IRCTC to resume e-catering services at 62 stations from Monday

NEW DELHI: After nearly a year-long suspension due to the Covid-19 pandemic, the Indian Railway Catering and Tourism Corporation (IRCTC) will resume e-catering services at 62 stations from Monday.
“IRCTC is going to resume e-catering services at 62 stations in the first phase from February 1, the second phase of resumption will take place most probably after three weeks,” an IRCTC official told ANI.
New Delhi, Bhopal, Ahmedabad, Howrah, Surat, Vijayawada, Patna, Ujjain, Panvel are amongst major stations where e-catering services will be resumed in the initial leg.
Railways had suspended the service due to the Covid-19 pandemic, and consequent unprecedented lockdown, on March 22, 2020.
Railways had earlier said IRCTC is ensuring that all its e-catering partners ensure proper health and hygiene protocols while serving the meals to the passengers.

Budget 2021: Rural poor, farmers’ progress to be govt’s priority

NEW DELHI: Amid the coronavirus pandemic when the pace of manufacturing and services sector came to a grinding halt, agriculture and allied sectors in India have picked up pace as the country saw the strength of the farm sector.
The government also took care of a large population of the country related to agriculture and farming and enacted new laws to intensify the winds of improvement in the agricultural sector. The Budget 2021-22 is going to be presented in Parliament on Monday, amid wrangling over agricultural reform.
In such a situation, it is expected that the Modi government, which claims to give priority to the progress of villages, the poor and farmers, will also give priority to agriculture and rural development in the upcoming Budget.
According to the Economic Review 2020-21, while the industry and services sectors are projected to fall by 9.6 per cent and 8.8 per cent, respectively, in the current financial year, the growth rate of agriculture and allied sectors can remain at 3.4 per cent. The agriculture and allied sectors recorded a growth rate of 3.4 per cent at constant prices during FY 2020-21 (first advance estimate).
The Modi government’s priority has been to double the income of farmers by 2022 and to develop basic facilities in villages including ‘pucca’ houses for all the poor in the country. Therefore, with a view to achieving these goals, the budgetary allocation of major schemes of agriculture and rural development sector can be expected to increase in the upcoming Budget.
A senior official of the Union Ministry of Agriculture and Farmers Welfare said that farmers’ awareness about all the schemes of agriculture sector including Prime Minister Kisan Samman Nidhi (PM-KISAN) is continuously increasing and the benefits of these schemes are beginning to be seen at the ground level.
The government will also focus on the scheme to provide short-term agricultural loans to farmers at affordable interest rates. Other schemes of the agriculture sector, including the Prime Minister Crop Insurance Scheme, the Prime Minister Agricultural Irrigation Scheme, can also be given importance in this budget. Agricultural economists point out that along with agriculture, the government will give prominence to the plans of the food processing industry, which will help in achieving the goal of doubling the income of farmers.
Major schemes for the development of villages proved to be very helpful in providing employment opportunities to the workers migrating from the cities during the corona period. The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA), in addition to providing employment to the daily wage labourers in the villages, proved to be crucial in the development of basic infrastructure in the villages, which was called an opportunity in disaster and under the self-sufficient India package.
Experts say that in the upcoming Budget also, other rural development schemes including MNREGA can be increased. The budgetary allocation of MNREGA was Rs 61,500 crore in 2020-21, but under the self-sufficient package in the corona era, an additional allocation of Rs 40,000 crore was made for the scheme.
Farmers have been agitating for more than two months on the borders of Delhi to repeal the new agricultural laws and to demand a legal guarantee for the purchase of crops at the minimum support price (MSP). Agricultural experts point out that MSP is a big issue in the farmers’ movement, so some announcement can be expected in the Budget regarding MSP as well.
Union Finance Minister Nirmala Sitharaman will present the General Budget of the upcoming financial year 2021-22 in Parliament on Monday.

‘RBI likely to maintain status quo on interest rate’

MUMBAI: The Reserve Bank is likely to maintain a status quo on benchmark interest rate in its next monetary policy meet outcome to be announced on February 5, four days after the presentation of the Union Budget 2021-22.
Experts are of the view that the RBI will refrain from tinkering with the interest rates and keep the monetary stance accommodative at the policy review though it will take guidance from the budget to be unveiled by Finance Minister Nirmala Sitharaman in the Lok Sabha on February 1.
“We expect the MPC (Monetary Policy Committee) to continue the pause. The fall in inflation rate was mainly due to fall in food prices. The core inflation rate has not come down. Excess liquidity needs to be watched. The vaccine availability is not going to impact macro economy immediately,” opined M Govinda Rao, Chief Economic Advisor, Brickwork Ratings.
The six-member MPC headed by RBI Governor is scheduled to meet for three days starting February 3. The resolution meeting would be announced on February 5.
The current repo rate or rate at which the RBI lends to banks is 4 per cent.
The RBI had last revised its policy rate on May 22, in an off-policy cycle to perk up demand by cutting interest rate to a historic low. The central bank has cut policy rates by 115 basis points since February last.
On expectations from the MPC, Aditi Nayar, Principal Economist, ICRA Limited, said that even though the CPI inflation dipped in December 2020, the trajectory remains unpalatable.
“We expect an extended pause for the repo rate, with the stance to be changed to neutral in the August 2021 policy review or later, once there is clarity on the durability of the economic recovery,” she said.
Sunil Kumar Sinha, Principal Economist and Director Public Finance, India Ratings and Research, too does not expect any change in policy rate.
“Growth needs to be supported through the monetary policy and that is the reason the accommodative stance of RBI will continue,” he said, and added there will be a status quo in the policy rate because the December number has shown that the CPI has somewhat moderated.
According to Sinha, the room available for further policy rate cut is very limited and the RBI would not like to use it when the economy is already reviving.
Mayur Modi, Co-Founder, Moneyboxx Finance, too was of the view that the central bank would continue its accommodative stance on monetary policy given that the economy is still not out of woods and requires constant support both from monetary and fiscal policy.
“Whilst the cost of borrowings both for the government and corporate India has come down, the risk premium continues to be high for borrowings for NBFCs who support the MSME and micro business loan segment, hindering the credit transmission to this important segment, which is the backbone in reviving the rural demand,” he said.
The RBI should take key targeted measures to make liquidity available to all NBFCs, especially small and unrated ones who operate in this segment, he added.
Ramesh Nair, former CEO of JLL India, said the real estate sector has been one of the most impacted sectors after the pandemic and multiple lockdowns.
The RBI will have to cut policy rates which will help reduce home loan rates as well as wholesale lending rates which will revive growth in the pandemic-ravaged real estate economy, he opined.
“Also the cut in these rates have to be complimented with transmission of these cuts to end users and developers, increase in quantum of credit and increase in tenure,” he said.
Retail inflation fell sharply to 4.59 per cent in December 2020 (latest data). Retail inflation based on the Consumer Price Index (CPI) was 6.93 per cent in November. The RBI mainly factors in the retail inflation while arriving at its policy rate.
The RBI has been asked by the government to keep the retail inflation at 4 per cent (+,- 2 per cent).
When asked what the MPC may do during its next meeting, Aarti Khanna, founder and CEO,, said: “The COVID-19 pandemic is more or less behind us now hence the monetary policy must focus on reviving the economy…Look forward to some constructive actions on the SME and MSME sector as a lot more needs to be done to this segment which stands as the backbone in reviving the economy.”
India’s economy is likely to rebound with a 11 per cent growth in the next financial year as it makes a “V-shaped” recovery after witnessing a pandemic-led carnage, as per the Pre-Budget Economic Survey tabled in Parliament. The Gross Domestic Product (GDP) is projected to contract by a record 7.7 per cent in the current fiscal ending March 31, 2021.
Meanwhile, V Swaminathan, CEO Andromeda & Apnapaisa, said the target rate of inflation is expected to be revised to 5 per cent from 4 per cent.
“This will give the RBI more leeway to cut rates and fund an expansion in borrowing by keeping interest rates low,” said Swaminathan.
CPI inflation eased sharply in December primarily on account of a substantial correction in food inflation — by 5 percentage points — to 3.9 per cent in December from 8.9 per cent in November.
Under the current dispensation, the RBI has been mandated by the government to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side. The inflation target has to be reviewed by end-March 2021.

ICICI Bank’s Q3 profit rises 17% to Rs 5,498 cr

MUMBAI: ICICI Bank on Saturday reported a 17.73 per cent jump in its December quarter consolidated net profit at Rs 5,498.15 crore, as against Rs 4,670.10 crore in the year-ago period.
On a standalone basis, the country’s second largest private sector lender by assets showed a 19.12 per cent rise in the post-tax profit at Rs 4,939.59 crore for the reporting quarter, up from Rs 4.146.46 crore in the October-December 2019 period.
Its total income increased to Rs 24,416 crore from the year-ago’s Rs 23,638 crore, while the total expenditure was lower at Rs 15,596 crore as against Rs 16,089 crore.
The reported gross non-performing assets ratio was at 4.38 per cent, but would have been 5.42 per cent if not for the Supreme Court order asking banks not to classify non-paying loan accounts as NPAs after the end of the loan repayment moratorium.
Its overall provisions increased to Rs 2,741 crore from the year-ago period’s Rs 2,083 crore, but lower when compared to the preceding quarter’s Rs 2,995 crore, as per its exchange filing.
It made a contingency provision of Rs 3,012.16 crore for borrower accounts not classified as NPAs pursuant to the interim order of the Supreme Court and utilised Rs 1,800 crore of the Rs 8,772.30 crore in provisions for the pandemic made earlier.
As at December 31, 2020, the bank held an aggregate Covid-19 related provision of Rs 9,984.46 crore, including contingency provision amounting to Rs 3,509.46 crore, it said.
It said the provisions held by it are more than what is required by the RBI and the bank’s capital and liquidity position are strong.
Its overall capital adequacy stood at 18.04 per cent as of December 31, 2020.

India mulls new law to ban cryptocurrencies, create official digital currency

MUMBAI: India plans to introduce a law to ban private cryptocurrencies such as bitcoin and put in place a framework for an official digital currency to be issued by the central bank, according to a legislative agenda listed by the government.
The law will “create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India (RBI),” said the agenda, published on the lower house website on Friday.
The legislation, listed for debate in the current parliamentary session, seeks “to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” the agenda said.
In mid-2019, an Indian government panel recommended banning all private cryptocurrencies, with a jail term of up to 10 years and heavy fines for anyone dealing in digital currencies.
The panel has, however, asked the government to consider the launch of an official government-backed digital currency in India, to function like bank notes, through the Reserve Bank of India.
The RBI had in April 2018 ordered financial institutions to break off all ties with individuals or businesses dealing in virtual currency such as bitcoin within three months.
However, in March 2020, the Supreme Court allowed banks to handle cryptocurrency transactions from exchanges and traders, overturning a central bank ban had that dealt the thriving industry a major blow.
Governments around the world have been looking into ways to regulate cryptocurrencies but no major economy has taken the drastic step of placing a blanket ban on owning them, even though concern has been raised about the misuse of consumer data and its possible impact on the financial system.

‘Increase R&D spend, jugaad will not help’

NEW DELHI: The Economic Survey has called for a significant ramp-up of R&D spend, especially by the private sector, arguing that mere reliance on ‘jugaad’ will not help get the required level of innovation.
It has contrasted India with other large countries, including China, to point out the huge potential for improvement. At the same time, it has called for process reforms, pointing out that India’s was one of the administrative processes which tend to over-regulate, leading to opaque decision-making.
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It then argued that along with this greater transparency, stronger systems of accountability and resolution mechanism need to be put in place to improve the process.
Jugaad refers to tweaks in available technologies and processes to meet the desired end.

India’s fiscal deficit explained in 10 charts

NEW DELHI: In every Budget, fiscal deficit is one of the most keenly observed numbers. This year it’s going to be even more so.
Finance minister Nirmala Sitharaman has promised that this year’s Budget will be one “like never before”. She has repeatedly said that the government won’t refrain from spending more to lift a sluggish economy.
Matching her words with action, India’s fiscal deficit is projected to rise to 7.5 per cent of the country’s gross domestic product (GDP) in this financial year, which is twice the target she had set for the year.
Hard-pressed for funds to combat the crisis, the government had in May increased its gross market borrowing for the current financial year by more than 50% to Rs 12 lakh crore from Rs 7.8 lakh crore budgeted earlier.
This, along with economic stimulus packages under the Atmanirbhar Bharat Abhiyan and announcement of comprehensive monetary, liquidity and regulatory measures by the Reserve Bank of India (RBI), among other measures are most likely to push up the fiscal deficit for FY21.
What is fiscal deficit
The difference between total revenue and total expenditure of the government is fiscal deficit. It is the negative balance that arises whenever a government spends more money than it receives in the form of taxes and other revenues. The latter comprises disinvestment and interest income.
India has had fiscal deficit for over 40 years, the last year of fiscal surplus being in the mid-1970s.
The most common way for government to finance fiscal deficit is by borrowing. Like private players, it can borrow from banks, financial institutions, public and overseas investors.
The government has always been criticised for not being transparent with the deficit numbers.
Writing for TOI, leading economist Swaminathan Aiyar has said: “We need a budget for truth, forgiveness and reconciliation. For too long the truth about the government’s spending and borrowing has been hidden by layers of financial fudging. Such fudging has been done by all political parties.”
Fiscal deficit and the economy
Fiscal deficit has a direct impact on a country’s growth, price stability and inflation. When an economy is in a slowdown or recession, governments tend to run a higher deficit to counter the negative impact of slowdown in private demand.
Higher government spending, by keeping the public investment high, has the potential to push up overall demand in the economy.
However, if the timing and size of deficit isn’t kept under watch it could create inflation by raising the cost of inputs like labour, raw material.
Further, when government borrows from the market it leaves a lesser share for the private sector to finance their investment plans. This phenomenon is called ‘crowding out’ effect. It tends to drive up interest rates.
However, when fiscal deficit is used for investments (building physical or social infrastructure) it creates long term assets in the economy and helps generate additional income for the poorer sections which in turn helps in reviving demand.
Fiscal Responsibility and Budget Management (FRBM) Act
Enacted in 2003, the FRBM Act sets targets for the government to bring down fiscal deficit. It requires the government to limit fiscal deficit to 3 per cent of gross domestic product (GDP) by March 31, 2021 and central government debt to 40 per cent of GDP by 2024-25.
However, the Act allows invoking of an escape clause in situations of calamity and national security. In such situations, the government can deviate from its annual fiscal deficit target.
In her Budget speech last year, Sitharaman had invoked the escape clause and taken a 0.5 per cent deviation. The fiscal deficit target for FY20 was revised to 3.8 per cent, while pegged the target for FY21 at 3.5 per cent.
How Covid impacted India’s fiscal situation
The Union Budget for 2020-21, presented before the Covid-19 ravaged the economy, had provided for a counter-cyclical fiscal support to the slowing economy.
As a result, the fiscal consolidation goal of achieving a gross fiscal deficit to GDP ratio of 3 per cent in 2020-21 was shifted to 2022-23 (3.1 per cent).
But all those calculations have gone awry in the wake of Covid-19. The Centre’s fiscal deficit widened to 145.5 per cent of the full-year’s Budget Estimates (BE) at Rs 11.58 lakh by December 2020, according to data released by Controller General of Accounts (CGA).
For the current fiscal, the government had pegged the fiscal deficit at Rs 7.96 lakh crore or 3.5 per cent of the GDP
Fiscal deficit at the end of December in the previous financial year was 132.4 per cent of the Budget Estimate (BE) of 2019-20.
India’s fiscal deficit had breached the Budget target in July itself as the economy faced the most stringent lockdown in the first quarter to contain the outbreak of the coronavirus pandemic.
Shortfall in government revenue
The shortfall in Centre’s revenue collection owing to the interruption in economic activity and the additional expenditure requirements to mitigate the fallout of the pandemic on vulnerable sections, created immense pressure on the fiscal resources.
According to the Economic Survey 2021, the government may register a fiscal slippage in 2020-21 due to revenue shortfall and demand for higher expenditure.
The capital expenditure during April to December 2020 stood at Rs 3.17 lakh crore, 24 per cent higher than the capital expenditure during the corresponding period in the previous year.
An analysis of the monthly expenditure also shows that the total expenditure registered an increase during the last three months of the year 2020 by 9.5 per in October, 48.3 per cent in November and 50.2 per cent in December compared to the same months in the previous year.
Capital expenditure during the last three months of the year 2020 recorded a phenomenal growth of 129.5 per cent in October, 248.5 per cent in November and 81.9 per cent in December as compared to same months in previous year, the survey noted.
According to CGA data, the centre’s total expenditure stood at Rs 22.80 lakh crore or 75 per cent of corresponding BE 2020-21 in December 2020. Out of this, Rs 19,71,173 crore was on revenue account and Rs 3,08,974 crore was on capital account.
Of the total revenue expenditure, Rs 4,72,171 crore was towards interest payments and Rs 2,27,352 crore is on account of major subsidies.
In comparison, total receipts till December 2020 works out to be 49.9 per cent of the BE.
Fall in tax collections
One of the major reasons for India’s stretched fiscal position has been its low tax collections.
The tax revenue collection was 42.1 per cent of BE of 2020-21, compared to 45.5 per cent of BE (2019-20) during the corresponding period a year ago.
Non-tax revenue was 32.3 per cent of BE. During the corresponding period of the last fiscal, it was 74.3 per cent of BE 2019-20.
GST collections (both Centre and states) took a severe hit too on account of the lockdown but recovered during June-December period as consumption spending revived, backed by pent-up demand and festive spending.
SBI report pegged FY21 fiscal deficit at 7.4% of GDP
A report released by State Bank of India (SBI) research pegged the Centre’s fiscal deficit for FY21 to be at 7.4 per cent of GDP. While, it pegged the combined fiscal deficit of the Centre and states at 12.1 per cent of GDP.
It said that the current trends in GDP for FY21 will translate into Rs 3.2 lakh crore net revenue shortfall for the Centre. Similarly, expenditure will be higher by around Rs 3.3 lakh crore. Thus, the fiscal deficit will be around Rs 14.46 lakh crore.
The SBI economists also pitched for avoiding new taxes and urged the government to mount “honest attempts” to settle past litigations to raise resources instead. As of data available till FY19, the total amount under tax dispute was around Rs 9.5 lakh crore.
What more can be done
The measures stated above along with aggressive and well planned sale of government stakes in public sector companies will not only raise one time revenue, but also prevent financial bleeding in some cases — like Air India that has piled up losses of about Rs 90,000 crore (debt-cum-liabilities).
Then there is the Finance Commission award which is likely to be made public on the Budget day. It is stated to transform the fiscal situation of the Centre and the states for the next five years. If the report is good then it, combined with International Monetary Fund’s (IMF’s) projection of 11.5 per cent GDP growth in 2021-22 will provide the government enough head room to spend big and yet not derail its finances next year.

The pandemic housing craze is fuelling another boom: reverse mortgages

With interest rates at rock bottom and home prices skyrocketing, reverse mortgages are losing their stigma.

Once considered by many a last-ditch solution for cash-strapped seniors, reverse mortgages have been growing in popularity for years. But the housing boom that’s taken hold in much of Canada during the COVID-19 pandemic is giving reverse-mortgage lenders yet another boost.

READ MORE: Are reverse mortgages the solution if you retire cash-poor?

HomeEquity Bank (HEB), by far the largest and oldest of the two reverse mortgage providers in Canada, saw 14 per cent growth in loan originations during the last quarter of 2020, according to Yvonne Ziomecki, who heads marketing and consumer sales operations at the bank.

And Equitable Bank, which joined the fray in 2018, saw its reverse mortgage balance double between November 2019 and November 2020, according to data from the Office of the Superintendent of Financial Institutions.

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Click to play video 'Open House: Pros and cons of reverse mortgages' Open House: Pros and cons of reverse mortgages

Open House: Pros and cons of reverse mortgages – May 15, 2020

Both banks had told Global News in June they expected to see more demand from seniors concerned about COVID-19 outbreaks in long-term care (LTC) homes and looking for financial options that would let them age in their own homes. But with interest linked to concern around LTC facilities has grown, the main drivers seem to be, quite simply, low borrowing costs and rapid home-price appreciation.

Reverse mortgages allow homeowners aged 55 and over to juice cash out of their real estate equity without leaving their house or making payments until they move out or pass away. Both interest and principal come out of the home equity, and the bank makes its money back when the house is sold. Borrowers can opt to receive a lump-sum loan or a certain amount of cash at regular intervals.

READ MORE: Pandemic housing boom means affordability is no longer just a big-city problem

Soaring home prices mean many older homeowners now have more room to borrow with a reverse mortgage. And low interest rates make it cheaper to do so.

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Many borrowers take out a reverse mortgage loan to pay off other debts, a strategy that allows them to eliminate debt repayments and free up some cash flow. Seniors have also traditionally used these loans to provide a regular, tax-free income supplement.

But in recent months, Ziomecki says she’s noticed an increase in the number of applicants who want to borrow against their home to help their children or grandchildren get into the real estate market.

The trend “does not surprise me in the least,” says Alexandra Macqueen, a certified financial planner and co-author of the book Pensionize Your Nest Egg.

While ballooning home prices potentially unlock additional home equity for homeowners, they can lock young people out of the housing market, according to Macqueen.

“What stops people, mostly, is the lack of the down payment,” she says.

In Toronto, for example, a dual-earner couple with a combined annual income of $200,000 may well be able to comfortably afford mortgage payments on an average-priced home. The real hurdle is saving to put enough money down, Macqueen adds.

READ MORE: Reverse mortgage, downsizing or HELOC? The best way to boost your retirement income

Data from the Toronto Regional Real Estate Board show the average price of a detached home in the Greater Toronto Area was $1.17 million in December, up nearly 23 per cent from a year ago, and requiring more than $230,000 in cash for a 20 per cent down payment.

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But the housing craze has also swept smaller cities in central Canada and British Columbia, as well as many areas of the Maritimes, as city dwellers looking for bigger homes moved to the suburbs and more affordable provinces.

Reverse mortgages allow house-rich parents and grandparents to transfer some of that wealth to younger generations when the children or grandchildren actually need to buy a house, Macqueen says.

“Grandma and grandpa are presumably going to leave an estate in the form of the house. Well, why not give out some of that estate and have it do some good today?” Macqueen says.

“I’m not saying that I agree with that or disagree with it, I’m saying I completely understand why people do it.”

Click to play video 'The benefits of a reverse mortgage' The benefits of a reverse mortgage

The benefits of a reverse mortgage – Jul 29, 2018

Managing the risk of reverse mortgages

Two risks associated with reverse mortgages are rising interest rates and falling home prices.

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While the possibility of higher borrowing costs are a concern for anyone taking out a mortgage, reverse mortgages are significantly pricier to begin with. For example, a five-year fixed-rate CHIP Reverse Mortgage at HEB currently comes with a discounted rate of 4.59 per cent for most clients, according to Ziomecki. By comparison, these days a well-qualified borrower may be able to access a five-year fixed-rate for less than 1.5 per cent.

In historical terms, though, a five-year mortgage rate of around five per cent isn’t outrageously high, Macqueen says. And while borrowing costs could climb in the future, there’s a strong incentive for anyone considering a reverse mortgage to jump in now, while rates are low, she adds.

Falling home prices mean there would be less cash, if any, leftover for the homeowners or their heirs once the home is sold and the reverse mortgage repaid. But borrowers don’t have to worry about the value of their home falling below the amount owed on the loan, as both HEB and Equitable Bank guarantee they will eat the loss if that happens.

“To reduce the risk, obviously, you want to take out as little as possible, as late (in life) as possible,” Macqueen says.

© 2021 Global News, a division of Corus Entertainment Inc.

Tax benefits, other incentives for startups

NEW DELHI: A startup, as generally understood, is a venture floated by entrepreneurs, often young and relatively inexperienced, with innovative ideas which could be transformed into a significant business opportunity.
The Prime Minister announced the “Startup India campaign” in 2016 to provide a nurturing ecosystem for innovation, technology and entrepreneurship. The Department for Promotion of Industry and Internal Trade (DPIIT) formulated the startup scheme.
Criteria for being an eligible startup:
* An entity which is less than 10 years old since its incorporation/ registration in India;
* The turnover of the entity has not crossed Rs 100 crore in any previous years;
* Entity is working towards innovation, development or improvement of products or processes or services with a potential of employment generation or wealth creation; and
* Entity is formed without splitting up, or reconstruction, of a business already in existence.
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Preferred form of entity
A startup may be established in the form of a sole proprietorship, partnership firm, limited liability partnership (‘LLP’) or a company. However, for qualifying to be an ‘Eligible startup’, it needs to be incorporated as a private limited company (under Companies Act, 2013), an LLP (under LLP Act, 2008) or a partnership firm.
Key registrations required
* PAN and TAN – PAN is the unique number allotted by the income tax authorities. TAN is required for undertaking TDS related compliances;
* GST registration is required where turnover from business/ profession exceeds the prescribed limit of Rs 40 Lakh for business engaged in supply of goods and Rs 20 Lakh for business engaged in supply of services;

* Profession tax registration – Eligible startup would be required to obtain profession tax registrations;
* Shop and Establishment License is required for the place of work of business;
* Patent registration, if any could be obtained to protect the patent generated by the entity;
* Industry specific regulatory approvals are needed for certain industries (example, telecom and broadcasting) before commencement of business;
* Import Export Code (IEC) is required where the entity is involved in import or exports of goods/services.
Other key benefits/incentives available
* Simple process for registration of startup
* Easy access to funds through Alternate Investment Funds and eligible to raise ECBs under relaxed norms
* Fast track patent application with up to 80% rebate in filling patents
* Self-certification of compliance under 3 Environmental laws & 6 Labour Laws
* Exemption from requirement of earnest money deposit, prior turnover and experience requirements in government tenders
* Easy winding up of Company within 90 days under Insolvency & Bankruptcy Code, 2016
The “Start-up India campaign” has been quite successful in furthering the potential of budding entrepreneurs and investor groups in India. The Government must extend the sunset date (1 April 2021) for availing deduction of profits available to Eligible start-ups by another five years, and ease compliances, to help them achieve their full potential.
– By Sheetal Shah, associate partner, EY India
(Views expressed are personal. Prachi C Kulkarni, senior tax professional with EY has also contributed to this article.)

In 5 charts: railways poor finances & how to fix it

Railway Budget 2021: Like every year, Indian Railways operating ratio will be an important parameter to track in Finance Minister Nirmala Sitharaman’s Union Budget 2021. In simple words, the operating ratio tells us the amount Indian Railways has to spend to earn every rupee. So, if railways has to spend 90 paisa to earn Re 1 revenue, then the operating ratio is 90%. But, why is operating ratio important? We look at the significance of this indicator, why it has worsened in the last few years, the likely impact of COVID-19 on railways’ finances and the policy prescriptions for a financially healthier railways.
Operating ratio is a key indicator of an organisation’s financial health and the higher it is, the more strained the finances. The national transporter’s operating ratio has been deteriorating for some years now, with the last few years consistently seeing a figure above 95%. Indian Railways reported its worst operating ratio in 10 years at 98.44% in 2017-18.
Operating ratio: The cause for deterioration
The rapid rise is evident from 2016-17 when the operating ratio hit 96.5% as against 90.48% in 2015-16. According to the government’s Medium Term Fiscal Policy Cum Fiscal Policy Strategy Statement 2019-20, operating expenses and pension payments have soared in the last few years.
In 2008-09, the operating ratio was 75.9% due to buoyancy in the national economy getting reflected in railway traffic. However, since the implementation of the 6th and 7th Central Pay Commission the working expenses have ballooned. The momentum in earnings growth has also not sustained, the statement noted. This has resulted in the operating ratio steadily rising in the last few years.
The narrowing gap between the Gross Traffic Receipts and Working Expenses is evident from the graph above, thereby reflecting in the poor operating ratio.
Window-dressing finances?
After clocking its worst ever operating ratio in 10 years, railways declared a marginally lower figure of 97.29% for 2018-19. However, the Comptroller and Auditor General (CAG) of India in its report tabled last year stated that the national transporter “window-dressed” finances. “If the advance freight of Rs 8,351 crore (pertaining to 2019-20) from NTPC and CONCOR was not included in the earnings of 2018-19, the operating ratio would have been 101.77% instead of 97.29%,” the report said.
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CAG recommended that the Ministry of Railways should look to diversify its freight basket and take steps to augment internal revenues.
COVID-hit railways
Budget 2021 is being presented at a time when the Indian economy is in technical recession, with two quarters of contraction due to COVID-19. Indian Railways has suffered huge passenger revenue loss due to regular train operations being shut. The revenue from passenger fares may see a massive 72% year-on-year slump in FY21, VK Yadav, the then Railway Board Chairman said in December. A 72% decline would imply passenger revenue of just over Rs 15,000 crore for railways. However, Yadav expressed confidence that freight revenue figures would surpass FY20 tally. The Economic Survey 2020-21 has also noted the railway freight traffic has not just recovered but surpassed the previous year’s levels in the third quarter. Rail freight loading saw a 8.5% increase in December as compared to the same month in 2019.
The impact of COVID-19 on the railways’ operating ratio target of 96.2% will only be known on February 1. Importantly, working expenses with regards to salaries and pensions form a huge chunk of the overall working expenses.
With several thousand coaches sitting idle in depots, the maintenance cost may have gone up, but the fuel cost of running trains and associated maintenance with every run would have come down. Passenger revenues have fallen drastically, but it’s a loss making segment for railways. Freight revenue has also not grown as per the Budgeted projections. The net impact on operating ratio is hence difficult to ascertain.
The road ahead
For the long-term, experts advocate focusing on growing freight and passenger revenues since a substantial portion of working expenses are fixed. In this regard, the opening of dedicated freight corridors and running of private passenger trains may help railways grow their revenue receipts at a higher rate. The Economic Survey also highlights the National Rail Plan’s objective to strategize a significant modal shift to rail. “The objective is to increase the modal share of rail in freight from the current level of 27% to 45%,” the Survey notes.
Freight revenue has grown 47.1% from Rs 91570.9 crore in FY14 to Rs 1,34,733 crore in FY20. Passenger revenue has risen 53.2% from Rs 36,532.2 crore to Rs 56,000 crore over the same time period. According to India Brand Equity Foundation’s report on railways, the revenue from passenger segment has increased at a Compound Annual Growth Rate (CAGR) of 6.43% from FY08 to FY19. Freight revenue has increased at a CAGR of 4.03% over the same time period.
Shri Prakash, Former Railway Board Member (Traffic) is of the view that Indian Railways would do well to focus on catering to high demand routes and commodities for passenger and freight segments. On the passenger front, there is high demand for overnight travel and that can easily be met, he told TOI.
Mukesh Rathore, Retired Director (Technical) of RITES has listed four priority areas for improving the operating ratio. “Firstly, expedite ongoing organisational reforms, secondly enhance staff productivity and efficiency,” he said. “Digitisation, automation and induction of world-class technologies in Indian Railways processes & systems and more professional selection & management of projects to minimise cost and time overruns will enable railways to reap their intended benefits sooner,” he said.
For freight customers, multi-modal approach will help railways earn better revenue – the promise of end-to-end connectivity and delivery via tie-ups with ports and inland waterways will be a game changer, believes Parvesh Minocha, Group Managing Director at Feedback Infra. “Indian Railways should focus on corporatising its structure, monetising and PPP so that the revenue earned can be invested back in improving passenger trains and introducing world-class products such as Vande Bharat,” he told TOI.
According to Shri Prakash, a healthy operating ratio for Indian Railways would be in the range of 80s. “For that to happen the working expenses should increase on an average of 8% assuming a 5% inflation rate. The revenue should grow at 12-15%, only then the operating ratio will come down in the range of 80s,” he said.