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Interest rates unlikely to go up further: Dea Secretary Subhash Chandra Garg

The finance ministry does not see any scope for further northward movement of interest rates, notwithstanding RBI Deputy Governor Viral Acharya’s signal for hike in repo rate in June policy. “My sense is that interest rates have firmed up enough. I don’t think that they should increase further,” Economic Affairs Secretary Subhash Chandra Garg told PTI in an interview. As per the minutes of the monetary policy committee meeting of April, RBI Deputy Governor Viral Acharya favoured withdrawal of monetary accommodation in the next policy review meeting on June 4-5.

Acharya was of the view that the central bank should wait for some more time before withdrawing monetary accommodation. “I feel it is important to let some more hard data come in, especially on growth, and allow some more time to let the early skirmishes on the global trade front play out. “I am, however, likely to shift decisively to vote for a beginning of ‘withdrawal of accommodation’ in the next MPC meeting in June,” said Acharya.

RBI Governor Urjit Patel preferred to wait for more data before changing monetary stance though he took note of recovery in economic activities and continued improvement in credit offtake, according to minutes of the April policy meeting. Patel noted that economic activity has been recovering, with the GDP growth in 2018-19 projected to be higher at 7.4 per cent amid clearer signs of revival of investment activity.

The six-member Monetary Policy Committee (MPC), headed by Patel, had left the benchmark repo rate unchanged at 6 per cent for the third time in a row after deliberations on April 4-5. Accordingly, reverse repo was kept unchanged at 5.75 per cent. No changes were made to cash reserve ratio (CRR) and statutory liquidity ratio (SLR), which stand at 4 per cent and 19.5 per cent, respectively.

1 trillion GST mop-up, not enough! Here’s why Modi’s worry is far from over

For the first time, the GST collection in the month of April surpassed a whopping Rs 1 lakh crore mark, which Finance Minister Arun Jaitley dubbed “a landmark achievement”. However, analysts are still concerned over low tax compliance. The GST tax compliance has stayed around 69% for the past few months. The compliance showed a little improvement in the month of March as it increased to 69.5% until April 30, analysts say that the Narendra Modi government needs better taxpayer numbers to meet its FY19 target.

“The gradual increase in the percentage of GST return filers while being encouraging, still is quite low as it appears that 30% of taxpayers are not filing returns,” MS Mani, Delloit India told FE Online. He said that 70% GST returns filers also include those filing nil returns.

“It is now essential to allow the reform to stabilise and not keep making constant changes as simplification and stability are essential attributes of increased tax compliance,” he added. The GST Council is scheduled to meet on May 4 and will likely discuss simplification of tax returns, a long-pending agenda. Tax experts have opined that frequent changes in the GST rules and rates were creating confusion among businessmen while filing returns.

In the month of March, the tax mop-up also included a total tax of Rs 579 crore from the composition dealers, who filed their quarterly return (GSTR 4). Out of 19.31 lakh composition dealers, 11.47 lakh have filed their return, which turns out to be only 59%. Arun Jaitley had expressed worry over low compliance from composition dealers and even said that these dealers may have been “underreporting their income.”

Even after nine months, GST Network (GSTN) continues to have teething troubles, which could be another reason for low compliance. “There are still a few registered assesse (taxpayers) who are unable to file GST return on account of either technical glitches or resistance in acceptance of technology,” Sandeep Chilana, Partner, Shardul Amarchand Mangaldas told FE Online. A Ficci survey showed that businessmen are facing problems such as delayed reflection of updated data as well as payments, delays in process of input credit set-offs and lack of provision to modify or revise errors.

The Rs 1,03,458 crore collection in April, pushed the average monthly collection to a comfortable Rs 89,885 crore but still below the target of Rs 92,000 crore. Sonal Verma of Nomura told CNBC-TV18 that the GST collection was lower than expected when “adjusted for seasonality”, and there is a “need for better tax compliance to ensure target”. With E-way bill implementation, analysts hope that tax evasion would come down and help collections to stabilise.

India’s thirst for oil imports destined to undermine modinomics, but that’s just half the story

From about the beginning of 2017, even skeptics had to admit, India looked to be recovering from a growth slowdown. Most dramatically, in the last two quarters for which data is available, investment in physical capital — which had long been too low for growth to recover — increased by 12 percent and 10 percent, respectively. In the first two months of 2018, exports grew by over 9 percent. For once, optimism seemed warranted: Decent growth and macroeconomic stability seemed likely to bolster optimism, encourage more investment and launch a virtuous cycle.

Unfortunately, while growth is indeed reviving, the macro-economy isn’t looking all that robust. Most worryingly, the rupee is just about the worst-performing currency in Asia this year; some analysts believe that it will, before the end of the year, be cheaper against the dollar than ever before. Others may not be as gloomy but, across the board, they’ve lowered their forecasts for India’s currency.

What’s going on? Well, in part, the problem is a familiar one: India’s dependence on imported oil. The health of the Indian economy tends to rest on two great, uncontrollable factors — the level of monsoon rains and the price of oil. India’s enjoyed a nice run of low prices and lower import bills for the past several years, as crude prices crashed from over $100 a barrel to near $40 a barrel. But now that they’ve climbed back to $75 a barrel and may go higher, India’s again facing worries about inflation, government spending and the current account deficit.

Back when crude oil prices were at their peak, India was being talked about as one of the “fragile five” economies most at risk from a tightening of the U.S. Federal Reserve’s monetary policies. The country’s current account deficit stood at an uncomfortably high 4.8 percent of GDP. There were even murmurs that India might have to seek relief from the International Monetary Fund, until the government, spooked into action, imposed a sharp series of import controls — particularly on gold, for which India has a ravenous appetite.

Then, luckily, crude oil prices began to crash in the middle of 2014. So did the current account deficit, falling to 0.7 per cent of GDP in 2016-17. Now things are heading in the opposite direction: Kotak Institutional Equities worries that during 2018-19, India’s current account deficit could be as high 2.9 per cent of GDP.


Air pollution not scary enough? it costs India almost a 10th of total gdp

Air Pollution is back in news; this time, due to India’s 14 cities that joined the list of top 20 most-polluted cities in the world. 13 cities in India, in terms of PM10 levels, figured among the 20 most polluted cities, according to data released by the WHO. And if it is not scary enough, air pollution in India has a huge economic cost too — almost a tenth of India’s GDP.

The latest available data show that about 1.4 million people lost their lives due to air pollution, and the total welfare loss was 7.69% of total GDP. World Bank’s ‘Cost of Pollution’ report shows that India lost $505.1 billion (PPP adjusted) in the year 2013 or 7.69% of total GDP. “Average losses from household air pollution increased, stemming mainly from the higher per capita losses in China and India,” the World Bank had said in its report.

“In northern India and eastern China, because of combustion emissions from multiple sources, including household solid fuel use, coal-fired power plants, agricultural burning, and industrial and transportation-related sources,” the report added.

The air pollution situation in India is likely to get worse in coming days as the country is estimated to become the largest growing consumer of energy — mainly dirty fuel. The share of India’s energy demand is estimated to increase from around 6% in 2014 to almost 11% in 2040.

GST alert! simplification of return filing form top agenda in 27th council meet Friday

The 27th meeting of the GST Council tomorrow will among other things consider introduction of simplified tax return form and also decide on proposal for converting GST Network into a government company. The Union Finance Minister Arun Jaitley-chaired council, comprising state finance ministers, will meet through video conferencing. The meeting comes at a time when Goods and Services Tax (GST) collections achieved its record high by exceeding Rs 1 lakh crore milestone in April. The government mopped up Rs 1.03 lakh crore in GST collections last month.

The new indirect tax regime, which was rolled out on July 1 last year, had earned a revenue of Rs 7.41 lakh crore in entire 2017-18. A decision on return simplification is on the agenda with the Sushil Modi-led group of ministers (GoM) putting the three models of new return form for discussion before the council, an official said, adding GSTN proposal will also come up for consideration.

Currently, five private financial institutions — HDFC Ltd, HDFC Bank Ltd, ICICI Bank Ltd, NSE Strategic Investment Co and LIC Housing Finance Ltd — hold 51 per cent stake in GSTN, which was incorporated on March 28, 2013, in the erstwhile UPA regime. The remaining 49 per cent stake is with the Centre and states. With Jaitley been advised by doctors to stay in isolation to avoid contracting infection, the meeting has been planned through video conferencing.

The council, the official said, will deliberate on the new simplified form to be common for both small and large tax payers and providing some relief for NIL return filers by allowed them to file return quarterly. At present, NIL return filers have to file returns monthly. Besides, monthly return filing process for other and quarterly return filing for composition taxpayers will continue.

The council had in March held discussions on the two models of GST returns and suggested that the GoM work on further simplification. The official said the amendment to the law would also be taken up once the council clears the new GST return format. One of the models presented before the council was that provisional credit should not be granted unless the taxpayers file returns and pay taxes.

GST council defers decision on sugar cess, refers digital payments incentive issue to GoM

The all-powerful GST Council deferred a decision on levying a cess on sugar and referred the issue of incentivising digital payments to a group of state finance ministers. The panel, the highest decision making body of the Goods and Services Tax (GST) regime, in its 27th meeting agreed to a proposal to convert the GST Network — the company that provides IT backbone to the new indirect tax regime — into a government-owned entity. Announcing the decisions taken, Finance Minister Arun Jaitely, who chaired the meeting conducted through a video conferencing, said a road map for introduction of simplified return filing has been decided.

A single monthly return filing system would come into force in six months, Finance Secretary Hasmukh Adhia said. Jaitley said while most states were in favour of giving a 2 per cent incentive if all payments are paid digitally or through cheques, some wanted a small negative list and so the issue will be referred to a five-member group of state finance ministers. Another group of ministers (GoM) would look at the issue of levy of cess on sugar beyond the GST tax rates.

West Bengal Finance Minister Amit Mitra said some states were not in favour of such a levy. Jaitley said the GST Network or GSTN currently is 24.5 per cent owned by the central government and a similar percentage is held by state governments collectively. The remaining 51 per cent is with five private financial insitutitions — HDFC Ltd, HDFC Bank Ltd, ICICI Bank Ltd, NSE Strategic Investment Co and LIC Housing Finance Ltd. The council agreed to a proposal of buying out the stake of private entities to make GSTN a government-owned entity, he said adding the central government will own 50 per cent and the remaining would be collectively held by state governments.

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