confederation of All India Traders (CAIT), which represents millions of brick-and-mortar retailers, said it has received assurances from India's commerce minister that policy changes were in the offing.
On Saturday, CAIT in a statement said the USIBC letter was an "uncalled for intervention" which runs against the interest of 85 million traders. "Such a hue and cry is not understandable," CAIT said, adding that it had also written a letter in protest to the USIBC President.
The government is also considering prohibiting online sales by a seller who, for example, purchases goods from an e-commerce entity's wholesale unit, or any of its group firms, and then sells them on the entity's websites, Reuters has reported.
The 2018 rule changes soured relations between India and the United States, as Washington said the policy changes favored local e-commerce retailers over U.S. companies.
Industry sources told Reuters on Friday that the prospects of such frequent policy changes in India have alarmed Amazon, which has committed $6.5 billion in investments in India, and Walmart, which invested $16 billion in Flipkart in 2018.
The USIBC letter said "investments require reasonable policy predictability and fair treatment". "USIBC is concerned that material changes to the FDI policy creates uncertainty and impacts investor confidence, as well as business continuity of existing investments," it said. Amazon declined to comment on the USIBC letter. Walmart and Flipkart did not respond to requests for comment.
Source: The Economic Times
The government will set up National Bank for Financing Infrastructure and Development (NaBFID) to meet the infrastructure financing requirements of the country. It will introduce The National Bank for Financing Infrastructure and Development (NaBFID) Bill 2021 in the Budget session to set it up as a developmental financial institution or DFI.
The government will also introduce The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 to provide for an official digital currency.
“To set up a new DFI as a provider, enabler and catalyst for infrastructure financing,” the NaBFID Bill 2021 purpose of statement noted, adding that NaBFID will be the, “principal financial institution and development bank for building and sustaining a supportive ecosystem across the life cycle of infrastructure projects.”
The Economic Survey tabled on Friday has also pointed out that investment in infrastructure is quintessential for more rapid and inclusive economic growth adding that the strong backward-forward linkages of the infrastructure sector are well established. The National Infrastructure Pipeline (NIP) project proposes to spend Rs 111 lakh crore between FY20 and FY25 on infrastructure creation across sectors.
The government will also introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 which seeks to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. “The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exemptions to promote the underlying technology of cryptocurrency and its uses,” its purpose of statement noted.
Earlier this month, RBI had noted that is exploring the possibility as to whether there is a need for a digital version of fiat currency and, in case there is, how to operationalize it. Last year in March, the Supreme Court had overturned a ban by RBI on the use of bank channels for payments associated with cryptocurrency.
The government will also introduce The Pension Fund Regulatory and Development Authority (Amendment) Bill 2021 for ensuring universal pension coverage as well as strengthening PFRDA. “To amend the PFRDA Act to fulfil the Budget Announcement 2019 regarding the separation of NPS Trust from PFRDA,” the bill purpose of statement noted.
Source: The Economic Times
India will emerge as the most resilient economy after Germany in 2021 exhibiting a strong “economic resurgence” to the global economic turmoil caused by the COVID-19 pandemic, according to a report.
Germany ranks first in the PHDCCI International Economic Resilience (IER) Rank followed by India and South Korea at second and third positions, respectively, according to the report released by industry body PHDCCI.
based on analysis of five lead macroeconomic indicators reflecting a country’s economic performance including real GDP growth rate, merchandise export growth rate, current account balance (as percentage of GDP), general government net lending/borrowing (as percentage of GDP) and gross debt-to-GDP ratio.
India’s IER Rank stands at second among the top-10 leading economies, indicating strong resilience of the Indian economy to the daunting pandemic of COVID-19, said PHD Chamber of Commerce and Industry President Sanjay Aggarwal.
The overall performance is projected at the second position after Germany in 2021, he added. India’s real GDP growth rate is projected to be the highest at 11.5 per cent in the year 2021 among the top-10 leading economies in the world, according to the industry body.
The merchandise export volume growth is estimated to be the strongest at 14 per cent in the year 2021, reflecting the great potential that the economy holds in terms of its international presence, said Aggarwal.
Source: The Financial Express
Indian Union Budget 2021-22: In the midst of an economic slowdown induced by the ongoing pandemic, the Hon’ble Finance Minister must grapple with the challenging task of encouraging consumption for economic revival against our peaking fiscal deficit in the upcoming Union Budget, 2021. Tax proposals will play a key role in this balancing act.
To begin with, the Government is likely to focus on the basics, for giving relief on the personal income tax front. For instance, the Government may consider continuing the reduced TDS rates by 25% for another fiscal year to ensure extra liquidity. Additional relief in the form of special deductions for COVID related health expenses would be a welcome step too. Other measures, such as increasing the basic exemption limit or increasing the threshold of section 80C deductions under the Income-tax Act, could also encourage saving and ensure more spending money in the hands of individual and HUF taxpayers.
A fillip is also required for the pharmaceutical and health sector that has been working relentlessly in the pandemic. Weighted deductions for expenditure incurred on research and development activities for developing a viable and effective vaccine may make a comeback. Deductions for capital expenditure incurred towards developing infrastructure and supply chain for storage, dissemination, and application of vaccines and other essential medical products will be welcome. The current deduction for capital expenditure incurred towards building and operating a hospital with at least 100 beds should also be allowed to smaller facilities to build medical infrastructure. Likewise, to encourage spending on training and hiring of skilled healthcare professionals, the current deductions for hiring new employees under section 80JJA could be increased from 30% to 50%. This could be coupled with raising the threshold of total emoluments of such additional employees. Such measures will help build capacity and address the growing rate of unemployment due to loss of jobs during the economic slowdown.
The Government could consider allowing deductions on CSR spends, making COVID vaccines available to employees and related causes. They could also consider permitting tax deductions to encourage corporate spending on health related charitable and philanthropic causes.
Besides the incumbent need to reign in COVID related amendments, a slew of rationalizing measures in the corporate tax space are also recommended by industry stakeholders. Headline tax rates for LLPs should be brought at par with most companies now enjoying an effective tax rate of 25.6% sans deductions. Similarly, alternate minimum tax provisions should be done away with, for such LLPs. Further, extending the presumptive taxation regime under section 44AD to LLPs could help bring them at par with resident companies and partnerships.
Relaxing of restrictions such as turnover thresholds for tax neutral conversion of a company to an LLP will also be welcome. In the same spirit, conversion of sole proprietorship and partnership firms to company, and conversion of company to LLP which are considered tax neutral from a capital gains standpoint should be included as exceptions to Section 56(2)(x). As an additional measure, allowing losses to be set-off for an additional period beyond 8 years could help in reviving businesses, especially SMEs reeling with losses and business disruptions due to the pandemic.
Additionally, the Government could consider reducing the holding period from 36 months to 24 months for affording favorable long-term capital gains treatment on transfer of real estate assets to encourage real estate activity. Similarly, holding period for ReIT units listed on Indian stock exchange should be reduced from 36 months to 12 months in line with listed equity shares to incentivize investment. Some tax sops in the start-up space would also help induce growth.
It would also be expedient for the Government to introduce measures to increase tax collections while easing compliance for taxpayers. In this direction, Vivad se Vishwas Scheme, 2020 has already seen a tax collection of over INR 75 thousand crores. Extending the scheme beyond the current January 31, 2020 deadline will only aid further tax collections while reducing the pending litigation at various forums.
As an additional measure, with faceless appeals to be implemented soon, the Government could consider introducing a reasonable limitation period on the adjudication of cases at the first appellate stage, where appeals remain pending for long periods of time.
Needless to say, a lot rides on Union Budget 2021 as it will set the tone for India Inc.’s trajectory for the next decade.
Source: The Financial Express
NPS Contribution Grows 30%
Covid-related relaxations gave a boost to NPS. Contribution under NPS grew over 30% with assets under management at Rs 4.94 lakh crore as on September 30, 2020, as compared to Rs 3.71 lakh crore a year ago.
Repo Transmission Improved
The weighted average lending rate on fresh rupee loans declined by 94 bps between March and November 2020 in response to reduction of 115 bps in the policy repo rate and comfortable liquidity conditions. The weighted average lending rate on rupee loans fell 67 bps.
Forbearance Gives a False Sense of security
Prolonged forbearance has the effect of overstating the actual capital and creating a false sense of security. With forbearance, a bank can rejig troubled loans and still report capital adequacy ratio at 12%. But without forbearance, the bank would make provisions.
Public Issues Used Aptly
Resource mobilisation through public issues between April-December period was higher at Rs 31,087 crore as against Rs 10,950 crore in the year-ago period. A number of firms raising money was less at 33.
FPI Inflows Jump 5.4%
Net investments by FPIs was Rs 2.1 lakh crore during Apr-Dec 2020 as compared to net inflows of Rs 0.81 lakh crore during the same period in 2019-20. Total cumulative investment by FPIs rose by 5.4% to $273.6 billion as on Dec 31, 2020 from $259.5 billion the year before.
Lending to Zombies Increased Manifold
Regulatory forbearance led to higher lending to low-solvency and low-liquidity firms as witnessed in higher higher lending to unproductive firms, known as “zombies”. Such firms have high interest coverage ratio. Share of new loans rose from 5% in FY08 to 27% in FY15.
Defaulters Among Restructured Cos Rise 51%
The proportion of restructured firms that became defaulters grew by 51% in the forbearance period, while the pre-period increase was marginal (by 6%). In terms of amount under default, the figure more than doubled (an increase of 114%) in the post-forbearance period .
Source: The Economic Times
Indian Union Budget 2021-22: The Union Budget 2021 is one of the most awaited budgets in the history of Indian economy. While every budget is about bringing reforms and measures to enhance the economic progress of the country; this budget is more about bringing the economy back to track.
Real estate is one of the most important sectors of the Indian economy. It is an active contributor to the economy being one of the biggest employment generators of the country. The sector’s contribution to the economy, post COVID 19 has also been very significant. Industry developers and consultants have tirelessly worked on developing schemes and offers throughout 2020 to keep the business rolling in the sector. “Once in lifetime” offers have been provided to build and sustain consumer interest, which gave a huge push to the sector despite the trying times.
The industry expects constant support from the government for policies and cash flows which is strongly required for its functioning. Below are some of the expectations from the government for Budget 2021.
Bring back the Input Tax Credit: The government should look at bringing back input tax credit as developers have to pay GST on various goods and services during the construction of projects. Input tax credit will help in bringing down the cost of construction, which in turn will help in lowering price of properties. It can be one of the leading factors for boosting demand in the sector..
Tax relief for the consumers: Consumer demand is one of the key push factors in the real estate market. Especially post COVID; it is consumer demand which keeps the business rolling. Housing real estate will be able to sustain the momentum only when consumer demand is in a sustained mode. Hence, higher tax relief for home buyers should be looked into for this budget. Cap of INR 2 lakh on housing loan interest, should be increased to INR 4 lakhs. Affordability on home buying has always been one of the major concerns for real estate; some tax relief will boost consumer sentiments and drive more demand.
Relaxation in fundraising norms: The sector needs liquidity for better functioning and timely deliveries. Due to lack of liquidity, real estate is facing a lot of challenges like delayed projects, unsold inventories and high project costs. The government should look at incentivizing the real estate private players and also look at relaxation of fund raising norms.
Funding support for mid-income projects: COVID 19 has badly impacted the smaller developers, especially in Tier 2 & 3 cities. These developers are continuing to face significant cash flows which is affecting their projects. If the government can set up last-minute funding support for affordable and mid-income projects, the small-time developers can avail the funds to ensure that there is no further delay in stalled projects. This can also lead to increased demand for such projects as incomplete projects are one of the main reasons for the slowdown in consumer demand in this segment.
Budget for 2021 is crucial for real estate; a lot of business development would depend on what positive measures and policy reforms are taken by the government. The entire industry is eagerly waiting with watchful eyes for the announcement for the much-needed reforms and incentives, genuinely required to boost this sector.
Source: The Financial Express
All eyes are on Finance Minister Nirmala Sitharaman as she has promised that the 2021-22 Budget will be like no other in the past and help India emerge the engine for global growth.
If, indeed, she redeems this promise, the Budget she will present tomorrow can be expected to be ‘expansionary’, with at least a 10-15 per cent increase in expenditure over and above ₹30.42-lakh crore proposed in the last Budget.
A hint of what the Budget could offer also came from Prime Minister Narendra Modi’s customary remarks on the opening day of the Budget session of Parliament. He said the Budget should be seen as a part of a chain of the ‘4-5 Mini Budgets’ 2020 saw.
More spending
Chief Economic Advisor K Subramanian has also pitched for more spending. All these aspects build expectations for generating a demand push by spending rather than through tax cuts. Eminent economists, too, feel that there is no room for tax tweaks. “A revenue neutral tax reform, which simplifies taxes, would stimulate growth, particularly of MSMEs, but any rise in tax rates would send a negative signal for investments,” said Arvind Virmani, Chairman, EGROW Foundation.
Covid bond
With income-tax rate reduction not on the horizon, change in slabs is a possibility. Also, in order to raise additional revenues, a cess/surcharge versus Covid bond debate is on, with the balance tilting towards the latter. A tax-free Covid bond with a separate limit over and above existing caps under various Sections of the Income Tax Act can make this an attractive instrument and increase the savings kitty.
“We know that such recovery that has happened so far is profit-led. Income support to daily-wagers and small businesses is essential. The big guys are having a good pandemic at the expense of the small. Fiscal policy can correct this. But the question remains that given the Central government’s poor execution record on public spending, can they do this relying solely on simple instruments like cash transfers. They cannot even accelerate payment of dues for purchases made,” Rathin Roy, Managing Director, ODI London said.
Disinvestment push
With a new Public Sector Enterprises policy approved, disinvestment and especially privatisation is likely to get a push. This is also critical as the government needs more non-tax revenues, and asset monetisation is a solution. Official sources said that a lot of work has been done on creating a ‘land bank’, so it won’t come as a surprise if the Budget talks about it. Indications are that the Budget will focus on neo-middle and middle-class as there is a feeling that this segment needs support. The options being explored include raising the exemption limit for housing loan and bringing in select exemptions for the new income-tax paying option that offered lower rate but no exemptions.
Focus on health, infra
Two areas the Budget will definitely focus on are health and infrastructure. Part A is expected to bring in some new schemes, including one for boosting employment and start-ups. The buzz is that for ailing power distribution firms a booster shot, in the form of loans, may be offered, as the recoverables are mounting.
Incentives could be in the offing for the renewable energy sector. PM-KISAN and pension schemes are expected to see some modifications. To bring down the cost of raw materials, measures like lowering the import duty could be considered.
Source: The Business Standard
The fashion industry, a multibillion-dollar global enterprise devoted to the business of making and selling clothes. Frequent changes in fashion choices and trends have increased the buyer demand, causing a requirement of shorter Lead time and to keep up with the market.
Fast fashion apparel is time-sensitive and follows a very tight timeline and meeting the deadline is important than ever. During the COVID-19 period, this issue has become prevailing. It is of high importance to maintain a steady streamline of backward integration of all raw materials linked with the apparel industry.
But due to source vulnerability, it has become a pressing need to enhance or build up local capacity, supported by local entrepreneurs, investors and as well as support from the government.
Mostly cotton and other fibers are import base. We are adding value from yarn manufacturing to finished products. But we do not have enough capacity in terms of backward linkage industries, like dyes and specialty chemical industries. These industries require support from the government in the tax and duty benefits for local production units.
Other important issues are technical capacity buildup and investment required by enterprisers as these solutions can certainly provide more competitiveness as far as the Fast fashion industry is concerned. In Bangladesh, the Auxiliary chemicals manufacturers are now importing raw materials and started re-formulating according to customer demand and functional requirements.
This initiative is helping the industries to run with minimum raw materials inventory, reduces the challenge of MOQ, and more importantly, ensures all products needed for the wet process are readily available. Which will help the reduction of costs by getting raw materials Just in Time.
With the global pandemic COVID-19, the sourcing became more challenging and expensive with the development of weekly based demand at the customer’s end. As of present, scarcity of shipping space has risen, and the cost has been increased four times compared to the previous year.
Again, in this context, as users, we are importing 40% volume of inert materials (Water to be specific) which adds import space cost and additional inventory cost. These issues can be eventually mitigated if and only if through local capacity build-up; which will address not only the shipment issues & delayed lead time but also will help reduce the additional cost.
Finally, the focus area would be “Made in Bangladesh; for Bangladesh & Global market”.
Source: Textile Today
Union Minister of State for Finance Anurag Thakur on Monday asserted that the budget 2021-22 will be in accordance with people's expectations and added that the government is working towards a self-reliant India and making its economy grow.
"The Budget will be in accordance with people's expectations. Sabka Saath, Sabka Vikas, Sabka Vishwas is the agenda of the Modi government. The government which functions on the mantra of 'Sabka Saath, Sabka Vikas, Sabka Vishwas' gave a new direction to India by announcing the Aatmanirbhar package, protecting it from the pandemic and bringing the economy back on track swiftly," Thakur told ANI.
"I have full confidence the budget will fulfill the aspirations of the people. We will continue to make efforts to make India self-reliant and make our economy grow," he added.
Thakur also offered prayers at his residence, ahead of the presentation of the Union Budget 2021-22 in the Parliament.
All eyes are fixed on Finance Minister Nirmala Sitharaman as she is set to present Union Budget 2021-22 in Parliament on Monday, at a time when India is recovering from the COVID-19 crisis.
The Budget presentation will begin with a speech from Finance Minister scheduled to take place at around 11 am.
The Union Cabinet will hold a meeting at 10:15 am before the presentation.
This year, the Union Budget will be delivered in paperless form for the first time.
The Finance Minister had launched the "Union Budget Mobile App" for hassle-free access of Budget documents by Members of Parliament (MPs) and the general public using the simplest form of digital convenience, according to the Finance Ministry.
The App facilitates complete access to 14 Union Budget documents, including the Annual Financial Statement (commonly known as Budget), Demand for Grants (DG), and Finance Bill as prescribed by the Constitution. Ahead of the Budget, Sitharaman tabled the Economic Survey in Parliament on Friday.
The Indian economy can contract by 7.7 per cent in the current financial year ending on March 31 and the growth could be 11 per cent in the next financial year, according to the survey.
The contraction in FY21 is mainly due to the coronavirus pandemic and the visible damage caused by the subsequent countrywide lockdown to contain it.
The survey unveiled two days before the Union Budget is broadly in line with forecasts by the Reserve Bank of India (RBI) which has said it expected the country's GDP to contract by 7.5 per cent in the year ending March 31.
In the quarter ending June 2020, the GDP contracted by 23.9 per cent followed by a milder contraction of 7.5 per cent in the quarter ended September 2020,
The first part of the Budget Session is scheduled to continue till February 15 while the second part of the session will be held from March 8 to April 8.
Rajya Sabha will function from 9 am to 2 pm and Lok Sabha from 4 pm to 9 pm with Zero Hour and Question Hour. Parliamentary Affairs Minister Pralhad Joshi said on Saturday that the budget session will take up 38 legislative items.
Source: The Economic Times
A day ahead of the Union Budget, which is likely to report a huge fiscal deficit, the government has got some cushion with goods and services tax (GST) collection touching a record high of Rs 1.19 trillion in January.
Since the figure pertained to collection till 6 pm on January 31, some more is expected to come into the government coffers for the month.
GST collection surpassed Rs 1 trillion for the fourth straight month due to economic recovery and because of government measures to tighten its noose on tax evaders.
GST collection grew 8 per cent during the month on a high base of Rs 1.10 trillion in January last year and breached the earlier record of Rs 1.15 trillion of December 2020, the data released by the Ministry of Finance on Sunday showed.
Collection posted growth for the fifth straight month in January after months of disruption caused by the Covid-19 lockdown.
The collection mostly accounts for transactions done in December. The number of GSTR-3B returns filed for January touched 9 million against 8.7 million in December.
The robust collection is important since the Centre’s fiscal deficit has crossed the Budget estimate by 45.5 per cent till December 2020-21. While it is not expected that the government will rein in the deficit at 3.5 per cent of GDP as was projected in the estimates, the collection will play a role in narrowing the deficit in the wake of increased expenditure on health, muted disinvestment receipts, low direct taxes, and stimulus packages.
Source: The Business Standard
Finance Minister Nirmala Sitharaman on Monday will deliver her promised budget like no other that is expected to provide relief to the pandemic-hit common man as well as focus more on driving the economic recovery through higher spending on healthcare, infrastructure and defence amid rising tensions with neighbours. As India emerges from the COVID-19 crisis, the ninth budget under the Modi government, including an interim one, is widely expected to focus on boosting spending on job creation and rural development, generous allocations for development schemes, putting more money in the hands of the average taxpayer and easing rules to attract foreign investments.
Sitharaman, who had in her first budget in 2019 replaced leather briefcase that had been for decades used for carrying budget documents with a traditional red cloth 'bahi-khata', had earlier this month stated that the budget for the fiscal year beginning April will be "like never before".
The budget, economists and experts say, will be the starting point for picking up the pieces after the economic destruction caused by the COVID-19 pandemic. And it must go beyond being just a 'bahi khata' or a ledger of accounts, as well as canning old schemes in a new bottle.
It has to be a vision statement, a roadmap to get the world's fastest-growing major economy back on track.
A prescient budget, which goes a long way in instilling confidence, cannot be replaced by 'mini-budgets' such as the one in September 2019 when the government cut corporate tax rate just two months after Sitharaman presented her maiden one, or the periodic announcements of economic measures that dotted 2020.
There is a larger consensus among economists that the annual GDP for FY21 will decline by 7-8 per cent, one of the weakest performances among the developing nations.
The government has to play a critical role in pulling the economy out of the trough. While the pandemic is showing signs of being less virulent, a gradual progress in the vaccination programme is fuelling hope for a better future. A sustainable economic revival will need a policy catalyst. That's where this budget assumes a special relevance.
The pandemic struck at a time when the economy was already caught in the grip of a growth slowdown. GDP growth touched an 11-year low of 4 per cent in 2019-20. A steadily declining investment rate has been a major factor in causing deceleration prior to the coronavirus crisis.
And the lockdown imposed to curb the spread of coronavirus in March last year brought economic activities to a grinding halt, causing a sharp contraction in the GDP in two successive quarters of FY21, pushing the economy into a recessionary phase.
In response, the government announced a number of policy measures under Aatmanirbhar Bharat package 1.0, 2.0 and 3.0 to support the economy. The package was a combination of grant, equity and liquidity measures by the central government, state governments and the Reserve Bank of India (RBI).
While the headline stimulus was pegged at close to Rs 21 lakh crore, the actual fiscal impact of the economic packages works out to be about Rs 3.5 lakh crore (1.8 per cent of GDP).
Also, since last budget, the size of the economy has reduced from Rs 2.24 lakh crore nominal GDP considered in the FY21 budget to Rs 1.94 lakh crore. There has been lower-than-budgeted revenue growth and higher expenditure to offset the adverse impact of the pandemic.
Among the most-watched figures in the budget would be the expenditure on vaccination in FY22 which could be shared among the central government, state governments and households.
India has started the largest vaccination programme in the world from January 16 and is using two vaccines - Covishield and and Covaxin.
Also, to be watched is the revenue that the government is projecting to receive from the privatisation of companies such as Bharat Petroleum (BPCL), Air India and Shipping Corporation of India (SCI).
Market borrowings are expected to remain elevated and external deficit financing would increase.
Higher capital expenditure outlay for National Infrastructure Pipeline (NIP) programme that has an aggregate investment target of Rs 111 lakh crore over the period 2020-25 and making recently introduced Production-Linked Incentive (PLI) scheme more attractive to lure foreign manufacturers to boost domestic manufacturing are top expectations from the budget.
Acuite Ratings & Research Limited said there are two primary objectives before the government at this stage - reignite the growth engine in the economy while committing itself to a medium-term fiscal consolidation path.
"The growth impetus should incentivise demand in the near term and ensure its sustainability over the medium to long term.
"Four elements must be activated to build economic vibrancy over the long term - give infrastructure a significant push through public and private investments, facilitate large-scale private and foreign investments across industrial, services and agricultural sector; incentivise private consumption in the near term without significant compromises on tax revenues; and step up allocation in health and education sectors."
Arun Singh, Global Chief Economist at Dun and Bradstreet said unprecedented circumstances require unprecedented measures.
"Globally, governments are facing massive policy and operational challenges and are adopting unconventional measures to revive their economy. A big bang package of reforms is thus on the anvil."
Undeniably, the government has a difficult task of manoeuvring the nascent recovery of the economy and managing the fiscal burden, which is expected to remain high not only for the current year but also for the subsequent years, he said.
"In the current scenario, it would be impossible not only for India but for countries globally to shoulder the pandemic without fiscal destabilization in the short to medium term."
India Ratings and Research said the government finances need to be steered in a way that puts the economy back on tracks.
Projecting a Rs 60,000 crore revenue shortfall in the fiscal year ending March 31, it estimated the fiscal deficit at over 7 per cent in the current fiscal as against budget target of 3.5 per cent. For the next, it put the fiscal deficit at 6.2 per cent.
The budget will have to address a number of issues - health infrastructure, reviving demand, banking sector reforms, fiscal consolidation and implementation of 15th Finance Commission report, said Brickwork Ratings.
Centrum said, "We expect the upcoming budget to prioritise growth-oriented measures with the commitment to warrant that the momentum of recovery seen in the economy recently remains sustainable."
The emphasis of the budget is likely to be on the revitalization of durable consumption impulses at the current juncture as the supply-side measures have already been implemented.
Alongside, the key focus will also remain on the further fostering of private investments as well after the initiation of a slew of measures like corporate tax rate cut, NIP and PLI scheme on this front, it said.
Amidst a plethora of market expectations around the budget FY22, key areas where the central government is highly anticipated to put its more attention to are the establishment of a bad bank to clean up bank balance sheets, presenting finer contours of the PLI scheme for boosting manufacturing for the 10 sectors announced earlier and resources likely to be made available.
Others include offering sops to reinvigorate household consumption demand via tax incentives for spending and higher deductions on housing loans coupled with the introduction of a COVID Cess that is expected to be levied on high-income individuals, it said.
India Ratings and Research believes that the major focus of the government to revive the COVID-19 battered economy has till now been on the supply side, but it is high time to change gears and focus on the demand side as well, lest the ongoing recovery begins to lose steam.
Its budget expectations include spending on infrastructure especially that are employment-intensive and have a shorter turnaround time, creation of development financial institutions, continue with relief/income support to the households who are at the bottom of the pyramid and higher allocation to MGNREGS as it provided a safety net not only to rural households but also to the workers who migrated back to rural areas.
Also, more support to real estate given its backward-forward linkage in the economy especially affordable housing segment, boosting micro small and medium enterprises, reprioritisation of both revenue and capital expenditure towards essentials such as top priority to mass vaccination/public health, reprioritisation of expenditure and mobilisation of higher non-tax revenue, it added.
GlobalData, a leading data and analytics company, said the need of the hour is to increase credit flows, especially to small and medium enterprises sector, as well as investment in education and health sectors to boost production and consumption.
Gargi Rao, Economic Research Analyst at GlobalData, said, "The expectations from the upcoming budget are mainly inclined towards infrastructure development, tax concessions for elderly to provide a breather for consumers to increase their overall consumption, along with increasing domestic production."
The budget will come as an economic vaccine for the pandemic-battered economy and steer India with the much-needed stimulus to boost demand, consumer confidence and at the same time boost the purchasing power of the people, the Indian Chamber of Commerce (ICC) said, adding incentives to industries like textiles, apparel, leather, food processing, construction and retail are expected.
Source: The Economic Times
Budget 2021 LIVE updates: Finance Minister Nirmala Sitharaman will present her third Union Budget in Parliament at 11 am today. The Budget speech will be keenly watched by both domestic and foreign investors, various interest groups like farmers, anxious middle class and corporate entities, besides parliamentarians.
As the Covid-19 pandemic hit India last year, the government witnessed a rising expenditure and tumbling revenue, even as economic activity came to a standstill due to the pandemic-induced lockdown. However, the economy is now in a recovery mode. On Friday, the government tabled the Economic Survey 2020, which pegged India's real GDP growth at 11 per cent in FY22. Meanwhile, the finance minister has promised a 'Budget like never before'. At the start of the joint session of Parliament on Friday, PM Narendra Modi said the FM had already announced three to four mini budgets and that the 2021-22 Budget should be seen as an extension of the same effort.
While the country awaits FM Sitharaman's Budget presentation, there are some key issues we must keep in mind -- economic recovery is still fragile and fiscal interventions are necessary; and there are constraints in the government’s execution capacity.
Source: The Business Standard
Union Finance Minister Nirmala Sitharaman on Monday morning reached the Ministry of Finance in the North Block, ahead of presenting the Union Budget 2021-22 in the Parliament.
MoS Finance and Corporate Affairs Anurag Thakur has also arrived at the Ministry of Finance.
The Budget presentation will begin with a speech from Finance Minister scheduled to take place at around 11 am. The duration of the budget speech usually ranges from 90 to 120 minutes.
This year, the Union Budget will be delivered in paperless form for the first time.
Finance Minister had launched the "Union Budget Mobile App" for hassle-free access of Budget documents by Members of Parliament (MPs) and the general public using the simplest form of digital convenience, according to the Finance Ministry.
Ahead of the Budget, Sitharaman tabled the Economic Survey tabled in Parliament on Friday. The Indian economy can contract by 7.7 per cent in the current financial year ending on March 31 and the growth could be 11 per cent in the next financial year, according to the survey.
The contraction in FY21 is mainly due to the coronavirus pandemic and the visible damage caused by the subsequent countrywide lockdown to contain it.
The survey unveiled two days before the Union Budget is broadly in line with forecasts by the Reserve Bank of India (RBI) which has said it expected the country's GDP to contract by 7.5 per cent in the year ending March 31.
In the quarter ending June 2020, the GDP contracted by 23.9 per cent followed by a milder contraction of 7.5 per cent in the quarter ended September 2020.
The first part of the Budget Session is scheduled to continue till February 15 while the second part of the session will be held from March 8 to April 8. Rajya Sabha will function from 9 am to 2 pm and Lok Sabha from 4 pm to 9 pm with Zero Hour and Question Hour.
Parliamentary Affairs Minister Pralhad Joshi said on Saturday that the budget session will take up 38 legislative items.
Source: The Economic Times
GST collections surged to an all-time high of about Rs 1.20 lakh crore in January as economic activities picked up after the withdrawal of stringent lockdown restrictions.
Mop-up from the Goods and Services Tax (GST), which is levied when a consumable item is sold or a service such as travel booking rendered, in January was 8 per cent higher than such receipts in the same month of 2020.
In a statement, the Finance Ministry said the January collections were the highest ever since the implementation of the nationwide tax in July 2017.
The previous best was in December 2020 when Rs 1,15,174 crore was collected.
This is the fourth straight month of over Rs 1 lakh crore tax collections, a sign of strong recovery.
The ministry said the total number of GSTR-3B Returns filed for the month of December up to January 1, 2021, is 90 lakhs.
“The GST revenues during January 2021 are the highest since introduction of GST and has almost touched the Rs 1.2 lakh crore mark, exceeding the last month’s record collection of Rs 1.15 lakh crore.
GST revenues above Rs 1 lakh crore for a stretch of last four months and a steep increasing trend over this period are clear indicators of rapid economic recovery post pandemic, the ministry said.
Closer monitoring against fake-billing, deep data analytics using data from multiple sources including GST, Income-tax and Customs IT systems and effective tax administration have also contributed to the steady increase in tax revenue over last few months, it added.
GST revenue during October-January has grown on an average of 8 per cent, as compared to (-) 24 per cent during the first half (April-September) of the fiscal year.
“The gross GST revenue collected in the month of January 2021 till 6PM on January 31, 2021, is Rs 1,19,847 crore of which CGST is Rs 21,923 crore, SGST is Rs 29,014 crore, IGST is Rs 60,288 crore (including Rs 27,424 crore collected on import of goods) and Cess is Rs 8,622 crore (including Rs 883 crore collected on import of goods),” the ministry said in a statement.
The number could be upped further as more number of GST sales returns get filed.
GST collections, which directly reflect the state of economic activity, had plummeted to a record low of Rs 32,172 crore in April 2020, after the government imposed a nationwide lockdown to curb the spread of coronavirus.
The lockdown, categorised by several agencies as one of the strictest curbs in the world, pummelled the economy as demand dried up and non-essential businesses were shuttered. In the April-June quarter, the economy contracted by the steepest ever 23.9 per cent.
As restrictions were gradually lifted, many parts of the economy were able to spring back into action although output remains well below the pre-pandemic levels.
Commenting on the GST numbers, Deloitte India Senior Director M S Mani said, “The surge in GST collections observed during the past four months is expected to be sustained in the coming months of the current fiscal with more of service sector activities like aviation, hospitality, entertainment etc opening up across states since January”.
The GST revenue in April-January was down about 12 per cent compared to the same period of the previous year.
GST revenues have topped Rs 1 lakh crore in eight out of 12 months of 2019-20 fiscal. However, in the current fiscal, the revenues have taken a hit due to the COVID-19 pandemic.
Revenue in April was Rs 32,172 crore, followed by Rs 62,151 crore in May, Rs 90,917 crore in June, Rs 87,422 crore in July, and Rs 86,449 crore in August. Collections in September were Rs 95,480 crore, Rs 1,05,155 crore in October, Rs 1,04,963 crore in November and Rs 1,15,174 crore in December.
Source: The Financial Express
The government has garnered Rs 19,499 crore through CPSE disinvestment and share buyback so far in 2020-21, as against the Rs 2.10 lakh crore budget target set for the entire fiscal year ending March 31.
With COVID-19 related delays impacting big ticket strategic sales and listing of insurance behemoth LIC, the government is likely to miss the budgeted disinvestment target by a wide margin in this financial year.
Finance Minister Nirmala Sitharaman had in her budget for 2020-21 set a target of raising Rs 2.1 lakh crore from privatisation, sale of minority stakes in state-owned companies and share buyback by CPSEs.
While Rs 1.20 lakh crore was to come from stake sale in CPSEs, Rs 90,000 crore was to be mopped up from share sale in financial institutions.
As many as 4 CPSEs Hindustan Aeronautics Ltd (HAL), Bharat Dynamics, IRCTC and SAIL have come out with offer-for-sale (OFS) this fiscal year. This fetched Rs 12,907 crore to the exchequer.
Besides, initial public offering (IPO) by IRFC and Mazagon Dock Shipbuilders together fetched Rs 1,984 crore.
Moreover, selling of government stake in private companies held through SUUTI and other transactions garnered about Rs 1,837 crore. So far in current fiscal year, 4 state-owned companies -- RITES, NTPC, KIOCL, NMDC-- have completed share buyback which got Rs 2,769 crore to the exchequer.
A buyback, also known as a share repurchase, is when a company buys its own outstanding shares to reduce the number of shares available in the open market.
The government is also looking to sell its entire 26.12 per cent stake in Tata Communications Ltd (TCL), erstwhile VSNL, through OFS and strategic sale route in the current fiscal.
The process of privatisation of Air India, BPCL, Pawan Hans, BEML, Shipping Corp, Neelachal Ispat Nigam Ltd, and Ferro Scrap Nigam Ltd (FSNL) is underway.
Source: The Business Standard
Finance minister Nirmala Sitharaman will present the Union Budget 2021-22 in Parliament today.
The Budget presentation will start at 11 am with an address from the FM. This is going to be Sitharaman's third budget. This year's budget will be paperless, a first.
As per tradition, Team FM will call on President Ram Nath Kovind ahead of the budget presentation. Before that, The Union Cabinet will hold a meeting, at around 10:15.
The Finance minister had launched the "Union Budget Mobile App" for hassle-free access of Budget documents by MPs and the general public.
According to the FinMin, the App will facilitate complete access to 14 Union Budget documents, including the Annual Financial Statement (commonly known as Budget), Demand for Grants (DG), and Finance Bill as prescribed by the Constitution.
One can watch the budget presentation on Lok Sabha TV, business news channels, and social media forums like YouTube and Twitter, etc.
Besides, you can watch the presentation live on ET.Com and ET app.
Source: The Economic Times
There is good reason to cheer the quicker-than-anticipated recovery but the optimism needs to be tempered. Recent signals from the economy are mixed: the core sector contracted for the third straight month in December while demand for diesel has been slowing. The sluggishness in sales of goods such as two-wheelers is disquieting.
The concern is that rural demand which has been robust may taper off in 2021, though it may hold up better than urban demand. The kharif farm income for FY21 is estimated to have grown by just 7.4% compared with 10.6% in FY20. The summer rabi farm income, however, is expected to grow by 10.4% in 2021 from an estimated 8.7% last year. It is critical the key services sector, which is lagging, sees a pick once the rollout of the vaccine progresses and more transport options are available. The retail and recreation segments are seeing a drop in momentum post the wedding and festive seasons. There are few signs companies are making big-ticket investments; capacity utilisation is going up but slowly. In the absence of investments joblessness could persist. The government needs to step up investments, ensure better credit flow to more sectors and businesses and liberalise FDI norms to attract more foreign capital.
Source: The Financial Express
Finance minister Nirmala Sitharaman is likely to announce measures including a hike in infrastructure spending and tax cuts to boost the pandemic-hit economy when she presents the budget 2021 on Monday, while deferring debt cut plans.
Sitharaman is likely to increase spending by more than 15 per cent year-on-year in 2021-22 with an emphasis on infrastructure and healthcare, say senior officials and advisers involved in budget preparation.
Check Budget latest news here
The economy is projected to contract 7.7 per cent in the current fiscal year. However in its annual report on the economy to parliament on Friday the government forecast growth of 11 per cent for the coming fiscal year, after a massive Covid-19 vaccination drive and a rebound in consumer demand and investments.
Prime Minister Narendra Modi has said the budget will be in continuation of government efforts to revive sectors impacted by pandemic, which has hit all economic activities and led to millions of job losses mainly in small businesses.
Check Budget live updates here
The government is likely to hike import duties on a number of high-end goods in a bid to raise more than 210 billion rupees in revenue, government sources earlier told Reuters.
New Delhi is likely to rely heavily on privatisation of state-run firms and sales of minority stakes in large companies such as Life Insurance Corp to fund its expenditure programme.
It could aim to raise 2.5-3 trillion rupees from stake- sales in 2021-22, after raising just about 180 billion rupees in the current year, well short of its 2.1 trillion rupees target, government sources say.
Tax cut hopes
Corporations and industry chambers expect the finance minister to unveil some tax relief measures for pandemic-hit sectors such as real estate, aviation, tourism and autos.
And analysts say the government would also have to consider providing tax relief to small businesses and consumers.
But, with India's fiscal deficit for the current financial year ending in March likely rising to more than 7 per cent of gross domestic product - double the government's initial estimate of 3.5 per cent - analysts believe this may be quite challenging.
Source: The Business Standard
Thirty-two Bangladeshi apparel makers have received US$5.0 million so far in cash out of $41 million work orders from American buyer – Sears – through a settlement reached after a lawsuit, said people involved with the process.
According to the settlement, these 32 factories will be given an additional $1.6 million.
The report ‘Bangladesh Garment Makers Score Victory Against Sears in $40 Million Lawsuit’, published in Forbes on Saturday, said that a US attorney’s Bangladeshi clients have gotten “the bulk” money back in the settlement.
When asked, Iqbal Hossain, managing director of Patriot Group, said after they had filed the case through a US law firm, a settlement was agreed upon between the Bangladeshi suppliers and Transformco, the privately-held company set up by American billionaire Edward Lampert’s ESL Investments hedge fund.
Transformco paid $5.0 million in keeping with the settlement after the release of the shipped goods worth $22.7 million, he said.
However, the suppliers have, in their possession, ready goods worth $11.9 million and raw materials valued at $6.4 million against the $41 million work orders, Mr Hossain pointed out.
It was also settled that both the parties would get 50 per cent each from the amount that would come from the sales of the remaining goods.
“We are scheduled to get $1.6 million but yet to receive the agreed amount,” he told the FE on Sunday.
The 32 factories belong to 13 apparel manufacturing groups, namely Nassa, AKH, Babylon, Prudent, Envoy, ABA, Mohammadi, Palmal, Windy, Meghna, Sotex, Pearl Global and Amtranet.
The Forbes report said the ‘crumbling retailer’ left its manufacturers with stacks of its clothing and unpaid bills last spring and has stiffed them multiple times before as it muddled through ugly bankruptcy proceedings.
The report quoted attorney Joseph E Sarachek as saying that the 21 Bangladeshi factories filed the lawsuit against Sears last June before reaching the settlement with Transformco.
“The suppliers were obviously thrilled that we got them a significant return,” Sarachek was quoted saying.
However, when his attention was drawn to this issue, Mr Hossain claimed that the Forbes’ report was fake.
In her quick response to the FE query, Rubana Huq, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said the news story was ‘misleading’.
Source: The Financial Express Bangladesh
Emphasising the importance of bilateral relations, China on Friday reiterated that the border issue with India will not be linked with the growth of overall ties with New Delhi, reported Xinhua.
The border issue between China and India shall not be linked with bilateral relations, said Zhao Lijian, Chinese Foreign Ministry spokesperson, at a press briefing on Friday when asked to comment on a recent address on India-China relations delivered by External Affairs Minister S Jaishankar.
Speaking at the 13th All Indian Conference of China Studies, Jaishankar on Thursday said that the relationship between India and China were at a 'crossroads' and choices made by the two countries will have "profound repercussions" for the entire world.
"Experiences of the past have taught us the importance of stabilising our relationship (with China) even while adjusting to changes. From that, we can seek proper guidance that will be to the benefit of both nations," the external affairs minister stated.
Zhao acknowledged that Jaishankar's remarks showcase the significance India attaches to its relations with China and stressed that the border issue shall not be linked with bilateral relations.
"This is an important lesson learned through the two countries' efforts over the past decades to keep our ties moving forward," Xinhua quoted the Chinese Foreign Ministry spokesperson.
He further added that China hopes India will work with it to properly manage differences, promote practical cooperation and bring bilateral relations back on the right track.
On January 24, India and China agreed to push for an early disengagement of the frontline troops in eastern Ladakh during the ninth round of the China-India Corps Commander Level Meeting held on the Chinese side of the Moldo-Chushul border meeting point.
The joint press release issued by Defence Ministry on January 25 said the two sides had a candid and in-depth exchange of views on disengagement along the Line of Actual Control in the Western Sector of China-India border areas.
The two countries have been engaged in a stand-off along the Line of Actual Control (LAC) since April-May last year. While China began amassing massive military strength along the LAC, India responded with a befitting build-up.
Source: The Mint
The central bank has decided to stick to the expansionary monetary policy during the second half (H2) of this fiscal year (FY) with some adjustments, taking into account the money market and the overall macroeconomic situation.
The decisions were taken at a meeting of the monetary policy committee (MPC) held at the Bangladesh Bank (BB) headquarters in Dhaka on Sunday with BB Governor Fazle Kabir in the chair.
"We'll continue with our expansionary monetary policy stance during the January-June period of FY, 2020-21, with some adjustments reflecting monetary and other macroeconomic developments," Md. Habibur Rahman, executive director (research) of the central bank, told the FE after the meeting.
Dr Rahman also said the central bank is set to bring such adjustments in its monetary programmes following the government's downward revision of the gross domestic product (GDP) growth.
The government has already cut its GDP growth projection at 7.40 per cent from its earlier projection of 8.20 per cent for the FY'21 mainly due to the ongoing Covid-19 pandemic.
According to the planned adjustments, the target of the country's aggregate money supply, measured by broad money (M2), is expected to decrease by 0.60 percentage point to around 15 per cent in June instead of 15.60 per cent earlier, according to officials.
M2 is a measure of the amount of money in an economy with the combination of highly-liquid and the less-liquid money.
The growth of M2 stood at 14.21 per cent in December 2020 against its target at 14 per cent, set by the BB earlier.
Besides, the target of reserve money (RM) is also set to slash in line with the growth of revised M2 to curb possible inflationary pressure on the economy, they added.
They also said targets of credit to the public sector particularly the government borrowing from the banking sector is likely to decline in H2 of FY'21 while the private sector credit growth is expected to remain unchanged.
Such revisions of the monetary programme for H2 of FY'21 will be announced formally on Monday through issuing a press statement.
The BB's latest moves came against the backdrop of rising trend in excess liquidity in the country's banking sector in recent months following lower private sector credit growth.
Banks' excess cash hit an all-time high of Tk 2.04 trillion in December last following lower private sector credit growth, caused by supply chain disruptions amid the ongoing coronavirus pandemic, according to bankers and experts.
The growth in credit flow to the private sector came down to 8.37 per cent in December 2020 on a year-on-year basis from 9.20 per cent in July last calendar year.
This growth was 3.13 percentage points lower than the BB's target of 11.50 per cent for the first half (H1) of the current fiscal year.
The central bank officials, however, said the private sector credit growth is expected to pick up in the coming months as the launch of coronavirus vaccination is set to contain the spread of deadly virus in the country, thus boosting the people's confidence in economic activities.
The BB is set to keep unchanged the private sector credit growth target at 14.80 per cent for H2 of FY'21.
The ongoing expansionary monetary policy coupled with the implementation of the government's stimulus packages have driven up liquidity in the banking system, they explained.
The government has so far announced a total of 23 stimulus packages worth Tk 1.24 trillion to offset the shock of Covid-19 pandemic in various sectors of the country.
The packages, equivalent to 4.44 per cent of the country's GDP, are being implemented under the supervision of the central bank and the ministry of finance.
"Fresh credit demand particularly from the private sector will help reduce the amount of excess liquidity in the banking sector," Mustafa K. Mujeri, executive director of the Institute for Inclusive Finance and Development (InM), told the FE while explaining the excess liquidity situation in the banking system.
Dr Mujeri, a former chief economist at the BB, also said the central bank is set to adjust its different indicators of the monetary programme in line with the government's revised GDP growth projection.
"It will be very challenging to achieve the private sector credit growth target when it is not expected to reach the double-digit growth even by March 2021," Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh (ABB), told the FE while explaining the private sector credit growth situation.
Earlier on July 29, the central bank unveiled an expansionary monetary policy for FY'21 aiming to speed up recovery of the pandemic-hit economy.
As part of the expansionary policy stance, the BB slashed overnight repurchase agreement (repo) rate by 50 basis points to 4.75 per cent while cut reverse repo rate to 4.00 per cent from 4.75 per cent.
The central bank cut the policy rates to ensure the availability of cheaper funds for banks and greater flow of funds into the economy.
Besides, the bank rate has been re-fixed at 4.0 per cent from 5.0 per cent to rationalise it with the current interest rate regime.
Source: The Financial Express Bangladesh
