Monetary Policy 28 Dec 2016 by Tojo Jose

Most of the banned notes are back; black income estimation will take time

Most of the banned notes are back; black income estimation will take time

Around 90 per cent of the scrapped Rs 500 and Rs 1000 are now returned back to the RBI. According to sources, the RBI has received nearly Rs 13.2 lakh crore of these notes out of the Rs 14.5 lakh crores. Next expected step from the government is to track the black income kept in bank accounts. But according to tax and legal persons, this will take time. A smart guess by experts estimate that the black income may be between Rs 1 to 2.5 lakh crores.   To tap the black money stored in banks during demonetisation, government has provided an option for the income holders to pay 50% taxes and come clean. Response for this scheme is yet to known. First estimate about the black inc

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Fiscal Policy 27 Dec 2016 by Tojo Jose

Finance Minister hints migration to lower corporate income tax regime

Finance Minister hints migration to lower corporate income tax regime

Initiating the chat on the new budget, the Finance Minister Arun Jaitely made positives of a lower tax regime. According to him, India need a transition to lower level of taxation to make the economy globally competitive. The Finance Minister was speaking at the inauguration of IRS officers training at Faridabad. In the last budget Jaitely made his plan to reduce corporate income tax rate to 25% from the current 34.6%. India is supposed to be a median tax rate country with corporate income tax rate placed at middle levels. The new tax rate is reduction and exemption free as all such leakages are expected to be phased out with the reduction of rates to 25%. Speaking about the ne

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Monetary Policy 24 Dec 2016 by Tojo Jose

Modi warns the ‘dishonest’ and offers more reforms to raise taxes

Modi warns the ‘dishonest’ and offers more reforms to raise taxes

Prime Minister Modi hinted more reforms especially those aimed at raising tax revenues. Speaking at a inaugural function of several infrastructure projects near Mumabai’s Bandra Kurla Complex (BKC), he renewed war against black money. “Dishonest people, you should not underestimate the mood of 125 crore people. You will have to be afraid of it… Time has come for ruin of dishonest people. This is a cleanliness campaign,” Just few days to the end of time line that the Prime Minister set for the eliminating cash trouble, he indicated more policies soon. “Let me make one thing very clear: This government will continue to follow sound and prudent econom

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Monetary Policy 23 Dec 2016 by Tojo Jose

NITI Ayog meeting called to discuss economic recovery measures post demonetisation

NITI Ayog meeting called to discuss economic recovery measures post demonetisation

Prime Minister Modi has called a meeting of NITI Ayog officials along with that of Ministry of Finance to design economic rebuilding after demonetisation. The meeting is scheduled to be held on Tuesday and is expected to bring the thoughts of all the available resource persons associated with the government. Government is reinforcing quickly as the note ban impact is not going to be settled by December 30- the promised deadline by the Prime Minister. Indications are that continuing cash crunch may develop distrust about demonetisation among people. Similarly, the momentum and popular mood may shift away from attack on black money to cash crunch created hardships. The meeting will

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Fiscal Policy 18 Dec 2016 by Tojo Jose

Demonetisation deposits by political parties will be tax exempt: government

Demonetisation deposits by political parties will be tax exempt: government

The government has clarified that Rs 500 and Rs 1000 note deposits by political parties in their accounts will be tax exempt. Tax exemption implies that political parities’ as the only entities whose accounts are exempt from any scrutiny. Revenue Secretary Hasmukh Adhia who is supposed to be the chief architect of the demonetisation drive said that bank accounts of political parties will be exempt as they are eligible for exemption from different types of taxes. As per Section 13A of the Income Tax Act, 1961, income from house property and other sources, capital gains taxes etc. will not be applicable to political parties. Similarly, voluntary contributions to political par

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Monetary Policy 15 Dec 2016 by Tojo Jose

Inflation enters demonetisation phase

Inflation enters demonetisation phase

The Wholesale Price Inflation data indicated a declining trend for November. as per the Ministry of Commerce data, the WPI inflation came down to 3.15 % from 3.4% in the previous month. This is the five-month low and the index is registering a third month consecutive decline. The present decline in inflation was largely led by falling food prices. A general slowdown of inflation is expected in the context of demonetisation. Low consumption, wages and decline in general economic activities are supposed to bring interesting effects on the price front. Commodity markets are already reporting low turnover with the decline in consumption. Market participants at the same time warns so

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Monetary Policy 15 Dec 2016 by Tojo Jose

US Fed makes second rate increase, hints more in the coming year

US Fed makes second rate increase, hints more in the coming year

A return cycle of capital from emerging markets is on the card as the US Fed has raised its policy rate for the second time after the reversal of monetary stimulus. More than that, the US central bank has indicated more rate cuts in the coming year, than it previously indicated. The Fed raised its policy rate called the Fed rate to between 0.5% to 0.75% on Wednesday. The central bank was expected to raise the rate as US inflation rate and employment rate went on to the expected figure. Inflation has got momentum over the last two months and the Fed was informing the market about the rate hike consistently. Markets and currencies have already accommodated the rate hike though the

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Fiscal Policy 08 Dec 2016 by Tojo Jose

Adhaar architect Nandan Nilekani called to assist govt. on digital payments

Adhaar architect Nandan Nilekani called to assist govt. on digital payments

UPA government’s super hit - Aadhaar identification project’s man in charge and technocrat Nandan Nilekani was called into service by the government to head a 13-member committee. The committee will suggest ways to encourage people to adopt digital payment systems. Government is now in a hurry to maximize and showcase the returns from demonetization. New forecasts from experts and rating agencies rates demonetization as a GDP dampener. So far attempts are concentrating to exhibit the high achievements on two fronts- black money and cashless transaction. On the cashless transaction front, the huge number of illiterates, rural orientation, weak penetration of smart phon

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Monetary Policy 07 Dec 2016 by Tojo Jose

RBI may not opt for large scale MSS use to manage liquidity

RBI may not opt for large scale MSS use to manage liquidity

Rather than rate cut, the liquidity management becomes a stressful issue for the RBI right now. When nearly 10 lakh crore rupees is returning to the balance sheet of the banking system, the first responsibility of the RBI is to ensure that banks will facilitate the re-monetization. They should not lend out of the temporary deposit. Deposited money is not actual deposit rather a temporary monetary stock and will be quickly withdrawn by the people in the form of new currencies. To discourage banks from lending, the RBI has imposed 100 per cent CRR on deposits from September 16 onwards. But the CRR is painful for banks as they have to give a short-term interest for deposits while no

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Monetary Policy 07 Dec 2016 by Tojo Jose

Demonetization was a joint effort of the government and RBI – claims Urjit Patel

Demonetization was a joint effort of the government and RBI – claims Urjit Patel

So far, the demonetization was interpreted as a technical misstep secretively designed by the bureaucracy inside the Ministry of Finance.  But for the first time, the central bank Governor has uttered some words about the role of RBI in the process. Speaking after the monetary policy declaration by the RBI, Mr Urjit Patel who kept an uncharacteristic silence about the event so far, pointed out that the decision was well planned and was taken without haste. “The consequences that have emanated from that were taken on board. That is why the planning, the process and implementation was what it was, keeping in mind high secrecy has to be maintained. The central bank and th

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