Three strokes from Indian Economy - GST, UPI and Inflation targeting

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  Three strokes from Indian Economy - GST, UPI and Inflation targeting

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• GST collections: In good tidings for the government, the goods and services tax (GST) revenue collections in March 2021 came it at the highest (Rs.1.24 lakh crore) since the tax system's introduction in July 2017. The collections were up 27 per cent when compared with the year-ago period. In line with the trend of recovery in the GST revenues over past five months, the revenues rose.

1. The govt. informed that GST revenues were above Rs 1 trillion for the last six months and a steep increasing trend over this period were clear indicators of rapid economic recovery post pandemic.
2. Closer monitoring against fake-billing, deep data analytics using data from multiple sources including GST, Income-tax and Customs IT systems and effective tax administration have also contributed to the steady increase in tax revenue over last few months.
3. Of the total revenue collected, CGST is Rs 22,973 crore, SGST is Rs 29,329 crore, IGST is Rs 62,842 crore (including Rs 31,097 crore collected on import of goods) and Cess is Rs 8,757 crore (including Rs 935 crore collected on import of goods).
4. The government has settled Rs 21,879 crore to CGST and Rs 17,230 crore to SGST from IGST as regular settlement. In addition, Centre has also settled Rs 28,000 crore as IGST ad-hoc settlement in the ratio of 50:50 between Centre and states.
5. The total revenue of Centre and the states after regular and ad-hoc settlements in March is Rs 58,852 crore for CGST and Rs 60,559 crore for the SGST. Centre has also released a compensation of Rs 30,000 crore during the month of March 2021.
6. Revenues from import of goods was 70 per cent higher and the revenues from domestic transaction (including import of services) are 17 per cent higher than the revenues from these sources during the same month in 2020.
7. The GST revenue witnessed growth rate of (-) 41 per cent, (-) 8 per cent, 8 per cent and 14 per cent in the first, second, third and fourth quarters of financial year 2020-21, respectively, as compared to the same period in 2019-20, indicating the trend in recovery of GST revenues as well as the economy as a whole.

• UPI rising: Transaction volumes over the Unified Payments Interface (UPI) more than doubled over a year, touching 2.73 billion in March 2021 compared to 1.25 billion in 2020. The March 2021 numbers were a 20% jump from February’s 2.29 billion. Transactions value crossed ?5 trillion in March, up 18% from February 2020.

1. March 2021 represents a strong growth in UPI volumes, which had slowed to 1-3% growth between November 2020 and February 2021. 
2. As the pandemic set in and consumers started opting for digital payments, UPI transactions grew in double digits through the lockdown months.
3. The recent slowdown in growth could be attributed to rising transaction failures because of frequent technical glitches at banks, which also dethroned Google Pay as the UPI market leader.
4. Google Pay had registered 857.8 million transactions in October and reached a peak of 960 million transactions in November, commanding close to 43% market share in UPI payments. The platform has seen a continuous drop in transactions since. It recorded 854.4 million transactions in December, 853.5 million in January, and 827.86 million in February 2021.
5. UPI market leader PhonePe also crossed a milestone during March 2021. The total transactions on its platforms across the payment instruments of wallet, card, and UPI was 1.3 billion.
6. The National Payments Corporation of India (NPCI) defined its standard operating procedure on the 30% market share cap on UPI transactions for third-party app providers such as Google Pay and PhonePe. On crossing the 30% mark, apps and their partner banks will have to stop signing up new users with immediate effect. However, NPCI stated that it may grant exemptions based on justifications provided. 
7. Other payment instruments operated by NPCI also witnessed growth. Immediate Payment Service saw transactions rise to 363.14 million in March from close to 318.79 million in February. FASTag transactions also grew to 193.21 million in March from 158.96 million in February 2021.

• Inflation targeting regime: The Government of India has decided to retain the inflation target of 4%, with a tolerance band of +/- 2 percentage points for the Monetary Policy Committee of the Reserve Bank of India (RBI) for the coming five years. The RBI in its Currency and Finance (RCF) report for the year 2020-21 also had recommended the inflation target to be kept same as 4% +/-2% for next 5 years. Points to note are -

1. To control the price rise, the Centre in 2016 gave a mandate to the RBI to keep the retail inflation at 4% with a margin of 2% on either side for a five-year period ending 31st March, 2021. 
2. The RBI and the government agreed in 2015 on a policy framework that stipulated a primary objective of ensuring price stability while keeping in mind the objective of growth. The Flexible Inflation Target (FIT) was adopted in 2016. The Reserve Bank of India Act, 1934 was amended to provide a statutory basis for a FTI framework.
3. The amended Act provides for the inflation target to be set by the Government, in consultation with the RBI, once every five years.
4. The Consumer Price Index (CPI) tracks the change in retail prices of goods and services which households purchase for their daily consumption. The inflation target for 1st April, 2021 to 31st March, 2026 under the RBI Act 1934 will be at same level as was for previous 5 years
5. Inflation Targeting - It is a central banking policy that revolves around adjusting monetary policy to achieve a specified annual rate of inflation. It is known to bring more stability, predictability, and transparency in deciding monetary policy.
6. Strict Inflation Targeting - It is adopted when the central bank is only concerned about keeping inflation as close to a given inflation target as possible, and nothing else.
7. Flexible Inflation Targeting (FIT) - It is adopted when the central bank is to some extent also concerned about other things, for instance, the stability of interest rates, exchange rates, output and employment.
8. Monetary Policy - It is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.
9. The RBI implements the monetary policy through open market operations, bank rate policy, reserve system, credit control policy, moral persuasion and through many other instruments. 
10. Monetary Policy Committee - It is a statutory and institutionalized framework under the Reserve Bank of India Act, 1934, for maintaining price stability, while keeping in mind the objective of growth. The Governor of RBI is ex-officio Chairman of the committee. The MPC determines the policy interest rate (repo rate) required to achieve the inflation target (4%). An RBI-appointed committee led by the then deputy governor Urjit Patel in 2014 recommended the establishment of the Monetary Policy Committee.

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