The government hopes to control price-rise now that key factors are favourable again, sources said today, adding that India is “set to be world’s fastest growing economy this year and the next”. The government also intends to eventually “do away with income tax exemptions” and “look at ways to strengthen the system”, they said.
“There is a good monsoon and, with crude, fertiliser and commodities prices, coming down, there will be an easing on inflation,” the sources said, dismissing possibilities of a recession.
“There is inflation and there’s no denying it… Reserve Bank of India and Finance Ministry have been working on inflation and keeping it below 6 per cent. We want it to come back to the 4-per-cent level,” they added.
The exact figures may be debated, though. There are reports that retail inflation did ease in July — to below 7 per cent — but remained above the Reserve Bank’s tolerance range of 2-6 per cent.
In fact, it’s been above the 6 per cent limit for more than six months now.
In July, however, it likely fell to an annual 6.78 per cent, lowest in five months — down from a June’s 7.01 per cent — as per a poll of economists by news agency Reuters. Food prices, which have a major effect, came down last month. There was also the benefit of lower international prices of goods and government interventions, such as cut in import duties and restrictions on wheat exports, said the Reuters poll.
Besides inflation, the sources spoke of a no-exemption income tax regime too. No deadlines were mentioned, though. The idea has been floating for some time. Two years ago, people were given an optional alternative to pay lower tax if they didn’t take deductions and exemptions — such as those on house rent, loans, and long-term investments.
Finance Minister Nirmala said Sitharaman had said, after the 2020 budget, that exemptions would go but there’s no set timeframe. “At the moment we only started a second alternative with some exemptions removed or some exemptions included, although the original intention was to remove all exemptions and give a clear, simplified reduced rate of income tax,” she had said.
On privatisation plans, the sources today said the government wants to move ahead with disinvestment — in IDBI for instance — and “meet the required targets”, they said. But it wants the proposed law on privatisation of banks to be “absolutely correct” before being presented in Parliament.
The sources also had a word of caution on cryptocurrency, saying that recent cases have shown that it can be misused in “money laundering, terrorist activities”. They cited the recent raids by the Enforcement Directorate on a crypto exchange. This exchange was allegedly helping some Chinese firms illegally divert their money into digital assets that couldn’t be traced.