Thoughts on Universal Basic Income

Consider the government has decided to give money to every citizen in its country every month unconditionally. By unconditionally I mean you don’t have to do anything at all! Sounds like a fantasy right? Well not really. The idea of universal basic income has been floating around for decades and there are several places where this idea is being currently tested.

Let me explain why this idea is worth considering.

First, let’s agree on some common things. The reason majority of the people go to work is because they need money to pay their monthly bill. So with Universal Basic Income in place, those who are truly passionate about something can follow them without having to do a mundane job.

Well one might argue that most of the population will stop working if they are given free money. Let me ask you something, will you stop working if I give you Rs.5000 every month? Of course not. Universal basic income ensures that every citizen has enough money to meet his basic needs but not lead a luxurious life. So even with universal basic income in place, I am sure 99% of the people will still go to their job.

Then one might wonder why bother giving money to everyone if 99% of the people end up going to their same old work. The whole universal basic income concept is all about empowering the remaining 1%. It was always that one person who made a revolutionary discovery and not the majority of the population.

But for that 1% to unleash their true potential they should have enough free time and the only way to ensure they get free time is through Universal Basic Income. Moreover, this will also reduce the female infanticide, farmer suicide and most of the social evils drastically.

Next question is how will the government pay for all of this? Switzerland has already voted on Universal Basic income (Although the people rejected the proposal ). But with most jobs getting replaced by machines, Universal Basic Income will be viewed seriously in a couple of decades rather than a Utopian fantasy.

This is what will happen if Universal Basic Income is implemented in Rocky’s world.

---

Want more content like this? Register for free site membership to get regular updates and your own personal content feed.

#UniversalBasicIncome #Vihara #Economy #studyhall #Annanagar #chennai #UnionBudget #UPSC #Prelims2019 #TNPSC

Insolvency and Bankruptcy Code: What's all the noise about?

There have been major debates, whether the implementation of IBC is a boon or a bane

The Government of India implemented the Insolvency and Bankruptcy Code (IBC) to consolidate all laws related to insolvency and bankruptcy and to tackle Non-Performing Assets (NPA)— a problem that has been pulling the Indian economy down for years.

About one year ago, India’s NPA ratio was higher than any other major emerging market (with the exception of Russia), higher even than the peak levels seen in Korea during the East Asian crisis. Sectors such as energy and infrastructure, metals and mining, procurement, construction, and so on, in particular, had taken hits and showed signs of weakness. Making things worse, India’s crème-de-la-crème thought they could walk away from their debts without facing any consequences.

The Code provides an order of priority to distribute assets during liquidation. 

It is unclear why: (i) secured creditors will receive their entire outstanding amount, rather than up to their collateral value, (ii) unsecured creditors have priority over trade creditors, and (iii) government dues will be repaid after unsecured creditors.

Supreme Court upholds Bankruptcy Code, rejects promoters' challenges 

The Supreme Court on Friday upheld the constitutional validity of the Insolvency and Bankruptcy Code (IBC) in its entirety. The IBC law was passed in 2016 to prevent defaulting promoters from regaining control of their companies.

While upholding the law, a bench led by Justice RF Nariman rejected the plea to give operational creditors parity with financial creditors. On related parties, the apex court said that it should mean a person connected with the business.

The order also upheld the Section 29A of the IBC which bars promoters of a company facing insolvency proceedings from bidding for it to regain control.

Success Of IBC, 2016.

the total flow of resources to the commercial sector in India, both bank and non-bank, and domestic and foreign (relatable to the non-food sector), has gone up from a total of Rs 14,530.47 crore in FY17 to Rs 18,469.25 crore in FY18 and to Rs 18,798.20 crore in the first six months of FY19. These figures show that the IBC is largely successful.

According to legal observers, the SC order is a setback for the Essar Group promoters, Ruias, who have offered to clear all dues to regain control of Essar Steel. Otherwise, ArcelorMittal’s bid of `42,000 crore has been approved by the committee of creditors. A final ruling on this matter is pending before the Ahmedabad bench of the National Company Law Tribunal, which is expected to give its order on January 31.

According to statistics, India is ranked 103 in the World Bank’s rankings of how nations handle insolvencies. Before the introduction of IBC, it took companies about four to five years to dissolve its operations; the number has dropped drastically to a year. This has not only increased the ease of doing business but also imbibed a stronger sense of trust in lenders and investors.

India’s Economy is on the higher side compared to China. As per IMF Estimates, India Growth Rate Would be 7.5 & 7.7 for 2019 and 2020 respectively.

Read More at : https://www.viharastudyhall.com/post/india-to-be-top-emerging-economy-in-2019-2020

There have been major debates, whether the implementation of IBC is a boon or a bane. Or is it just a great move with teething problems. Historically, the entire process of insolvency and liquidation has always been in the hands of the shareholders and debt holders. Generally, by the time the entire process was over, the assets were eroded with very little left for distribution.

All in all, the IBC seems to be in its elementary stage, backed by a strong structure and framework. The government is continuously evolving and bettering the provisions of the code; furthermore, the Supreme Court (SC) has also amended it multiple times already.

The general belief is that it will certainly enable banks to take early legal steps. The aim of the IBC is to develop a proper insolvency resolution process, which focuses on resolution and not become a recovery mechanism. Now, it seems to be a work in progress, with better future prospects if it overcomes its present obstacles, plugs gaps and tackles important issues.

The Insolvency and Bankruptcy Code is

a comprehensive and systemic reform, which will give a quantum leap to the functioning of the credit market. It would take India from among relatively weak insolvency regimes to becoming one of the world’s best insolvency regimes. It lays the foundations for the development of the corporate bond market, which would finance the infrastructure projects of the future. The passing of this Code and implementation of the same will give a big boost to ease of doing business in India.

Reference: Forbes India, Finance Express, ET.

#Finance #Economy #Yojana #2019 #prelims #upsc #tnpsc #Group1 #Group2Mains

#Budget #IBC #SupremeCourt #Essar

Support our Blog by subscribing to Vihara here. We welcome your comments at aspirantsabode@viharastudyhall.com

Black, dream, rollback: How Budgets got their names

Black, dream, rollback: How Budgets got their names

Every Budget has a personality. It could try to please all, punish a particular section, present a radical future vision, or disappoint everyone. The Budgets that stand out for their unique aspects get tags that describe them succinctly. Black Budget, Rollback Budget and Dream Budget are some of the Budgets that are remembered for their uniqueness. 

Black Budget 

Yes, it was grim enough to deserve this tag. Yashwantrao B. Chavan, the finance minister in the Indira Gandhi government, presented this Budget in 1973. The darkest part of his Budget was a deficit of Rs 550 crore. There was another reason it could have attracted the 'black' tag : it proposed to nationalise the coal mines. This was to allow uninterrupted supply of coal in line with the growing demand for coal in industries like power, cement and steel. However, the Budget hit coal production in the long run and India had to depend on coal imports. 

Rollback Budget

It was the infamous Budget 2002-03 by Yashwant Sinha, finance minister in then NDA government, that came to be called the Rollback Budget due to Sinha buckling under pressure of the opposition parties and within his own to roll back several proposals. Sinha had raised PDS prices of LPG, kerosene and sugar, cut interest rates for small savings, reduced subsidy on fertilisers and income-tax rebate under Section 88. Due to populist pressures, Sinha had to roll back several of his proposals. However, he was able to rescue some key structural changes introduced in the Budget such as taxing dividend incomes in the hands of investors and linking small saving rates to market-determined rates of interest. 

Dream Budget

In 1997, P Chidamabram — then a member of Tamil Manila Congress and the finance minister in the HD Deve Gowda government — presented what came to be known as the Dream Budget. Chidambaram heavily slashed income and corporate taxes with an eye on increasing compliance. The economic theory of Laffer Curve sets up a relationship between rates of taxation and the government revenue. A general interpretation means raising taxes cannot be a surefire way to raise revenues. Chidambaram's cut in corporate taxes was in the hope that it would increase tax compliance as high rates had proved to be discouraging. Chidambaram abolished the surcharges on corporate tax and reduced the tax rate to 35 per cent. He also cut the peak rate of customs duty from 50 per cent to 40 per cent.

What is the Laffer Curve?

The Laffer Curve is a theory developed by supply-side economist Arthur Laffer to show the relationship between tax rates and the amount of tax revenue collected by governments. The curve is used to illustrate Laffer’s main premise that the more an activity — such as production — is taxed, the less of it is generated. Likewise, the less an activity is taxed, the more of it is generated.

Laffer- Curve

The Deve Gowda government fell a month later. Though the immediate impact of Chidambaram's revolutionary move could not be gauged as the Asian crisis besieged the economies in the region, his tax cuts did have a positive impact on the economy in the long run. In fact, his 1997 Budget was seen in continuation of the reforms and liberalisation ushered in by Manmohan Singh during the PV Narsimha Rao government in 1991 

#Finance #Economy #Yojana #2019 #Atal #GokulMission #Schemes #prelims #upsc #tnpsc #Group1 #Group2Mains #LafferCurve #Budget #Economictimes

Support our Blog by subscribing to Vihara here. We welcome your comments at aspirantsabode@viharastudyhall.com