Prior to the 4th bi-monthly monetary policy review on September 29, 2015, RBI governor, Raghuram Rajan had come under unprecedented pressure to cut the policy repo rate [interest rate at which the apex bank lends money to commercial banks] to help government’s efforts in giving a fillip to the economy and putting it on a higher growth trajectory. Almost all stakeholders viz., industry and commerce, investors, experts/economists were unanimous in demanding a cut. While, refraining from taking any position [lest this be misconstrued as interference in RBI’s autonomy], the government had nonetheless given a ‘subtle’ signal that this brooks no further delay. This was evident when finance minister, Arun Jaitely recently said “common sense requires a rate cut”. That the...
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Category: Foreign investment & other inflows
Where are the big bang reforms?
Modi deserves accolades for unlocking stalled projects, expediting approvals, making the state policy driven, bringing-in transparency and accountability in governance and increasing ease of doing business. All of this is yielding good dividends by way of spurt in investment [including foreign], boost to growth and a drastic improvement in India’s image globally earning it the distinction of being the only ‘bright spot’ amongst emerging economies. Alas! action is missing in some of the vital areas which were long crying for big bang reforms. Normally, the first 2 years of any new government are considered to be a golden period and that is the time when, it can really risk some unpalatable steps. Unfortunately, Modi – dispensation has wasted both these...
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E-tailers and retailers – Allow 100% FDI for both
In 2012, the erstwhile UPA dispensation had permitted 51% FDI [foreign direct investment] in multi-brand retail [MBR] with riders. The riders include sourcing 30% of requirements from small enterprises, a minimum investment of US$ 100 million besides giving full leeway to states on whether to grant permission or not. The policy was as bad as saying ‘No’ to FDI in MBR. Modi – government which took charge in May, 2014 has continued with that policy decision. Finding that the direct route of entering MBR was choked, foreign investors have been looking for opportunities to make in-roads. And, they found one in e-commerce where business was growing leaps and bounds. So, how did they manage to grab this opportunity? Under the...
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Don’t override judicial process
Any apprehension that judicial process would take time is ill-founded. The matter is slated for hearing by the SC this month itself. While, presenting the budget for 2015-16, Union Finance Minister Arun Jaitley had announced the government’s decision not to levy minimum alternate tax [MAT] on capital gains made by foreign portfolio investors [FPIs] from investment in securities from April 1, 2015. In his speech, he had proposed to rationalise MAT provisions for FPIs whereby profits corresponding to their income from capital gains on transactions in securities, which are taxed at a lower rate, would not be subject to MAT. Since the exemption was intended to be applicable only prospectively from financial year 2015-16, the income tax department served show -cause...
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MAT on FPIs – government must not override judicial process
While, presenting the budget for 2015-16, finance minister, Arun Jaitely had announced government’s decision not to levy minimum alternate tax [MAT] on capital gains made by foreign portfolio investors [FPIs] from investment in securities from April 1, 2015. In his speech, Jaitley had proposed to rationalize MAT provisions for FPIs whereby profits corresponding to their income from capital gains on transactions in securities, which are taxed at a lower rate, would not be subject to MAT. Since, the exemption was intended to be applicable only prospectively from financial year 2015-16, the Income Tax [I-T] department served show cause notices on FPIs for the ‘untaxed gains’ made for previous years. This led to flutter amongst foreign investors who felt this was...
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Indian economy on ‘fast track’ – jobs will follow
In an open letter addressed to Prime Minister, Mr P Chidambaram, former finance minister in the erstwhile UPA government has taken pot shots at Modiji for his ‘alleged’ failure to create jobs. He laments that during 2014-15, jobs were generated at a measly rate of 100,000 per quarter which works out to 400,000 in the whole year. Mr Chidambaram’s observation is reminiscent of a phrase coined by ex-Prime Minister, Dr Manmohan Singh “money does not grow on tree”. Dr Singh was alluding to efforts-led creation of wealth even as right under his nose, people witnessed a contrasting spectre of huge amount of national wealth being plundered and given to close contacts/favourites of political bosses in the grand old party. However,...
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E-tailers vs retailers – ‘level off’ playing field
Mr Kishore Biyani of Future Group has alleged discrimination against brick-and-mortar players in FDI (foreign direct investment) policy vis-a-vis e-commerce companies in the retail space. Meanwhile, seeing threat from near explosion in e-commerce transactions, the Retailers Association of India (RAI) [besides Future Group, it includes Reliance Retail, Bharti Retail etc] had petitioned the government seeking a level playing field. It also approached Delhi High Court (DHC) who directed that let government deal with it first and if problem persists, it will hear their plea after 4 months. So what is the concern flagged by brick-and-mortar players? How does the discrimination arise? Are mom-and-pop stores also feeling the heat from e-commerce onslaught? What is the stance of government on FDI? What...
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Modi delivers ‘scam-free’ India
On May 26, 2015, Modi – government completes one year in office. Naturally, it is time to review and reflect on the pluses and minuses; on what it did and what it did not. But for die hard critics, those wearing coloured glasses and determined to see only negatives, all others viewing happenings from an objective and un-biased mindset will only be able to see positives as this is all that the present dispensation – led by a charismatic leader Modiji – has put on the plate of 1.25 billion people of India. Poor catapulted to center stage For the common man, the poor and the poorest among them, there is a lot to feel relieved and rejoice as the...
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Tax terrorism or tax heaven – say ‘NO’ to both
In recent times, foreign investors have viewed every action of tax authorities in India with suspicion. They have reacted to tax demand for past years with vengeance and in most cases, dragged the latter to court. In several cases, they even avoid Indian jurisdiction (for fear of losing the case) and have gone for international arbitration invoking bilateral investment protection agreements (BIPAs). On a parallel track, they run high voltage media publicity which is even pushed to a point of branding India as an un-attractive investment destination and actions of I-T as ‘tax terrorism’. And, since we need foreign investment for development and building infrastructure, they get additional fuel in their armoury to intensify attack on the government. True, in...
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Invoking bilateral investment treaty on tax claims – an act of brinkmanship
In recent times, multinational companies have taken increasing recourse to international arbitration under Bilateral Investment Promotion and Protection Agreement (BIPA) to resolve the income tax (IT) department claim on them arising from application of the 2012 retrospective legislation. Spate of international arbitration Thus, the British telecom major Vodafone had invoked the India-Netherlands BIPA seeking international arbitration in its long-drawn Rs 20,000 crores tax dispute with the tax department following cancellation of its conciliation talks with the Government of India (GOI). Similarly, the Finnish mobile handset maker Nokia resorted to the treaty to resolve the tax department claim of over Rs 21,000 crores tax liability, both in the form of existing and anticipated liability, for seven years commencing 2006-07. More recently,...
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