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Current Events 6 April 2016



6th APR 2016


As RBI cuts repo rate, home loans could become cheaper

The Reserve Bank of India (RBI) cut the benchmark repo rate by 25 basis points to 6.5 per cent, as widely expected, with Governor Raghuram Rajan assuring that the monetary stance will remain “accommodative.” Bankers said the comment signals that the central bank is leaving the door open for further reductions.

The rate cut could help lower the cost of loans for consumers, including automobile and home buyers.

The RBI said easing price pressures had been a key factor in determining the policy stance and cited “government’s effective supply side measures keeping a check on food prices, and the government’s commendable commitment to fiscal consolidation.” Retail inflation slowed to 5.18 per cent in February after accelerating for six consecutive months.

The repo rate, which is at its lowest in five years, will help banks reduce borrowing costs, helping boost economic growth. “We have cut interest rates by 150 basis points since the beginning of the accommodative cycle,” Dr. Rajan told reporters.

The latest rate cut should be seen in the backdrop of banks reducing lending rates by 25 to 50 bps since adopting a new loan pricing mechanism — the marginal cost of funds based lending rate — in the first week of April, according to the RBI Governor.

“Policy action is more significant today than just a 25 basis points rate cut. Borrowing is now significantly cheaper and will continue to get so,” he said.

The RBI also announced measures to ease liquidity in the banking system. The daily requirement for maintaining cash reserve ratio has been reduced to 90 per cent from 95 per cent from April 16, the marginal standing facility rate (the penal rate at which banks borrow from the RBI) was cut by 75 basis points and the reverse repo rate (the rate banks earn when they park money with the RBI) raised by 25 bps.



Colourful start for India’s fastest train

Indian Railways stepped towards the high speed age, with the launch of the much-touted Gatimaan Express, fastest train in the country.

The semi high-speed train, with a 5,400 horse power electric locomotive and top speed of 160 kmph, covered the nearly 200 km distance between Delhi’s Hazrat Nizamuddin railway station and Agra Cantonment station in exactly 100 minutes, as promised.

It is, however, only slightly faster than the Bhopal Shatabdi , which takes 117 minutes to reach Agra but also takes a longer route, starting from the New Delhi Railway station.



Govt. notifies new rules on waste management

The Environment Ministry has notified rules making it incumbent on a wide range of groups — hotels, residential colonies, bulk producers of consumer goods, ports, railway stations, airports and pilgrimage spots — to ensure that the solid waste generated in their facilities are treated and recycled. Though the onus on garbage management would continue to be the responsibility of municipal bodies, they would be allowed to charge user fees and levy spot fines for littering and non-segregation.

Though these rules would take effect from April 6, there would be a “transition period” of two to five years, beyond which fines would be imposed, said Environment Minister Prakash Javadekar.

Over the past month, the Central Environment Ministry has notified a bunch of rules spanning the recycling and treatment of a variety of refuse, including biomedical, plastic and electronic waste among others. “This is an essential component of Swachh Bharat (Mission) … only 70 per cent of garbage is collected and of that 30 per cent is treated,” said Mr. Javadekar at a press briefing.

The rules on solid waste management have been amended after 16 years and a key provision is to formalise the profession of rag-picking. “Rag-pickers form a critical arm of society…we cannot shoo them away,” said Mr. Javadekar. Nearly 62 million tonnes of waste are generated annually in India, of which only 11.9 million are treated and nearly half — 31 million — is dumped in landfill sites. According to the Central Pollution Control Board, municipal authorities, as of 2013-14, have so far set up only 553 compost and vermin-compost plants, 56 bio-methanation plants, 22 refuse derived fuel plants and 12 waste-to-energy plants.

By 2031, municipal solid waste is expected to increase to 165 million tonnes and, if untreated, would require 1240 hectares of land.

According to the new rules, local bodies with a population of one lakh or more were required to set up solid waste processing facilities within two years, census towns below a lakh would be given three years and old and abandoned dump sites would have to be closed or bio-remedied within five years.


Black money hunt yet to yield results

Despite several official efforts to trace and recover black money India has not registered any major success, and investigation agencies are still struggling to estimate how much Indian wealth is parked in tax havens.

While the Panama papers bring out yet another list of India’s rich and influential who have parked money in tax havens, officials are grapping to find credible ways to verify a new estimate showing that over $505 billion (approximately Rs. 33,83,500 crore) has left India during the 2004-13 period.

Officials who have worked with the Special Investigation Team (SIT) on black money say that India is too far away from making any major breakthrough on the hunt for black money. “On our own there is very slim chance that we would be able to make any major breakthroughs,” a senior official who has been integral part of SIT consultations said.

He pointed out that all major databases on which action have been initiated have all come from foreign sources. “Be it HSBC Geneva or Liechtenstein, they have all come from abroad,” he said.

Justice M.B. Shah, chairman of the SIT on black money, told The Hindu, “Lot of things have been done, but it cannot be seen easily.” As an example, he pointed out that new restrictions are in place to control misuse of export-import facilities. Strict implementation of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 could lead better results, the former Supreme Court judge said.

Voluntary disclosure

Over the years, the Indian government has made several attempts to recover black money, by mostly offering opportunity to people to declare their black money. The first such scheme was in 1951, which led to the collection of Rs. 10.89 crore in taxes, and there have been eight more such schemes, until the Modi government came to power in 2014. In 1997, the Voluntary Disclosure of Income Scheme was the most successful of all of them, collecting Rs. 9,745 crore in taxes.

644 declarations only

The Modi government’s first major announcement was the setting up of the SIT on black money. It followed it up with a three months compliance window between July and September 2015 under the black money Act.

It resulted in 644 declarations, totalling declaration of foreign assets worth Rs. 4,164 crore. A total of Rs. 446 crore was collected as tax and penalty. Officials admit that what has been collected is negligible. Despite several agencies and an SIT looking into black money, there is no clear estimate about how much Indian money is parked in foreign tax havens.


Iceland PM resigns

Iceland’s Prime Minister Sigmundur David Gunnlaugsson has resigned, his party said , the first major political casualty to emerge from the leak of the so-called Panama Papers financial documents.

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