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Sunday, February 2, 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


Sitharaman gives note ban hoarders a chance to come clean

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NEW DELHI: Individuals who received income tax notices following demonetisation in 2016 will be able to take advantage of the amnesty scheme announced in the budget, revenue secretary Ajay Bhushan Pandey said. These will be with regard to unexplained bank deposits and not cash unearthed in raids."Search cases will be excluded… We will come out with the framework… Some demonetisation cases have been finalised and some people have gone to appeal — they can take advantage," Pandey told ET in an interview.Finance minister Nirmala Sitharaman had announced a 'Vivaad se Vishwas' scheme in the budget with a view to cut down on litigation.No Penalty if Full Liability PaidUnder the scheme, taxpayers will be spared penalties and interest if they pay the entire liability.The government announced on November 8, 2016, that Rs 1,000 and Rs 500 notes then in circulation were being rendered void.This was followed by income tax authorities sending notices to individuals who couldn't explain deposits of such cash made in bank accounts after the announcement.Pandey said the new personal income tax regime that offers some individuals the option of foregoing all exemptions at a lower rate was aimed at simplification and giving a fair deal to those who don't claim deductions, such as retirees. "The complications were there in the old regime, but in the new regime, it is quite simple. So, this is a step towards simplicity," he said.He said people were sometimes forced to make investments to avail of tax benefits. "The earlier regime… it was slightly unequal to those who are having less funds for exemptions. Our claim is not that we're providing tax benefit to everyone. Our policy objective was to offer a simplified tax structure, and if possible, give some relief to those who are unable to claim," he said. This was an established system in many parts of the world where people either take an itemised deduction or a flat deduction, he said."What we have done is that if you have a flat deduction, you have a flat rate structure, and if it suits somebody to take more deduction, you can take that," he said.The new system will benefit those without the cash to invest in multiple instruments to claim deductions, he said. "If I am in a situation where I have surplus funds or I need all the exemptions, I will take that exemption and stay in the old one," he said."So, in this entire proposal, not a single person will be the loser. It is a win-win for everyone."Pandey said the scheme provides adequate protections for those switching to the new regime when asked about the treatment of investments such as those in the National Pension System (NPS) and Public Provident Fund (PPF) made over the past few years.The government will conduct a detailed exercise to identify exemptions as it seeks to do away with them and simplify the regime."This is just the beginning," he said. "We'll have to see how many people find it suitable for this tax regime. Based on that, the exercise will be conducted and we'll see if more exemptions are to be removed. It will be considered at an appropriate time based on the experience of this one."On the increase in customs duties on various items, Pandey said the levies had been increased marginally because these goods are being manufactured by micro, small and medium enterprises (MSMEs) in India, are of good quality and are even being exported. "It is just and fair that we provide a level playing field to our domestic MSMEs," he said.

You could be in for dividend bonanza soon

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Companies with high promoter holding are likely to announce high interim dividends in March before the new budget proposal, which makes dividend income taxable in the hands of the recipient, takes effect from April.Most promoter-owners hold equity individually or in trusts, and are in the upper tax bracket. So, they will now have to pay 43 per cent tax on dividends from April 1.At present, shareholders in the country need not pay any tax on income from dividends from domestic companies for receipts up to Rs 10 lakh, and they are taxed 10 per cent on dividend income beyond Rs 10 lakh. After the abolition of dividend distribution tax (DDT), investors will have to pay according to their respective tax slabs, which are as high as 43 per cent."Shareholders of companies with high promoter holding can expect a flurry of dividend announcements in March," said Vijay Bhushan, president, Association of National Exchanges of Members of India (ANMI). "This could generate short-term buying interest in the cash-rich companies as yields have become attractive with falling stock prices."For instance, Mukesh Ambani and his personal firms have received nearlyRs 1,800 crore of dividend from Reliance Industries in FY19. Anil Agarwal and his holding companies have got dividend of Rs 3,500 crore last year from Vedanta. Similarly, the Munjal family received nearly Rs 600 crore of dividend from Hero MotoCorp. These are calculations based on the dividend payouts at the respective companies in FY19 and promoter holding.However, some companies are owned by holding companies and they will have to pay the new tax only if the holding company is not a dividend paying company, said analysts. 73887420 "Under revised section 80M (of the Income-Tax Act), for a dividend paying company it can avail deduction to the extent of dividend received or distributed, whichever is less," said Gaurav Dua, head of capital market strategy & investments, Sharekhan.There could be a rush of interim dividend announcements similar to what happened in March 2007 after the presentation of the 2007-08 Budget, when the then finance minister P Chidambaram proposed an increase in dividend distribution tax (DDT) to 15 per cent from 12.5 per cent.A record 300 companies listed on the BSE and NSE announced their plans to pay interim dividends."Many companies will likely pay interim dividends by March 31and look for some other options to reward the shareholders from the next fiscal," said Ravi Sardana, senior VP – investment banking, ICICI Securities.A similar rush to pay interim dividend was witnessed in 2002, when the then finance minister Yashwant Sinha had proposed to make dividends taxable in the hands of the shareholders.Budget 2020 has proposed to abolish DDT on dividends paid by the corporates and transfer the tax burden completely in the hands of the recipient.73869292

Hinduja boss on what the Budget missed

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By Gopichand P HindujaThe fine balancing that the finance minister has done between the tight fiscal situation and the need for a strong support to boost investment and growth is the right balance, but it could have been better. It feels like winning a bronze medal when we could have won gold. The next year will tell us, if this has been powerful enough to lift the stressed economy or not.The three guiding themes of the budget – Aspirational India, Economic Development and Caring Society – are very appropriate for the country. The schemes announced on social sector are powerful, but implementation is key.Industrial manufacturing has not got the boost that it needs in the current situation, especially after three consecutive weak quarters. Focus on manufacturing of electronics, medical devices and textile is in the right direction though long overdue and we hope to see details soon and the speed with which it is steered.Automotive sector, one of the biggest employment generators, has not been given the attention it deserved. We hope the finance minister would address the situation on an ongoing basis, without waiting for the next budget. Stimulants like scrappage policy and recalibration of GST, we hope, would be looked at in immediate future.The agrarian stress and our inability to generate jobs in the farms continue to be a high value threat. This budget has addressed concerns covering areas including supply chain, credit availability, soil nutrient management, focus on dairy and fishery etc.Education and skill development initiatives will prepare young India for employment in future.Setting up of the investment clearance cell for entrepreneurs with comprehensive set of advisory services will help in ease of doing business.Enhancing the quality of services in railway on a public-private partnership mode is also a welcome move.The reduction in personal tax, across many of the income categories, can put money into the hands of taxpayers and we expect this to boost demand and consumption. Leaving out higher income-tax slabs could be reconsidered as they are the high spenders and therefore could be incentivised.Creation of a taxpayer's charter and simplification of various procedures will help in compliance. The assurance of decriminalising offences under the Companies Act is heartening. This is something we had been advocating for long.Abolition of dividend distribution tax and increasing the limit of investment by FPI's in government securities and bonds will go a long way in attracting more capital investment from across the border. However, LTCG issues could have been addressed.Incentives to sovereign wealth funds to invest in infrastructure sector is an encouraging move. The decision to list LIC is a bold move and could attract foreign investors. When India needed to fire on all its possible economic engines, leaving out NRI potential to contribute to the economy is somewhat perplexing. Their investments bodies could have been treated on a par with domestic investors. Changes in the definition of non-residency will trigger several high net worth individuals to review their Indian residency status.Increasing the deposit insurance from Rs. 1 lakh to Rs. 5 lakh will increase the confidence of investors in bank deposits and the banks will be able to attract more deposits from the investors.The new lower corporate tax regime introduced earlier for manufacturing companies has been extended to power generation companies. While this is good, the power sector needs stronger policy measures for it to be pulled out of the current crisis. Directions towards establishment of a full service global standard international financial service hub is certainly a move that India deserves.SMEs have got encouragements. They form the foundation for the manufacturing sector and create jobs. They need further boost especially when we need to create lots of employment opportunities for young India. The announcement of measures to bring cooperatives on a par with corporates on taxation is a good move. Cooperatives can create a large number of jobs.This was the time when every sector was seeking help. This was also the time of big fiscal constraints. As a balance, the FM has delivered a well-balanced budget to boost growth. But, it could have been better… May be a faster and efficient implementation of the policies can make up for this.The author is the Co-Chairman of the Hinduja Group.

What’s in Modi's Budget for Indians? Precious little

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By Andy MukherjeeAn all-out push to revive its sputtering economy is not within India's reach. Instead of spending meager local resources to rebuild faltering demand, New Delhi is betting that world growth this year will be down in the dumps — and that will make India appear attractive to foreigners even when it really isn't.The budget unveiled by Prime Minister Narendra Modi's government Saturday left virtually every domestic constituency unhappy. My interpretation? Luring overseas investors to high-yielding Indian assets amid a global coronavirus scare is the preferred strategy.Under this blueprint, sovereign wealth funds such as Singapore's GIC Pte and Abu Dhabi Investment Authority will pay no taxes on what they earn from Indian infrastructure investment made before 2024, even though domestic investors were miffed the budget didn't scrap their long-term capital gains tax.Financiers in Mumbai are upset that the budget did little to clear the jammed arteries of credit. But yield-starved overseas investors will get full access to parts of the rupee-denominated Indian government bond market, where 10-year yields are a juicy 6.6%. The overseas participation ceiling on corporate bonds, currently limited to 9%, will rise to 15%. A Saudi Aramco-style initial public offering of the Life Insurance Corp., a state-owned former monopoly with $434 billion in assets, would add to Wall Street banks' bragging rights.The locals will have to sacrifice, though. Funding has been cut for a rural job guarantee program even as widespread agrarian distress weighs on demand for everything from toothpaste to biscuits. The urban middle class got thrown a carrot of lower tax rates, but it's only for those who give up existing exemptions. Most people won't. Dividend earners will, in fact, pay higher taxes as well as a levy — albeit one they can offset against their tax bill — on sending money overseas for education or holidays.Except for a renewed commitment to affordable housing, Modi's government provided little demand stimulus. Existing bottlenecks remain, including a large overhang of unfinished homes. A bold rescue of troubled shadow banks, which are clogging up credit, isn't in the cards. The planned 10.85 trillion rupees ($152 billion) of capital expenditure is expected to grow by just 2.4%.No recipe for growthBreak it down, and the Rs 6.73 lakh crore outlay of public-sector companies will shrink by 5%. The remaining Rs 4.12 lakh crore of capital spending funded out of budgetary resources will grow, but 5% of it will go to propping up dying state-run telecom companies. With the private sector refusing to invest, such poor-quality public expenditure won't pull up growth in nominal gross domestic product — which is what matters for tax collections — to the targeted 10% rate, from a four-decade low of 7.5% in the fiscal year that ends March 31.India's fiscal situation is parlous. I have previously argued that the country should attract patient capital from developed countries, because its domestic balance sheets — financial, corporate, government and households — are simultaneously stretched. Meanwhile, global pension and sovereign funds are staring at chronically low interest rates, a problem that could worsen if the coronavirus plays havoc with growth in an over-leveraged world.To attract some of this money to a highway or a grid-connected solar farm is tactically sound. So is the plan to seek India's inclusion in global bond indexes. However, an honest embrace of global capital this isn't. That would have meant reversing a 2012 weaponization of tax laws to hound investors like Vodafone Group Plc, and Cairn Energy Plc. Vodafone's entire investment in India is now worthless because of the state's overreach. Amazon.com Inc. is being snubbed because people in Modi's administration don't like what what the Jeff Bezos-owned Washington Post is saying about it.Yet the government's bargain with its own 1.3 billion people is far from fair. Desperate job seekers, firms and farmers are all paying a price for the fiscal deficit, which is closer to 5% than the 3.8% New Delhi is acknowledging for this year and a far cry from the 3.5% projected for next. The fudge comes at a cost: With the government cornering household savings, the cost of capital can't fall, even with the central bank furiously cutting its policy rate and buying longer-dated bonds.Inconvenient truths about the deficit could jeopardize India's fragile investment-grade rating. Foreigners will stop coming. Showing them love in the time of coronavirus may be the only idea India has right now. But ultimately it's Indians who will have to believe in a pro-growth message to generate a return for themselves as well as for global capital. It's this link of trust that's missing.

ONGC, IOC, other oil PSUs to invest Rs 98,521 cr in FY21

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NEW DELHI: ONGC, IOC and other oil PSUs will invest over Rs 98,521 crore in the coming fiscal starting April 1 in exploring for oil and gas, refineries, petrochemicals and laying pipelines to meet needs of the world's fastest-growing energy consuming nation.The investment proposed in 2020-21 is almost 4 per cent higher than Rs 94,974 crore spending by the state-owned oil firms in the current fiscal year that ends on March 31, according to Budget 2020-21 documents.Oil and Natural Gas Corp (ONGC) leads the pack with a 19 per cent rise in its capital spending at Rs 32,501 crore. The company is investing in finding new reserves of oil and gas and bringing to production discoveries it has already made. It is developing discoveries on both east and west coast of the country.The top oil producer's overseas arm, ONGC Videsh Ltd (OVL) will invest almost 10 per cent more at Rs 7,235 crore in oil and gas operations abroad.Indian Oil Corp (IOC), the country's top oil refiner, will see a 17.4 per cent rise in spending to Rs 26,233 crore with the bulk of it in expansion and upgrade of its seven refineries that produce fuel.IOC will also see investment in petrochemical business almost double to Rs 3,387.5 crore while its exploration spends quadruples to Rs 2,150 crore.Privatisation-bound Bharat Petroleum Corp Ltd (BPCL) has proposed a 14 per cent higher capital spending at Rs 9,000 crore, two-third of which will be in its core refining business.Gas utility GAIL India Ltd will not see any major increase in its investments at Rs 5,412 crore as most of its pipeline grid expansion projects are nearing completion.Hindustan Petroleum Corp Ltd (HPCL), a subsidiary of ONGC, will invest Rs 11,500 crore in FY21, the same as the previous year.Oil India Ltd, the nation's second-largest oil producer, will invest Rs 3,877 crore next year as compared to Rs 3,675 crore in current fiscal.In her second budget, Finance Minister Nirmala Sitharaman had on Saturday laid down plans for expansion of national natural gas pipeline network to 27,000 km from the present 16,200 km and pricing reforms as the government looks at boosting the use of environment-friendly fuel.The government has set a target of raising the share of natural gas in primary energy basket to 15 per cent by 2030 from current 6.2 per cent. Connecting gas sources to consumption hubs is key to achieving this.Presently, most of the gas pipelines are concentrated in the western and northern part of the country with a few lines in the east and south."To deepen gas markets in India, further reforms will be undertaken to facilitate transparent price discovery and ease of transactions," she had said.Presently, the price of natural gas produced domestically is fixed by a formula that averages out rates in gas surplus nations such as Russia and the US."Further, it is proposed to expand the national gas grid from the present 16,200 km to 27,000 km," she said without giving a timeline.

Hyundai to unveil all new Creta, Tuscon at Auto Expo

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NEW DELHI: Hyundai Motor India plans to showcase a range of products and future technologies, including the all new Creta and updated version of Tuscon, at the upcoming Auto Expo. The 2020 Tuscon will be unveiled on February 5, while the new generation Creta will debut a day later on February 6, Hyundai Motor India Ltd (HMIL) said in a statement. The company will showcase 13 exciting cars and future ready technologies and concepts under the theme 'Freedom in Future Mobility', it said. "Hyundai as a customer centric organisation will showcase the technology prowess...and unveil the upcoming trendsetter SUV's for the Indian market," HMIL MD and CEO S S Kim said. The company has also plans to showcase Kona Electric along with NEXO FCEV at the biennial event, which will be held from February 5 to February 12 at Greater Noida.

Panel on LIC IPO soon, stake sale not over 10%: Rajiv Kumar

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The government will soon set up an inter-ministerial group to look at the listing of Life Insurance Corporation while stake dilution is unlikely to be more than 10%.An inter-ministerial mechanism of department of financial services, Department of Investment and Public Asset Management (DIPAM) and law will work on various parameters of the IPO, said finance secretary Rajiv Kumar in an interaction with mediapersons.Kumar did not confirm the quantum of dilution, but a government official said it is unlikely to be more than 10%.The IPO is likely in the second half of FY21.Kumar said that first LIC has to be evaluated and a number of processes have to be followed, including legislative changes. The finance secretary said sovereign guarantee to the policies will continue. The listing of LIC is an important move as it would bring transparency and enhance disclosures by the entity, Kumar added.ON PENSION REFORMSKumar said amendment to the PFRDA Act to allow it to regulate all pension products is a significant reform in that space. He said the auto-enrollment provision provides that a person gets a pension number allotted as soon as he enters the market, which carries with him for his lifetime. "So, enterprises which were running pension funds of their employees, they get regulated," he said adding that the amendment bill may be introduced in the budget session. "It's a major welfare because demography-wise you're going to get older, much more populated. Secondly, it's also strategic. The moment your kitty increases over the regulated norm, you also become a strategic investor in many places like Canadian funds," he said.NO PREMIUM HIKE FOR CONSUMERSOn around Rs 1 lakh deposit, banks give 10 paisa, Kumar pointed. This will increase a little. There is a kind of cross subsidisation by the banks which are very secure to the ones which are not so secure. "Therefore, premiums could go up to 11-12 paisa… there is a limit of 15 paisa in the Act. This is on the bank not on the customer. If you are depositing money with me it is my duty to return it, so it's on banks," he said.ON CREDIT DEFAULT SWAPSKumar said the government would introduce a legislation that will allow financial entities to net their liabilities in the current session of Parliament, which is seen as the first step towards credit default swaps (CDS). "Netting is the first phase towards credit default. You cannot have CDS without netting law. CDS is the second stage," he said.Netting law, he said, will allow them to square off their payment liability. "For example, if I have to take Rs 100 from you, and you have to take Rs 80 from me. It will be square on some particular day, but as of today, I have to take Rs 100, you have to take Rs 80… Total is Rs 180. On the 10% of provisioning, you're blocking Rs 18 capital. You will do two rupees now, Rs 16 are freed up. He said a cabinet note had already been moved by the department of economic affairs. Besides, Kumar said a separate law on CDS will be brought in.PORTAL FOR MSMEKumar said the government is working on a UPI-based platform from April 1, 2020. "We're developing a platform," he said adding that as soon as an MSME raises an invoice it will be issued a QR code and then it would become discountable. "The invoice is kind of a bill in your hand, which has a value. So, you're creating a value on that invoice by just putting it in your hand. GSTN portal will do that activity," he said.GOVERNANCE REFORMS IN PSBSKumar said the government had already carried out a number of governance reforms in public sector banks and only some were left. Now, what is left is HR recruitment and training. "This is essentially hiring," he said adding that the move could aim at flexibility in hiring at the lowest level in PSBs.NEW FRAMEWORK FOR CO-OP BANKSKumar said the government is amending the Banking Regulation Act to place robust regulatory and management norms in cooperative banks. He said these norms could focus on regulatory as well as capital. The government could come out with a separate set of norms specific to cooperatives on permissible lending to a single group."Cooperative banks play a very important role in the rural areas. But, at the same time, if you are taking deposits, you need to be responsible to the customer also. So those norms will change through the Banking Regulation Act to make it far more robust in terms of regulation," he said.He said cooperatives would also have to maintain capital as also put in place certain qualification criterion for management. These changes have been prompted by the recent PMC Bank scam in Maharashtra. Kumar said the proposed changes in the law will not touch the powers of regulations of the registrars. There are two-three kinds of registrars, one is the state registrars one the multi-state cooperative business, it's not touching their powers. "Our powers are relating to the entire cooperative structure under the cooperative branch, this is only talking about the banking," he said.MEASURES FOR NBFCSKumar pointed out that NBFCs are not allowed to factor, which restricts the supply of bill discounting and others especially for the sectors. "We are allowing the NBFCs who are not allowed to factor, also to factor," he said adding that the budget also seeks to make NBFCs enabled in the SARFAESI Act to do the recovery proceedings. He said right now recovery is permitted by NBFCs of Rs 500-crore asset size, which is now being brought down to Rs 100 crore.

Pidilite, TCS, Havells, L&T Fin to show strength: Bhavin Mehta

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By Bhavin Mehta, VP, Derivatives Strategist, Dolat CapitalWhere are we: Nifty started the year on a positive note amidst global tensions cooling off, went on to make higher highs and later met with supply in 12,350-12,400 range. We have seen a sharp reversal in the market recently on the back of concerns arising from Coronavirus followed by budget on Saturday that didn't meet the expectations of the participants. This also coincided with weakness in Bank Nifty combined with MACD on daily charts now below neutral line while RSI also below 50 indicates weakness creeping in. Our view on Bank Nifty had been on the negative side for the last two weeks and continue to maintain the same.What is in store: We believe, the impact of the budget should last at least for the next two-three trading sessions. Participants will later look at the global market and Q4 earnings for fresh directions. Technically, for Nifty 12000 should now emerge as major supply while 11,500-11,400 on the downside should be crucial.All eyes will be on India VIX and a sustained move below 15 could indicate fresh strength back in the market.What could traders do: Notably, both January and February usually are biased negatively. Since 2007, the month of February has seen negative returns 70 per cent of the time with average loss at negative 1.2 per cent for Nifty. Notable trend change is usually seen from mid/late March. We believe this should hold true even for this quarter. Post the recent the developments will be looking to execute the following pairs: Buy TCS, Bharti Airtel and, HCL Technologies; and sell Pidilite, L&T Finance and Havells.

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