Monday, January 14, 2013

2-year delay of GAAR implementation and inflation dynamics!

The possible RBI rate cut rise scheduled later this January has gathered enough grounds with the country’s headline inflation slowing to its lowest level in three years. India has posted its most sluggish economic growth in a decade and rate cut is one of the boosters to growth. 

Part of the cause of the decaying economy was a fall in investment flows into India last year following India's moves to toughen tax collection by implementing The General Anti-Avoidance Rules (GAAR) from April 2014. The minimal amount applicable to fall under GAAR would be 30 million rupees; investors and companies, routing the said or more amount through tax havens such as Mauritius, are aimed at.

The Finance Minister P. Chidambaram announcing delay of the implementation of GAAR by another two years (i.e., to be effective from April 1, 2016), has had a positive impact in the Indian stock market. The economy may witness moderate boost following capital inflows owing to the move.

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