Letters to the editor: A cautious policy

Written by The Financial Express | Updated: Jun 7 2014, 06:29am hrs
A cautious policy

Apropos of the editorial RBI makes the first move (FE, June 4), the decision to maintain a status quo in the key policy rates by RBI in the second bimonthly monetary policy statement announced on June 3 is on expected lines. The policy document gives us a feeling that the worst is perhaps over and there are signs of economic recovery and stabilisation seen in the economy. The reduction in the Statutory Liquidity Ratio by 50 basis points, on other hand, is a tactical move to provide more leeway for banks to expand credit and lend to the productive sectors of economy. There is good news now in terms of political stability, and with improved market sentiments, the conditions are turning conducive for growth but inflation is still a concerning factor that has the potential to spoil the party. Finance Budget 2014 is round the corner and a sensible and a reform-oriented budget aimed at removing supply-side bottlenecks and ensuring fiscal consolidation etc is expected. It would, therefore, be prudent for RBI to wait for the budget to be announced by the new government. Clearly, the ball is now in the court of the government to initiate appropriate measures and push the growth process forward.

Srinivasan Umashankar


Existing mechanism

This refers to the column Revive the tax-dispute resolution forum (FE, June 3). Santosh

Tiwari has rightly pointed out the need for continuing the forum for addressing tax-related issues created in the UPA-2 government regime in which fruitful deliberations are carried out to resolve tax litigations and to give a legal follow up to the solutions arrived at. Being most democratic in its modus operandi, the forum helped to resolve foreign companies' tax problem which are not having permanent establishment in India and suggestion to reduce 10% tax on subsequent software sales are fruitful outcomes and the new government has to continue the forum. The column emphasised the need to revisit the retrospective tax law in which giant corporates like Vodafone and Nokia are in litigation with gargantuan quantum of tax obligation to be paid. Hence, expedited solution under international arbitration, as suggested, will bring fruits to pacify the investors confidence and could draw huge investment on infrastructure from countries like Japan on amicable outcome, if any, on such issues. The new government must look into both the cases and take right steps to have fair and needy tax structure with fast solutions to disputes.

NR Nagarajan