Goverment & RBI

The new budget to be presented in the parliament on March 16th is expected to bring few surprises. Here are some of those projected measures. Amnesty Scheme to track parallel economy Perhaps, the most desirable one is the launch of an amnesty scheme like VDIS to tap tax revenue out the gigantic quantity of black money existing in the country. On this front, the government should initiate supplementary actions to unearth unaccounted money parked in foreign countries. The VDIS 1996 has given Rs 10000 crores tax revenue to the government. Hence, now given the high fiscal deficit condition in the budget, the launch of an amnesty scheme will be fruitful. Direct taxes: Personal incom

One of the toughest decisions that the government must take in this years’ budget is on the diesel price front.  The diesel subsidy is an issue on many grounds.              Firstly, for the government’s budget, the fiscal deficit may overshoot its expected target at least by 20%. This means that the government has to contain the fuel subsidy bill by bringing it more near to the real cost. During the last year, the government has allocated Rs 23640 crores for fuel subsidy. But as per the first hand estimates, the actual figure may reach nearly thirty five thousand crores for the current year.   

The Wikileaks is known for leaking and publishing even the most hidden US military secrets, shocking the entire US government machinery. Wikileaks once threatened that it will publish the details of Indian black income account holders in foreign countries. But, the Julian Assange formed entity never published the list; a testimony to the power of India’s black income account holders.             Now, the Central Bureau of Intelligence has made a soft estimate that black money of India is around Rs 25 lakh crore or nearly US$ 500 billion. The amount is equal to the size for the Indian government to execute  two year&

Budget for 2012-13 is scheduled to be presented in the Parliament on 16th of March. This year’s budget is  going to be a critical one for the government as well as for the economy in many respects. Firstly, the national and global environment is difficult and this situation may put pressure on revenue front. Similarly, on the expenditure front, the government should carryout expenditure compression measures, given the possibility of tax revenue under-realization.             An interesting pre-budget development is the CSO’s downward revision of GDP growth target to 6.9% for the current year. This rate is th

The leading issue related to the conduct of monetary policy is that central banks all over the world are implementing monetary policy under a globalized economic environment. Specifically, faster mobility of global financial capital has caused macroeconomic management problems for the central banks especially for that of the emerging market economies. Capital inflow and outflow are exerting significant pressure on both exchange rate and domestic liquidity. The Reserve Bank of India also faces tough task of simultaneously managing exchange rate and domestic liquidity to ensure overall stability in our economy.             As me

The Indian economy is struggling under the clutches of a hard interest rate regime. Investment has been reduced as rate of interest of loans roared. Investment has responded to the RBI’s high interest rate call and economic growth rate has come down accommodating the high interest rate.   Fortunately, inflation is now showing signals of decline and is nearing towards a comfortable zone, driven by negative food inflation. Investors and business people are expecting that the RBI will initiate soft interest rate signals soon.                 The most controversial issue in monetary policy execu

The RBI has been making a group of stimulus measures ever since the appearance of financial stringency in our economy in mid September 2008. The CRR has been reduced by four hundred basis points from the high nine percent in September 2008 to five percent. Another key policy rate- the repo has been reduced by 350 bps to 5.5%. Both these measures means that the economy is operating in a relatively easy liquidity- soft interest rate regime akin to that existed five years back.   Further, there is always complementarity between interest rate and the level of inflation. The inflation rate is now brought down to comfortable levels.  Hence the overall interest rate in the eco