The RBI’s first and most authenticate response about its role in the demonetisation response indicate that the central bank has acted as per government instructions. In a reply to the Parliamentary Committee on Finance led by Congresses’ M Veerappa Moily, the RBI submitted answers to several tactical questions on the subject. The RBI reply indicate that the government on November 7, 2016 ‘advised’ “the RBI to mitigate the problems of counterfeiting, terrorist financing and black money, the Central Board of the RBI may consider withdrawal of legal tender status on of the notes in high denominations of Rs 500 and Rs 1000” The CBD has met on Nove
Continuing the induction of non-monetary experts into the monetary policy operations of RBI, the government has inducted financial sector expert Shankar S Acharya as the fourth Deputy Governor of the RBI. In the notification showing the appointment, Sri. Acharya has entrusted with the Monetary Policy and Research cluster, a relatively academic body rather than having any policy development content. Mr Acharya was serving as Professor, at the Department of Finance, New York University and is a PhD holder in Finance. Interestingly he was a member of the Financial Sector Legislative Reforms Committee that recommended government control over of the RBI’s Monetary Policy Operatio
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
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
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
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
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
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
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
The RBI is becoming increasingly comfortable with the liquidity management situation in the context of the aftershocks of demonetisaiton. It has withdrawn the 100% CRR requirement for demonetisaiton deposits from December 10 onwards. The central bank has not changed policy rate of repo in its latest monetary policy revision. Earlier the central bank asked banks to keep the full deposits obtained after demonetization with the central bank. A 100 per cent CRR norm was introduced as a step. Now after the last review of the Monetary Policy on Wednesday, the central bank withdrawn it and instead is going to relay on the usual Liquidity Adjustment Facility operations and the ren
Dictionary on Indian Economy
- Logic of withdrawing Rs 1000 and Rs 500 notes
- Raghuram Rajan: The Gladiator returns to Chicago
- Why the GST reform is transformational?
- Good intention but poor thinking - what troubles demonetization?
- India Black Money Report: CBI underestimates black money at Rs 25 lakh crore
- High interest rate rather than inflation is the macroeconomic problem for India right now
- Japan’s first trade deficit in 30 years is part of the Global Shift
- Why we need an emergency monetization plan as well?
- Arvind Subramanian rocks with 'Chakravyuha' in Economic Survey
- NREGS: give respect to the tax payer’s money