Fiscal Policy 24 Sep 2016 by Tojo Jose

GST Council starts work and sets Rs 20 lakh as exemption limit

GST Council starts work and sets Rs 20 lakh as exemption limit

The GST Council has started its difficult work of structuring the newly agreed GST in its first meeting. As an initial decision, the Council has agreed on an exemption limit of Rs 20 lakh. This means that traders and entities whose turnover is less than Rs 20 lakh annually doesn’t come under the tax net. At the two-day inaugural meeting of the Council, a consensus was reached on rules for setting the GST rates. Design of the rate structure will be the core work of the Council. The Council has agreed to meet on September 30 to finalise rules for rate determination and a subsequent meeting on October 17-19. The exemption threshold of Rs 20 lakh will not be applicable for geog

Read More »
Monetary Policy 22 Sep 2016 by Tojo Jose

Academicians fills government’s slot in the monetary policy committee

Academicians fills government’s slot in the monetary policy committee

Government has appointed three academicians from the country’s renowned institutions as its nominees to the newly formed Monetary Policy Committee (MPC). Chetan Ghate, Professor at Indian Statistical Institute, Pami Dua, director at Delhi School of Economics and Ravindra Dholakia professor of IIM Ahmedabad are named by the government as its three representatives to the Committee. The MPC is a newly constituted body for taking decisions on setting the repo rate. It was established to facilitate monetary policy decision making in the new inflation targeting regime. Governor of the RBI is the Ex – Officio Chairman of the MPC. Of the six members, government and the RBI wil

Read More »
Monetary Policy 23 Aug 2016 by Tojo Jose

Government to complete the formation of Monetary Policy Committee

Government to complete the formation of Monetary Policy Committee

The government is about to complete the setting up of the Monetary Policy Committee by appointing three of its nominees to it. The MPC has six members; three each from the RBI and the government. RBI’ Governor is the ex-officio member of the Committee. Raghuram Rajan has nominated the Executive Director Michael Patra as one member and the remaining member from the RBI is to be selected from its Deputy Governors. As a fresh mechanism to navigate monetary policy interventions, the role and functioning of the MPC will be keenly observed as it will substitute the existing Technical Advisory Committee. Unlike the TAC, the MPC doesn’t gives any extra voting power to the Go

Read More »
Monetary Policy 20 Aug 2016 by Tojo Jose

Urjit Patel is the new RBI Governor

Urjit Patel is the new RBI Governor

Deputy Governor of the RBI, Urjit Patel has been chosen by the government as the successor of the outgoing Governor Raghuram Rajan. Patel will become the 24th governor of central bank after the term of Rajan by next month. Patel was appointed as the deputy governor of RBI in 2013 before that he worked with IMF and with the Boston Consulting Group. From 2013 onwards, he took charge of the RBI’s monetary policy department and most importantly chaired the committee on Monetary Policy Framework that suggested the present inflation targeting framework. In the RBI, Patel is known as the architect of the new inflation targeting monetary policy framework. The new Governor was appo

Read More »
Monetary Policy 10 Aug 2016 by Tojo Jose

RBI’s bad loan cleanup mechanism is prudent -says Raghuram Rajan

RBI’s bad loan cleanup mechanism is prudent -says Raghuram Rajan

In his last monetary policy declaration, Governor Raghuram Rajan asserted that the RBI is comfortable with bad loan recognition process by banks. In a nearly non-event policy statement, Rajan has engaged the most disturbing element of his term – rising bad debts with banks. Criticism from several quarters including from the Supreme Court has raised doubts about the ability of existing arrangements including the issue of handling wilful defaulters to check NPAs. “Banks have certainly taken a lot of steps… the culture of cleaning up seems to be well embedded as well as the culture of recovery on some of the loans” Rajan told the media. The RBI had deployed

Read More »
Monetary Policy 08 Aug 2016 by Tojo Jose

Raghuram Rajan to make his valedictory policy review before the MPC’s take over

Raghuram Rajan to make his valedictory policy review before the MPC’s take over

Tomorrow’s bi-monthly monetary policy review by the outgoing Governor Raghuram Rajan is going to be the last one for a ‘powerful’ RBI Governor. As of now, the Governor has the veto power while taking interest rate policy decisions.  But under the proposed MPC (Monetary Policy Committee) format, the Governor has only a casting vote. This means that tomorrow’s policy declaration will be the last one where Governor has the ultimate say in repo rate policy whatever may be the stand of other members. Government has already announced the formation of the MPC and it is expected that the next monetary policy decision will be taken by the MPC in early Septembe

Read More »
Monetary Policy 07 Aug 2016 by Tojo Jose

Government formally inducts inflation targeting with flexible failure interpretation

Government formally inducts inflation targeting with flexible failure interpretation

The government has notified the introduction of Inflation Targeting (IT) monetary policy framework as a macroeconomic policy approach for the conduct of the RBI’s monetary policy. The fresh element as per the government’s notification is the interpretation of monetary policy failure and the launch time for correction measures. As per the policy, if inflation goes above 6% or goes below 2% for three consecutive quarters, then it will be treated as the failure of the RBI’s monetary policy. Counteractive measures should be initiated in such a scenario. Already, the government has created a Monetary Policy Committee by inducting three members each from the RBI and t

Read More »
Fiscal Policy 04 Aug 2016 by Tojo Jose

Why the GST reform is transformational?

Why the GST reform is transformational?

And finally it happened, India’s disagreeing political class were able to sideline their vote-seeking differences on an issue unrelated to politics- an economic reform. Nearly ten years after the first step towards a national common market by creating a Goods and Services Tax, the Parliament has passed it. The move is simply transformational – tax boundaries will not divide India from within. There is no meaning in saying that you are moving a good from Tamil Nadu to Maharashtra or from Haryana to West Bengal. There will be only one tax identity – a pan Indian identity and rate structure; that is the GST. Till now, for the last seven decades, barricades and tax

Read More »
Fiscal Policy 03 Aug 2016 by Tojo Jose

GST is all set to make India a common market

GST is all set to make India a common market

The biggest indirect tax reform in India’s history – the Goods and Service Tax (GST) is almost on the launch pad with the Rajya Sabha is about to pass it today. Congress party has instructed its members to ratify the bill. There are three major amendments to the 2014 bill and the major one is the deletion of the 1% additonal tax on supply of goods that tries to compensate the producer states while agreeing for a destination based tax. Deletion of this 1% tax makes GST more purposeful as it would have become a distortion on economic activities by posing an additional tax burden for the consumers. The amendment also makes it mandatory for center to compensate for any r

Read More »
Fiscal Policy 27 Jul 2016 by Tojo Jose

Cabinet approves GST Bill with amendments

Cabinet approves GST Bill with amendments

The long wait for the path breaking Goods and Service Tax (GST) is coming to an end with the Union Cabinet ratifying the Constitution amendment bill. Major feature of the amendment is that the center will compensate in 100% for the revenue loss incurred by the states. This is a much strong compensation package than proposed in the initial format of the bill. Similarly, the amendment also abolishes the 1% additional tax within the GST for the producer states. The Congress and other opposition parties demanded its removal as such a tax will raise the burden on the tax payers. Empowered council of the state finance ministers- the coordinating body for designing the GST, in its meet

Read More »