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Can’t be ‘heads I win, tails you lose’ situation: RBI chief defends govt on retro tax move – Mint

Reserve Bank Governor Shaktikanta Das on Friday praised the government’s decision to end retrospective taxation ghost and termed it as a “timely” move.

Das, who was responding to a specific question on government’s retro tax move in customary post-policy conference call, said that he wondered why we blame the government if it does not take any action by calling it indifferent while when the government initiates an action it is termed as one taken under pressure.

“It cannot be a situation where you say ‘heads I win and tails you lose’,” Das said.

The career bureaucrat-turned-central banker also welcomed the government’s approach to the pandemic-triggered crisis as a prudent and calibrated one.

On Thursday, the government brought a bill in the Lok Sabha to withdraw all back tax demands on companies such as Cairn Energy and Vodafone and said it will refund about 8,100 crore collected to enforce such levies.

“It is my assessment – I have been revenue secretary and economic affairs secretary – that this (retrospective taxation) had been a long-pending issue. It (introduction of the bill) is a very good step, it’s a timely step and it is definitely a welcome measure,” Das told reporters.

RBI on Friday expectedly kept interest rates unchanged at a record low as it chose to support economic revival over inflation.

The six-member Monetary Policy Committee voted unanimously to retain the main repurchase rate at 4 per cent but was split on continuing with the lower-for-longer stance.

RBI had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting the interest rate to a historic low. This was the seventh straight meeting when it maintained the status quo.

Meanwhile, the fiscal response from the government to navigate the economy out of the reverses of the pandemic was also welcomed by Das.

“I think the government’s fiscal response has been very prudent, calibrated and responsive,” Das said, adding that there is a “pattern” to the response as well.

He said the government first responded to the stress at the individual level where it tended to the poor sections, and followed it up with measures to boost credit offtake and then veered to the sectoral interventions.

Das said we “have not heard the last word” from the government and RBI expects it to continue with the same fiscal response.

As for the central bank’s own monetary response, Das said it has done whatever was possible for them to do and will keep at it.

“We (RBI) are still in the ‘whatever it takes’ mode. The pandemic is still on. We have to be very vigilant,” Das said.

He said the economic recovery has been uneven and varies from sector to sector.

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