Only one Arvind was expected to be appointed to a key position in the economic policy making architecture of the Narendra Modi government, says Sutanu GuruArvind Subramanian, Raghuram Rajan, Arvind Panagriya. Of the three, only one was expected to be appointed to a key position in the economic policy making architecture of the Narendra Modi government. One was supposed to be sent to greener pastures and the third was never supposed to be hired. All this, if you were member of the fan boys and girls club of Modi who expected him to demolish the influence of Luytens Delhi in favour of outsiders unsympathetic to the “cause”. Ironically, Raghuram Rajan, the Governor of the Reserve Bank of India, who was appointed by the previous UPA regime recently received a pat on the back from Modi. The other, Arvind Subramanian, was made the Chief Economic Advisor despite publicly slamming the first Modi era Union Budget presented by Arun Jaitley in July, 2014. The third, Arvind Panagriya, has been a vocal supporter of Modi as well as his so called Gujarat model even before the 2014 Lok Sabha elections along with Jagdish Bhagwati. Modi fans who were disappointed when a “vocal critic” like Subramanian was appointed, cheered loudly when Panagriya was asked to head the newly constituted Niti Ayog which has replaced the Planning Commission. But they would have been sorely disappointed with a recent report in The Indian Express which claims Panagriya is floundering around looking for a role and a place in the sun. The paper quotes a namesless official who says, “Before this confusion over his rank, when Panagariya called a meeting, it was attended by all Secretaries. In a meeting called after change in rank and pay, Secretaries sent across their juniors,” said a source. “It is for the Prime Minister to intervene in situations like these. The bureaucracy is the last in welcoming a foreign body into the system.” In sharp contrast, Subramanian has successfully authored the latest Economic Survey and continues to be candid in his opinions. For example, he publicly stated that there could be a debate on the decision of RBI Governor Raghuram Rajan to persist with high interest rates despite clear indications that lower interest rates are needed to fnance higher growth rates. Some pundits took it as a public expression of a feud between Rajan and Subramanian. But that is mere speculation and Rajan has given no indication that he is going to dramatically cut interest rates in the near future. This despite Arun Jaitley publicly stating that he is in favor of lower inerest rates. Normally, not many would be interested in what the RBI Governor, the CEA and the Niti Ayog Head are up to individually and collectively, except their stated positions on official policy. But it just so happens that all three are star economists who have been imported from the United States. All sorts of benevolent as well as malevolent motives can be ascribed to such American imports! In fact, the curiosity and page three gossip when Rajan was first appointed by the UPA government bordered on the voyeuristic. In this particular instance, gossip factories will keep churning out stuff. But the continuation and the performance of the trio reveals is that contrary to pre 2014 hopes of fans, Modi will continue to be measured and an incrementalist when it cmes to key economic policy making.
Read More
Haider Ali Khan takes a look the corporate houses affected by the government decision to cancel 22 SEZs22 SEZs were cancelled by a Union Cabinet decision on Wednesday (17 June). The sixty fifth meeting of the Board of Approval (BoA) for Special Economic Zones (SEZ) held on 19 May, 2015 under the chairmanship of Shri Rajeev Kher, Secretary, Department of Commerce at Udyog Bhawan, New Delhi had taken the decision to cancel the SEZs after examining the 22 cases of the agenda for cancellation of formal approval. The board had noted that the progress made by the developers were not satisfactory. A look the corporate houses affected by the government . S. NoName of Developer/co-develpoerSectorDate of formal approvalZone1M/s. Hall Marc Technopark (P) Ltd. (Coimbatore District, Tamil Nadu)IT/ITES27.02.2007MEPZ2M/s. Tamilnadu Industrial Development Corporation Ltd. (Ennore, Tiruvallur District, Tamil Nadu)Multi Product23.07.2007MEPZ3M/s. Platinum Holdings Pvt. Ltd. (Navallur, Chennai, Tamil Nadu)Hardware and Software6.11.2006MEPZ4M/s. True Developers Pvt. Ltd. (Palladam Taluka, Coimbatore District, Tamil Nadu)Electronic Hardware including IT/ITES30.07.2007MEPZ5M/s. KPR Developers Ltd. (Coimbatore District, Tamilnadu)IT/ITES and Electronic Hardware27.02.2009MEPZ6M/s. Haaciendaa Realtors Pvt. Ltd. (Kancheepuram District, Tamil Nadu)IT/ITES25.10.2008MEPZ7M/s. DSRK Holding (Chennai) Pvt. Ltd. (Kancheepuram District, Tamil Nadu)IT/ITES30.10.2008MEPZ8M/s. R.C. Infosystems Pvt. Ltd. (Tech Zone, Greater Noida)IT/ITES27.02.2008NSEZ9M/s. Rose View Promoters Pvt. Ltd. (IMT Manesar, Distt Gurgaon, Haryana)IT/ITES29.11.2010NSEZ10M/s. IVR Prime IT SEZ Pvt. Ltd. (Sector – 144, Noida, Uttar PradeshIT/ITES01.07.2008NSEZ11M/s. Sohna Buildcon Pvt. Ltd. (Dist. Gurgaon, Haryana)IT/ITES14.01.2008NSEZ12M/s. Mohan Investment and Properties Pvt Ltd. (Badshapur, District Gurgaon, Haryana)IT/ITES27.07.2007NSEZ13M/s. SarvMangal Real Tech Pvt. Ltd. (Sector 140-A, Noida, Uttar Pradesh)IT/ITES18.02.2008NSEZ14M/s. Sunwise Properties Pvt. Ltd. (Gurgaon, Haryana)IT/ITES21.04.2008NSEZ15M/s. Uppal Housing Ltd. (Knowledge Park–V, Greater Noida)IT/ITES15.02.2008NSEZ16M/s. Mikado Realtors Pvt. Ltd. (Village Behrampur & Balola, District Gurgaon, Haryana)IT/ITES30.10.2008NSEZ17M/s. GHI Finlease and Investment Ltd. (Village Bhonsi, Distt. Gurgaon, Haryana)IT/ITES25.08.2006NSEZ18M/s. Progressive Buildestate Pvt. Ltd. (Tehsil Sohna, Distt. Gurgaon, Haryana)IT/ITES01.07.2008NSEZ19M/s. Township Developers India Pvt. Ltd. (Pune, Maharashtra)Engineering26.02.2009SEEPZ20M/s. APIIC Ltd. (Putlampally Village, Andhra Pradesh)IT/ITES30.07.2007VSEZ21M/s. APIIC Ltd. (Kurukalava Village, Renigunta, Andhra Pradesh)IT/ITES12.10.2007VSEZ22M/s. Raaga Mayuri Builders Pvt. Ltd. (Tadakannapalli Kurnol Dist., Andhra Pradesh)IT/ITES10.09.2008VSEZ
Read More
The Reserve Bank of India (RBI) on Thursday relaxed rules for Indian companies to raise money in rupees from overseas lenders. The overseas lenders will have to enter into currency swap transactions with their overseas banks who in turn will provide rupees by tapping a bank in India for extending funds in rupees to the corporate. Earlier, an Indian corporate offshore had no access to borrow in rupees from overseas market and had to first take a dollar loan and then convert the same into rupees which included undertaking the foreign currency risk. However, under the relaxed rules, the forex risk will shift from Indian corporate to the lender of that fund offshore, a senior foreign banker said. The back to back swap arrangement between the offshore lender, the overseas bank and the bank in India will be subject to underlying external commercial borrowing rules, the RBI said. (Reuters)
Read More
India is one of the largest consumers of gold in the world and imports as much as 800-1,000 tonnes of the metal each year. Indians' penchant for gold spans centuries and is rooted in the Hindu religion, with the Diwali festival being one of the biggest annual buying seasons. Gold also forms part of dowries and it is an instrument of financial security for 70 per cent of India's rural population. In a move to monetise some 20,000 tonnes of gold sitting idle inside vaults, the government has released a draft scheme that lets individuals and entities such as temple trusts to deposit the yellow metal and earn tax-free interest on the value of the gold. Here's all you need to know about unlocking the value of gold1) Gold monetisation scheme in a nutshell The scheme is designed to help people and entities such as temple trusts to deposit the yellow metal and earn tax-free interest on the value of the gold. 2) How it worksWhen a customer brings in gold to the counter of specified agency or bank, the purity of gold is determined and exact quantity of gold is credited in the metal account. Customers may be asked to complete KYC (know-your-customer) process. The deposited gold will be lent by banks to jewellers at an interest rate little higher than the interest paid to customer. 3) Against the Scheme Since such schemes attract interest rates of not more than half a per cent to 2 per cent, they are rarely popular in developing nations. Individuals assign high intrinsic value to gold craftsmanship and heirlooms and are unwilling to melt down gold, especially if it has historic value 4) What does the depositor get Will see his gold grow over time, that too tax freeNo wealth, capital gains or income tax likely on gold deposited 5) Way to calculate rate Both principal and interest to be paid to the depositors of gold, will be ‘valued’ in gold. For instance, if a customer deposits 100 gm of gold and gets one per cent interest, then, on maturity he has a credit of 101 gram. Banks will have the freedom to decide on the rate of interest they will offer 6) TenureThe tenure of gold deposits is likely to be for a minimum of one year. The minimum quantity of deposits is pegged at 30 gram to encourage even small deposits. The gold can be in any form, bullion or jewellery 7) Past imperfectThe Centre had launched a gold monetisation scheme in 1998-99 that proved unproductive as it required a minimum of 500 gm of gold to be depositedUnder that scheme, SBI offered 0.75 per cent to 1 per cent interest and only 15 tonnes of gold had been deposited till date 8) Use of deposits The gold deposited will be used to buy foreign currencies or turned into coins for on sale by banks or lent to jewellers or else deposited with the RBI to meet cash reserve ratio and statutory liquidity requirements 9) Redemption plan Customer will have the choice to take cash or gold on redemption, but the preference has to be stated at the time of deposit.10 ) Deposit details After depositing the gold, the customer will be issued a certificate. Based on this certificate, the bank will open a gold savings account. Under the proposed scheme, the interest will be payable after 30/60 days of opening of the account. 10) For jewellersThe scheme will also allow jewellers to obtain loans in their metal account. It has proposed to allow banks to lend the gold they collect under this scheme to jewellers 11) What’s in it for banks Banks will have another source of income and they can sell gold to raise forex for lending to traders Banks can lend gold deposited to jewellers at higher rates 12) What’s in it for economy Unproductive gold will come out in open Need for gold imports will come down, conserving forex (BW Online Bureau)
Read More
Finance minister Arun Jaitley has said the BJP was “never” in favour of allowing foreign direct investment (FDI) in multi-brand retail and a recent government notification only published the extant policy on it. “Let’s be very clear. What the DIPP (department of industrial policy and promotion) did was publish the existing policy and so far what was decided by the UPA is continuing, the fact that the BJP was never in favour of this decision is publicly known,” Jaitley told PTI in an exclusive interview. He was replying to a question on the DIPP in its FDI policy compendium stating that 51% foreign direct investment was permitted in the multi-brand retail sector. “If somebody asked me what is your view, I said BJP is never in favour of this,” he said. Asked that what is stopping the government to reverse the decision of the UPA government on the sector, he said: “Leave something for the government also.” On 12 May, the DIPP retained the previous UPA government’s decision allowing foreign retailers to open multi-brand stores with 51% ownership, in its consolidated FDI policy released. Although the previous government had allowed FDI in multi—brand retail, only one investment proposal of the UK—based Tesco was cleared. The BJP manifesto had said, “Barring the multi—brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialised expertise.” Jaitley also evaded giving a direct reply to a question on what the government’s response will be if a retailer was to submit an FDI proposal. “When it will come, I will (respond),” he said. “I have replied what I have said, the DIPP circular has reproduced what is the existing policy. At the same time if somebody asked me what is your view, I would say the BJP is never in favour of this,” he added. (PTI)
Read More
Seeking to mobilise gold held by households and institutions, government today came out with a draft scheme under which a person or entity can earn interest by depositing the metal with banks. As per the draft guidelines, minimum gold deposit is proposed at 30 gms and the interest earned on it would be exempt from income tax as well as capital gains tax. A person or institution holding surplus gold can get it valued from BIS-approved hallmarking centres, open a Gold Savings Account in banks for a minimum period of one year and earn interest in either cash or gold units, the draft said. The Finance Ministry has sought comments from stakeholders on the draft gold monetisation scheme by June 2. The gold monetisation scheme, which is proposed to be initially introduced only in selected cities, was announced in the Budget this year by Finance Minister Arun Jaitley. "The new scheme will allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal account. Banks/other dealers would also be able to monetise this gold," Jaitley had said. India is one of the largest consumers of gold in the world and imports as much as 800-1,000 tonnes of the metal each year. The stock of gold in India that is neither traded nor monetised is estimated to be over 20,000 tonnes. The scheme is aimed at mobilising idle gold held by households and institutions, provide a fillip to the gems and jewellery sector and reduce reliance on import of gold over time to meet the domestic demand. Under the proposed scheme, the bank interest to the customers will be payable after 30/60 days of opening of the Gold Savings Account. "The amount of interest rate to be given is proposed to be left to the banks to decide. Both principal and interest to be paid to the depositors of gold, will be 'valued' in gold," the draft norms said. It added, as example, that if a customer deposits 100 gms of gold and gets 1 per cent interest, then, on maturity he has a credit of 101 gms. With regard to redemption, the guidelines said that customers will have the option of getting it back either in cash or in gold, which will have to be exercised in the beginning itself that is, at the time of making the deposit. The tenure of the scheme has been proposed at a minimum 1 year and with a roll out option in multiples of one year, it said, adding that it would be like a fixed deposit, breaking of lock-in period will be allowed. "To incentivise banks, it is proposed that they may be permitted to deposit the mobilised gold as part of their CRR/SLR requirements with RBI. This aspect is still under examination," it said. Cash Reserve Ratio and statutory liquidity ratio are mandatory requirement which banks have to follow as per RBI directive. Elaborating other benefits of the scheme, the guidelines said, banks may sell the gold to generate foreign currency. The foreign currency thus generated can then be used for onward lending to exporters or importers. Bank may convert mobilised gold into coins for onward sale to their customers and can be used for lending to jewellers, it said. The government is also planning to commence work on developing an Indian Gold Coin, which will carry the Ashok Chakra on its face. Such a coin is expected to help reduce the demand for coins minted outside India and help recycle the gold available within the country. As far as lending to jewellers is concerned, a Gold Loan Account has to be opened on the basis of the terms and conditions of the banks. "When a gold loan is sanctioned, the jewellers will receive physical delivery of gold from the refiners. The banks will in turn make the requisite entry in the jewellers’ Gold Loan Account," the draft guidelines said. They also said that banks will enter into a tripartite MoU with refiners and purity testing centres, that are selected by them to be their partners in the scheme. The MoU will be required to clearly lay down the details regarding payment of fee, services to be provided, standards of service and the details of the arrangements between the banks, refiners and purity testing centres, it said. (PTI)
Read More
The Finance Ministry could have sidestepped a damaging multibillion-dollar tax row with foreign investors if it had acted on regular warning letters that officials had been sending since as long ago as September. The warnings went unheeded, according to senior sources in the tax department and finance ministry, until the dispute with overseas investors over the imposition of the minimum alternate tax (MAT), which had not previously been applied to them, hammered the country's stock and bond markets and dented the business-friendly image of Prime Minister Narendra Modi. Investor lobbies and tax lawyers estimate the bill for international funds and banks could be as high as $8 billion. Modi's government has been scrambling to contain the fallout since foreign funds started publicising their fight against MAT in mid-April, but it could have headed off the row if it had acted on the cautionary letters from its tax officials. One official's letter seen by Reuters, sent in November, asked for direction and warned that once tax notices were issued there could be "large ramifications". "They were sitting on a powder keg waiting for it to explode," said a senior official at the tax department. The finance ministry last week asked officials to stop issuing new MAT notices, but that is some eight months after the first letter and roughly six weeks after a storm sparked by the sending of almost 70 initial claims totalling Rs 6oo crore. A spokeswoman for the Central Board of Direct Taxes said it was "totally incorrect to say that the Finance Ministry did not appear to realise the seriousness of the issue" and denied that the ministry's response was slow. She said the issue was brought to the notice of the government as it prepared its annual budget for 2015-16, with Finance Minister Arun Jaitley announcing that MAT would no longer apply to foreign investors from April 2015. But Jaitley, whom a senior government source said was aware of the issue from January, left open the question of liabilities for past years, citing an outstanding court ruling. Last week, more than two months after the budget was announced, the government announced a temporary freeze on MAT notices pending a review. "COMPLETE MESS" Foreign investors have long been critical of India's tax bureaucracy, citing aggressive claims that have led to damaging rows with companies including Vodafone and, more recently, Cairn India. Foreign funds are drawn to India in part because taxes on market investments can be lower than in Asian emerging market rivals. Before the MAT dispute, funds paid 15 percent on short-term listed equity gains, 5 percent on gains from bonds, and nothing on long-term gains. Taxes can be even lower if the investor is based in countries with tax exemption treaties with India. The MAT claims so far have been small - Aberdeen Asset Management (ADN.L) has, for example, received a claim of less than $50,000 - but investors complain the unpredictability unsettles them and the market. The current controversy stems from a 2012 ruling over Mauritius-based Castleton Investment Ltd, an affiliate of pharmaceutical giant GlaxoSmithKline plc (GSK.L). Contradicting previous decisions that had restricted MAT to domestic companies, a tax court ruled on a theoretical question that Castleton would be liable to MAT if it transferred shares in GSK's India unit to a Singapore arm. Tax officials were initially reluctant to pursue the ramifications of the ruling for other foreign companies, but were prompted to do so by India's Comptroller and Auditor General (CAG) in 2013. "We were in a position where you're damned if you do and you're damned if you don't," said the senior tax official. As the tax officials got no substantive response to their letters from the finance ministry, they sent notices to investors, then claims, in late March. The issue will be decided by the Supreme Court in August. "This is just one of those cases where the government and the bureaucracy have created a complete mess of what was not such a complicated issue," said a London-based fund manager. "Now they are trying to pacify investors, but all of this just leaves a very bad after-taste." (Reuters)
Read More
After just making a slew of amendments to the 'complicated' Companies Act, government will constitute an expert committee next week to suggest further changes to make it easier to do business. "There were about 50 odd provisions (in the Companies Act, 2013) which were very hurting...I will be constituting a committee...may be in the course of next week," Finance Minister Arun Jaitley told in an interview. He said the government might go in for "another round" of amendments depending on the suggestions received from the committee, which will interact with stakeholders on further easing of rules. The Companies Act, 2013 has more than 450 clauses and several of them had complicated doing of business, he said, adding "you are feeling the pinch after its being implemented." The government earlier this week effected 16 amendments in the Companies Act with a view to streamline procedures and remove some of the provisions with regard to denial of bail for violations of those provisions. He said that there was one provision in this Act, which had similar conditions for bail in a corporate crime as in the now-defunct Prevention of Terrorism Act (POTA). Under POTA, bail was virtually impossible unless the public prosecutor concedes that there is no case or the judge comes to the conclusion that there is no case made, he said. While POTA was replaced by Unlawful Activities Prevention Act with harsh bail provision dropped, the same was brought in the Companies Act, he said. Bail provision "considered too harsh for an anti-terrorism law, word for word, full-stop for full-stop was brought into the Companies Act," he said, adding Jaitley said, the worst offence in a corporate setup could be extreme fraud like the Satyam scam. There are several other offences where you pay penalty and get out, but you have "a bail provision in which you will never get bail".(PTI)
Read More
