Seventh Pay Commission payout: Finding the ‘missing $15 billion’ in Budget 2016

This piece originally appeared on Livemint.com

 

A Bloomberg report on Wednesday titled “Missing: $15 billion lost somewhere in India’s 1,500-page budget” raised a red flag on the Indian government’s balancing of its books in Budget 2016. It pointed out how the global financial data provider and other analysts were unable to locate the numbers allocated for implementing the recommendations of the Seventh Pay Commission (SPC), which doles out the once-in-10-years pay hike given to central government employees. The allusion was the government may have understated this payout—and, by extension, its deficit.

We tried to locate those “missing” numbers in the same budget documents. First, we need to know how much it will cost the government to implement the SPC recommendations. The estimate for 2016-17 by the SPC is a 24% increase in payouts to government employees, or Rs.102,100 crore (around $15 billion).

 

g_mission1_web

 

The first place to look for is under non-plan expenditure, and a table titled “Estimated strength of establishment and provision thereof”. This details how many employees are there in 56 government departments (excluding defence) and how much the government has budgeted to pay their salaries: an increase ofRs.65,690 crore in 2016-17. Thus, we have accounted for around 65% of SPC’s impact.

 

g_mission2_web

 

The second place to look for is pensions, the details of which are again provided under non-plan expenditure. This shows the government has budgeted for an increase of Rs.37,066 crore.

 

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Thus, the total increase in salary and pension bill in 2016-17 is Rs.102,756 crore. However, there is one rider. The pension liabilities include increased outgo on account of implementing the One Rank One Pension (OROP) scheme.

Implementing OROP is estimated to cost the government Rs.7,500 crore. Deducting this amount means the government has budgeted Rs.95,256 crore to meet SPC recommendations. In other words, the net shortfall in budget estimates on account of implementing the SPC is Rs.6,844 crore.

What’s “missing” is $1 billion and not $15 billion.

 

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News in numbers, Feb 4, 2016: Two possible zika vaccines from India, annual cost of OROP…

 

2

What is it? Number of possible vaccines Bharat Biotech, an Indian biotechnology company is working on to fight zika virus.

Why is it important? There is currently no cure or treatment for the virus declared as a global health emergency by the World Health Organisation, and linked to birth defects. France-based Sanofi and Japan’s Takeda Pharmaceutical have recently announced they are working on developing a vaccine for the disease.

Tell me more: The virus spreading in Americas can also hit Africa and Asia, according to WHO. The Indian Council of Medical Research, the apex body for biomedical research, has assembled a team of experts to validate Bharat Biotech’s findings. The company says they are probably the first ones in the world to file for global patents for zika vaccine candidates.

 

54.3

What is it? Nikkei’s Services Purchasing Managers’ Index (PMI) in January, a composite indicator of India’s services based on a survey by Markit, a financial information and services company. It increased from 53.6 in December.

Why is it important? This is the highest in 19 months. However, it’s below the levels before the 2008-09 global financial crisis, indicating India’s vulnerability in the wake of economic slowdown in Asian and emerging markets.

Tell me more: The growth in new business was at a 11-month high of 54.1 in January from 53.8 in the previous month.

 

300-400

What is it? Number of physical bookstores Amazon plans to open, according to a US mall operator.

Why is it important? Amazon has been the predominant force behind putting physical bookstores out of business.

Tell me more: Traditional bookstores’ online ventures have proven to be no match for Amazon so far. It remains to be seen if Amazon can do well in a segment that it helped destroy. It opened its first store in Seattle last November and stacks books based on customer ratings and popularity on its website. At that time, the company had said it had used its 20 years of bookselling experience to “build a store that integrates the benefits of offline and online book shopping”. Barnes & Noble, one of the few biggest chains of bookstores in the US, has 640 retail outlets.

 

50 years

What is it? The age below which women are advised not to go for mammography (specialised imaging system to examine breasts), according to the International Agency for Research on Cancer (IARC).

Why is it important? Mammography tends to cause harm due to false positive results, overdiagnosis and possibly radiation-induced cancer. But evidence show it is effective in reducing breast cancer mortality in women aged 50-69 years and not in the younger age band of 40-49 years. The benefit of reduced mortality extends for women aged 70-74.

Tell me more: Women in the lower age group could continue to do breast self-examination and an annual clinical examination but there is no proof that these had helped in reducing breast cancer mortality, according to Dr Surendra Shastri, who heads the WHO Collaborating Division for Cancer Prevention.

 

Rs 7,500 crore

What is it? Annual cost of implementing the one rank, one pension scheme (OROP), according to the government.

Why is it important? Earlier it was estimated by the government to cost Rs 8,300 crore. Analyst estimates in September last year were even higher – HSBC (Rs 16,000 crore) and Nomura (Rs 10,000 crore). Both had said the OROP scheme would add to India’s fiscal burden, while the Indian government has maintained that it will not have a huge cost burden. Analysts will pore over the documents to see how the present estimates are lower.

Tell me more: The government has said it will pay arrears from July 2014 as against April 2014 (as demanded by the ex-servicemen) and this adds up to Rs 10,900 crore until December 2015.

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News in Numbers – September 8, 2015

News In Numbers: September 8, 2015

 

Rs 9,625 crore

The investments in equity mutual funds in August, a 63% increase from July and the 16th consecutive month of inflows, according to the Association of Mutual Funds in India. This is despite Indian share markets having their worst August in four years. Also, Indian equity markets have seen the third-largest outflows in Asia since China devalued its currency last month, with foreign institutional investors pulling out pulling out $3.3 billion. Household ownership in equities , both direct and indirect, has halved in the past 15 years. Just about 2% of Indian households’ total financial assets are invested in stocks, against 35% in the US. A research report by Morgan Stanley estimates that Indian households are likely to invest $300 billion in equities over the next 10 years.

 

Rs 16,000 crore

The likely cost of implementation of the one rank, one pension programme (OROP) for ex-servicemen in 2015-16, according to an HSBC report, which adds this would “have a significant impact on the fiscal bill”. Japanese brokerage Nomura’s estimates of Rs 10,000 crore for 2015-16 are closer to the government’s calculation (Rs 8,000-10,000 crore). Both HSBC and Nomura say OROP would add to the fiscal burden, though the latter does not expect it to derail the 2015-16 fiscal deficit target of 3.9% of GDP. HSBC says the key determinant will be tax revenue growth. The government maintains it has the “fiscal space” to absorb the OROP expenses without affecting its fiscal deficit target.

 

$1 billion

The estimated valuation of Zomato Media in April 2015, which yesterday said it had raised $60 million in fresh capital. The restaurant search and review website is planning to deploy half of the funds raised to grow its India business, with the rest for services business in other countries, besides venturing into two new undisclosed markets. The Indian food services industry is expected to reach $78 billion by 2018, while the overall food ordering business was estimated to be around Rs 5,000-6,000 crore in 2014, according to India Brand Equity Foundation. Several food start-ups in India have entered the online ordering space in the last few years, including FoodPanda, JustEat, Tiny Owl and Swiggy.

 

150

British scientists have discovered a blood test that determines the “biological age” of a person, rather than the one calculated using the date of birth, to predict the rate of ageing in a person. This test, discovered by a team from King’s College London, compares the behaviour of 150 different genes. Instead of looking at genes associated with diseases or extreme longevity, the researchers found out that the ‘activation’ of 150 genes in blood, brain and muscle tissue signalled good health at 65 years of age. For instance, one might be 50 years old but have a body of a 30-year-old due to a good lifestyle. This research also found that people with lower “healthy age gene scores” had been diagnosed with Alzheimer’s disease.

 


Rs 1.7 lakh

The price per sq ft of the built-up area of the property that Aditya Birla Group chairman Kumar Mangalam Birla is close to purchasing in Malabar Hill in Mumbai. At a reported price of Rs 425 crore, this will be one of the most expensive residential property deals in the city. Yet, the price per sq ft of the built-up area for this property is slightly lower than the bungalow (Rs 1.9 lakh) purchased by the managing director of an apparel manufacturing company in Central Delhi for Rs 173 crore. On a total area basis, though, the Mumbai house is priced at Rs 1.3 lakh per sq ft, against the Delhi house of Rs 60,637. The iconic Mumbai property, Jatia House, is currently owned by Chem Mach, a company promoted by industrialist Yashvardhan Jatia.

 

 

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News in Numbers – September 1, 2015

News In Numbers: September 1, 2015

 

7%

The rate at which Indian economy grew in the first quarter of 2015-16, slower than the 7.5% in the previous quarter. Agriculture and manufacturing grew at a slower pace, while construction and trade, hotel, transport, communication and services related to broadcasting grew faster. Ratings agency Moody’s recently downgraded India’s GDP (gross domestic product) growth to 7%, from 7.5%, for 2015-16, Japanese brokerage Nomura has pegged the GDP growth rate at 8%. The Indian government has set a target of 8.1-8.5% for 2015-16, while the Reserve Bank of India (RBI) has estimated it at 7.6%.

2

Number of banks the RBI has classified under the ‘Domestic Systemically Important Banks’ category, which means these are too big to fail: State Bank of India, India’s largest state-owned bank, and ICICI Bank, the largest in the private sector. This is the first time the central bank has made such a classification, which will be an annual exercise. SBI and ICICI will have to maintain additional capital as a certain percentage of loans, though both banks say their capital base is higher than mandated. The RBI framework for such a classification will have five buckets. The higher the number, the more systemically important a bank. SBI falls in bucket three, ICICI in bucket one.

$5.6 billion

A theoretical maximum penalty India’s competition regulator can levy on Internet giant Google, based on a calculation of 10% of its average global revenues for the past three years. The Competition Commission of India has accused Google of misusing its dominant position and unfairly promoting its other services through its search engine. In response to queries raised by CCI, 30 companies, including Makemytrip, Flipkart, Nokia’s maps division and Bharat Matrimony, have submitted their views. Google has time until 10 September to respond to CCI’s findings. Google’s search engine had a market share of 97.3% in India in July.

78

The number of days since ex-servicemen have been agitating at Jantar Mantar in Delhi demanding the implementation of one rank, one pension (OROP) in addition to annual revision of pension. Finance minister Arun Jaitley has ruled out annual revision, saying it does not happen anywhere in the world. He, however, said the government would “safeguard the interests” of soldiers who retire early by paying them higher pensions. Three more Army veterans have joined the fast-unto-death at Jantar Mantar, taking the total number of those on hunger strike to 12. About 22 lakh retired servicemen and over six lakh war widows would be the immediate beneficiaries of this scheme, if implemented.

831

The number of dengue cases reported in Delhi this year, of which 93.6% were in August alone. The overall number is the highest in five years: thrice what was recorded during 1 January to 29 August between 2011 and 2014. In the same period in 2010, the number of cases was over 1,000. This year, India recorded 9,874 dengue cases until 29 July, of which Karnataka, Kerala and Tamil Nadu accounted for 62.7%. The number of dengue deaths in India stood at 25 in the same period, with Kerala accounting for 60% of the deaths.

 

 

 

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