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Monday, January 13, 2020

economic news of india - world economic news - economics news for students - indian economy news

economic news of india - world economic news - economics news for students - indian economy news


Fudging GST bills may become a non-bailable crime for buyers too

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NEW DELHI: The government is likely to make fraudulent claims for input tax credit a non-bailable offence in the hands of recipients of goods and services in the February 1 budget by tightening the GST law, as it seeks to plug leakages. CXOs, directors or employees directly responsible for making such claims can also be penalised as per the proposed changes aimed at tackling evasion."Changes are being proposed to the law to plug issues related to fraud input tax credit," said a government official. The threshold of Rs 5 crore will apply for the offence being treated as bailable; beyond that it will be non-bailable. The provision already applies to suppliers of goods and services.GST Council has Okayed ChangesThe provision is now proposed to be expanded to include recipients found guilty of colluding in such fraud, said the person.The proposed amendments to Sections 122 and 132 of the GST Act have been endorsed by the law committee and the GST Council, the apex decision-making body for the tax. Current provisions don't have specific measures to deal with such tax evasion."A value-added tax like GST should have explicit penalties to deal with cases where active collusion results in input tax credit frauds," said MS Mani, partner, Deloitte India. "Such cases by a small community of taxpayers lead to increasing compliance and procedural requirements on all taxpayers." 73237453 Another official said the government has come to the view that beneficiaries of such fraudulent claims, usually made through dummy companies, should be penalised commensurately.The authorities have registered several cases in which input tax credit has been claimed without supporting invoices or receipt of goods or services. A clear provision in the law will provide a framework for dealing with such cases, the second official said.An official said the names of daily wage earners such as rickshaw pullers and others are being used to open multiple firms that issue invoices without supply of goods or services to pass on input tax credit. Those who orchestrate such frauds also arrange for actual suppliers of goods or services to whom these invoices will be sold on payment of an agreed amount of money.These suppliers then utilise this credit to either discharge their GST liability or claim refunds of duty paid on export of overvalued goods, the official said.The GST Council has also endorsed changes to Section 49 of the GST Act empowering officials to block credit in the case of fraud. This will also be introduced in the budget.Experts said the changes will need to be elaborated upon to avoid confusion. "While there is a need to have legislative recourse to prevent such instances, it's important that government issues detailed guidelines as to how and when these provisions have to be invoked so that possibility of misuse can be minimised," said Pratik Jain, indirect tax leader, PwC.

More cash in hand for you this Budget?

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Mumbai: The government is considering a proposal to extend further incentives to salaried tax payers in the upcoming budget. The finance ministry may allow tax exemptions of up to Rs 2.5 lakh for savings under the 80 category and carve out a separate segment under section 80C of the Income Tax Act to give tax exemptions up to Rs 50,000 for National Savings Certificate (NSC), three people familiar with the development said.It is also mulling allowing a maximum investment limit of Rs 2.5 lakh for Public Provident Fund (PPF) investors. "A proposal to allow tax incentives on the small savings scheme, especially PPF and NSC, is with the finance ministry. If given a go ahead, these would be part of the budget announcement," an official, privy to the matter, said. "These fiscal incentives would put more money in the hands of the savers."Presently, there is an exemption of Rs 1.5 lakh under section 80C of the IT Act, which includes investments made to the PPF account. NSC is also part of that exception. India's household sector's saving rate fell to 17.2 percent in 2017-18 from 23.6 percent of GDP in 2011-12. Data for FY19 is unavailable. Since 2011-12, household savings in financial assets have hovered around 7 percent of GDP. 73237572 Bank deposits, at 27%, account for the biggest share in the total gross financial savings of households. The government's plan is to put more money in the hands of the savers and hope to spur consumption. "The potential increased savings arising on account of an increase in the limit of PPF by Rs 1 lakh from Rs 1.5 lakh to Rs 2.5 lakh is immense if we consider that there could be over 3 crore individual taxpayers having a gross total income of Rs 5 lakh or more. Compared to other measures around providing tax relief, this one has the advantage of garnering significant personal savings," said Gautam Mehra, leader, tax and regulatory services, PwC India."Also, a step like this could go be crucial at a time when India's savings are going down," he said. ET recently reported that a flat tax rate without exemptions, new slabs for those earning higher incomes, cuts in personal income tax in line with those in corporate tax, are proposals being examined ahead of the upcoming federal budget on February 1.The government has already shrunk its kitty through the Rs 1.45 lakh crore in corporate tax cuts, but that's seen as part of broader direct tax reform aimed at attracting investments. But it sparked calls for cuts in personal income tax, since there were no reliefs in this regard in the last budget.Industry trackers said while these proposals may put some dent in the tax collections, it won't be crucial. The government is trying to manage the fiscal deficit that stood at Rs 8.07 lakh crore at the end of November last year, 13% above the full-year target, as per the Controller General of Accounts. Indian revenue collections have been below expectation.

Mistry uses Tata stake to bail his firm out

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MUMBAI: The Shapoorji Pallonji (SP) Group has leaned on its stake in Tata Sons — the subject of India's biggest corporate battle — to buy time for the liquidity-starved construction empire and raise short-term funds, said people with knowledge of the matter.Deutsche Bank has provided $200 million (Rs 1,400 crore) as bridge financing, they said. The funds were given to Sterling Investments and Cyrus Investments, which belong to the Mistry family, against the ownership of Tata Sons shares, they said.Cyrus Mistry has challenged his ouster from Tata Sons in October 2016 — the case is currently in the Supreme Court. The 18% stake that the Mistry family owns in Tata Sons is held through the two entities.This short-term finance is part of a larger fundraising exercise that the Mistrys and SP Group are evaluating to deal with the squeeze. The SP Group has also initiated several divestment exercises, including selling flagship Eureka Forbes and solar energy assets.SP Group Needs Rs 5,000-6,000 CrThe Deutsche Bank funding is a temporary solution to meet immediate needs ahead of the asset sales, said the people cited above.Cyrus Mistry's office, the SP Group and Deutsche Bank declined to comment. Tata Sons didn't respond to queries. 73237392 The SP Group likely needs Rs 5,000-6,000 crore to give them the flexibility to undertake group-wide M&As and divestments in order to restructure the balance sheet.Closely held Tata Sons, which controls the $111 billion conglomerate spanning more than 100 companies, is 66% owned by Tata Trusts, helmed by chairman emeritus Ratan Tata.Sources said the Mistrys have been in talks with a diverse set of funds including KKR, banks such as Standard Chartered and nonbank finance companies (NBFCs) like Edelweiss, among others, to raise funds. Talks with KKR had advanced significantly but were inconclusive, said the people cited above."Multiple discussions are ongoing," said one of those directly involved. "They are looking at different deals, structuring with different sets of investors—asset-based, project-level funding, holding company infusion that gives them options to use the money whichever way they want… This was an urgent requirement, so Deutsche Bank stepped in."The documentation for the financing is believed to have been finalised at the end of December.The SP Group had informed exchanges on December 31 that the promoters had repaid another tranche of the Rs 750 crore debt owed to group company Sterling and Wilson Solar (SWSL). The Deutsche Bank funding is expected to have assisted in those repayments.The Mistrys have been engaged in a legal battle alleging suppression of minority shareholder rights in the wake of Cyrus Mistry's ouster in October 2016. The constitution of Tata Sons was changed in September 2017 to convert it into a private limited company from a public limited one. This freed it of the need to seek shareholder consent on crucial decisions, which could be passed with board approval.The National Company Law Appellate Tribunal (NCLAT) had reinstated Cyrus Mistry in Tata Sons and quashed the latter's conversion, terming it "illegal" on December 18. The Supreme Court subsequently stayed the NCLAT order in its entirety on January 10.The Mistrys have alleged that the decision to convert Tata Group's holding company was to choke the family's liquidity tap. At a time when the group is facing an unprecedented liquidity crunch, being able to raise money against the holdings in the Tata Group will help immensely, said people close to the Mistrys.The value of the Mistry family stake, as per various credit assessments for advancing money against it, is pegged at $14-20 billion. Cyrus Mistry had cited $14 billion as an estimate in the past. "Therefore, at this point, the ability to realise the full value of their 'stored wealth' would help the family whose main business has been construction and realty – both parched for cash," said a Mistry family associate.Tata Group experts said the transfer of Tata Sons shares to a third party would need board approval. As per its Articles of Association, such a transfer can only take place among shareholders. If they do not exercise the right of first refusal (RoFR), then the board can authorise a share sale, according to the persons cited.A share pledge, however, is different from a transfer though theoretically the equity can be invoked in case of a default.It is unclear if Tata Sons knew about the recent transactions or if the Mistrys sought any approvals.There are various ways in which such deals can be structured, banking sources said."One needs a collateral but instead of direct control of the shares, lenders do use combination of covenants and structuring methods like a non-disposal undertaking or power of attorney… What matters is the effective control," said a banker. "Here too, the transactions are with entities which in turn own Tata Sons shares, even though the value lies there."The SP Group sold nearly 3.9 million shares in Tata Consultancy Services (TCS) in December to raise around Rs 780 crore as part of the group's assetmonetisation plan to pare its Rs 30,000 crore debt. The TCS share sale was undertaken "with a view to strengthen the balance sheet," the company said last month.What has compounded the urgency is the group's need to pay off the debt raised from Sterling and Wilson, a commitment that had been made before its initial public offer. Sterling and Wilson got listed in August last year. The Rs 2,850 crore IPO was to have enabled the promoters to repay loans amounting to Rs 2,563 crore within 90 days of listing.

Now, cash recharge option for FASTags

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The government will roll out the option of cash recharge for FASTags to accelerate its adoption, as penetration of electronic toll collection (ETC) has been stagnating after a steep rise in toll collection via FASTags since December 15.Over 40% traffic is being registered in hybrid lanes at toll plazas meant for both cash and electronic collection, nearly a month after government mandated use of FASTags in at least 75% of toll lanes at plazas across national highways.The National Highways Authority of India (NHAI) has been mandated the task of implementing the ETC infrastructure to reduce congestion at toll plazas. Come January 15, only one hybrid lane in each direction will be allowed at toll plazas in the country."Right now, country wide toll collection via FASTags is still at around 60%," said an official in the know. "While we saw a rampant increase in the first three weeks, the growth is stagnating now," the official said. 73235346 "There are some toll plazas where the traffic flow is very less, so people are using the hybrid lane instead of FASTag ones," another official said.

Family buyers drive multiple purpose vehicles sales up amid slowdown

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MUMBAI: The family pack is very much in demand – and is moving at a fast clip in an otherwise sputtering auto market.Led by a series of new launches, the multiple purpose vehicles (MPV), or family cars, are back. The segment registered 35% growth in 2019 to 2.2 lakh units, with cars priced between Rs 6 lakh and Rs 25 lakh. By contrast, most segments of the automotive market contracted, often in double digits.So, the share of MPVs in India has risen from 5% to 8%. To be sure, at its peak, MPVs accounted for 10% of the overall market. Launches from Kia, Maruti Suzuki and Toyota should help the segment regain its previous peak.The segment was singlehandedly driven by Maruti Suzuki's new generation Ertiga, which accounted for almost 50% share. It was complemented by Renault Triber at the entry level, making up a tenth of the market. Toyota Innova continues to rule the upper end of the segment, which now has Maruti's XL6 and Mahindra Marazzo populating the middle.Shashank Srivastava, ED, sales and marketing, Maruti Suzuki, says design is the number one criteria while buying an MPV now."It has been an exceptional year for us in the MPV segment. MPVs grew by over 100% led by the new Ertiga. With the new-generation vehicle, we are not only seeing the percentage of first car buyers moving up, but also an increasing number of buyers who are affluent and prefer a top-end variant," said Srivastava.Interestingly, the share of petrol in MPVs has gone up to 35-38% from 5% about 5-7 years ago, and Maruti Suzuki is also reporting strong demand for the CNG variant of Ertiga.First-time buyers for Ertiga have jumped from 16% to 37% over the last seven years, indicating higher affordability quotient. For Renault India, the share was even higher, at 62%, thanks to the sub-6 lakh price point.Gaurav Vangaal, country lead for production forecasting at IHS Markit, said MPVs are fast transforming from high-on-practicality and space to high-on-design and features, with space and ride comfort as a prerequisite."MPVs today have similar specifications to the high-on-aspiration SUVs. Barring the difference on exteriors, there is very little to differentiate on the inside. Fleets always formed a sizeable share of the MPV market, but with new-generation vehicles, we expect increased traction from personal buyers too," added Vangaal.Naveen Soni, Sr VP, sales and service at Toyota Kirloskar, said the Innova created the people mover segment and has remained the preferred choice for thousands of family buyers over the years. With time, Innova has evolved with the needs of the Indian buyers and has remained a strong contender for upgrading families."Upright driving position and stance of the vehicles are some of the other factors behind buyers' continued preference for the Innova," added Soni.Renault has no plans to open up Triber to fleets as yet. Mahindra too ensured that the fleet version of Marazzo came in much later.

Budget may make faking input tax non-bailable crime for buyers too

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NEW DELHI: The government is likely to make fraudulent claims for input tax credit a non-bailable offence in the hands of recipients of goods and services in the February 1 budget by tightening the GST law, as it seeks to plug leakages. CXOs, directors or employees directly responsible for making such claims can also be penalised as per the proposed changes aimed at tackling evasion."Changes are being proposed to the law to plug issues related to fraud input tax credit," said a government official. The threshold of Rs 5 crore will apply for the offence being treated as bailable; beyond that it will be non-bailable. The provision already applies to suppliers of goods and services.GST Council has Okayed ChangesThe provision is now proposed to be expanded to include recipients found guilty of colluding in such fraud, said the person.The proposed amendments to Sections 122 and 132 of the GST Act have been endorsed by the law committee and the GST Council, the apex decision-making body for the tax. Current provisions don't have specific measures to deal with such tax evasion."A value-added tax like GST should have explicit penalties to deal with cases where active collusion results in input tax credit frauds," said MS Mani, partner, Deloitte India. "Such cases by a small community of taxpayers lead to increasing compliance and procedural requirements on all taxpayers." 73237453 Another official said the government has come to the view that beneficiaries of such fraudulent claims, usually made through dummy companies, should be penalised commensurately.The authorities have registered several cases in which input tax credit has been claimed without supporting invoices or receipt of goods or services. A clear provision in the law will provide a framework for dealing with such cases, the second official said.An official said the names of daily wage earners such as rickshaw pullers and others are being used to open multiple firms that issue invoices without supply of goods or services to pass on input tax credit. Those who orchestrate such frauds also arrange for actual suppliers of goods or services to whom these invoices will be sold on payment of an agreed amount of money.These suppliers then utilise this credit to either discharge their GST liability or claim refunds of duty paid on export of overvalued goods, the official said.The GST Council has also endorsed changes to Section 49 of the GST Act empowering officials to block credit in the case of fraud. This will also be introduced in the budget.Experts said the changes will need to be elaborated upon to avoid confusion. "While there is a need to have legislative recourse to prevent such instances, it's important that government issues detailed guidelines as to how and when these provisions have to be invoked so that possibility of misuse can be minimised," said Pratik Jain, indirect tax leader, PwC.

Nifty50 in uncharted territory; don't chase stock rally blindly

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The domestic stock market made a better-than-expected start to the session on Monday, as it opened higher and sustained gains throughout the day. Despite spending most of the session in a capped 25-point range, NSE Nifty ended with a gain of 72.75 points or 0.59 per cent at 12,329.55, a fresh record high. The headline continues to remain in the present area formation. The index traded in the broadening formation and is expected to test some incremental highs on Tuesday. In the same breath, given the rising nature of the upper trend line of the present area formation, there are fewer chances of Nifty giving a clean breakout despite making incremental highs. Lead indicators are pointing towards more strength, which may lead the market higher, albeit with a limited potential. Tuesday's session is likely to see 12,350 and 12,390 levels act as immediate resistance. Support may come in at 12,295 and 12,245. The Relative Strength Index (RSI) on the daily chart was 60.42 and marked a fresh 14-period high, which is bullish. 73233022 The daily MACD continued to stay bearish and traded below its signal line. Apart from a white body, no other important formations were seen on the candles. As per pattern analysis, Nifty continued to trade in the broadening formation. The index is expected to keep tracking the upper trend line, which is rising in nature. Even as India VIX rebounded from its recent multi-month lows, it is still trading lower lower 2019's average. This being said, despite the direction that the market may take, the possibility of volatility increasing in the near term cannot be ruled out. All in all, upward momentum is likely to persist for some more time. Traders can continue to follow incremental upward moves. However, they shouldn't chase rally blindly, as Nifty trades in the broadening formation despite being in uncharted territory. A cautiously positive view is advised for the day.(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)

Regional plays good bets in cement, ALL in auto: Prabhakaran

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Prasanth Prabhakaran of YES Securities says while Infosys' Q3 numbers did impress, the company still has a lot of catchup to do with TCS. He also shared his outlook on auto, cement and some other sectors in this exclusive interview with ETNOW. Excerpts:-ET Now: Looking at Infosys' performance, we were wondering whether its valuation gap with TCS could narrow?Prasanth Prabhakaran: The way I look at it is simple: TCS has got its act into place. It has managed to get its digital PEs, product PEs into place, and it has been continuously growing with a stable management, which has been there. Infosys will take some more time to catch up, with the basics getting taken care of. So maybe, you will end up seeing this gap narrowing in a couple of quarters. Right now I believe the performance that they have come out with has been a good one. They are on the right track, but it will take some time before it catches up with TCS. I am very much interested to see TCS results at this point.ET Now: How are you looking at oil marketing companies? A number of experts say this is the year when we are going to see rerating for some of these OMC stocks based on oil price movement. How have these stocks fared? What is your assessment?Prasanth Prabhakaran: Our standpoint has been to stay away from commodity stocks, because traditionally they have been driven not just by global factors but by government intervention, which is regular. We have not covered these stocks. When we talk to our clients, we refrain from advising them on these sectors. So, right now, giving a view on them will be difficult.ET Now: How are you looking at the real estate sector? There are reports indicating that we might see some sort of an uptick in this space. Are you seeing potential in individual stocks? What are you pencilling in for the earnings season?Prasanth Prabhakaran: When you look at data for last five-six years, you end up looking at the number of approvals that have come in for major cities across the country, and approvals for fresh projects have actually been down by around 60-odd per cent over the last five years. This is a clear indication that the market is waiting for the existing stock to get exhausted and that will trigger a pickup in activity in this segment. It might just be a surprise pack in the entire investment universe that you have, where you will see better-run companies with better balance sheets end up having an advantage over the others. So maybe, a company like Godrej Properties, which has actually done well already, along with maybe a Prestige and an Oberoi might be the pack that you will end up looking at to invest for the future.ET Now: What is your view on cement? Till a few months back, only UltraTech Cement was the darling of the Street. Would you say, there is a case for dabbling in some of the regional players in anticipation of a real estate recovery?Prasanth Prabhakaran: You need to look at regional players in the cement pack. But UltraTech remains a clear 'buy' for two reasons; one, they are market leader on both pricing and volume fronts. Also, there is going to be consolidation in this space. So you have to be careful when you look at regional players, because the ratio at which it will get picked up will be different. Wherever the companies are stable and debt is low, you are going to see action. You have regional players in Bangalore, Bombay and Delhi, which are going to make a difference and we will see a pickup in activity as far as real estate is concerned. Anything that is going to be regional in this space might end up getting a preference in midcaps from the cement pack.ET Now: When it comes to autos, do you think a decent recovery in sales is on the anvil? That sector has been a beleaguered one and companies from this space have been talking about green shoots. Where do your preferences lie?Prasanth Prabhakaran: We have not gone into the passenger vehicles portion of it, where we are still bearish. What we are actually bullish on is Ashok Leyland. The reasons are simple. The moment we see recovery in the economy, the first company that is going to do well will be Ashok Leyland. It has reduced debt in books and there has been a change in the top management, which is looking at growth proactively. The stock has been beaten down nearly 50-60% from the top.ET Now: What is your view on the PSU pack? I am not only talking about the banking space; any view on some of the other rerating candidates from among the PSUs?Prasanth Prabhakaran: I wish I could have a lot more confidence than I have on the PSU pack. They remain undervalued, because there is no clarity from the top managements on how they will end up driving the businesses. It is always preferable when you have choices to look at. There are better-run private banking names compared with the PSU banks. You have a HDFC Bank, which has had a fabulous run as far as retail franchise is concerned. It is a good pack to look at. And you have ICICI Bank in the corporate place, which is doing everything right, from setting up the liability franchise to looking at retail growth. That pack is what I will be interested in rather than trying to dig out names in the PSU space where there has been de-growth in credit. They were nearly 75-80% of the entire credit cycle in this country, in the last five years they have fallen to nearly around 58-59%. Apart from that in the PSU space, it is very unpredictable the way the government functions. I would prefer to stay away from the PSU pack, because we have burnt our fingers enough over there in last 10 years.ET Now: What is the word on some of the specialty chemicals names, because that is one island which has performed well through all of 2019. What is the outlook going forward. Will the gain sustain or do you think it is time to take some profit off the table?Prasanth Prabhakaran: It is time to take profit. The runup that has happened in the specialty chemicals space has been reasonably large, considering that there have been China-related problems that have helped these guys out. Fundamentally, nothing has changed, except for the simple fact that China has moved out of the scenario for a period. However, this story has played out. Unless there is a separate pickup as far as further margin improvement, you are not going to get large returns. So it is better to book profit in around 50-60% of your portfolio, allow your positions to ride out and build up fresh positions in these segments. So it is an 'avoid' at this point.

Microsoft’s Nadella sad with CAA, wants Bangladeshi immigrant to launch unicorn, be Infy CEO, quotes Buzzfeed editor

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Microsoft CEO Satya Nadella has expressed his disappointment with India's new Citizenship Amendment Act and expressed his desire of a Bangladeshi immigrant help create the next unicorn in the country or become the CEO of Infosys, Ben Smith, Editor-in-Chief of online website BuzzfeedNews said on Monday."I think what is happening is sad... It's just bad.... I would love to see a Bangladeshi immigrant who comes to India and creates the next unicorn in India or becomes the next CEO of Infosys" Smith wrote on the micro blogging platform Twitter, quoting the Indian-born Nadella as responding to his question. Smith told ET that Nadella made these comments at a meeting with editors in Manhattan earlier in the day. By popular demand, here's the verbate https://t.co/I8YcMDJsf8— Ben Smith (@BuzzFeedBen) 1578941841000 ET reached out to Microsoft seeking comments on Nadella's statement.Here is what Microsoft responded in an email:"Every country will and should define its borders, protect national security and set immigration policy accordingly. And in democracies, that is something that the people and their governments will debate and define within those bounds. I'm shaped by my Indian heritage, growing up in a multicultural India and my immigrant experience in the United States. My hope is for an India where an immigrant can aspire to found a prosperous start-up or lead a multinational corporation benefitting Indian society and the economy at large." – Satya Nadella, CEO, MicrosoftHistorian Ramchandra Guha, who has opposed the government's move saying that it was against the country's constitution, welcomed Nadella's statement and asked Indian IT leaders to have similar courage."I am glad Satya Nadella has said what he has. I wish that one of our own IT czars had the courage and wisdom to say this first. Or to say it even now," wrote Guha on the microblogging platform Twitter.On January 11, the government notified the law that amended the Citizenship Amendment Act of 1955 that would provide Indian citizenship to Hindu, Sikh, Buddhist, Jain, Parsi and Christian migrants who have come to India until December 31, 2014. People across India have protested this move saying that the CAA discriminates muslims and violates the Indian constitution.Former Infosys board member T V Mohandas Pai, who supports the government, said that Nadella was confused and has been misled by Indian leftist academics in the US."Yes, he is very confused in his statement.Must be the Indian leftist academics in the US who have confused him by misinformation., @satyanadella Pl study the CAA before you comment!We respect you as @Microsoft CEO and you must not make comments to malign India!," Pai wrote on the microblogging platform Twitter.

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