Economy Current Affairs - 2019

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Government raises its contribution in National Pension System to 14% from 10%

Union Cabinet has decided to raise contribution of Central Government to National Pension System (NPS) corpus of its employees from 10% to 14%. This will increase in eventual accumulated corpus of all central government employees covered by NPS. There are 18 lakh central government employees at present. The revenue impact from higher government contribution to employees’ corpus is expected to be around Rs.2,840 crore for 2019-20 and will be in nature of a recurring expenditure.

Government also has decided to make NPS fully tax free, making it on par with the provident fund scheme. It has decided to exempt income tax that is applicable on part of NPS corpus that is withdrawn on retirement. At present, while exiting scheme, 60% of corpus could be withdrawn and 20% of withdrawn amount is taxable. This portion now has been made tax free. The remaining part that could be used to buy annuities is anyway tax free. With this decision, NPS has acquired parity with provident fund savings, which are not taxed at any of three stages of saving, profit accrual or exit.

National Pension System (NPS)

It is easily accessible, low cost, tax-efficient, flexible and portable retirement savings account. It was launched in 2004 and was initially introduced for new Government recruits (except armed forces). It aims to institute pension reforms in country and to inculcate habit of saving for retirement amongst the citizens. Its objective is to provide retirement income to all the citizens. Under it, individual contributes to his retirement account. Employer can also co-contribute for social security/welfare of individual. It was extended for all citizens of country from May 2009 including the unorganised sector workers on voluntary basis. NPS is governed and administered by Pension Fund Regulatory and Development Authority (PFRDA). Currently, any Indian between age of 18 to 65 years may voluntarily join the NPS. NRI can open an NPS account, however contributions made by NRI are subject to regulatory requirements as prescribed by RBI and FEMA from time to time.

Month: Categories: Government SchemesNational

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India to receive total remittance of $80 billion in 2018: World Bank

According to World Bank’s Migration and Development Brief, India will retain its position as world’s top recipient of remittances in 2018, receiving a total remittance of $80 billion from its diaspora. India is followed by China ($67 billion), Mexico and hilippines ($34 billion each) and Egypt ($26 billion).

Remittance: It is transfer of money by foreign worker to individual or family in their home country. It competes with international aid as one of the largest financial inflows to developing countries. It has direct impact on alleviating poverty for many households especially in developing and low- and middle-income countries.

Key Highlights Migration and Development Brief

Global remittances: Including flows to high-income countries, are projected to grow by 10.3% to $689 billion. However it is projected to moderate. They are expected to grow 3.7% to $715 billion in 2019.

Developing countries: Remittances to developing countries will increase by 10.8% to reach $528 billion in 2018, against a 7.8% growth in 2017.

Low- and middle-income countries: Future remittances to these countries are expected to grow moderately by 4% to $549 billion in 2019.

India: Over the last three years, India registered asignificant flow of remittances, from $62.7 billion in 2016 to $65.3 billion 2017. In 2017, remittances constituted 2.7% of India’s GDP.

South Asia: Remittances are projected to increase by 13.5% to $132 billion in 2018, a stronger pace than 5.7% growth seen in 2017. The upsurge is driven by stronger economic conditions in advanced economies, particularly US and increase in oil prices having positive impact on outflows from some Gulf Cooperation Council (GCC) countries such as UAE, which reported a 13% growth in outflows for first half of 2018.

Bangladesh and Pakistan have experienced strong upticks of 17.9% and 6.2% in 2018, respectively. For 2019, it is projected that remittances growth for region will slow to 4.3% due to moderation of growth in advanced economies, lower migration to GCC and the benefits from the oil price spurt dissipating. GCC is regional inter-governmental political and economic bloc of six oil rich middle-east countries viz. Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE.

Month: Categories: National

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