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Monday,27-September-2021

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Kerala’s economy will be hit hard: Finance Minister Thomas Issac

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Kerala Finanace Minister Thomas Issac, a former professor of economics feels times ahead are going to be critical as the world comes out of the Covid-19 crisis.

He points at an unprecedented recession in India with Kerala’s economy to be one of the worst hit.

A comparatively late entrant into the field of politics at 49 then, still a teacher of economics at the Centre for Development Studies, whose first pet project was People’s Plan Campaign, has been cut up with the Centre as Kerala’s financial crisis has worsened.

With Covid-19 striking hard, IANS caught up with the 67-year-old Minister, who feels getting back to normal times will not happen anytime soon. He bats for stimulus package and proposes borrowing 5 per cent of the GDP from the RBI and allowing half of it to be given to the states.

As for the state, he feels the Pinarayi Vijayan government has done well even within a month, looking ahead he feels Kerala should dig deep into it’s healthcare image — pharmaceuticals, nurses training, etc.

Here are excerpts from the interview:

Q: Can you please explain what this Covid-19 would be for the country in general and Kerala in particular?

A: India’s economy will shrink by 10 per cent and this will lead to the biggest recession, the country has ever witnessed. With regards to Kerala, its economy would be worse than the country’s, as the remittances will take a huge beating leading to reverse multiplier effect.

Q: How long do you think this crisis would last ?

A: You can safely forget this fiscal, for sure and it should be the same globally too.

Q: What’s the way out for this crisis and what would be a prudent handling of finance?

A: The Centre should borrow 5 per cent of the GDP from the Reserve Bank of India and give half of it to the states. The rest should be used by the Centre for a stimulus package. The Centre should transfer Rs 7,500 to each and every Jan Dhan account, besides give 50 per cent of the potential last year’s wages paid under the rural employment guarantee scheme as advance. This can be adjusted during the year.

Q: What else?

A: The Centre should introduce a universal pension scheme. With regards to the MSME sector there should be a moratorium on all loans for a year with the Centre bearing the interest burden. The banks should be asked to provide 25 per cent for working capital.

Q: There are reports that companies might move from China. Do you think that will benefit India?

A: I seriously doubt about that as China is hugely mechanised and India just cannot match that. Other South East Asian countries might get an advantage. Perhaps, labour intensive units might look towards India.

Q: What steps have you taken to see Kerala does not fall deeper into trouble?

A: We have already pumped Rs 20,000 crores into our economy which includes payment to small time contractors. This money effectively circulates in our economy. Rs 8,500 each have been paid to people as social pension that is worth Rs 4,500 crores. Besides we have paid Rs 1,000 each to all people who do not fall into any pension list. Just take a look around and see, things after a month appear to be stable. By the end of May we will settle all out standings that are due to people under various schemes and heads. I think we have done a good job.

Q: What about Kerala and its prospects in the aftermath of Covid-19?

Ans: The biggest advantage Kerala has is its hugely popular ‘Kerala health brand’. It is in that our state should tap into sectors like pharmaceuticals and medical devices. Urgent steps have to be taken by our Industries Department to set up pharma and medical devices park. Our state-run Kerala State Drugs and Pharmaceuticals can take the lead and we are planning to make it a Rs 200 crores company, to make use of the Kerala brand image.

There is also a huge scope for Kerala nurses and the need of the hour is to train and keep ready about 25,000 nurses. They should be professionally trained by sending them to finishing schools and get them certification ready. The potential worldwide is huge and we will do everything to tap this.

Q: In Kerala, everything is linked to politics. Do you think the Left government has walked into the hearts of the people?

A: Yes, we feel that people do appreciate what we have done. Chief Minister Pinarayi Vijayan has been able to carry everyone along. The first signs that we have done well will be reflected in the local bodies election. The opposition here has been taking a negative stand. If they have any sense, they should join in bringing solace to the people, if not they will be isolated. I feel they are on the wrong track.

Business

IFIN to sell 62 NPA accounts worth Rs 4.3K cr

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 IL&FS Financial Services (IFIN) has put its non performing asset (NPA) portfolio of approx Rs 4,300 crore up for sale as part of plan to bring down overall group level debt.

The sale of NPA would be done under Swiss Challenge with the new board already having received a binding bid.

Under this method of bidding, the seller who have already received a bid, publishes the bid and invite third parties to match or better it. The process also allows the entity which submitted the first bid then to match or better the best bid which comes out of the Swiss challenge process.

IFIN’s sale of NPA book includes 62 accounts aggregating to total outstanding principal of Rs 4,297 crore. Bids have been invited from eligible applicants for purchasing the entire sale asset book comprising all of the 62 accounts.

The public process of inviting bids was launched on Monday and the sale would be concluded on cash consideration basis. The last date for submission of bids is October 19, 2021.

IFIN has an asset under management of around Rs 18,000 crore involving external and internal loans and investments.

The sale of external corporate loans is part of the resolution process of the overall debt.

IFIN is a 100 per cent subsidiary of IL&FS and is registered with the Reserve Bank of India as a systemically important non-deposit accepting non-banking finance company.

IL&FS group had total outstanding debt over Rs 90,000 crore. The new team is resolving some these through a strategy of asset sale and combing resources of other entities.

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Business

Service given by corporate offices to their branches taxable

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In what may pose challenge to companies having wider spread of employees and branches all across the country, an authority for advance ruling (AAR) had said that managerial and leadership services by a corporate office to its group companies and other construction sites registered in different states is considered as supply of service and would be taxable under GST.

This would mean companies having separate GST registration for its head offices and branches would need to pay GST on the services that a head offices gives to its branches and receive payment for it.

The order on the issue came from Maharashtra AAR or MAAR on application filed by Pune-based B.G. Shirke Construction Technology Private Limited.

The company supplied managerial and leadership services to its branch office and group companies, and received fixed monthly charges from each of them. It asked MAAR whether it is liable to pay tax on such service which gave its order on affirmative going by a similar order given Karnataka AAR on a separate application. This application is now pending before the Karnataka High Court.

Though AAR orders are valid only for the applicants, tax officials use it for other matters as well. These timings also form the basis for amendment to rules of taxation

According to the tax experts, the present ruling with respect to head offices and their branch operations would create a lot of confusion over the issue of valuation of services rendered and valuation taxes.

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Business

India needs 4-5 more SBI sized banks: FM

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 India needs a lot more banks and a lot more large sized ones to meet the growing needs of the country needs in the path of making a smart recovery post pandemic disruptions, Finance Minister Nirmala Sitharaman said on Sunday.

Speaking at 74th Annual General Meeting of Indian Banks’ Association at Mumbai, Sitharaman said there was an urgent need to scale up banking to meet the growing needs of the industry and also to ensure that all economic centres of the country are covered with at least one physical or digital banking presence.

“We need to scale up banking. The need is for at least four-five more SBI sized banks,” she said, while reminding that the amalgamation exercise among public sector banks have helped in moving ahead with creation of large banks.

Having done two rounds of bank consolidation earlier, the Central government in 2019 decided to merge six disparate and weak PSBs into four in one stroke.

Accordingly, Punjab National Bank (PNB) took over Oriental Bank of Commerce and United Bank of India; Allahabad Bank became part of Indian Bank; Canara Bank subsumed Syndicate Bank; and Andhra Bank and Corporation Bank merged with Union Bank of India. Earlier, State Bank of India (SBI) with five of its associate banks while Vijaya Bank and Dena Bank were merged with Bank of Baroda.

Sitharaman lauded the efforts of the PSBs to see through that the amalgamation of banks during the pandemic period was completed without any inconvenience to customers.

She said that that in the post pandemic world, hanks would need to change their mindset and the way they conduct their businesses.

Digitisation, the Finance Minister said has changed a lot of how businesses are done and banks will now need to think futuristically and keep pace with evolving technology.

Sitharaman also asked the IBA to conduct a digitised mapping of each district of the country with regard to presence of bank branch operation and their location. This, she said, would help to plug areas of gaps with no banking presence effectively.

“Not necessary to have physical banking presence everywhere. The country’s optic fibre network has covered two-third of about 7.5 lakh panchayats. This could be used to deliver banking services in unconnected areas as well,” the Finance Minister said.

She also asked banks to develop models and better understanding of businesses focused on exports as country has set a $2 trillion export target by 2030.

With regard funding for the infra sector, she said that a government sector development financial institution (DFI) is coming up soon.

Sitharaman said that Indian economy is at a critical stage of a reset and banks would form the backbone for it by providing best of the financial services.

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