Owing to the above average monsoon, the market expectation is that the consumer prices will go down, and accordingly the confidence is that RBI will go for a policy rate cut in the forthcoming bi-monthly policy review on August 9.
RBI hold on rates
Owing to the above average monsoon, the market expectation is that the consumer prices will go down, and accordingly the confidence is that RBI will go for a policy rate cut in the forthcoming bi-monthly policy review on August 9. However, since the prices of consumer items are rising the possibility of a cut in the repo rates is remote. Looking at the rising prices of consumer goods, particularly food items, RBI will look for either maintaining the status quo or even look for raising the policy rates. Without the full and fast execution of the economic reforms, policy rate cut alone would not be sufficient to accelerate the process of growth. Nevertheless the previous policy rate cuts and it’s partial transmissions the revival in investment is slow and is adversely affecting the creation of job opportunities. The government has to remove supply side problems of consumer goods, particularly the food items to ensure stability in the price level. The policy rate needs to compensate the inflation rate to keep reasonable price for capital. It is also evident that despite the reduction in lending rates by the banking sector the debt servicing capacity of the India Inc hasn’t shown any marked improvement and led to the stressed asset crisis. At this juncture, government has to look for creating an investor friendly atmosphere and target inflation to boost the confidence level of investors to attract more flow of foreign capital to the economy.
Create GST awareness
Apropos of the editorial “Will GST rates fall” (FE, August 5). The introduction of a GST across the nation is the most important indirect tax reform since independence. The adoption of the GST is an iconic example of what prime minister Narendra Modi has called cooperative federalism. The credit goes to the finance minister, who has been working hard to accommodate the suggestions of all the parties. The load of the GST, which will largely be borne by the lower- and middle-income groups, will significantly reduce their capacity to save. The concept of a single national market, a uniform rate of tax all over the country is a pipe dream. GST bill is an essential tool of tax reforms, that will bring, promote and create more and more employment opportunities, play a significant role in the economic growth and will lead to a uniform, seamless market across the country. The constitutional amendment will enable both the centre and the states to simultaneously levy the GST, which will subsume all indirect taxes currently levied, including excise duties and service tax. Such a unity of the members in parliament must be utilised in solving major issues in the interests of people’s welfare and nation at large. government must create wide publicity of contents of GST Bill to create full awareness to all.
Vinod C Dixit