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Short-term pains amid long-term optimism
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Bikky Khosla | 08 Aug, 2017
The RBI in its recent policy review kept the growth outlook for the current financial year unchanged at 7.3 percent, on expectations of a normal monsoon, higher rural demand, increased government spending and growth enhancing effects of GST. While this positive outlook is all very well, macro data sets released recently-- May industrial production data, eight core industries growth in June and manufacturing and services sector downfall in July-- give a different picture. But majority of economists see this slowdown as disruption-caused, which should wither away soon.
According to official data, industrial production growth fell to 1.72 percent in May, reflecting the uncertainty relating to GST and subdued investment demand. Also, growth of the eight infrastructure sectors slowed to a 19-month low of 0.4 percent in June from 3.6 percent in May and 6.92 percent in June 2016, pulled down by low output of coal, refinery products, fertilizer and cement. Again in July, the manufacturing PMI plunged to its lowest since February 2009 while a similar downturn was seen in the services sector with its PMI for the month falling to 45.9, the lowest since September 2013. All these indicators, along with slower exports growth in June, present a subdued picture.
It is obvious that these macro figures are reflecting the effects of disruptions caused by GST and demonetisation, but there is a widely agreed view that once these shocks are absorbed fully, the growth numbers will automatically start improving. Besides, the ongoing push for reforms and higher spending by the government should also help. Most importantly, on what economists are pinning their hopes-- in line with RBI expectations-- is this year's above-average monsoon. According to reports, sowing of the summer Kharif crop has already gained momentum in most parts of the country, indicating bright prospects of agricultural & allied activities and rural demand.
But precaution is important. While a good monsoon is good news, it is equally important to ensure how to capitalize on it. In the last financial year, we saw how mismanagement can lead to price-crash and as a result how bumper harvests may neither generate rural demand nor alleviate farm distress. So, the Centre should, if required, need to tweak its policies to hold the agri-product price level at a favourable level both for farmers and consumers. At the same time, the government should start working vigorously on a wide-ranging reform package for the farm sector, which can still be the key to economic transformation of the country.
I invite your opinions.
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Short term pains aimed long term optimist.
Harishkumar Trivedi. | Wed Aug 9 19:01:29 2017
In this point I comment only one line. Disruptions Shocks are absorbed fully within short time limit with watching and necessary action taken by Govt.
New Guest of India - GST
A.V. Chandran | Wed Aug 9 09:53:52 2017
GST an extra ordinary guest of India is one of the macro revenue factors to this Great Nation subject to extra ordinary increasing return and subject to extra ordinary speed up between to and fro transportation of goods. Considering macro nature of this country Goods movement is devoting round the clock involving various transport mechanism and corresponding withdrawal of abnormal check posts whereas full-fledged check is a must at loading station and unloading station to ensure no deviation and no misleading in order to ensure actual goods movement. GST element on account of mass transport of goods will have macro role in revenue generation. The other macro area is GST on Insurance Premium will have extra ordinary income generation in view of its FIRST entry hence it could be treated as extra ordinary additional income of increasing return. If we deeply examine FIRST entries like Insurance are covered on various items and all are resting in the mouth of GST with no justification hence such items could be exempted from GST once for all. Similarly Review Mechanism of GST could be applied on various do and don'ts by virtue of inviting open proposals by virtue of press release By virtue of Revenue generation through GST Central Govt of India must ensure its equitable distribution or sharing to all States of India subject to consideration of Population of precise State. Retaining 30% of overall GST to Central Govt and left out 70% of GST could be shared by one and all states based on population factor of state divided by total population of India. For instance if population of UP is 1000 lakh the sharing of UP is 70% of GST x 1000 lakh/13000 lakh (projected population of India). This type of calculation is a must for sharing GST and it could be a part and parcel of the Central Budget. In short the great advantage of GST is removal of check posts involving macro figures and addition of Insurance Premium and share market will have extra ordinary macro revenue to the Great Nation. Further it is also suggested that Income Tax could be converted into GST as per working attached herewith in respect of Individual, Companies and Institutions from micro to macro and sharing between Central and States subject to demerger between GST and I.T. Departments.
Fruits & Vegetable Federation
Indian farmer | Wed Aug 9 07:35:34 2017
Why can't there be a fruits & vegetable federation wholly run by the government like like Karnataka Milk Federation etc. if the government can take care of the milk which gets spoiled in a day, why not the fruits & vegetables? which can profit both the producer & consumer...... think about it.
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