Skip to main content

Growth slowdown bottoming out, says RBI governor

Growth slowdown bottoming out, says RBI governor 
While expectations on price rise remain stable for the moment, “considerable caution and vigilance is warranted on the inflation front” but the slowing in growth could be over, said Reserve Bank of India (RBI) Governor Urjit Pate
“Recent success in containing inflationary pressure needs to be viewed in the broader context of entrenching macroeconomic stability, in which the government has play edacrucial part,” Patel said in opening remarks at a recent conference on ´Financial System and the Macroeconomy´.
The consumer price index (CPI)based inflation rate quickened to 4.88 per cent in November, from 3.58 per cent in October.The rate in June had fallen to a record low of about 1.5 per cent.The central bank works within a framework that aims to keep inflation anchored around a central 4 per cent, in a range of another two percentage points either way.
The government has actively managed price pressure on some key food items, the governor said. “The economy is at an important juncture.Our recent growth numbers might have disappointed some in the first quarter of this fiscal year but the second quarter (JulySeptember) has recorded an up tick and the slowdown may well be bottoming out.”
“If one sees far, structural changes that temporary disruptions can be growth augmenting in the medium to long what has happened, for instance, with of the GST (goods and services tax). It gains that will mean better tax compliance more efficient tax system that, in turn, permanent upward push to our growth.” He mentioned a couple of positives.
current account deficit remains within levels.Other indicators of external viability, such as the ratios of in debtedness to GDP (gross domestic product) and/or reserves, are also reflecting a healthy improvement.” In this context, Patel praised the government for pursuing a path of fiscal consolidation and containing the public debt.
As a result, international investors have warmed to where the Indian economy is positioned, reflected in sizable foreign investment inflow.Meanwhile, domestic financial markets have shown resilience and stability, in spite of escalation in global geopolitical uncertainty and heightened financial market volatility, he said.
“These developments have enabled the buildup of buffers against unforeseen shocks.” India´s foreign exchange reserves have crossed Rs 400 billion.RBI deputy governor Viral Acharya said on Thursday at a separate event that reserves, without some form of capital control, were not enough to stem volatility when portfolio flows reverse.
Through caps on investment and coupons that can be offered to investors, India has raised some protection against such an eventuality.While stating that India and other emerging countries are in an environment of excessive financialisation, the RBI governor once again argued for making swap lines with developed countries equally available for everyone, rather than keeping these for a privileged few.
“While emerging markets have shown a degree of resilience to the turmoil of recent years, they remain vulnerable to liquidity and bridge financing gaps that are debilitating, even if transitory.Against this background, building up adequate buffers in the form of foreign exchange reserves is a natural self insurance to manage these risks better and, thereby, prevent the risks from assuming systemic proportions, threatening financial stability,” Patel said.
Terming the Insolvency and Bankruptcy Codea ´landmark development´, he said the ensuing ordinance “scales up the ability of the Reserve Bank to deal decisively with stress in banks´ balance sheets and unclog the flow of credit to grease the wheels of growth.” “In the year ahead, we must seize this opportunity to overcome the debilitating problem of corporate loan delinquency and get our banks back into the main stream of financial intermediation.”
The Business Standard, New Delhi, 15th December 2017


Popular posts from this blog

At 18%, GST Rate to be Less Taxing for Most Goods

About 70% of all goods and some consumer durables likely to cost less

A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.

India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.

For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment.

Going by this formulation, about 70% of all goods could fall in the 18% bracket.

The GST Council has finalised a four-tier tax structure of 5%, 12%, 18% and 28% but has left room for the highest slab to be pegged at 40%. A committee of officials will work out the fitment and the council…

Firms with sales below Rs.50 crore out of ambit

The tax department has reiterated that the PoEM rules, which require foreign firms to pay taxes in India if the effective control is here, will not apply to companies withaturnover of Rs.50 crore or less inafinancial year. Last month, the tax department had come out with the longawaited Place of Effective Management (PoEM) rules, which require foreign companies in India and Indian firms with overseas subsidiaries to pay local taxes if their businesses are effectively controlled by Indians. Then the rules did not setathreshold above which they were to apply. However, the accompanying press release states that the rules will not apply to companies withaturnover of up to Rs.50 crore inayear. That created confusion whether the threshold will be adhered to. Inacircular to clarify things, the Central Board of Direct Taxes (CBDT) said the provision "shall not apply toacompany havingaturnover or gross receipts of ~50 crore or less inafinancial year".

PoEM rules essentially target shell …