National Income Accounting

National Income Accounting:

The sum of income taken from all sectors, including personal, business and government. Also called NNI.

The formula for calculating net national income is: NNI = C + I + G + NX + NFF - IT - D

Where: C = Consumption, I = Investments, G = Government spending, NX = Net exports (calculated by subtracting imports from exports), NFF = Net foreign factor income, IT = Indirect taxes, D = Depreciation.

National income(NNP fc) basically calculated in three ways :-

 

1. PRODUCT METHOD (Value added method):

Theory-only the value of final goods is to be included; otherwise there arises a problem of double counting.

Formula

value of output= Sales + change in stock

• Change in stock = closing stock – opening stock

• Gross value added (GDPMp)=Value of output - Intermediate consumption

• NNP Fc (N.I) = GDPMp (-) consumption of fixed capital (depreciation) (+) Net factor income from abroad ( -) Net indirect tax.

2. Income method:

Theory-Under this method, national income is measured as a flow of factor incomes.

Formula

NDP fc-Compensation of employees(1) +Operating surplus(2)*+Mixed income of self-employed(3)

Operating surplus=Rent & Royalty Interest ,Profit (Corporate Corporate dividend Tax Savings (Net retained earnings)

NDP fc = (1) + (2) + (3)

NNP fc = NDP fc + Net factor income from abroad

3.Expenditure method:

Theory-In this method, national income is measured as a flow of expenditure.

Formula

GDP mp =

1. Government final consumption expenditure.

2. Private final consumption expenditure.

3. Net Export.

4. Gross domestic capital formation*.

Gross domestic capital formation=Gross Domestic fixed capital formation + Change in stock

NNP fc = GDPmp - consumption of fixed capital + NFIA- Net indirect taxes

AFTER ONE YEAR- DEMONETISATION: Success & Failure

AFTER ONE YEAR

DEMONETISATION: Success & Failure

Demonetisation  represents the retirement or rejection of any note or currency from the economy to regulate the economy from a number of evil situations faced by the nation. Sometimes the demonetised note or currency is replaced by the same or different amount of other one.

The demonetization was announced by Mr Narendra Modi, the Prime Minister of India, on November 8, 2016 in a sudden and unscheduled live television address at 8PM. In the days following the demonetisation, the country faced severe cash shortages. The use of Rs.500 and Rs.1000 banknotes was made invalid past midnight of November 8. Instead new Rs.500 and Rs.2000 banknotes of the Mahatma Gandhi new series were introduced.

Success of Demonetisation:

 

* Rate of Inflation goes down

Prices of commonly consumed commodities like Pulses, fruits, vegetables had gone down substantially post demonetization. Accordingly it brought down the rate of inflation during the months that followed demonetization. The chart below represents the impact of demonization on the commodities

* India moves to cashless economy

One of the key effects of Demonetization 2016 has been that more people have made digital payments part of their lives moving towards a cashless economy. The details of growth of such digital transactions since January 2016 to August 2017 reflect that NEFT transactions that involved Rs. 7086 bn increased to Rs.12500 bn; Debit cards transactions increased from Rs.2328 bn to Rs. 2700 bn; credit cards from Rs. 214 bn to Rs.366bn and the IMPS transaction which was not used by the people, got a share of Rs.651 bn. 

* Stock Market gets bullish 

After demonetization stock market in India got bullish. While BSE index which was 27, 459 on November 7, 2016 rose to 33680.92 on November 6, 2017, the NSE rose from 8497 to 10,443. 

* Banks’ lending increases for small businesses

Banks’ finance to small business was going down in pre-demonetization period. There was a negative growth even in short period of months. As on November 25, 2016, a negative growth of -7.71% was recorded in Banks’ lending to small business. It went to -8.16% as on December 23, 2016. However, as on September 29, 2017 the Reserve Bank of India has reported a positive growth of 1.65% in lending to small business by the Banks.

* Automobile sales picked up

Sale of 2 wheelers and 4 wheelers was showing a negative growth in 2016. In 2017 it went up substantially and recovered from the impact of negative growth to high positive growth as reflected in the report.

  

* More people use Mobile wallets than cas

Instead of using cash, more people have started using Mobile wallets for making payments for their regular needs. Even less educated people have learned and switched over to mobile transactions. The volume of transactions which was Rs.22.14 bn in January 2016, had gone up to Rs. 83.53bn in January 2017.

Failures of Demonetisation:

* Economic Growth slows down

Post demonetization growth of Indian Economy slowed down from 9.1% to 5.7% in less than one year. Month-wise GDP growth chart for the period March 2016 to September 2017.

* Realty sector bears the brunt

The triple decisions of demonetisation, RERA and GST resulted in a deceleration of new property launches. The supply of new housing units in the top-6 cities in India during the first three quarters of 2017 was down by around 60 per cent, compared with the corresponding period of 2016.

With respect to property sales, the secondary market was obviously highly susceptible to demonetisation as compared to the primary market. Property transactions in the secondary sales and luxury housing segments tended to have significant cash components, and such sales have been hampered significantly due to demonetization.

* Which way to go in GD: Expert advice

You may get not more than 1 minute while speaking for or against or taking a balanced view on demonetization and its impact on economy. The only thing is that you should be well aware about the topic and only this can lead you to speak the way you think is right. Besides, once someone else is speaking you may carefully listen to him and later try to get in and speak out your view point. Please remember do not criss-cross your own stand.

2018 Union budget of India

Submitted to	Parliament of India
Presented	1 February 2018
Passed	1 February 2018
Parliament	16th (Lok Sabha)
Party	Bharatiya Janata Party (BJP)
Finance minister	Arun Jaitley
Total revenue	₹2,399,147 crore (US$380 billion)[1]
Total expenditures	₹2,920,484 crore (US$460 billion) (grand total)[2]
Program Spending	₹2,442,213 crore (US$380 billion) (through budget)[3]
Debt payment	₹575,795 crore (US$90 billion)[3]
Deficit	₹624,276 crore (US$98 billion)[4] (3.3%)[4] (Fiscal deficit) ₹416,034 crore (US$65 billion)[4] (2.2%)[4] (Revenue deficit)

Significant announcements:

• A special scheme to tackle air pollution in Delhi.
• A healthcare programme called 'National Health Protection Scheme' to cover 50 crore poor people.
• Government to contribute 12% Employees' Provident Fund for new employees for 3 years.
• Medical allowance and transportation allowance to be replaced by standard deduction of ₹40,000 (US$630) for salaried employees.
• No reduction in personal income tax rates.
• Cess on income tax increased from 3% to 4%.
• 10% tax imposed on income from equity-based mutual funds.
• Corporate tax reduced from 30% to 25% for companies with turnover upto ₹250 crore (US$39 million).
• Salaries of Members of Parliament to be increased every 5 years.
• Customs duty on mobile phones increased from 15% to 20%.

BUDGET>>>  WINNERS & LOSERS

• 2018 Budget- WINNERS:

Farmers
Distressed farmers have been protesting across the country. This budget promises to raise the minimum price offered to farmers for crops, while investing heavily in agricultural markets across India. It also delivers more money for rural areas, including irrigation projects and aquaculture projects, and directs state governments to purchase extra solar power generated by farmers using solar-powered pumps. Agriculture-focused companies such as Shakti Pumps India Ltd., Jain Irrigation Systems Ltd., KSB Pumps Ltd., Kirloskar Brothers Ltd., Avanti Feeds Ltd., Waterbase Ltd., JK Agri Genetics Ltd., PI Industries LtdBSE -1.76 %. could benefit.

Health Care Providers
The government's new flagship National Health Protection Scheme, which aims to insure as much as 500 million people for up to 500,000 rupees a year of care, could benefit companies such as Apollo Hospitals Enterprise Ltd., India's largest hospital company, as well as Fortis Healthcare Ltd.

Transport Companies
With Jaitley promising record infrastructure spending on roads and railways, construction and engineering firms, as well as train wagon-producers, could benefit. That includes Larsen & Toubro Ltd., Hindustan Construction Co Ltd., NCC Ltd., IRB Infrastructure Developers Ltd., Dilip Buildcon Ltd., Titagarh Wagons Ltd., and Cimmco Ltd.

Consumer Companies
With boosted spending on India's vast hinterland, fast-moving consumer goods companies such as Hindustan Unilever Ltd., Britannia Industries Ltd. and Marico Ltd. could benefit as day laborers get jobs and disposable income. Other companies with rural exposure include: Hero MotoCorp Ltd., Mahindra & Mahindra Ltd., Larsen & Toubro Ltd.

Jewelers
With 60 percent of gold demand coming from rural India, the budget's focus on boosting rural and farm incomes could benefit companies such as Titan Co Ltd., Tribhovandas Bhimji Zaveri Ltd., PC Jeweller Ltd.

Airports
With the government pledging to expand regional airport construction, firms such as GMR Infrastructure Ltd. and GVK Power & Infrastructure Ltd. could benefit.

• 2018 Budget-LOSERS

Bond Investors
Bond investors drew some relief from a lower than expected borrowing program. Nevertheless, the relief could prove short-lived. India missed its fiscal deficit target of 3.2 percent, saying its targeting a 3.5 percent target for fiscal 2019. Big bond investors such as India's state-owned banks could be hit as yields go even higher than the the 96 basis points they climbed in the past six months, the most in Asia. Shares of HDFC Bank Ltd., ICICI Bank Ltd., Axis Bank Ltd., State Bank of India, Bank of Baroda and Punjab National Bank might be affected.

Financial Sector
The government's decision to impose long-term capital gains tax on equity investments may dent investor sentiment for financial services companies, life insurers and providers of mutual fund products including IDFC Ltd., Reliance Capital Ltd.BSE -9.60 %, Aditya Birla Capital Ltd., ICICI Prudential Life Insurance Co Ltd., HDFC Standard Life Insurance Co Ltd., General Insurance Corp of India

Defense Sector
Jaitley praised the armed forces and promised an industry-friendly policy to promote defense production as he addressed parliament. But there was no indication of a huge boost to defense spending. Companies such as Bharat Forge Ltd. may not see a boost. 

GST: Something to get informed......

What is GST?

‘G’ – Goods
‘S’ – Services
‘T’ – Tax

“Goods and Service Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and service at a national level under which no distinction is made between goods and services for levying of tax. It will mostly substitute all indirect taxes levied on goods and services by the Central and State governments in India.

GST is a tax on goods and services under which every person is liable to pay tax on his output and is entitled to get input tax credit (ITC) on the tax paid on its inputs(therefore a tax on value addition only) and ultimately the final consumer shall bear the tax”.

  Goods and Services Tax (GST) is an indirect tax levied in India on the sale of goods and services. Goods and services are divided into five tax slabs for collection of tax - 0%, 5%, 12%,18% and 28%. Petroleum products and alcoholic drinks are taxed separately by the individual state governments. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold.^[1] In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products

GST Rates as on 07 November 2017

The GST council on Friday announced major cuts in taxes of 27 items along with a slew of relief measures to support exporters and small businesses. Here are some items that are set to get cheaper under GST:

Description	Present GST Rate	New GST Rate
Mangoes sliced dried	12%	5%
Khakra & plain chapati / roti	12%	5%
Packaged Food	18%	5%
Namkeens	12%	5%
Ayurvedic, Unani, Siddha, Homeopathy medicines	12%	5%
Poster Color	28%	18%
Modelling Paste for children amusement	28%	18%
Plastic Waste, Pairing & Scraps	18%	5%
Rubber Waste, Paring & Scrap	18%	5%
Hard Rubber Waste	28%	5%
Paper Waste & Scrap	12%	5%
Duty Credit scrips	5%	Nil
Sewing thread of manmade filaments	18%	12%
All synthetic filament yarn, such as nylon, polyester, acrylic	18%	12%
All artificial filament yarn, such as viscose rayon, cuprammonium	18%	12%
Sewing thread for manmade staple fibres	18%	12%
Yarn of manmade staple fibres	18%	12%
Real Zari	12%	5%
Floor Tiles	28%	18%
Cullet or other waste of glass	18%	5%
Fittings for loose leaf binders, or files, letter clips, letter corners, paper clips, staple in strips,	28%	18%
Plain shaft bearing 8483	28%	18%
parts suitable for use solely or principally with fixed speed diesel engine of power not exceeding 15HP	28%	18%
parts for Pumps	28%	18%
E-waste	28% / 18%	5%
Biomass briquettes	18%	5%

GST Advantages and Disadvantages

The GST is a Value added Tax (VAT) is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by the Indian Central and State governments. Though GST is considered to be a historical tax reform in India, it also has some demerits. We here would look into GST Taxation and deal with its advantages and disadvantages.

GST Advantages

1. GST is a transparent tax and also reduce number of indirect taxes.
2. GST will not be a cost to registered retailers therefore there will be no hidden taxes and and the cost of doing business will be lower.
3. Benefit people as prices will come down which in turn will help companies as consumption will increase.
4. There is no doubt that in production and distribution of goods, services are increasingly used or consumed and vice versa.
5. Separate taxes for goods and services, which is the present taxation system, requires division of transaction values into value of goods and services for taxation, leading to greater complications, administration, including compliances costs.
6. In the GST system, when all the taxes are integrated, it would make possible the taxation burden to be split equitably between manufacturing and services.
7. GST will be levied only at the final destination of consumption based on VAT principle and not at various points (from manufacturing to retail outlets). This will help in removing economic distortions and bring about development of a common national market.
8. GST will also help to build a transparent and corruption free tax administration.
9. Presently, a tax is levied on when a finished product moves out from a factory, which is paid by the manufacturer, and it is again levied at the retail outlet when sold.
10. GST is backed by the GSTN, which is a fully integrated tax platform to deal with all aspects of GST.

GST Disadvantages

1. Some Economist say that GST in India would impact negatively on the real estate market. It would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent.
2. Some Experts says that CGST(Central GST), SGST(State GST) are nothing but new names for Central Excise/Service Tax, VAT and CST. Hence, there is no major reduction in the number of tax layers.
3. Some retail products currently have only four percent tax on them. After GST, garments and clothes could become more expensive.
4. The aviation industry would be affected. Service taxes on airfares currently range from six to nine percent. With GST, this rate will surpass fifteen percent and effectively double the tax rate.
5. Adoption and migration to the new GST system would involve teething troubles and learning for the entire ecosystem.

GST Rates Structure

Tax Rates	Products
0%	Milk	Kajal
	Eggs	Educations Services
	Curd	Health Services
	Lassi	Children’s Drawing & Colouring Books
	Unpacked Foodgrains	Unbranded Atta
	Unpacked Paneer	Unbranded Maida
	Gur	Besan
	Unbranded Natural Honey	Prasad
	Fresh Vegetables	Palmyra Jaggery
	Salt	Phool Bhari Jhadoo
5%	Sugar	Packed Paneer
	Tea	Coal
	Edible Oils	Raisin
	Domestic LPG	Roasted Coffee Beans
	PDS Kerosene	Skimmed Milk Powder
	Cashew Nuts	Footwear (< Rs.500)
	Milk Food for Babies	Apparels (< Rs.1000)
	Fabric	Coir Mats, Matting & Floor Covering
	Spices	Agarbatti
	Coal	Mishti/Mithai (Indian Sweets)
	Life-saving drugs	Coffee (except instant)
12%	Butter	Computers
	Ghee	Processed food
	Almonds	Mobiles
	Fruit Juice	Preparations of Vegetables, Fruits, Nuts or other parts of Plants including Pickle Murabba, Chutney, Jam, Jelly
	Packed Coconut Water	Umbrella
18%	Hair Oil	Capital goods
	Toothpaste	Industrial Intermediaries
	Soap	Ice-cream
	Pasta	Toiletries
	Corn Flakes	Computers
	Soups	Printers
28%	Small cars (+1% or 3% cess)	High-end motorcycles (+15% cess)
	Consumer durables such as AC and fridge	Beedis are NOT included here
		Luxury & sin items like BMWs, cigarettes and aerated drinks (+15% cess)