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The largest effects are expected to emanate from increased The largest effects are expected to emanate from increasedhouse rent allowance in the Consumer Price Index, which maypush up retail inflation, which shot up to nearly 2-year highof 6.07 in July. RBI said he commitment of the central government to thepath of fiscal consolidation in 2016-17 has enhanced thecredibility of fiscal policy, which will, in turn, help inanchoring inflation expectations and in improving the businessenvironment, including by fostering credibility amonginternational investors. A conducive environment has also been created throughappropriate incentives or penalties for states to renew theirfiscal consolidation. "The passage of the Goods and Services Tax (GST) Billmarks a new era in co-operative fiscal federalism and agrowing political consensus for economic reforms," the reporthighlighted. It said GST implementation will boost trade, investmentand growth by reducing supply chain rigidities, encouragingscale economies, cutting down transportation and transactioncosts, as also promoting efficiency gains. Report said the country’s external position is viable andwell-buffered to sustain a pick-up in non-oil non-gold importsas growth gathers momentum. "Nevertheless, the external environment continues to posechallenges stemming from large currency movements, a risingincidence of protectionist measures, swift and massivemovements of capital and the amplification of uncertainty bythe Brexit vote," it said. The report said that even as the outlook for capitalinflows is optimistic with the recent liberalisation of FDIpolicy, the repayment of FCNR(B) deposits under the specialswap scheme due in September to November 2016 will need to bemanaged carefully. PTI HV NPSA