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Disinvestment blues
- Add Sticky Note | RemoveWith hardly five months left for the fiscal to end, the Centre is nowhere near achieving its target of Rs 40,000 crore from disinvestment for 2011-12.
- Disinvestment during this fiscal has been characterised by false starts – ONGC being a good example, where the Centre came close to making a follow-on public offer (FPO) on at least three occasions before retreating
- BHEL, SAIL and Hindustan Copper, too, were in line for FPOs, but they have remained so on paper.
- various options being apparently under the Centre's consideration: FPOs, IPOs for unlisted entities such as the National Buildings Construction Corporation, and buyback of government equity by so-called ‘cash-rich' oil or mineral resource public sector undertakings (PSUs).
- Announcing lofty budget targets is easy; but achieving them is less so.
- Disinvestment ought to be only a means to various ends. They include injecting managerial efficiencies resulting from private enterprise in languid government enterprises, promoting competition, accessing technology and even promoting the growth of capital markets through the listing of these valuable entities.
- As a promoter of publicly-held companies in the Indian economy, the Government must set superior standards of governance for private promoters to emulate, rather than be guilty of lowering them.
Small, medium units' business confidence declines
- Business confidence among Indian micro, small and medium enterprises (MSMEs) has dropped by 2.5 percentage points
- Credit, whenever available, has been too costly and has scared many SMEs away. Several bankers have also admitted that if tight policies continue, the costs would be passed on to buyers
- However, the situation is helped somewhat by some of the actions taken by the Government, such as announcement of the 2 per cent interest subsidy on rupee export credit to the labour-oriented SMEs to help them overcome the global market slowdown
Global turmoil impacts rupee
- Add Sticky Note | RemoveThe rupee plunged breaching the psychological barrier of 50 a dollar amidst a mood of negativity in the economy. The uncertainties in the global economy are stronger today than in 2009
- Markets expected the central bank to intervene to check the fall of the rupee. But instead of doing so, it allowed the rupee to decline gradually ensuring no volatility affecting the market.
- spot rupee opened at 49.42 and traded at a low of 49.81 and a high of 49.3650 before closing at 49.8050. In the futures trading too, the rupee moved down sharply on Friday
- There were several reasons for the fall in value of rupee against the dollar. First, there is a strong demand for dollar as no one is able to predict an end to the European debt crisis.
- While France suggested the use of more European central bank money to fight the eurozone debt crisis, Germany and other EU partners resisted this move.
- For India, falling rupee means importing inflation, which is hovering at higher levels, more than the central bank's tolerable expectation.
- India's highest import is oil which is around 80 per cent of the total demand for oil.
- the oil import bill is estimated between $120 billion and $130 billion in the current fiscal year.
- the increasing Current Account Deficit is another concern.
- CAD stood at $14.1 billion in the first quarter of current financial year
- Goods exports recorded a 47.1 per cent growth while imports registered a growth of 33.2 per cent during the first quarter of the current fiscal. The trade deficit on Balance of Payments (BoP) basis, in absolute terms, amounted to $35.4 billion, which was higher
- Net exports of services grew by 19.1 per cent during the first quarter of 2011-12
- The U.S. and European Union are the biggest importers of Indian goods. Exports were growing but the European crisis will have a negative impact on Indian exports.
- If oil and commodity prices remain elevated, the CAD will remain significant
How treaty benefits are availed?
- Add Sticky Note | RemoveAll Double Taxation Avoidance Agreements are not identical. Extent of relief can be decided only with reference to terms of the Agreement and the nature of income.
- Following are the broad features of an Agreement. (1) The date on which it comes into effect; (2) taxes covered by it; (3) rules for determination of residential status for the purposes of the Agreement; (4) guidelines for inference of permanent establishment in respect of business income and fixed base for professional income; (5) definitions of concepts such as immovable property, dividend, business profits, royalty, technical fees and salaries; (6) extent of relief to be granted on doubly taxed income on agreed tax-sharing between the participants to the Agreement; (7) exchange of information as between the countries primarily to tackle tax evasion and recovery of tax due in one country in the other; (8) provision for non-discrimination and (9) other clauses to suit the requirements of the participating countries.
- There are both provisions of avoidance and relief depending upon the categorisation of income. Income and capital gains from immovable properties are ordinarily taxable in the country where the immovable property is located so that the other country cannot tax the same, though the owner of such income is a permanent resident of that other country.
- In countries like India or the U.S., every income within its borders is bound to be reported and so is the global income abroad by residents under the domestic law. Information relating to income outside the country can always be obtained by the tax collector, through the provision for exchange of information under the Agreement, special agreements which India now has with some countries under Tax Information Exchange Agreement (TIEA) or by enquiry through its embassies or even by purchase of information from informants or other third parties.
