Retrospective taxes, cancellation of coal blocks among reasons behind decline in private investments: Shamika Ravi

India has been reeling under economic slowdown, with now largely an unanimous acceptability the debate now surrounds the core reason behind the GDP growth rate reading 5 per cent for the first quarter of FY20.

While India’s former Chief Statistician Pronab Sen believes that demonetisation was the “initial trigger”, Shamika Ravi – PM’s Econ. Advisory Council believes the problems stem back to India’s Former Minister Pranab Mukherjee’s 2012 decision to introduce retrospective taxes and Supreme Court’s cancellation of coal block allocation since 1993.

Ravi on Monday, September 9 Tweeted “Objective of economic reform is to reduce policy uncertainty in the economy,” she further adds, “Private investments in India have been declining since 2012: after Pranab Mukherjee’s retro taxes and then SC cancellation of all coal block allocations since 1993(!)…anyone estimated growth foregone?”

In a subsequent Tweet, the Research Director at Brooking India, referring to an yearly “bank credit to Power sector(in INR billions)” graph, said, “Bank #NPA story can be explained by the following graph major growth of bank exposure to power sector (after 1998 reforms) making India a power surplus economy. Then suddenly SC cancels almost all coal block allocations since 1993. Overnight.”

In 2012, Pranab Mukherjee, proposed to amend Income-Tax Act, 1961 with retrospective effect to tax Vodafone-type merger and acquisition deals done overseas involving domestic assets. The decision was heavily criticised by economists.

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While two years later, in 2014, the Supreme Court pulled up the Centre on coal block allocations declaring more than 218 allocations made from 1993 to 2011 illegal.

A Bench of Chief Justice RM Lodha, Justices Madan Lokur and Kurian Joseph said the entire allocation of coal blocks as recommended by the Screening Committee from 1993, and the allocation made through government’s dispensation route suffered from legal flaws.

In its 163-page judgment, the Bench wrote, “As we have found that the allocations made, both under the Screening Committee route and the government dispensation route, are arbitrary and illegal, what should be the consequences is the issue to be tackled. To this limited extent, the matter requires further hearing. The Screening Committee has never been consistent, it has not been transparent, there is no proper application of mind.”

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