Keynes’s supposition of short-term interest rates as the key driver of long-term government bond yields is investigated for India, after controlling for various key economic factors. It is seen that long-term interest rates of Indian government bonds are positively associated with the short-term interest rates of Treasury Bills.

Higher long-term interest rates on IGBs are influenced by higher short-term interest rates, higher rates of inflation, a faster pace of industrial production and higher fiscal deficit (and vice versa). The bond market was disrupted during 2013 when yields rose sharply in India. Incorporating this structural break improved our findings.

Source – www.epw.in/journal/2018/13/money-banking-and-finance/long-run-determinants-sovereign-bond-yields.html

While India has drastically moved up in the Ease of Doing Business Rankings, it has also simultaneously earned the tag of being amongst the most polluted countries in the world, with National Capital Region (NCR) being the worst-affected. The city is in a state of public health emergency and anyone staying there cannot help but feel being in a severely affected war zone-like situation. Delhi is home to over 16 million people and is currently the world’s 11th-most polluted city. The levels of PM2.5, tiny particles that can clog people’s lungs, have increased by more than 90 times from the level that is considered to be safe by the World Health Organisation (WHO). All that the Delhi administration has done besides shifting blame to surrounding states and fighting on Twitter, is to try to put a band-aid by announcing revival of the Odd-Even scheme, under which vehicles with odd and even registration numbers are barred from the roads on alternate days; the scheme was later pulled out due to differences with the National Green Tribunal (NGT). But are such cosmetic measures enough to contain the toxic smog?

Let us try to take a holistic perspective of the current situation. Air Pollution is a proven case of market-failure and a negative externality where the ill-effects of one‘s actions are borne by the entire population and hence market fails to control the same by any negative reinforcement. Farmers in Punjab and Haryana have a short window of three weeks to remove the tall stubs left over by combined harvesters before they have to sow the next crop. Burning stubble is the quickest and cheapest mode available and the practice has been going on for many years since paddy was introduced in these states as a second crop. However, it is only recently that the pollution situation has turned so alarming.

Source – www.tehelka.com/2017/11/air-pollution-in-delhi-are-we-doing-enough/

The Congress party has set up two new organisational departments to woo the middle class and financially weaker sections in a bid to revive its shrinking vote base.

However the decision may come a little too late in the day and might not have a huge impact on the party’s electoral fortunes less than two years from now, when the next round of general elections take place.

The 2014 elections turned out to be one of the worst electoral defeats for the Congress party, which has governed the country much more than any other party. However, its vote share has been on the decline.

Although it formed the government in 2004 with the help of allies, the vote share of the Congress party reduced from 28.3 per cent to 26.53 per cent. In the next general elections, even as it came to back power with an improved electoral performance, its vote share was 28.9 per cent with just a marginal increase of 0.6 per cent from its vote share in 1999.

In 2014, as it suffered defeat, the vote share took a huge dip with only 19.3 per cent of the votes being polled in favour of the Congress party.

Compare this to the electoral gains made by the BJP. The BJP went out in power in 2004 despite the ‘India Shining’ campaign but its vote share from 1999 went down from 23.75 to only 22.16 in percentage points.

Source – blogs.timesofindia.indiatimes.com/voices/professionals-in-congress-is-it-too-little-and-too-late/

Agriculture is a politically sensitive subject in India. Particularly, any talk on agriculture income tax is a taboo against the backdrop of farmers’ protests, grievances and suicides. So, it was heartening to see the Chief Economic Adviser Arvind Subramanian raising the issue last month.

The federal think tank Niti Aayog Member Bibek Debroy recently presented 12 facts on agricultural income taxation. He said, “in order to widen the tax base of personal income tax, besides removing tax exemptions, rural income including agriculture income could be taxed.”

It was suggested that including agricultural income under personal income tax net will broaden the tax base and thereby pave the way to eventually reduce the overall tax rate.

These are quite bold statements as taxation of agricultural income has been strictly off-limits for any policy makers in India. As expected, Finance Minister Arun Jaitley quickly issued a denial and stated that the government has no intention to tax agricultural income. Even Niti Aayog distanced itself from the comments made by Debroy saying that those were his personal views.

Agriculture income is defined as rent or revenue from land through agriculture and from buildings on that land under Section 2(1A) of Income Tax Act. As India is primarily an agrarian economy providing employment to almost 50% of the population, the central government exempted the income generated through agricultural activities from tax liabilities under Section 10(1) of Income Tax Act of 1961 to boost the agricultural sector.

However, it needs to be mentioned that agriculture and taxation of agriculture income is a state subject. “Nothing prevents state governments from taxing agriculture income”, said Arvind Subramanian.

Agricultural Income Tax Acts exists in several states like Assam, Bengal, Bihar, Kerala, Maharashtra, Odisha and Tamil Nadu. Uttar Pradesh which introduced Agricultural Income Tax Act in 1948 repealed it within a decade in 1957 while Karnataka repealed its Act in 2016. Moreover, different states have different tax policies. Assam levies taxes on income from tea plantation at the highest slab of 45% while its neighbouring state West Bengal does not. Similarly Kerala taxes plantations but not Tamil Nadu.

Source – m.deccanherald.com/articles.php?name=http%3A%2F%2Fwww.deccanherald.com%2Fcontent%2F618633%2Ftime-taxing-farm-income-has.html#undefined.uxfs

In a rare interview last Friday, Reserve Bank of India Governor Urjit Patel emphasised the need to ensure that the hard earned gains of macro-economic stability was maintained in order to withstand the global financial volatility. His explanation regarding the change of stance of the central bank was well-timed.

Under his governorship since September last, senior RBI officials have significantly reduced communication through the media. In the absence of any guidance, the central bank had managed to surprise the economists and the market in each of the last three policy meetings. According to a Reuters analysis, Patel gave only nine public speeches or press conferences in first five months of his governorship including one on the disruptive period of demonetisation.

In comparison, D Subbarao, who took over in 2008 at the start of the global financial crisis, spoke 16 times and Raghuram Rajan who started in 2013 amid rupee crisis, spoke 20 times during the same period. Previously, these media interactions were used to ease investors’ concerns and guide the market.

Under the amended RBI Act, the monetary policy decisions are taken by the six member MPC (Monetary Policy Committee) and not by the governor with the help of Technical Advisory Committee. Most probably, the communication strategy of the MPC members needs to evolve over time. None of the MPC members have yet spoken publicly. The absence of communication had increased the volatility in the market.

The monetary policy decision to maintain status quo on February 8 was a surprise because there was an expectation that the RBI might decide to front load its rate cut as the window of opportunity was closing very fast. The backdrop was also just right. India’s growth which was already weak, further slowed after demonetisation.

Investments are yet to pick up and bank credit growth remains muted. Inflation, particularly Consumer Price Index (CPI), softened on falling food-grain and vegetable prices. The government announced a prudent budget with only incremental increase in fiscal deficit to 3.2% of GDP vs the target of 3%. Quality of spending also improved in the Budget.

Source – https://www.deccanherald.com/content/597928/external-factors-limit-possibility-rate.html

The surprise move that pulled out 86% of currency out of circulation does not have any precedence in the world. There was absolutely no template to follow and no experience to draw upon. Considering this, it is not surprising that economists disagreed on the efficacy of the objective and severity of the impact. However, there is a broad consensus that demonetisation has hurt the reputation of the Reserve Bank of India (RBI).

It is still not very clear who proposed the idea. Recently, RBI governor Urjit Patel told a parliamentary panel that work on demonetisation began in May 2016. Did former governor Raghuram Rajan refuse a second term because he did not support demonetisation?

The RBI had earlier said that the government advised it on November 7 to scrap high-value notes. The RBI Board cleared the move next day, hours before Prime Minister Narendra Modi’s televised address. This led to the growing perception that the RBI crumbled under government pressure. The vacant posts of independent directors in the RBI Board added to the perception.

A number of former RBI governors were anguished at the erosion of the central bank’s autonomy. Y V Reddy said that “institutional identity of the RBI has been damaged”. He said the Centre has every right to take the decision but if he were the governor, he would have simply expressed his professional disagreement over the feasibility of the move. Bimal Jalan said, “The autonomy of the RBI is a very fundamental fact and we have to maintain it”. In a recent op-ed, former deputy governor Usha Thorat wrote, “It is indeed a sad day to see one of the most respected public institutions in India becoming an object of ridicule and scorn”.

While the British were first setting up RBI, Sir Norman, the then governor of the Bank of England, commented, “It should be like a good ‘Hindoo’ wife, always tendering advice and obedient. The husband, the government, would be dominant and free to take the wifely advice or not”.

Source – https://www.deccanherald.com/content/592621/where-spine-credibility-matter.html

Dust is far from settling down on the sudden move against black money and corruption. ‘Demonetisation’ or ‘Re-monetisation’, whatever one may call it, has shaken the whole country as 86% of total value of notes in circulation was sucked out of the system. Most importantly, it made the ill-gotten cash worthless, unless the corrupt hoarders found innovative ways to change their old notes.

The move was immediately hailed as a master-stroke by poor, middle-class Indians – an attempt to fulfil the major election promise by PM to recover black money. The opposition parties were too stunned to react instantly. But as the days passed and bank employees worked on war-footing; chinks started to emerge in logistics in terms of long queues, cash crunch, non-functioning and dry ATMs. Hard-working, honest people were affected. Harish, a poor carpenter, was distraught as he could not get Rs 5000 for the treatment of his only son. Ordinary working-class people are struggling to meet their cash demand and wasting many productive hours in queues.

Opposition parties were quick to criticise the government demanding a rollback of the scheme. Winter session of the parliament has been a wash-out till date. Most of the political parties were building up their war chest for election early next year which suddenly became worthless.

It is obvious that the pain will continue for some more time as many ATMs are still waiting to be recalibrated or stocked with new notes. This led to an emotional appeal by the PM, “I also feel the pain but…The long term gain would be the India-of-their-dreams”.

Source – https://timesofindia.indiatimes.com/blogs/voices/follow-up-demonetisation-with-structural-reforms/

The e-National Agriculture Market (e-NAM), touted as the ‘turning point’ of India’s Agriculture sector, was launched by PM Modi in April this year. The e-NAM platform is expected to provide information to both buyers and sellers on produce available, its quality and price at the bidding markets. A farmer, empowered with this information, can take his produce for sell wherever he gets the desired price, thereby connecting producers directly to consumers, processors, exporters or large retailers. The intent is to accrue maximum benefit to both farmers and consumers as farmers decide “when, where and at what price” they sell their produce by collapsing the long supply chain and removing the profit of the middle-man (arhtiya).

This portal will eventually link 585 mandis by March 2018, creating a seamless national market for agricultural and horticultural produce in India. The farmers will be provided “farmer helpline services” for any information related to this portal and soil testing facilities near the mandis.

E-NAM is not a parallel agriculture market but a trading portal supported by existing physical mandis creating a unified national market – an intra-state portal now but expected to expand inter-state. AGMARKNET, an online portal is already up indicating daily prices of agricultural commodities.

Source – https://timesofindia.indiatimes.com/blogs/voices/e-nam-the-dream-of-one-nation-one-market/