‘Draft law on Ponzi schemes addresses all the main issues’

While it is easy to monitor the regulated deposit schemes, there is a clear need to demarcate unregulated deposits and Ponzi schemes from other schemes, says Shaktikanta Das, Secretary of Department of Economic Affairs.

In an interview with BusinessLine, Das shared his thoughts on tax rates under the Goods & Services Tax (GST) regime, inflation, growth targets, and role of RBI. Excerpts :

The roadmap for roll out has been prepared by the Ministry of Corporate Affairs (MCA). Work is in progress for the appointment of the bankruptcy regulator. To implement the Bankruptcy Law, it was a toss up between the Department of Financial Services and the MCA. It was felt that MCA is better positioned as it is not just about debt recovery tribunals (DRTs), but there are Company Law issues as well.

To curb the menace of unregulated deposit schemes the government has come out with draft law. Will there be an overlap between the two pieces of legislation – one dealing with non-banking financial companies (NBFCs) and the other with Ponzi schemes?

NBFC activities are already regulated. The challenge was how do you deal with Ponzi schemes? First, certain acts have to be declared illegal. Second, if there is a Ponzi scheme there has to be a provision of seizing the assets and returning them to the investors. The third aspect is taking penal action against the perpetrators of this kind of illegal schemes.

The draft Bill on Ponzi schemes addresses all these issues. Some States have enacted laws, but there are a few deficiencies. The Central law will be very robust legal framework, which will address all the issues. We are working on it.

When will the members of the Monetary Policy Committee (MPC) be appointed? Will MPC decide the next policy? Where do you see retail inflation heading?

The orders for appointment of the MPC members are expected shortly. Possibly, the next policy in October will be formulated by the MPC. The RBI Act, after amendment, says that the objective of the Monetary Policy is to achieve price stability keeping in view the requirements of growth. So there has to be a balance between price stability, inflation targeting linked to CPI at 4 per cent (+/-2 per cent) and also keeping in mind the requirements of growth.

Going forward, we expect inflation to ease.

Is eight per cent growth this fiscal attainable given that the first quarter GDP was 7.1 per cent?

In the Economic Survey, we had said growth will be in the range of 7.25 per cent to 7.75 per cent. Now, we are expecting a growth of close to eight per cent. In the first quarter, growth was 7.1 per cent due to the heavy subsidy outgo, which was 53 per cent higher than a year ago. Going forward, it will correct itself.

Also the monsoon has been very good and agriculture production is expected to be good. Rural purchasing power will also improve and the Seventh Pay Commission pay out will also help.

Not all States have ratified the Constitution Amendment Act (to enable GST). What happens to the States which don’t come on board?

The Constitution Amendment Act gives a window of one year, within which every State has to come under GST. Beyond one year, it is not a matter of discretion. It becomes a mandatory Constitutional requirement to come into GST. If I recollect correctly, it is one year from the date of notification. There is sufficient level of keenness and interest in every State to introduce GST. If a few States have not yet ratified it, it is just a matter of their legislative calendar. All States are for it.

What is the thinking on the taxation rate for GST?

While it is the GST Council that will look into all issues relating to tax rates, I feel that the GST rate will have to be revenue neutral so that there is no loss to the exchequer. The rate should be reasonable and moderate. You cannot have a very stiff GST rate, as that would be a non-starter. That is the objective of everyone.

The Economic Survey and Reserve Bank of India (RBI) gave a different number on savings of RBI. The Comptroller and Auditor General (CAG) is initiating audit of money infused by the government (recapitalisation) into public sector undertakings. Can the government auditor also look into RBI savings?

What comes out in the Economic Survey is an economist’s understanding of the economy and how things should move forward. It doesn’t necessarily reflect government policy, which is based on several factors keeping in view the broad requirements of the market, RBI’s point of view. In any case, CAG audit will be based on the provisions of the Constitution and the CAG Act.

But at the moment, there is no decision on it (auditing the RBI savings).

Gold monetisation scheme has not taken off to the extent government was expecting. Are you satisfied with the response to the fifth tranche of gold bonds?

The original intention was to discourage savings by way of buying gold and encourage investments in financial instruments. We asked the bankers whether the investors who have subscribed for the bonds would have otherwise bought gold. The bankers told us that quite a good number of retail investors are purchasing the bonds in lieu of gold.

The scheme has clicked. Many retail investors are also buying this instrument as a gift for children. What would normally people do? People would buy gold and hold it for the children. People have also started giving it as a gift during marriages or social occasions.

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