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More Reforms Very Soon Until You Die!
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More reforms very soon until you die! A resolute Finance Minister P. Chidambaram Monday made it clear that the government, despite domestic political opposition, would usher in more economic and financial reforms to rev up growth and investment. India will unveil a credible and feasible fiscal consolidation path for the next five years, Finance Minister P. Chidambaram said on Monday, days after a government panel said the economy was on the edge of a fiscal precipice. A slowing economy has hurt tax returns while subsidies on fuel, food and fertilizer have further strained government finances and endangered India's investment-grade credit rating. The economic slowdown has bottomed out, but a full recovery requires tough decisions, finance minister P Chidambaram said on Monday, signalling his intent to push through unpopular reforms.After years of policy inertia that hit investments, slowed economic growth to a near three-year low and put India's investment-grade credit rating in peril, the Congress-led ruling coalition is on a reform overdrive.In the last few weeks, the government has increased the price of heavily subsidised diesel, opened up the retail sector to global supermarket chains, allowed foreign airlines to buy stakes in local carriers and proposed raising the bar on foreign direct investment in insurance firms. Finance minister P Chidambaram ruled out any probe into business dealings between Robert Vadra and DLF on Monday in the wake of allegations levelled by Arvind Kejriwal who stuck to his charge that he got favours from the realty major.The government will place before the Cabinet the Electronics Policy in the next two weeks that aims to give a boost to local manufacturing of electronic products.
Corporate greed rules the nation.Government today said that it will not wait for the Budget, which is due in February, to address the issues concerning retrospective amendment to Income Tax laws.On the other hand,the Group of Minister (GoM) on Land Acquisition Bill today remained divided over the issue of retrospective acquisitions.Indian companies directly invested USD 1.4 billion overseas in September, lower than USD 1.9 billion a month ago, data from the RBI showed on Monday.Bank guarantees for such investments fell sharply to USD 653.6 million in September from USD 1.1 billion in the previous month, while equities and loans also declined to USD 478.6 million and USD 226.4 million respectively, the data showed.You may not hope any respite any way!Economic ethnic cleansing to continue to sustain the sensex growthstory in the exclusive free market economy!Swedish furniture and home furnishing chain IKEA today said it has filed the final document this week seeking permission to open its store in India. The Finance Ministry will soon take up the proposal of UK-based footwear and accessories retailer Pavers England, which has proposed to invest Rs 100 crore to set up single brand retail stores in India.
An Empowered Group of Ministers today decided to refund licence fee of companies whose telecom licences stand cancelled but have no criminal charge against them.The EGoM, headed by Finance Minister P Chidambaram, also decided to recommend to the Cabinet a one-time fee on existing telecom operators for spectrum they hold beyond 4.4 MHz.The Supreme Court in February had cancelled 122 licences granted during former Telecom Minister A Raja's regime.Operators wishing not to pay the additional fee would be allowed to relinquish the excess spectrum beyond 4.4 MHz. The one-time fee would be imposed from the day the Cabinet takes a decision on the matter.Companies willing to retain excess spectrum will have the option of making staggered payments in yearly instalments, officials privy to the EGoM deliberations said. The government is likely to rake in about Rs 27,000 crore from the one-time fee, they added.
Meanwhile,indicating more reforms, Commerce and Industry Minister Anand Sharma today asserted that the government will "keep taking decisions" such as FDI in retail in the national interest.
However,intensifying her tirade against the Centre for allowing FDI in pension funds, West Bengal Chief Minister Mamata Banerjee on Sunday said the future of pensioners in the country would be jeopardised the way it had been in the US.
"With introduction of FDI, the future of pensioners will crash. Let us be united and oppose this move," Banerjee wrote on Facebook.
The chief minister narrated the experience of an Indian working in a well-known IT company in California who was putting his savings into a pension fund to secure his future at old age.
"It is shocking that when the US stock market crashed during 2008-09, our Indian friend lost 50 per cent of his entire savings. He was left high and dry without compensation and with an uncertain future," Banerjee said.
"Do you want this to happen to you and fellow countrymen on introduction of FDI in pensions by UPA II?," she asked, saying this was not just a stray case, but one among millions of sufferers in USA where pension funds are invested in stock markets.
A federation of various Railway employee unions has decided to launch a country-wide 24-hour hunger strike tomorrow to demand better package for railway employees and scrapping of new pension scheme.
"More than a lakh railway employees including trackmen, running staff and technicians will join the mass hunger strike on October 9 for the fulfilment of their genuine demands," All-India Railwaymen's Federation (AIRF) General Secretary Shiv Gopal Mishra told reporters here today.
The demands include better package for trackman, upgradation technician's grade, improvement of pay scales of running staff and clearance of arrears, among others.
"We are also demanding scrapping of new pension scheme (NPS) as it has become a 'no pension scheme' for railwaymen," he said, demanding guaranteed pension including family pension.
The railway employees will stage protest infront of zonal and division offices.
"Despite the recommendations of the joint committee, Railway Ministry has not implemented it and it has resulted in widespread discontentment among the affected employees," Mishra said.
Threatening to give a call for general strike on the issue, he said, "We will wait for some time for the response and then we will be forced to resort to direct action."
He said all these issues have been raised at various platforms earlier also, but no result has come so far, he said.
Commenting on railways financial health, Mishra said, "There is an urgent need for taking steps like rationalisation of fares as it is in the interest of railways."
The government is readying a blueprint to rescue the railways from long years of rampant populism by successive ministers, lining up measures to push stalled investments and increase revenues.
A senior official told ET the finance and railways ministries and Planning Commission are working on a plan that could include measures such as benchmarking fares to inflation, public-private partnerships to bring in investments and monetisation of land to generate funds. A freight network on the lines of the Golden Quadrilateral is also being considered, said the official, who did not wish to be named.
"Turning around railways is next on the agenda," the official said, without giving a deadline. "A plan will be drawn up soon to re-energise the organisation to put it back on track."
Talks have begun to help revive the government-run entity that has seen its operating ratio, the money spent on ordinary expenses to earn every Rs 100, rise from Rs 91 in 2004-05 to Rs 95 in 2011-12.
This means, after meeting interest costs, the railways does not have enough surplus to plough back into investments. On a turnover of Rs 1.03 lakh crore in 2011-12, the surplus was just Rs 1,500 crore, leaving it with about Rs 9,100 crore of internal resources to fund its plan in the year.
"The immediate priority is to make the organisation financially viable and make it efficient enough to enable it to attract private sector investments," said another senior government official.
The blueprint could include creation of an independent rail regulatory authority to fix tariffs, a railway modernisation fund and setting up two boards, one for operations and another for governance, with independent directors. One option is to link fares to inflation, the official said, adding that 60% of increase in the wholesale price index could be passed on to passengers, for example.
"There are a number of prescriptions available to turn around the organisation, including reports by Rakesh Mohan, Sam Pitroda and, recently, Deepak Parekh...The plan would draw from these reports," said the official.
An expert group set up under Pitroda had in its report earlier this year said the railways needs Rs 8.39 lakh crore of investments in the next five years, pointing to the large cost to the country from "a severe and chronic under-investment in railway infrastructure".
A beginning has been made in the form of implementing service tax that had been put on hold to appease Trinamool Congress, which held the railways portfolio and was the Congress' biggest partner in the ruling coalition before it parted ways over the recent push to reforms, including the nod to foreign direct investment in multi-brand retail.
Passenger fares have not risen since 2004, when the Congress-led UPAfirst came to power and offered the portfolio to its alliance partners until recently, when CP Joshi took over. In fact, Dinesh Trivedi of Trinamool Congress had to resign after he raised fares against the wishes of his party chief Mamata Banerjee.
Freight carriage has, however, become more expensive than warranted, causing the railways to lose market share to road transport. The public-private partnership initiatives launched by the railways are yet to attract private sector investments. Critical areas of IT and safety infrastructure in the railways have not seen funds inflow either.
Experts paint a grim picture.
"It's time to wake up and revamp the administrative, governance and management functioning," said Vinayak Chatterjee, chairman, Feedback Infra.
Indian Railways has the world's third-largest rail network and transports 2.65 million tonnes of freight traffic and 23 million passengers every day.
"Without reforms, we risk a sharp and continuing slowdown of the economy, which we cannot afford given the imperative need to generate jobs and incomes for a large population, most of whom are young," Chidambaram said at the annual Economic Editors' Conference.
India's economic growth slumped to a near nine-year low of 5.5 per cent during the first quarter of the current fiscal. The gross domestic product rate was 6.5 in 2011-12.
He said it is legitimate on part of political parties to oppose but they should not obstruct decision-making. "Every government is entitled to lay down policies. Opposition to policies is legitimate, obstructionism is not," he said.
"The government of the day must be allowed to lay down policies, pass legislations wherever necessary, and get on with the job of implementing those policies."
He said with reforms investments are likely to pick up in the third and fourth quarter and predicted a return to average growth of about 8 percent during the next five years.
"Once domestic investments pick up and the foreign investments come in, the situation will improve."
Chidambaram said the government would take all possible steps to improve business sentiments and boost investments.
"Our foremost task is to augment savings, and then channelise these savings into investments," he said, assuring every step possible to put the Indian economy back on the high growth path.
"I am going to do my best to help bring the change."
Defending the decision to allow foreign direct investment (FDI) in multi-brand retail and insurance, he said this should be tested on a clear assessment of the advantages that would accrue to India and not on the basis of ideology or theory.
"We must not fear foreign investments in India. We have the sovereign right to decide where and how foreign investments would be allowed into India.
"FDI in retail, aviation and FM radio broadcasting is decisions that will benefit the economy and the country."
The finance minister admitted that GDP growth in the current financial year would fall below the budgetary target of 7.6 percent, largely due to adverse global economic climate.
However, India, despite the slowdown, would remain among the fastest growing economies in the world.
"Even if we fall short of 7.6 percent target, our growth will be four times the average growth of advanced economies and twice the average growth of global economy," he said.
"India's growth story remains strong."
* Global problems, high inflation and declining investments responsible for slow growth: Finance Minister P Chidambaram
* Reserve Bank's tight money policy dampened growth and investments: Chidambaram.
* We should aim at 8-9 per cent economic growth: Chidambaram.
* Without reforms the economy would be at risk and it would not be possible to create enough jobs: Chidambaram.
* Fiscal and monetary policy must act in tandem to promote growth: Chidambaram.
* First draft on allowing FDI in multi-brand retail was prepared by the NDA government: Chidambaram.
* Chidambaram hopes to resolve issues related to GST soon; to meet Empowered Committee Chairman Sushil Modi on October 22.
* India's insurance sector needs USD 5-6 billion: Chidambaram.
* RINL disinvestment by month-end: Chidambaram.
* Unless there is specific allegation of quid pro quo, government can't probe private deals: FM on DLF-Robert Vadra controversy.
* Government will not wait for Budget to take action on Shome panel report on retrospective tax amendment: FM.
"People voted us and therefore we will keep taking decisions we have full faith and we will go to people. Let the people judge and the people will see through them (opposition parties) and their agenda," Sharma told Rajya Sabha TV.
He said the opposition and "political posturing" by the BJP to the foreign direct investment (FDI) in multi-brand retail was on the expected lines as it has a "partisan agenda".
Sharma said for long the opponents were trying to create an atmosphere where it had become difficult for the government to take decisions.
"Now they have to bear in mind that we are also a political bombardment and the largest political party in the country. ..." he said adding that preaching to the party should stop.
Sharma said anybody cannot be allowed to get up and say," Congress should not do this,". He said the government did enough consultations with
stakeholders before opening the retail sector to foreign investment.
"During the consultation process (even) two of the BJP-ruled states strongly asked for it , including Himachal Pradesh and Gujarat. (Also) I received in writing from the Punjab government,Deputy Chief Minister Mr Sukhbir Badal demanding that the Centre should come up with this policy because the Punjab farmers will benefit from it," Sharma said.
The Group of Minister (GoM) on Land Acquisition Bill today remained divided over the issue of retrospective acquisitions and the consent required from land owners with Agriculture Minister Sharad Pawar saying two-three meetings are required to finalise the bill.
During the last meeting too, the same issues had divided the members of the GoM headed by Pawar.
"No final view on retrospective clause could happen. We have not taken any final call on the suggestion that consent of two-third people will be required," a source familiar with the development said.
In today's meeting, some Ministers also demanded to retain the original clause of seeking consent of 80 per cent of people (land owners) for acquiring land.
The 80 per cent clause was earlier changed to seeking the consent of two-third (66 per cent) of the land owners for making such acquisitions.
Talking to reporters after the meeting, Pawar said, "Two or three more meetings are needed for finalising the bill."
He said all the issues will be settled and the bill will be finalised in two or three more meetings.
"All ministers except Finance Minister P Chidambaram and Planning Commission Deputy Chairman Montek Singh Ahluwalia were present in the meeting. It (more meetings) will get done before this week," the sources said.
The first meeting of the GoM on the Land Acquisition Bill last month had witnessed a strong demand by some members for retaining a window of retrospective application which was done away with earlier.
The meeting had discussed threadbare the contentious clause of prospectivity in the Bill and a question of Rehabilitation and Resettlement package on par with the Land Acquisition bill for the affected parties in mineral-rich forest areas.
Govt to axe Pranab's retro tax soon?
Seeking to lift investor sentiments, the government today said that it will not wait for the Budget, which is due in February, to address the issues concerning retrospective amendment to Income Tax laws.
"Once we take a view (on Shome Committee report), I see no reason why we should wait for the Budget session. We should move whatever changes have to be brought about in Parliament as early as possible," Finance Minister P Chidambaram told reporters here.
The Committee, headed by tax expert Parthasarathi Shome, had last week submitted its report on retrospective tax amendment to the Finance Minister.
"The Shome Committee report on retrospective legislation is under examination and we would have to complete that examination quickly and take a view," Chidambaram said.
The Committee was mandated to suggest measures to deal with retrospective amendment of I-T laws and tax treatment of cases that involve indirect transfer of Indian assets such as the Vodafone-Hutchison deal in 2007.
The committee was also asked to examine taxation of non-resident transfer of assets where the underlying asset is in India, in the context of foreign institutional investors (FIIs) operating in India purely for portfolio investment and all non-resident investors.
Chidambaram said the Finance Ministry after taking stakeholders view on the report would decide whether an amendment to I-T Act was necessary or there was any other way to resolve the matter.
"Resolution of the tax disputes, both pending and anticipated, is good for the country, good for the economy and good for investments. So we must find ways to resolve the issue," he added.
The retrospective tax changes were introduced in the 2012-13 budget by Finance Minister Pranab Mukherjee had been globally condemned and led to investors shying away from putting their money in India. Another feature of that budget that is much hated is General Anti-Avoidance Rules (GAAR).
No one will have confidence in the Indian economy if there is uncertainty about the fiscal stability of the country, Chidambaram told a news conference.
It is our intention to announce a credible and feasible path of fiscal correction beginning this year and ending in the fifth year of the 12th plan, which ends in March 2017.
In recognition of mounting worries over public finances, Chidambaram, after taking over the ministry in August, appointed a committee led by a former official, Vijay Kelkar, to recommend ways of improving government finances.
In its report, the Kelkar panel suggested slashing fuel, food and fertilizer subsidies urgently to curb a deficit it said could hit 6.1 percent of GDP this fiscal year.
Chidambaram did not give details of his plans for fiscal prudence, but said he was waiting for more feedback on the Kelkar report.
To shore up its balance sheet, the government last month raised the price of heavily subsidised diesel and cut supplies of subsidised cooking gas despite strong political opposition, including from within its own coalition.
In March, the government had promised to narrow the fiscal deficit to 5.1 percent of GDP this year from 5.8 percent last year. But analysts doubt New Delhi will come good on that commitment.
The investment rate in the Indian economy is seen picking up in the third quarter of the current fiscal year that ends in March 2013, Finance Minister P. Chidambaram said on Monday.
India's investment rate has fallen to 32 percent from 38 percent in 2007/08. Analysts say investment needs to pick up before the economy returns to the 9 percent growth it was clocking before the 2008 global financial crisis.
Expressing confidence that with requisite savings and investments India's economic growth rate will recover to 8 per cent and more, and perhaps touch 9 per cent, the Minister said, "We should keep that rate of growth as our objective and progress towards achieving that objective."
The government recently took host of reform initiatives but steps like hiking FDI cap in insurance and pension to 49 per cent would require legislative changes, which would not be possible without the support of main opposition party BJP.
While the recent reforms have helped financial markets rally and boosted investor sentiment, they may not be good enough to lift GDP growth, which slowed to 5.5 percent in April-June.
Chidambaram, who moved into his post in August, struck an optimistic note, predicting better economic growth in the remaining quarters of the fiscal year to end-March 2013 and a return to average growth of about 8 percent during the next five years. Analysts say federal finances and capital investment need to improve before the economy again hits the 9 percent growth it was clocking before the 2008 global financial crisis.
The investment rate has fallen to 32 percent of GDP from 38 percent in 2007/08. The fiscal deficit widened to 5.8 percent of GDP last year from 3.5 percent in 2007/08.
The high deficit is counteracting the Reserve Bank of India's efforts to control demand-driven price pressures, while the government's use of domestic savings to finance the deficit is crowding out private investment and lowering growth prospects.
In March, New Delhi promised to narrow the fiscal deficit to 5.1 percent of GDP this fiscal year, but sluggish tax revenues and high spending on fuel, food and fertilizer subsidies have cast doubt on that commitment. "No one will have confidence in the Indian economy if there is uncertainty about the fiscal stability of the country," Chidambaram said.
"It is our intention to announce a credible and feasible path of fiscal correction beginning this year and ending in the fifth year of the 12th plan," which ends in March 2017.
In recognition of the mounting worries over public finances, Chidambaram recently appointed a committee led by a former official, Vijay Kelkar, to recommend ways of improving government finances. In its report, the Kelkar panel said the economy was on the edge of a fiscal precipice and suggested slashing subsidies urgently to curb a deficit it said could hit 6.1 percent of GDP this fiscal year.
But in a country where any tinkering with subsidies raises a political storm, it would be tough for the government to implement the panel's recommendations in full.
Chidambaram said all the subsidies on food, fuel and fertilizer cannot be wished away, but promised to take corrective steps after receiving feedback on the Kelkar report.
To ease pressure on the fiscal deficit, the government is looking to increase revenues through more efficient tax collections, an auction of cancelled second-generation mobile phone licences and sales of stakes in state-run firms.
Now, Citi leaks credit card account detail
A Citi Bank branch manager here has been ordered by the Delhi State Consumer Commission to pay Rs 15 lakh as compensation to a credit card holder for leaking his account details to a third party.
The State Consumer Commission awarded the damages saying the supply of credit card statement details of the card holder to a third party is a "violation of confidential relationship" between the bank and its customer and "betrayal of trust."
"It appears that in the case, the copies of account of the complainant were produced before the civil court. Such accounts are universally treated as confidential account and are not supposed to be supplied to any one without prior approval of the account holder...
"The availability of the said account to a third party, which produced it in the civil court, is therefore a flagrant violation of confidential relationship between a bank and a customer and a betrayal of trust, which not only calls for alarm and dismay but also adequate financial compensation," said the bench presided by Justice Barkat Ali Zaidi.
The commission fixed the liability solely upon the manager of the bank's Punjabi Bagh branch here saying "he has to owe responsibility for all matters relating to the branch".
"The opposite party 1 who is the branch manager has therefore to be held responsible for the leakage," it said adding "opposite party 1 Hemant Kumar, Branch Manager, Citi Bank, will pay Rs 15,00,000 as compensation to the complainant (Amit Mittal)."
Delhi resident Mittal, in his complaint, had alleged that bank officials had unauthorisedly and illegally leaked details of his credit card account statements to a third party who, in turn, had produced it before a civil court in a private dispute.
The branch manager in his defence had contended that no information was leaked from the bank and that the complaint is not maintainable as Citi Bank was not made a party.
The commission, however, rejected the contention saying that as the account details found their way to a civil court, "it clearly indicates that they were leaked from the Bank".
It also rejected the argument that the bank was not made a party in the complaint saying "the person who is responsible for such leakage is primarily responsible."
14 FDI proposals worth Rs 113.35 cr cleared
The government today said it has cleared 14 FDI proposals worth Rs 113.35 crore including three from the pharmaceutical sector.
The Foreign Investment Promotion Board (FIPB) in its meeting held on September 18 approved 14 FDI proposals, which include 3 proposals worth Rs 81.05 crore in pharmaceuticals, the Finance Ministry said in a statement.
Among others, the board, headed by Department of Economic Affairs Secretary Arvind Mayaram, cleared the proposal of United Kingdom-based Dashtag to increase foreign equity valued at Rs 68.22 crore.
This is to carry out the business of pharmaceuticals specialising in dermatology, anti-histamines, antibiotics and oncology products.
Clearance was also given to Prime Surgical Centers Private Ltd proposal to set up an Limited Liability Partnership (LLP) to carry out the business of establishing and managing short stay surgery centres in India with its flagship centre in Pune. The company proposes to bring FDI worth Rs 14 crore in the venture.
Further, the proposal of Mumbai-based Neo Capricorn Plaza Ltd for post-facto approval for issue of partly paid up shares to carry out the business of construction of five star hotels was okayed.
FIPB also cleared the proposal of Pipavav Defence and Offshore Engineering Company Ltd to increase foreign equity by way of issuance of FCCBs to carry out the business of shipbuilding, ship repairs, offshore assets production etc.
Other proposals which have been approved are those of Calyx Chemicals and Pharmaceuticals Limited, Egon Software Pvt Ltd and Alburaq Trading LLP.
Decisions on nine proposals were deferred due to various reasons. These includes applications of Multi Commodity Exchange of India, Multi Screen Media Pvt and Deutsche Investments India Private Limited.
Also, seven requests for FDI including that of British Marine India, Atlas Equifin Ltd, Filtrex Technologies and IPsoft Netherland were rejected, the ministry said.
FDI inflows in the country in 2011-12 stood at USD 36.50 billion.
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