In The Media ⁽⁴⁰⁰⁾

Read full article Abstract: Deep down, perhaps the most important factor that concerned Indian negotiators of the Regional Comprehensive Economic Partnership (RCEP) was the threat of competition from China. India has a large existing bilateral trade deficit with China and it was feared that opening to it under RCEP would widen this deficit yet further. A related concern was that an avalanche of new Chinese goods would hit Indian markets, undermining its manufacturing sector and Make in India programme. Examine first the issue of bilateral trade deficit. Setting politics aside for the moment, as long as a country’s trade in goods and services is balanced in aggregate, economic logic tells us that bilateral deficits and surpluses should not be a matter of concern. There are nearly 200 countries in the world and each of them strives to buy its imports from countries that charge it the lowest prices and sell its exports to countries that offer it the highest prices. It will be a wonder if these myriad transactions result in mutually balanced trade for each pair of countries. To understand the…

RCEP would have been an easier agreement for India to sign, as compared to any other pacts with US or EU.Read full article Earlier this week, India announced that it was dropping out of the Regional Comprehensive Economic Partnership (RCEP). Its exit came amid a wide array of assertions from commentators — with some claiming that India’s past trade agreements had harmed its economy and that RCEP would do worse, others going further to demand a return to the inglorious days of ‘selfsufficiency’, and yet others insisting that the withdrawal reflected the weakness of the government against the efforts of protectionist lobbies. What were the actual outcomes under India’s past trade agreements? Did they hurt the Indian economy? What lessons do they hold for India with respect to RCEP or other future trade deals?

Partially motivated by efficiency considerations, but largely driven by fiscal squeeze, the government has made some progress in cutting its stake in PSEs since the launch of reforms in 1991.Read full article There is broad agreement among economists that governments should only enter activities that serve a public purpose. Defence, education, health, infrastructure and poverty-reduction programmes fulfil this condition. With some exceptions, manufacturing and services do not. For instance, government manufacturing steel or running hotels serves no public purpose. Instead, this public money could be freed up for investments in infrastructure or education, with private firms filling the gap in the manufacture of steel and running of hotels. Indeed, not having the luxury of the government underwriting their losses and having to compete in the marketplace, private enterprises have agreater incentive to improve efficiency and cut costs.

Read full article Abstract: In what is arguably one of the boldest reforms in the last 20 years, finance minister Nirmala Sitharaman has cut the effective tax rate on corporate profits from approximately 35% to 25.2% for existing domestic companies and 17% for new manufacturing companies established before October 31, 2023, provided the companies take no exemptions. For existing companies, the tax rate is now below or equal to those in Japan, South Korea, China, Indonesia and Bangladesh though higher than those in Taiwan, Thailand, Vietnam and Singapore. For new manufacturing companies, the tax rate equals that in Singapore but is below those in all other countries just named. By putting an end to exemptions, the government has greatly simplified the corporate profit tax system and thus eliminated numerous sources of bribes, harassment and tax disputes. Provided the government does not let exemptions slip back into the system, it would have limited future tax disputes to reporting of revenues and costs. Tax inspectors will no longer be able to harass enterprises and extract bribes from them by questioning the exemptions…

Modi could follow the model he himself pioneered in the Special Economic Zones in Gujarat back in 2004.Read full article In what is arguably one of the boldest reforms in the last 20 years, finance minister Nirmala Sitharaman has cut the effective tax rate on corporate profits from approximately 35% to 25.2% for existing domestic companies and 17% for new manufacturing companies established before October 31, 2023, provided the companies take no exemptions. For existing companies, the tax rate is now below or equal to those in Japan, South Korea, China, Indonesia and Bangladesh though higher than those in Taiwan, Thailand, Vietnam and Singapore. For new manufacturing companies, the tax rate equals that in Singapore but is below those in all other countries just named. By putting an end to exemptions, the government has greatly simplified the corporate profit tax system and thus eliminated numerous sources of bribes, harassment and tax disputes. Provided the government does not let exemptions slip back into the system, it would have limited future tax disputes to reporting of revenues and costs. Tax inspectors will no…