C. P. Chandrasekhar’s Blog

July 2020 marks the completion of three years since the launch of the Good and Services Tax regime. That is long enough to allow us to take stock of how well the new tax regime is performing. If the regime is still beset with “teething troubles” the conclusion must be that there are structural flaws in its character and design that make effective implementation near impossible. If such flaws are not undermining its effectiveness, the regime should show signs of delivering the results it was explicitly or implicitly expected to yield. An annual statistical report recently released by the Goods…

In a surprise move, the Indian government has decided to ban the use of 59 Chinese apps, some of which like Tik-Tok and UC browser are extremely popular in India’s consumer digital space. According to The Wall Street Journal, quoting estimates made by Sensor Tower, the 59 banned apps were the target of 4.9 billion downloads in India since January 2014, including 750 million so far in 2020. The move was widely interpreted as being part of India’s response to the disturbing developments along its border with China, and as a means to pressure China, even as India strengthens its…

The competition among Asian countries to win a slice of export markets currently controlled by China is intensifying. In a recent development, Vietnam has finally ratified a free trade agreement with the EU, under which more than 70 per cent of Vietnam’s exports to the EU and 65 per cent of the EU’s exports to Vietnam would be rendered duty free as of August when the agreement takes effect. Of the remaining goods, tariffs on items that would add up to 99 per cent of the two-way trade would be phased out by the EU over seven years and by…

India’s central government was faced with a fiscal crisis even prior to the Covid-induced lockdown. Provisional estimates from the Controller General of Accounts of actual revenues collected in financial year 2019-20, or the fiscal year that ended March 2020, point to an erosion of revenue receipts of crisis proportions. As compared with the original budget estimate of Rs. 19.6 lakh crore, and a revised estimate (or late-in-year projection) of a lower Rs. 18.5 lakh crore, actual revenue receipts are currently placed at just Rs. 16.8 lakh crore. This implies that the actual figure is more than 14 per cent short…

While forecasters grapple with predictions on the likely contraction in the world’s leading economies, big finance, especially in the US, seems to be prematurely preparing for its next celebration. Recall that while the post-2008 Great Recession was precipitated by the financial collapse triggered by unbridled speculation in financial markets, the subsequent ‘recovery’ from the crisis saved and rewarded finance, but left the real economy limping and workers and the middle class poorer and often homeless. As the US and the rest of the world got accustomed to a new normal of slower growth, financial companies returned to profit, speculative agents…

In a trend which sees equity markets in the “emerging economies” imitate stock markets in the US, the MSCI Emerging Market Index that collapsed over the month ending 23 March, from more than 1,100 to just above 750 (Chart 1), has since been on the rise, touching 930 by the end of May. An emerging market (EM) like India, which has been a favoured destination for foreign portfolio investors, has shown exactly similar trends (Chart 2). Over the month ending 23 March, the S&P sensitive index (SENSEX) capturing trends in the Bombay Stock Exchange had fallen sharply from more than…

Among the many damages wrought by the inapposite Central government policy response to the Covid pandemic in India is that on the fragile framework of economic cooperation between the Centre and the states. It is clear that the real task of mitigating the effects of the pandemic on the health and lives of citizens has fallen on the states. That is inevitable. As India prepares to lift the lockdown to stall the economic collapse it has caused and face the inevitable spike in the number Covid-positive cases, “the key to success … would be the preparedness of local governments in…

On May 12, Prime Minister Modi declared that the government, in response to the Covid-19 induced crisis, is about to unveil a Rs. 20 lakh crore relief and revival package amounting to 10 per cent of GDP. This announcement came more than seven weeks after the first response to the crisis in the form of the Gharib Kalyan Yojana, had been announced. Involving new and additional fiscal resources of far less than one per cent of GDP, that effort was seen as too meagre to be anything more than a hesitant first step. Given this fact, the human, social and…

On May 8, 45 days into the post-Covid lockdown, the central government, through a Finance Ministry statement, announced that its borrowing requirement for 2020-21 had been raised to Rs. 12 lakh crore, as compared with the Rs. 7.8 lakh crore projected in the budget. As of now, starting May 11, the Centre expects to be borrowing around Rs. 30,000 crore every week till September 25, as compared with a Rs. 19,000-21,000 crore planned for earlier. What would happen after September 25 is not clear as of now, but what is clear is that whether the central government likes it or…

As the times get tough, the big seem to the thrive. At a time when economies world over reel under the sudden stop triggered by the Covid-19 pandemic, India’s dominant business group Reliance Industries (RIL) and global social media major Facebook have announced a megadeal. Facebook has entered into a binding agreement to invest Rs. 43,574 crore ($5.7 billion) to acquire a 9.99 per cent stake in Jio Platforms, a wholly owned subsidiary of RIL. That investment amounts to one fourth the size of the package announced by India’s Finance Minister in response to the Covid-19 crisis. But this is…