Daily Current Events by Civils360 October 5, 2017
DAILY CURRENT EVENTS CIVILS360
October 5, 2017
RBI holds interest rates, warns against fiscal laxity
- The Reserve Bank of India (RBI) on Wednesday kept interest rates unchanged citing concerns about upward risks to inflation and cautioned the government against steps to relax fiscal discipline to spur growth as such a move could potentially adversely impact the deficit and add to inflationary pressure.
- Holding the benchmark repurchase or repo rate at 6%, the RBI’s Monetary Policy Committee (MPC) trimmed its forecast for economic growth in the current fiscal year in gross value added (GVA) terms to 6.7% and also raised its projected range for CPI inflation in the second half to 4.2-4.6%.
- “Retail inflation measured by year-on-year change in the consumer price index (CPI) edged up sequentially in July and August to reach a five-month high, due entirely to a sharp pick-up in momentum as the favourable base effect tapered off in July and disappeared in August,” the RBI said in the policy statement.
- The MPC also observed that headline inflation rose by two percentage points since the August policy review.
Ganga Mission plans turtle sanctuary in Allahabad
- The marquee National Mission for Clean Ganga (NMCG) will establish a turtle sanctuary in Allahabad, as part of efforts to protect the rich aquatic biodiversity of river Ganga from “escalating anthropogenic pressures,” according to a press statement.
- The project at an estimated cost Rs. 1.34 crore would contribute to the sustenance of more than 2,000 aquatic species, including threatened gharials, dolphins and turtles in the Ganga.
- The Ganga and Yamuna at Allahabad are home to some of the most endangered fauna like turtles ( Batagur kachuga, Batagur dhongoka, Nilssonia gangetica, Chitra indica, Hardella thurjii etc.), the National Aquatic Animal — Gangetic dolphin ( Platanista gangetica ), the Gharial ( Gavialis gangeticus ) and numerous migratory and resident birds. The government had planned such a sanctuary in Varanasi in 1989 under the Ganga Action Plan-I.
- However, its future hangs in the balance as the Uttar Pradesh government and the Union Environment Ministry are considering de-notifying it over construction activities along the bank.
GST network braces for biggest challenge
- The Goods and Services Tax Network (GSTN) is bracing itself for a “big challenge” set to emerge in the coming weeks as a ministerial panel Wednesday ruled out any further extension for filing GSTR 1 returns by traders.
- “There will be no extension,” said Sushil Kumar Modi, head of the five-member panel constituted to resolve the technology glitches being faced by traders on the network. “Already it has been extended three to four times and we are talking about July returns. Another big challenge that is facing us after October 10 deadline is when GTSTR 2 will be filed.”
- “GSTR 1 is outward and sales and GSTR 2 is purchase. It is auto-populated. Then there will be a matching of invoices of GSTR 1 and 2. That will be a much bigger challenge. We are all prepared for that challenge. We will discuss any new issue when it crops up. It is a big work. We have 21 days. If we succeed, 90% of the GSTR can be resolved in the coming days. As challenges come we will deal with it,” Mr. Modi said.
- The Goods and Services Tax (GST) came into effect on July 1. The indirect tax system has been plagued with technology problems, with traders and dealers struggling to file returns before the stipulated deadlines.
- The next meeting of the GST Council, slated for October 6, will decide on the refund of taxes to exporters and issues being faced by even small traders “90% of revenue is coming only from four lakh taxpayers. In GSTN, more than 90 lakh of taxpayers are registered.”
RBI flays banks for keeping rates high
- The Reserve Bank today flayed lenders for keeping interest rates high and flagged concerns over the base rate and the marginal cost of fund-based lending rate (MCLR), saying these have not improved monetary transmission.
- An internal RBI group also suggested switching over to an external benchmark in a time-bound manner so that better rates are available to borrowers.
- “The RBI study group has observed that internal benchmarks such as the base rate/MCLR have not delivered effective transmission of the monetary policy,” RBI said in a report today.
- The group was constituted by RBI to study various aspects of the MCLR system from the perspective of improving policy transmission.
- RBI introduced MCLR on April 1, 2016 after finding that the then prevailing base rate had failed to achieve the objectives of easier and faster policy transmission. Before the MCLR was rolled out, the banks were following a more rigid base rate system, which came into force on July 1, 2010, replacing the banks’ prime lending rate.
- “Arbitrariness in calculating the base rate/MCLR and spreads charged over them has undermined the integrity of the interest rate setting process,” the study group has observed.
- The base rate/MCLR regime is also not in sync with global practices on pricing of bank loans, it said, adding that “the study group has, therefore, recommended a switchover to an external benchmark in a time-bound manner.”
- “We think the internal benchmarks such as the base rate and MCLR, based on data, seem to give banks very high amount of discretion…, lots of factors that are flexible to them to ensure that the lending rate can be kept high even if monetary policy is going down and [is] accommodative.” He also said the move was to address the above-mentioned lacunae by bringing in a better global benchmarks wherein these rates are tied to external benchmarks as “this will create a fair bit of transparency for borrowers and they can just compare two loans and see which is at the lower spread because the benchmark will be the same.”
- The report also suggested that “the interest rate resets, which are right now at an annual frequency, creating potentially a one-year lag in transmission, can be changed on all floating rate loans to quarterly resets so that transmission would be much faster once the monetary policy changes.”
- RBI will take a final view on the recommendations of the study group after taking into account the feedback [from the public] received until October 25, 2017.