The Indian Economy in an Ever More Volatile and Complex World - Special Address by Dr. Poonam Gupta, Deputy Governor, Reserve Bank of India at the 13t...
Merchant discount rate on UPI merchant payments may be treated as a taxable payment settlement service with input credit availability. GST treatment of MDR charged on UPI merchant payments above Rs 2,000 is to be considered by the GST Council. The MDR framework imposes a merchant-borne charge for payment processing and settlement. As these activities are services, MDR may attract GST at 18 per cent, subject to the Council's view. Merchants paying GST on MDR may claim input tax credit, potentially reducing their net tax burden.
Fiscal responsibility limits frame cautions on new projects as budgetary discipline rather than financial crisis. Finance-department advice treats fiscal indicators as grounds for restraint in approving additional expenditure rather than as evidence that funds are unavailable. Funding new projects may be difficult until additional resources are mobilised or allocations already approved are reallocated. Project proposals lacking budgetary provision or earmarked funding may create cash-flow pressures and fiscal-management challenges, requiring deferment until resources are finalised.
Corporate document forgery allegations trigger investigation into unauthorised insolvency consortium participation and disputed share transfers. An FIR concerns alleged cheating, forgery, criminal conspiracy, corporate-document misuse, and unauthorised financial liabilities arising from participation in a corporate insolvency resolution process. Allegations include entering a consortium arrangement without the Parekh Group's knowledge or authorisation, reliance on a fabricated and unapproved board resolution, and unauthorised transfer of shares to a group-controlled entity. Investigation covers disputed-record authenticity, alleged digital-signature misuse, and financial transaction trails.
Energy security shapes continued Russian crude sourcing as alternative suppliers replace shortfalls amid potential sanctions-related restrictions. Russian crude imports are operating near 1.8 million barrels daily in September, with refinery maintenance, stronger Chinese buying, and disruptions to Russian export infrastructure constraining availability. Middle Eastern supply, especially from Iraq and Saudi Arabia, has offset reduced Russian volumes. Potential tougher restrictions on countries purchasing Russian oil could complicate procurement, but energy security and tight physical oil markets make a significant near-term reduction in Russian crude purchases unlikely. Replacement remains technically possible but may raise procurement costs and competition for medium-grade crude.
Direct tax payment gateway integration enables nationwide payments through digital options, branch channels, and customers' respective internet-banking services. IDFC FIRST Bank's payment-gateway integration for Central Board of Direct Taxes collections enables Direct Tax payments through UPI, credit cards, debit cards, Retail and Corporate Internet Banking, and branch-based cheque, demand draft, or cash payments. Customers of other banks may use their own internet-banking facilities through the gateway. Taxpayers create a challan on the Income Tax e-Filing Portal, select Payment Gateway and IDFC FIRST Bank, choose a payment mode, complete payment, and download or print the paid challan. Payment confirmations are also accessible.
Insurance distribution controls target commissions, expenses and loan-linked sales, reshaping bancassurance arrangements and intermediary remuneration structures. IRDAI's consultation proposals for insurance distribution contemplate lower Expenses of Management limits, tighter commission controls, and greater control over loan-linked insurance practices. The prospective framework concerns insurer and intermediary remuneration, distribution expenses, and bancassurance fee structures. Reported concerns centre on potential effects on insurer earnings, intermediary economics, and lending-linked distribution arrangements; the measures are not described as final operative obligations or enforcement action.
Personal loan eligibility and repayment planning: loan variants and digital applications remain subject to assessment, verification, and applicable terms. Eligible customers may seek collateral-free personal loans within stated amount, tenure and interest-rate ranges. Loan amount, interest rate and tenure determine the EMI and total interest payable, while calculator results are estimates rather than final repayment obligations. Eligibility includes nationality, age, employment and credit-score conditions, but approval, final pricing and loan amount remain subject to lender assessment, document verification and applicable terms. Online applications require personal, financial and employment details and KYC verification.
Nidhi company deposits lack insurance protection, requiring verification of government declaration before relying on high-return promises. Each company seeking to function as a Nidhi must file Form NDH-4 for declaration or updated Nidhi status and comply with the Companies Act, 2013 and applicable Nidhi Rules. Nidhi companies may accept deposits and grant loans only to members. Public investors should verify declared Nidhi status rather than rely on unusually high-return promises, agent representations, or informal assurances. Deposits with Nidhi companies are not insured by the Deposit Insurance and Credit Guarantee Corporation, and recovery may be difficult where a company fails or fraud occurs.
FCNR(B) liquidity deployment remains within banks' discretion, guided by credit pipelines, asset-liability positions, and prudent underwriting standards. Banks retain full discretion to deploy liquidity mobilised through FCNR(B) deposits, based on their credit pipeline, lending proposals, liquidity outlook and asset-liability position. No sector-specific direction applies to use of these funds. FCNR(B) deposits are fixed-term foreign-currency deposits in which principal and interest are repayable in the same foreign currency, protecting non-resident depositors from direct rupee exchange-rate risk. Continued prudent credit appraisal and underwriting standards are expected.
Compulsory Muslim marriage registration shifts registration to registrars under a statewide procedural framework, with local officials authorised when needed. Compulsory registration of Muslim marriages will operate under the Assam Muslim Marriage Registration (Compulsory) Rules, 2026, framed under the Assam Compulsory Registration of Muslim Marriage and Divorces Act, 2024. Registration will be undertaken by registrars, with panchayat-level officials potentially authorised where application volumes require additional capacity. The framework addresses the registration forum after kazis were barred from registering Muslim marriages.
Macroeconomic resilience supports fiscal consolidation, financial-sector stability, and orderly foreign-exchange management through persistent global and market shocks. Policy management emphasises clear communication, policy certainty, macroeconomic and financial-sector stability, efficient use of buffers, and sustained structural reform. Fiscal prudence is treated as necessary to avoid unsustainable stimulus and preserve long-term stability. External-sector resilience rests on services exports and remittances, while oil and gold shocks and weaker capital inflows have created temporary balance-of-payments pressure. Further improvement is linked to lower oil dependence, export diversification, trade agreements, capital inflows and orderly foreign-exchange market management.
Software export growth strengthens IT ecosystem as campus expansion supports startup activity, infrastructure development, and skilled employment. Software export revenue generated by Technopark reached Rs 17,092 crore in FY 2025-26, reflecting year-on-year growth of approximately 17.3 per cent. Growth is attributed to IT infrastructure, a skilled talent base, and company performance. Technopark also operates as an IT and ITeS hub and startup ecosystem centre, with ongoing campus development intended to expand its position among major IT hubs.
Artificial intelligence centre of excellence partnership advances industry-aligned training, supervised internships, startup mentorship, and applied research collaboration. IIEST Shibpur and Tata Consultancy Services have entered into a Memorandum of Understanding to establish an Artificial Intelligence Centre of Excellence at the Electrical Engineering Department's high-performance computing laboratory. The collaboration supports industry-aligned training, professional certifications, practical projects, supervised internships, startup mentorship, curriculum benchmarking, and applied research in natural language processing, computer vision, image processing, and advanced data analytics.
Money-laundering searches prompt protests over alleged political misuse while operations continue at public development offices and residences. Enforcement Directorate search and survey operations connected with a money-laundering investigation continued at development authority offices and premises linked with housing administration, a realty company, and private residences. AAP workers protested against the searches, alleging political and administrative pressure through central investigative agencies. The party further alleged that the operations could disrupt the development authority's functioning and impede Punjab government welfare schemes.
Money-laundering investigation procedure raises allegations over FIR registration, conflict concerns, and the choice between police, vigilance, or federal inquiry. A police inquiry, rather than a Vigilance inquiry, was directed following an Enforcement Directorate communication seeking registration of an FIR for cognizable offences. It was contended that FIR registration should be dealt with by the police and that governmental or ministerial intervention would raise concerns where a person facing allegations is involved in deciding the investigative course. A transfer to a federal investigative agency was sought on grounds of investigative independence and perceived conflict of interest.
Trade truce extension maintains tariff pauses and export-restriction rollbacks while negotiations continue on broader economic commitments. United States-China trade relations may remain governed by the Busan Agreement through January 10 under a stated two-month extension, though Chinese official confirmation is pending. The arrangement maintains pauses on elevated tariffs and prior rollbacks of restrictions affecting critical minerals and high-technology exports. Negotiations may produce a broader economic package or further continuation of existing terms, while implementation of agreed commitments is under review. The parties have also proposed reciprocal alerts on AI-related hacking incidents involving national-security concerns.
Gold Smuggling Enforcement: Concealed foreign-origin gold recovered from vehicles and a traveller, with arrests under customs law. Gold-smuggling enforcement involved the seizure of approximately 21 kg of foreign-origin gold in two operations and the arrest of five persons under the Customs Act, 1962. Gold bars were recovered from sophisticated vehicle-chassis cavities, while gold bars and cut pieces were recovered from a passenger's specially designed cotton waist belt. The operations concerned suspected cross-border gold movement and targeted organised smuggling networks using sophisticated concealment methods.
Cross-border gold smuggling enforcement resulted in Customs Act seizures after coordinated recovery of foreign-origin gold from border locations and a passenger. Cross-border smuggling of foreign-origin gold through the Bangladesh route led to coordinated recoveries and seizures under the Customs Act, 1962. Gold recovered near the India-Bangladesh border was taken over for customs proceedings, including a seizure under Section 110. Foreign-origin gold concealed by a train passenger was also recovered and seized, with investigation indicating its smuggling from Bangladesh.
BRICS tax cooperation creates standing platforms for international taxation, revenue statistics, professional capacity building and peer learning. India-led BRICS tax cooperation established standing Working Groups on International Taxation and Transfer Pricing and Revenue Statistics, providing institutional platforms extending beyond individual Chairships. It also institutionalised an annual Young Tax Professionals Capacity Building Programme, launched the BRICS Tax Cross-Learning Lab for peer learning on client-centric administration and human-resources practices, and approved the Terms of Reference for the BRICS Tax Support Network.
Wildlife trafficking enforcement applies protected-species safeguards to seized Tokay Geckos and enables further statutory action against suspected illegal trade. Wildlife-trafficking enforcement led to interception of two persons and seizure of 86 live Tokay Geckos under the Wildlife (Protection) Act, 1972. Tokay Geckos receive Schedule I protection under that legislation and are listed in Appendix II of CITES, regulating international trade. The persons and recovered geckos were transferred to the Mariani Range Forest Office for further action.
Extracts of FM’s reply on the Interim Budget - FURTHER CONCESSIONS IN CENTRAL EXCISE & SERVICE TAX ANNOUNCED - CUSTOMS DUTY EXEMPTION ON NAPTHA EXTENDED BEYOND THIS FISCAL
February 24, 2009
Contents
Summary
Note
Bookmark
Share
✓ Copied successfully !
Print
Print Options
For full text, please login
Login to TaxTMI
Verification Pending
The Email Id has not been verified. Click on the link we have sent on
Following are the extracts from the reply of Finance Minister, Shri Pranab Mukhejee on Interim Budget 2009-10, in Lok Sabha, here today:
"My friends from the other side have raised a number of issues. They have blamed the UPA Government for failure on the economic front, on the performance of the public sector, on employment generation, inflation, on fiscal deficit, plight of farmers, FDI and inadequacies of our regulatory framework. They have also pointed towards the "lost opportunities" in my Interim Budget speech.
Let me turn to some figures that tell their own story. A look at the comparative annual average figures between the two periods shows:
The GDP growth rate which was 5.8 per cent during 1999-2004 rose to 8.6 per cent during the 2004-2009.
The fiscal deficit and revenue deficit that stood at 5.5 per cent and 4.0 per cent respectively during 1999-2004 declined to 4.1 per cent and 2.5 per cent during 2004-09.
The Tax to GDP ratio went up from 8.8 per cent during 1999-2004 to 11.1 per cent during 2004-09, while the Savings to GDP ratio which was 25.6 per cent in 1999-2004 shot up to 34.8 per cent during 2004-08.
Similarly, Investment to GDP ratio at 25.2 per cent during 1999-2004 went upto 35.9 per cent during 2004-08.
The Government's policy on disinvestment does not envisage any outright or strategic sale of a Central Public Sector Enterprise (CPSE). The focus of the policy is to enable unlisted and profitable CPSEs to raise capital through Initial Public Offerings (IPOs) with the Government offering a minority shareholding for divestiture. The intent is to ensure that Government equity remains above 51% and Government retains management control. However, because of the adverse market conditions during the year 2008-09, there has not been a single IPO and nor has there been any disinvestment.
The UPA Government is making all possible efforts to turnaround the loss making Central PSE's like Indian Telephone Industries (ITI) through the infusion of funds and superior techno-managerial practices.
It is important to recognize that the Union Budget statement is just one of the instruments for addressing economic policy concerns. Indeed, right from the day when the financial crisis erupted in the middle of September 2008, the Government has been alert and responsive to the fast changing developments. Government has undertaken the required administrative and fiscal measures in tandem with the monetary policy initiatives of the RBI by announcing two stimulus packages on December 7, 2008 and January 2, 2009.
A number of Tax and other fiscal measures have been undertaken. These include:
• An across the board cut in CENVAT by 4 percentage points benefitting all sectors;
• Reduction of the rate of duty on cotton textiles and textile articles from 4% to Nil.
• Provision of additional funds of Rs.1100 crore to ensure full refund of Terminal Excise duty/CST.
• Specific measures on customs duties on sectors such as steel and cement through restoration of the levels of protection;
• Service tax concessions and enhancement of drawback rates for exports.
• Interest subvention on pre and post shipment credit for labour intensive exports like textiles, leather, gem and jewellery, carpets and handicrafts; and
• Extension of a Line of Credit (LoC) by Rs.5000 crore to EXIM Bank from RBI to provide pre-shipment and post-shipment credit, in rupees or dollars, to Indian exporters at competitive rates.
• Refinance facilities respectively of Rs.4000 crore for the National Housing Bank for housing sector.
• Announcement of a package by Public sector banks for borrowers of home loans of up to 20 lakhs. This sector will be kept under a close watch and additional measures would be taken as necessary to promote an accelerated growth trajectory.
• Provision of additional allocation of Rs.1400 crore to clear the entire backlog in Technology Upgration Fund (TUF) Scheme in the textile sector.
• Inclusion of all items of handicrafts under 'Vishesh Krishi & Gram Udyog Yojana'.
• To facilitate the flow of credit to Medium, Small and Micro Enterprises (MSMEs), RBI has announced a refinance facility of Rs.7000 crore for SIDBI which will be available to support incremental lending, either directly to MSMEs or indirectly via banks, NBFCs and SFCs. In addition, the following steps are being taken.
(a) To boost collateral free lending, the current guarantee cover under Credit Guarantee Scheme for Micro and Small enterprises on loans will be extended from Rs.50 lakh to Rs.1 crore with guarantee cover of 50 percent.
(b) The lock in period for loans covered under the existing credit guarantee scheme will be reduced from 24 to 18 months, to encourage banks to cover more loans under the guarantee scheme.
(c) Public Sector Banks have announced a reduction of interest rates on existing as well as new loans to MSME sectors.
(d) Special monthly meetings of State Level Bankers' Committees would be held to oversee the resolution of credit issues of micro, small and medium enterprises by banks. Department of MSME and Department of Financial Services will jointly set up a Cell to monitor progress on this front. Matters of MSMEs remaining unresolved with the Banks- SME Helpline for more than a fortnight may be brought to the notice of this Cell.
To provide a measure of security to unorganized workers, we have enacted the Unorganized Worker Sector Social Security Bill, 2008. The National Commission of Enterprises in the Unorganized Sector (NCEUS) has been asked to work out the detailed schemes in this regard.
The recommendations of the Committee of Governors for speedy socio economic development and empowerment of Women is under the active consideration of the Government. Meanwhile, the UPA Government has decided:
(i) to set up a High Power Committee of eminent persons and experts to study the Status of Women of India to enable the Government to take expeditious action.
(ii) to set up a 'National Mission for Empowerment of Women' for implementation of women-centric programmes in a Mission mode to achieve better coordination and synergy amongst the participating stakeholders.
(iii) to restructure and revitalize the Rashtriya Mahila Kosh (RMK) to scale up their activities including that of backward and forward linkages to function as a single window facilitator and service provider for women Self-Help Groups (SHGs). The authorized and paid-up capital of RMK will be enhanced in a phased manner.
Monetary Policy Measures
RBI took a number of liquidity enhancing measures to deal with the global crisis. These include:
• Reduction of the repo rate from 9 per cent in August 2008 to 5.50 per cent in January 2009.
• Reduction of the reverse repo rate which remained at 6 per cent from mid 2006 in December 2008 and January 2009 respectively by 1 per cent each to bring it to a level of 4 per cent.
• Reduction of the Cash Reserve Ratio from 9 per cent as on August 30, 2008 to 5 per cent with effect from January 17, 2009.
It is important to recognize that there is always some time lag between the announcement of a measure, be it fiscal or monetary, its implementation and its intended impact on the economy and financial parameters of the economy.
Latest figures confirm that our two fiscal packages are steps in the right direction. The data available for the month of December 2008 shows that some of the key sectors of manufacture are exhibiting early signs of recovery compared to November 2008. Cement production has gone up by 8 per cent in December- January and Steel has recorded a production of 22.8 million Metric Tons which is equivalent to the production in May 2008. For the quarter ending December 2008, FMCG registered a growth of more than 25 per cent and Food and Beverages 28 per cent. Railway freight which had declined to 2.2 per cent in October-November 2008 has recovered to a growth of 7 per cent in December, 2008. These are encouraging signs considering that all forecasts point towards a much bleaker 2009 as far as international economy is concerned.
New Concessions
Within the constitutional constraints, I have some flexibility which I want to use to provide further stimulus to the economy.
Even though the signals are encouraging, the full impact of the recession in other parts of the world specially Europe and Asia is yet to unfold. Due to the strong export linkages with these economies, it is likely that the Indian economy may feel further impact in coming months. To counter any such effects, the UPA Government has taken the following decisions:
Central Excise
• General reduction in Excise Duty rates by 4 per cent points was made with effect from 7.12.2008. It is now being extended beyond 31 March, 2009. In addition, it has now been decided to:
• reduce the general rate of Central Excise duty from 10 per cent to 8 per cent.
• retain the rate of central excise duty on goods currently attracting ad valorem rates of 8 per cent and 4 per cent respectively;
• reduce the rate of central excise duty on bulk cement from 10 per cent or Rs. 290 PMT, whichever is higher to 8 per cent or Rs.230 PMT, whichever is higher.
Service Tax
The Government is keen that the business confidence in the Services sector is restored. It is also our objective that the dispersal between CENVAT rate and the Service Tax rate is reduced with a view to move towards the stated goal of a Uniform Goods and Service Tax. In line with this objective, it has been decided to reduce the rate of service tax on taxable services from 12 percent to 10 per cent.
To provide relief to the power sector, Naptha imported for generation of electric energy has been fully exempted from basic Customs Duty. This exemption which was available upto 31 March 2009, is now being extended beyond that date.
Section 10 AA of the Income Tax provides for exemption in respect of export profits of a unit located in a Special Economic Zone (SEZ). The export profits are required to be computed with reference to the total turn over of the assessee. This has resulted in discriminatory treatment of assessees having units located both in SEZ and the Domestic Tariff Area (DTA) vis-à-vis assessees having units located only within the SEZs. It has now been decided to remove this anomaly through necessary changes in the Act.
Hon'ble Members may recall that in my Budget Speech, I had indicated that we may have to review the ceiling of fiscal deficit that the States can incur in 2009-10 in terms of the debt consolidation and relief facility. As a part of the first stimulus package, it was increased by 0.5 per cent to 3.5 per cent of the Gross State Domestic Product (GSDP) for 2008-09. To spur the development of infrastructure and employment generation, this arrangement is being extended to 2009-10 with the possibility of further review, if required, in the coming months.
Our priorities are clear. Rapid development of infrastructure, both in rural and urban areas, and agriculture growth leading to employment generation and distributive justice tops the list. For us economic growth is an instrument for development and not an end in itself. Economic growth has to be both inclusive and equitable. It must provide social justice and lead to the empowerment of Aam Aadmi. In the last five years, the UPA Government has moved steadfastly in that direction. But a social revolution which must flow from these measures is a long process and has to be worked out carefully and systematically, not only through economic growth and mobilization of resources, but also through institutional changes and mobilization of the masses. It is my earnest hope that we will all walk together in the journey ahead to achieve this shared vision."
Tax rate reductions and customs exemption extended to stimulate industry, exports, and state infrastructure financing.
The interim budget implements fiscal stimulus by reducing central excise rates (general reduction of four percentage points and a cut from ten to eight percent), lowering service tax from twelve to ten percent, and extending the basic customs duty exemption on imported naphtha for power generation. It announces credit and refinance facilities for housing, MSME and export sectors, enhancement of credit guarantee cover, and operational measures to speed MSME lending. It also provides that SEZ export profit computation will be amended to remove discrimination against mixed-location assessees and extends the states' fiscal deficit accommodation to promote infrastructure and employment.
Note: It is a system-generated summary and is for quick reference only.