04/02/2016
Request for submission of Memorandum to GDS Committee constituted by Department of Posts.
The Parliamentary Standing Committee on IT has sought a report from India Post with regard to the progress made by the department for starting payments bank, setting up of ATMs and real estate management.
The committee, headed by BJP MP Anurag Thakur, is scheduled to discuss all issues in this regard during its meeting tomorrow, an official source said.
The pilot for payments bank is set to start from January 2017 while full-fledged operations may start by March 2017. As many as 40 international financial conglomerates, including World Bank and Barclays, have shown interest to partner with Postal Department for the payments bank. The Reserve Bank of India has granted payments bank permit to the postal department, which has 1.55 lakh branches across country and already provides financial services. The Public Investment Board (PIB) is soon likely to approve the Rs 800-crore proposal from Postal Department for setting up payments bank. As part of the modernisation project, the postal department also plans to open 1000 ATMs by March this year. PTI KIR MKJ
Deferred implementation 7th
CPC award to Central government employees and pensioners It is possible to contemplate implementing the basic pay plus DA
[dearness allowance] merger in the current year.
National Institute of Public Finance and Policy Director and
Member of the Seventh Pay Commission Rathin Roy spoke to The
Hindu on his proposal of deferred implementation of its award to Central
government employees and pensioners. Edited Excerpts:
Should there be a further pause on fiscal consolidation?
Absolutely not. For three reasons: First the FRBM [Fiscal
Responsibility and Budget Management] target has been relaxed far too many
times in India’s recent history. . Second, the ostensible reason for reducing
the FRBM target, mainly to increase public investment, does not hold. Over 70%
of the fiscal deficit is devoted to borrowing for consumption in the form of
the revenue deficit. If you want to raise investment, you should do so by
borrowing less to consume Three, even if the government wants to implement the
[Seventh] Pay Commission award and modestly increase public investment, there
is a pathway to do so, which I can see and so presumably can the Ministry of
Finance.
What is this pathway for implementing the Seventh Pay
Commission award to Central government employees and pensioners?
The Pay Commission award would result in a net impact on the
Government of India Budget of approximately 0.5 % of GDP because the nominal
GDP is lower this year than I calculated in the Pay Commission report. It is
possible to contemplate implementing the basic pay plus DA [dearness allowance]
merger in the current year and deferring implementing any real increases in pay
and pensions to the future. This could be done by compensating those who would
have to bear the burden of the deference by giving them a more generous award
distributed over several years. I think what they should get, from April 1,
2016, is what they would get if we merge the basic pay and the DA, which is
more or less what they are already getting. That will mean some increase in
allowances but other than House Rent Allowance [HRA] the burden of that [on the
government budget] will not be very high. The second thing we can do is defer
allowances, principally the HRA. The case for that is strong because we are in
the midst of fairly flat growth in consumption expenditure and rents are not
going up much. The third thing we could do is to contemplate raising the
service tax. Of course, the revenue generated will have to be shared with the
States but when the GST [Goods & Services tax] comes in, the service tax
rate will any way be approximately be 18%. Today it is 14%. So, a 2 percentage
point increase in service tax is also a feasible option.
Could you explain your Pay Commission award implementation
pathway proposal with an example?
My salary is Rs. 80,000 per month (basic) and with DA it comes to
approximately Rs. 1,70,000. With the implementation of the Pay Commission
award, that would go up to Rs. 2,30,000 a month. I am saying that the increment
of Rs. 60,000 a month need not all be given at one go. It can be staggered and
made more generous. So this could be done for pay and for pension. Now I am not
competent to say whether this is politically feasible or not. But certainly it
is an option.
Now on increasing public investment…
If you want to increase public investment, one option is to
borrow less to consume, to reduce the revenue deficit. A 0.2% point reduction
in the revenue deficit, say by reducing subsidies, can transfer to a 0.2 %
point increase in public investment. That improves the quality of the fiscal
deficit. If you cannot reduce the revenue deficit, you can reshuffle the
portfolio of public sector assets. You can sell public assets that currently
exist on the government books to the value of 0.2% of GDP. Here, you are
selling public assets to create fresh public assets.
You are advocating disinvestment, which the government has not
shown much political appetite for especially strategic sales and privatisation…
I can think of several reasonably profitable public enterprises
which perform no public functions. Have you ever heard of a company called
Balmer Lawrie? It’s a government travel agency. I would urge that the
government identify assets like this which have no perceptible impact on either
public welfare or on the ability of the government to steer the economy in the direction
it wants and sell them.
Other options?
Given both the debt and fiscal deficit numbers of the States and
Centre taken as a whole are healthy then it just might well be worth
considering allowing States to increase public investment rather than the Centre.
We could think of relaxing the states FRBM targets which can then increase
public investment because the States together are not borrowing to consume
[unlike the Centre]. The States together are running either a zero or very
small revenue deficits. Allowing them to increase their fiscal deficits for the
purpose of public investment will be far more virtuous in terms of the quality
of the fiscal deficit than allowing the Centre to do it with its high level of
revenue deficit. The point is that the agency to do it consistently with the
minimum loss of the quality of fiscal rectitude today happens to be the states,
not all, but taken collectively.
Growth depends on the combination of fiscal and monetary
policy. The Reserve Bank’s Governor doesn’t appear open to reviewing the
inflation target…
Setting the inflation target is not a technical exercise anywhere
in the world. What the inflation target should be is not a call of the
Governor, though his opinion is very important, it is ultimately the call of the
government of the day and therefore of the Prime Minister and the Minister of
Finance. We have an inflation target of 4%-5% and it is delivering to us a repo
rate which is translating to an average lending rate of 11-12% whereas the
nominal GDP growth is 7.75%. Think of the economy as a business. You are asking
me to borrow money at 12% and the return I get from that borrowing is 7.75%. It
doesn’t make good business sense. So something has to give. Either we reduce
the cost of capital or we raise the nominal growth rate. The real rate of
growth is only 50 basis points lower than forecast by the government But the
nominal rate of growth has collapsed from around 13% just ten months ago to
around 7.5%.
Are you saying that the inflation target for the RBI needs to
be revised upwards? Or does it need to be redefined?
If you brought the GDP deflator in line with exactly what the
consumer price index [CPI] is then we would be home dry because if real growth
is 7.5% and the CPI is 4.5% then the nominal growth rate will be 12%.
So you are saying review not the inflation target but the GDP
deflator?
The deflator needs to be re-evaluated. If you are not willing to
do that then your inflation target needs to be re-examined.
Is an inheritance-based wealth tax an option?
As Gandhiji said of western civilisation, it would be a very good
idea.
Request for submission of Memorandum to GDS Committee constituted by Department of Posts.
The Parliamentary Standing Committee on IT has sought a report from India Post with regard to the progress made by the department for starting payments bank, setting up of ATMs and real estate management.
The committee, headed by BJP MP Anurag Thakur, is scheduled to discuss all issues in this regard during its meeting tomorrow, an official source said.
The pilot for payments bank is set to start from January 2017 while full-fledged operations may start by March 2017. As many as 40 international financial conglomerates, including World Bank and Barclays, have shown interest to partner with Postal Department for the payments bank. The Reserve Bank of India has granted payments bank permit to the postal department, which has 1.55 lakh branches across country and already provides financial services. The Public Investment Board (PIB) is soon likely to approve the Rs 800-crore proposal from Postal Department for setting up payments bank. As part of the modernisation project, the postal department also plans to open 1000 ATMs by March this year. PTI KIR MKJ