Category: Economic outlook

FDI in retail: The conundrum persists

The way forward is to legitimize Foreign Direct Investment in Indian online retail along with 100 per cent FDI in offline retail without any riders In 2020, the Department of Consumer Affairs, in the Ministry of Consumer Affairs, Food and Public Distribution issued the Consumer Protection (e-commerce) Rules, under Section 101of the Consumer Protection Act, 2019.The rules require all e-commerce entities that are not established in India, but intending to operate here to register with the Department for Promotion of Industry and Internal Trade in the Commerce Ministry, bar affiliated entities from selling on e-commerce platforms and restricting ‘flash sales’, and disallow seller from using the name or brand associated with that of marketplace e-commerce entity for promotion of goods....
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FDI in retail – conundrum

In 2020, the Department of Consumer Affairs (DoCA), in the Ministry of Consumer Affairs, Food and Public Distribution had issued the Consumer Protection (e-commerce) Rules, under Section 101of the Consumer Protection Act, 2019. The rules require all e-commerce entities that are not established in India, but intending to operate here: (i) register with the Department for Promotion of Industry and Internal Trade (DPIIT) in the Commerce Ministry; (ii) bar affiliated entities from selling on e-commerce platform and restricting ‘flash sales’(the discounts or promotions that ecommerce firms offer for a short duration); (iii) disallow seller from using the name or brand associated with that of marketplace e-commerce entity for promotion of goods. Within a year, the government has proposed certain amendments...
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Shun accommodative stance policy, now

Reduction in the repo rate or pumping of more liquidity is ill-advised as without any guarantee of propelling growth, it will yield negative outcomes  In its bi-monthly Monetary Policy Committee’s (MPC) review announced by RBI Governor Shaktikanta Das on December 8, the policy repo rate or RR has remained unchanged at 4 percent. The reverse repo rate or RRR is also unchanged at 3.35 percent. Besides, it has retained an ‘accommodative’ policy stance for as long as necessary. This is the ninth consecutive time since last August that both policy rates have remained unchanged. Das justified saying, “given the slack in the economy and the ongoing catching-up of activity, especially of private consumption, which is still below its pre-pandemic levels,...
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Shun ‘accommodative’ policy stance

In its bi-monthly Monetary Policy Committee’s (MPC) review announced by Governor Shaktikanta Das on December 8, 2021, the Reserve Bank of India (RBI) has kept the policy repo rate or RR ( interest rate at which it lends money to banks) unchanged at 4 percent. It has also kept reverse repo rate or RRR (interest rate on the surplus cash kept by the banks with it) unchanged at 3.35 percent. Besides, it has  retained an ‘accommodative’ policy stance as long as necessary. This is the ninth consecutive time that both the policy rates have remained unchanged since August 2020. Justifying the decision, Das observed “given the slack in the economy and the ongoing catching-up of activity, especially of private consumption,...
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Fiscal splurge has continued unabated

There has been no major event or budget announcement that could qualify as ‘far-reaching structural reform with unanticipated fiscal implications’ Even as the Finance Minister Nirmala Sitharaman prepares for the next budget, it is time to take stock of the fiscal scenario. During 2019-20, the revised estimate (RE) of fiscal deficit (FD) was 3.8 percent of GDP against the budget estimate (BE) of 3.3 percent. In her speech on the Union Budget for 2020-21, she had justified this in terms of the recommendation of the NK Singh Committee on review of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which permits breach of the target in case of “far-reaching structural reforms with unanticipated fiscal implications.” For 2020-21, she had...
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Fiscal splurge continues unabated

Even as the Finance Minister Nirmala Sitharaman prepares for the next budget, it is time to take stock of the fiscal scenario. During 2019-20, the revised estimate (RE) of fiscal deficit (FD) was 3.8 percent of GDP against the budget estimate (BE) of 3.3 percent. In her speech on the Union Budget for 2020-21, she had justified this in terms of the recommendation of the NK Singh Committee on review of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which permits breach of the target in case of “far-reaching structural reforms with unanticipated fiscal implications.” For 2020-21, she had set FD at 3.5 percent as against 3.0 percent as stipulated under the FRBM Act. Here also, she had justified...
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Directing the retail investor to G-security

Under this centralised system, customers will have a single point of reference to file their complaints, submit documents, track status and provide feedback On November 12, 2021, Prime Minister Narendra Modi launched two innovative customer-centric initiatives of Reserve Bank of India — Retail Direct Scheme (RB-RDS) and the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS). The RDS is intended to give retail investors – mostly the middle class, employees, small businessmen and senior citizens – an option of ‘directly’ investing in their hard-earned savings/surpluses in Government securities, making capital markets ‘easily accessible’ and ensuring that the investment is ‘more secure’. The RB-IOS is aimed at improving customer grievance redress mechanism. What are the schemes? How do these propose to achieve the stated...
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Tax cuts alone won’t help rein in oil prices

Given the fast pace of vaccination and substantially diminished effect of COVID-19, the GDP is expected to register growth close to 10 per cent On November 3, 2021, the Union Government notified reduction in central excise duty (CED) by Rs 5 per liter on petrol and Rs 10 per liter on diesel. Seen in isolation, these cuts may appear to be significant. However, when viewed in the backdrop of the unprecedented increase affected by the Narendra Modi Government ever since it assumed office, this is small. In May 2014, the CED on petrol was Rs 9.8 per liter whereas on diesel it was Rs 3.8 per liter. As on November 2, 2021, it was Rs 33 per liter on petrol...
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Cut in fuel taxes – not an unmixed blessing

On November 3, 2021, the Union Government notified reduction in central excise duty (CED) by Rs 5 per liter on petrol and Rs 10 per liter on diesel. Seen in isolation, these cuts may appear to be significant. However, when viewed in the backdrop of the unprecedented increase affected by Modi – Government ever since it assumed office, this is small. In May 2014, the CED on petrol was Rs 9.8 per liter whereas on diesel it was Rs 3.8 per liter. As on November 2, 2021, it was Rs 33 per liter on petrol – a cumulative increase of Rs 23.2 per liter. On diesel, it was Rs 32 per liter – higher by Rs 28.2 per liter. The...
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The OECD tax deal is unfair to India

As for distribution of profit for the purpose of taxing rights, the agreement allocates to the ‘source’ country the taxing rights only to the extent of 25 per cent of the profit In July 2021, the G7 meeting of Finance Ministers of advanced economies agreed on a framework to tax multinational companies that stands on two pillars, a global minimum corporate tax rate of 15 per cent and secondly, “reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20 per cent of profit exceeding a 10 per cent margin for the largest and most profitable multinational enterprises”. Meanwhile, 136 countries, including India, were involved in the efforts being made by...
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