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No plans to revise fiscal deficit target now: Sitharaman

NEW DELHI, Sept 22: Finance Minister Nirmala Sitharaman on Sunday said India had no plans to revise the fiscal deficit target for the current fiscal and a decision would be taken before the annual Budget.

According to financial experts, India’s fiscal deficit will widen as a result of the corporate tax reduction done by the government recently. Asked if the government will consider revising the fiscal deficit target, the finance minister said these are “decisions taken near the Budget”.

In the biggest reduction in 28 years, the government on Friday slashed corporate tax by almost 10 percentage points as it looked to pull the economy out of a six-year low growth and a 45-year high unemployment rate by reviving private investments with a Rs 1.45-lakh crore tax break. On raising the borrowing target for the second half of the current fiscal, the finance minister said, it will be decided in the next few days.

Base corporate tax for existing companies was reduced to 22 per cent from the current 30 per cent; and for new manufacturing firms, incorporated after October 1, 2019 and starting operations before March 31, 2023, to 15 per cent from the current 25 per cent.

“Not touching any of the given targets now. When the meeting for revised estimates takes place, we will look at it,” Sitharaman said.

According to global rating agency Moody’s, the reduction in corporate income tax revenue – even when balanced against the windfall from the recent transfer of central bank surplus reserves, equivalent to around 0.3 per cent of GDP in the current fiscal year – further narrows fiscal room for manoeuvre.

However, it described the rate reduction as credit positive for companies because it will enable them to generate higher post-tax incomes.

Corporate tax for domestic firms slashed

NEW DELHI, Sept 20: Finance minister Nirmala Sitharaman on Friday slashed corporate tax rates for domestic firms from 30% to 22% and for new manufacturing companies from 25% to 15% to boost economic growth.

The move brings India’s corporate tax rate on par with East Asian countries, the minister said about the government’s initiative that pushed Sensex up by 5.23%, or nearly 2,000 points.

The slew of tax concessions will be applicable from April 1 and any advance tax paid by the companies will be adjusted accordingly. The measures will have a revenue implication of Rs 1.45 lakh crore annually, Sitharaman said.

“In order to promote growth and investment, a new provision has been inserted in the Income-Tax Act with effect from FY 2019-20 which allows any domestic company an option to pay income-tax at the rate of 22% subject to the condition that they will not avail any exemption/incentive. The effective tax rate for these companies shall be 25.17% inclusive of surcharge and cess. Also, such companies shall not be required to pay Minimum Alternate Tax (MAT),” finance minister said.

In order to attract fresh investment in manufacturing and boost to ‘Make-in-India’ initiative of the government, another new provision allows any new domestic manufacturing company incorporated after 1 October to pay income-tax at 15%, she said.

“This benefit is available to companies which do not avail any exemption/incentive and commences their production on or before 31 March, 2023. The effective tax rate for these companies shall be 17.01% inclusive of surcharge and cess. Also, such companies shall not be required to pay Minimum Alternate Tax,” she added.

Sitharaman said the companies have option to opt for the new taxation system or remain take benefits under the existing taxation regime. “A company which does not opt for the concessional tax regime and avails the tax exemption/incentive shall continue to pay tax at the pre-amended rate,” she said.

GST Council hikes tax on caffeinated beverages, cuts rates on hotel tariffs

PANAJI, Sept 20: A meeting of the 37th Goods and Services Tax (GST) Council held in Goa on Friday recommended the slashing of rates on hotel tariffs while hiking the tariff on caffeinated beverages from 18% to 28%.

After a marathon meeting that lasted more than eight hours, Union finance minister Nirmala Sitharaman said that the council meeting was “long, but absolutely productive” and that “everyone was on board” with all the decisions that were taken.

Announcing the reduction in tariffs on hotel rates, the Union finance minister said that it was a “powerful presentation from the minister of the host state (Goa) that resulted in the council going beyond the rate reduction that was initially envisaged.”

The GST council agreed to reduce tax from 28% to 18% on hotel room tariffs of Rs 7,500 and above per night and from 18% to 12% on hotel room tariffs between 1001 to 7,500.

“Some of the decisions are those which have been waiting for a long time and let me happily say that here in Goa many of the decisions are driven by the broader principle and I take the example of tourism the decision has been taken keeping the promotion of tourism in mind,” Sitharaman said.

The reduction of hotel rates and their rationalisation was one of the primary demands of the hotel industry not just in Goa but across the country.

“GST rates for hospitality in India are very high as compared to our Asian competitors where they are 6-8%. Indian states lose a significant number of Foreign tourists due to this and will also lose domestic traffic in this segment,” the Travel and Tourism Association of Goa, which had lobbied hard for the rate reduction, said.

“We are extremely happy with the reduction in GST. A reduction to 12% would have helped us compete with many other countries but nevertheless we are happy. I am extremely proud that the TTAG lobbied to do what the industry in the entire country could not do for the last one year,” President of the Travel and Tourism Association of Goa Savio said in a statement.

The GST panel also decided to hike the GST rate on caffeinated beverages from 18% to 28% and in addition, impose a 12% compensation cess.

“The broader thumb rule of making the economy a lot more vibrant, through better taxation, the simplification of taxation and rationalizations of tax rates have governed this GST council meeting and as a result that we realised that we could have arrived at conclusions on many of these rates,” Sitharaman said.

“There has also been a very clear suggestion that GoMs (Group of Ministers) about four of them which are in existence should fairly quickly meet because they have had their meetings delayed for genuine considerations but now the house felt that the GoMs for the respective mandated topics would meet earliest and come to some kind of quick resolution of those issues which are posed to them,” Sitharaman added.

The meeting also paid tribute to former Finance Minister Arun Jaitley who passed away recently.

The council stood up for a minute’s silence for the immense contribution Jaitley has made. He was the chairman and chaired nearly 35 of the GST council meetings.

No oil supply disruption, says India even as Saudi Arabia halves output

NEW DELHI, Sept 16: Union petroleum minister Dharmendra Pradhan has allayed fears of oil supply disruption following a drone attack on Saudi Aramaco - the world’s biggest crude-processing plant set it ablaze in Saudi Arabia and forced the kingdom to cut its oil production by half.

“We have reviewed our overall crude oil supplies for the month of September with our oil marketing companies (OMCs). We are confident there would be no supply disruption to India. We are closely monitoring the evolving situation,” Pradhan tweeted.

The minister also said that Aramaco has assured India of a steady supply.

“Following the attacks on the oil stabilization centres of @Saudi_Aramco, top executives of Aramco have been contacted. Indian ambassador in Riyadh @IndianEmbRiyadh contacted the senior management of Aramco to ensure steady supply to India,” he said.

Saudi Arabia is the world’s biggest oil exporter and a major source of energy for India. It is the second largest supplier of crude oil and cooking gas to India.

The drone attacks pushed global crude prices up by almost 12 per cent which is the biggest surge since 1988, said Ashish Nanda EVP and Business Head - PCG, Commodities and Currency Business, Kotak Securities. A spike in global crude prices will impact India’s oil import bill and trade deficit.

Saudi Aramco’s crude-processing facilities at Abqaiq and Khurais have been forced to cut output by 5.7 million barrels per day. The company has not given a date by which it expects to resume full production.

Indian Government unveils Rs 70,000 cr boost to exports, housing

NEW DELHI, Sept 14: Finance minister Nirmala Sitharaman on Saturday announced a set of measures to boost the economy — the third in four weeks — including a Rs 50,000 crore package for exports and the creation of a Rs 20,000 crore fund for real estate projects that is expected help complete around 350,000 flats and houses stuck in various stages of construction.

Sitharaman said the government will contribute Rs 10,000 crore in setting up a special window to provide last-mile funding for unfinished housing projects that haven’t turned into non-performing assets (NPAs) and are not facing proceedings at the National Company Law Tribunal (NCLT).

The projects would be “net worth positive in affordable and middle income category”, and contributions of “roughly same amount” will come from outside investors, she said.

Many of these flats and houses have been sold. According to a report, around 400,000 such units (worth Rs 3.5 trillion) are stuck in the National Capital Region (NCR) centred on Delhi, and in Mumbai. Their buyers, typically belonging to the middle class, have been burdened with equated monthly instalments (EMIs) on loans taken to buy the flats and houses, and, in many cases, the rent they pay for their current dwellings.

“The announcement of Rs 20,000 crore fund to help stuck affordable housing projects is similar to the concept of a ‘stress fund’ to help bail out incomplete projects that have been stalled owing to problems of liquidity..,” said Niranjan Hiranandani, president of the National Real Estate Development Council, and one of Mumbai’s largest real estate developers. “It will ensure many affordable and MIG [middle income group] projects stuck because of last mile funding requirements – subject to not being under NCLT or NPA -- will be able to get completed.”

The fund will provide much-needed “last mile funding” for unfinished housing projects and help about 300,000-350,000 homebuyers across the country, Sitharaman said.

“GOI [government of India] on the lines of NIIF [National Investment and Infrastructure Fund], can contribute to the fund while rest of the investors would be LIC {Life Insurance Corporation} and other institutions and private capital from banks, sovereign funds, DFIs [development finance institutions] etc,” she said, explaining the contours of the real estate fund.

Stuck residential real estate projects have dampened sentiment and reduced the purchasing power of buyers. Economic affairs secretary Atanu Chakraborty said around 850,000 units are stuck and are in the process of resolution. “Even buyers of such units are recognised as operational creditors under the IBC [Insolvency and Bankruptcy Code] and they will get their dues,” Sitharaman explained.

To provide additional liquidity to the real estate sector, the government also plans to relax external commercial borrowing (ECB) guidelines in consultation with the Reserve Bank of India (RBI) to facilitate financing of homes for buyers who are eligible under the Pradhan Mantri Awas Yojana (PMAY). “This is in addition to the existing norms for ECB for affordable housing,” the finance minister said.

She added that the interest rate on advances for house construction by government employees will be lowered and linked with 10-year G-Sec yields to spur demand. “This will encourage more government servants to buy new houses.”

Announcing incentives for exporters, Sitharaman said a World Trade Organisation (WTO)-compliant new scheme for reimbursement of taxes paid on exports -- the Remission of Duties or Taxes on Export Product (RoDTEP) – would come into effect from January 2020, replacing the existing system of Merchandise Exports from India Scheme (MEIS). The new scheme will “more than adequately incentivise exporters,” she said.

According to director general of foreign trade, Alok Vardhan Chaturvedi, the total revenue forgone under RoDTEP is estimated at Rs 50,000 crore, which is about Rs 5,000-10,000 crore more than what’s on offer under the existing scheme that will end on December 31, 2019.

The government will also contribute a Rs 1,700 crore annual amount under the Export Credit Guarantee Corporation (ECGC) to offer higher insurance cover to banks lending working capital for exports. “This will enable reduction in overall cost of export credit including interest rates, especially to MSMEs [micro, small and medium enterprises],” Sitharaman said.

The Reserve Bank of India is also considering revising priority sector lending norms, which could release an additional Rs 36,000- Rs 68,000 crore as export credit, the finance minister added.

On lines of the popular Dubai Shopping Festival, annual mega shopping festivals in India will be organised in four places across March 2020 in four themes, the minister said. Focus of the shopping festivals will be gems and jewellery, handicrafts, yoga, tourism, textiles and leather.

Other measures to boost exports include speedy refunds of input tax credit on goods and services through electronic means by the end of September, initiatives to reduce turnaround time at airports and ports by December, and a special free trade agreement (FTA) utilisation mission to educate exporters and help them benefit from such agreements.

Exports were one of the drivers of India’s economic growth in the past decade. Between 2006 and 2010, for instance, merchandise exports grew at a compound annual growth rate of 15.4%, compared to global export growth of 5.9% in the same period. In 2010-11, they grew 37.5%. In contrast, they grew by a mere 9% in 2018-19 and according to the latest trade data, merchandise exports declined by 6% in August.

“Overall, the measures announced for exports and housing address significant pain points in these sectors, which will bring relief to the industries and help revive investments. Importantly, the two sectors have immense downstream and upstream linkages and facilitative steps to enhance fund availability will create a multiplier effect for gains to many sectors,” Confederation of Indian Industry (CII) president Vikram Kirloskar said.

On Saturday, Sitharaman said she would be meeting heads of public sector banks on September 19 to review the credit flow as banks have started transmitting policy rate cuts to lenders.

Sitharaman said that the three rounds of economic measures announced thus far aim at accelerating the economic growth. She added that the inflation rate is below 4% and there are “clear signs” of revival in the economy, as industrial production is up and fixed investment is growing. Factory output data for July, released last week, showed healthy growth of 6.5%.

India’s GDP growth slumped to 5% in the first quarter of the current financial year, the slowest pace since March 2013.

The opposition wasn’t impressed with the measures. Congress spokesperson and former commerce minister Anand Sharma said: “I would like to make this observation that the finance minister of India is lacking in macro-economic understanding. A comprehensive package for economy revival was expected. The government is unable to do because it does not have money...”

Shishir Baijal, chairman and managing director of the real estate consulting firm Knight Frank India, welcomed the policy measures announced by the finance minister to boost the real estate sector, but added: “We feel these do not sufficiently address the issues of the sector in terms of continued slow sales and low demand.”

The larger issue of demand creation has not been addressed “in any way and form” in the announcements, he said.

On the package to boost exports, Federation of Indian Export Organisations president Sharad Kumar Saraf said: “The new scheme [RoDTEP] looks attractive as it will neutralise all duties and levies suffered by the export products. Giving three months lead time till 31st December to the existing MEIS will remove the uncertainty creeping into the minds of the exporters and will greatly help to finalise their export orders.”

Manmohan Singh’s 5-point remedy for ’extremely serious economic slowdown’

NEW DELHI, Sept 12: Five remedial measures can reverse the current slowdown, which is both structural and cyclic mainly because of the demonetisation debacle and faulty implementation of the Goods and Services Tax, former Prime Minister and economist Manmohan Singh said in an interview to a daily publication.

The very first step before implementing the five reform measures is to accept that the country is facing an economic crisis, he said in an interview Dainik Bhaskar, conducted in Hindi. The government must listen to experts and all stakeholders with open mind, he said adding that he does not see any focused approach by the Modi government on this matter.

“The Modi government should come out of the habit of headline management. Already a lot of time is wasted. Instead of making sectoral announcements, efforts should be made now to simultaneously take forward the entire economic framework,” he said suggesting five measures to put the economy on a high growth trajectory.

First, GST should be made “logical” even though this would mean a revenue loss for a brief time. Second, devise new ways to both, revive the agriculture and boost rural consumption. “The Congress manifesto mentions ‘concrete alternatives’, wherein money could reach in the hands of people by freeing agricultural markets,” he said.

Thirdly, there is a need to infuse liquidity in the system for capital formation. Fourth measure is to revitalise key labour-intensive sectors such as textile, automobile, electronics and affordable housing. For that easy loans would be required, especially for micro, small and medium enterprises (MSMEs), he said.

Singh’s fifth measure pertains to harness emerging export opportunities because of the ongoing tariff war between the United States and China. “We must recognise new exports opportunities emerging because of America-China trade war. Remember, solutions to both cyclic and structural problems are must. Then only, we can get back to the high growth rate in 3-4 years,” he said.

Commenting on the current state of the Indian economy he said the government cannot live in denial. “India is in extremely serious economic slowdown. The growth rate of 5% in the last quarter is lowest in the six years. Nominal GDP growth is also at a 15 year low. Many key sectors of the economy have been affected,” he said.

The automobile sector is in trouble because of a severe fall in output. More than 3.5 lakh jobs have been lost. This pain is visible at auto hubs in Manesar, Pimpri-Chinchwad and Chhenai. Ancillary industries are also affected. The slowdown in truck manufacturing is more worrying, which is a clar indicator of tepid demand of goods and essential commodities. The all encompassing slowdown has also gripped the services sector, he said.

The real estate sector is not able to perform well for quite some time, which is affecting related industries such as bricks, steel and electricals. Core sector has slowed after a fall in coal, crude oil and natural gas sectors. The rural economy is eclipsed because of non-remunerative prices of crops. The unemployment was 45 years high in 2017-18. Consumption, which is the reliable engine of economic growth, is 18 months low. A decline in sales of biscuit worth Rs 5 a packet has narrated the entire tale in its entirety, Singh said.

 

Need Well Conceived Strategy to Make India 5 Trillion Economy: Manmohan Singh

JAIPUR, Sept 7: Former Prime Minister Manmohan Singh on Saturday said that a "well conceived strategy" was needed to make India a five trillion economy.

Singh was speaking at the JK Lakshmipat University, where he was felicitated with the 'JKLU Laureate Award 2019' for his contribution in public service, governance, economy and nation building.

"Presently, our economy seems to have slowed down. The rate of growth of GDP is declining, investment rate is stagnant, farmers are in distress, banking system is facing a crisis and unemployment is going up. We need a well conceived strategy to make India a five trillion economy," he said.

He suggested that the government should forbid tax terrorism, respect independent voices and provide for checks and balances at every level. "The need of the hour is to continue with economic reforms," he said.

The Rajya Sabha MP from Rajasthan said that the country needs principled, knowledgeable and visionary leaders in times to come to strengthen democracy.

Singh said political parties must be committed for safeguarding the values enshrined in the country's Constitution.

"For our continued unity, the government has to deliver justice, liberty, equality and an environment that respects contrary opinions," he said, adding, that supremacy of parliament and its procedures, the rules of the government and precedents have to be respected.

He also said that institutions like the Supreme Court, Election Commission, Comptroller and Auditor General, Central Bureau of Investigation, Vigilance Commission, Information Commission and other special commissions are expected to function independently within the framework of the Constitution.

"We must always promote the objective to reduce crime and corruption, consolidate the rule of law, enhance credibility, and create an environment conducive for investment as an engine of growth," he said.

Singh further said that a functional democracy has definite advantages over an authoritarian regime.

Citing the example of China in context of economic development, he said such countries, by persuading citizens to focus primarily on economic growth, created an atmosphere in which sacrificing personal freedom could be justified.

"This allowed these regimes to just impose the politically difficult but critically important policies needed to move the economy forward. However, over time as incomes grow, it changes the aspirations of society, which ultimately strives for a democratic structure," he said.

"The loss of freedom, in the long term run, is not a small price to pay," he commented.

Talking about liberal democracy, he said that it is a model of good governance that includes freedom, pursuit of equality, power sharing, deliberation, periodic elections, independent institutions, and the rule of law.

Referring to the economic reforms introduced in 1991 by the then Congress government, Singh said the steps have led to an improvement in the living standards of the people.

"Since then, millions of people have risen above poverty line. There have been several policy measures undertaken by the successive governments that have led to more inclusive growth in India, particularly assured work under Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and well designed programmes of universal healthcare and education," he said.

With more purchasing power, demand in the economy goes up, encouraging private investment, more government revenues to fund infrastructure needs and a reduction in social conflict, he added.

"Thus, it is clear that through these channels, democracy does increase economic growth," he said.

He said that population and social inequity, communalism, casteism, religious fundamentalism, corruption are some of the challenges before democracy and literacy and education, rooting out casteism, good governance, women and girl child empowerment, free and independent media and economic growth were needed to counter them.

India has an ancient culture of tolerance and respect for divergent views and a population accustomed to political opposition and peaceful transfer of power for over seven decades, he said.

"Political liberalism is a way of life for us," he said.

 

All-round mismanagement by government led to slowdown: Manmohan Singh

NEW DELHI, Sept 1: The state of the economy today is deeply worrying, former Prime Minister Manmohan Singh said, adding that "all-round mismanagement" by Prime Minister Narendra Modi's government has resulted in the slowdown. The veteran Congress leader's comments come two days after government data showed that India's economy expanded at its slowest pace in over six years in the quarter ended June 30.

Growth in the country's gross domestic product (GDP) stood at 5 per cent in the first quarter of current financial year (2019-20), compared with 5.8 per cent in the previous quarter, and 8.0 per cent in the quarter ended June 30, 2018.

"India cannot afford to continue down this path. Therefore, I urge the government to put aside vendetta politics, and reach out to all sane voices and thinking minds, to steer our economy out of this man-made crisis," Dr Manmohan Singh said in a video statement.

"The last quarter's GDP growth rate of 5 per cent signals that we are in the midst of a prolonged slowdown," he said, adding that the country has the potential to grow at a much faster rate.

Dr Manmohan Singh is widely recognised for the economic reforms which he announced in 1991 when he was the Finance Minister in the Narasimha Rao government.

Sliding for the fifth quarter in a row, economic expansion came in at the slowest pace since the March 2013 quarter, when it had stood at 4.3 per cent. A slowdown in the sale of cars to biscuits and lakhs of estimated job cuts across sectors plagued the economic growth of the country, say analysts.

In its bid to push investments and revive growth, the government has announced a range of measures in the past few days, including easing of FDI or foreign direct investment norms in four sectors, and a reversal of higher taxes on foreign investors as announced in Budget.

On Friday, Finance Minister Nirmala Sitharaman announced reforms in the banking sector, merging several public sector banks.

Nirmala Sitharaman dismisses fears of job loss after banks merger plan

CHENNAI, Sept 1: Finance Minister Nirmala Sitharaman on Sunday dismissed fears of job losses following the government’s decision to merge 10 public sector banks and insisted that not even a single employee would be removed in the wake of the amalgamation.

“Absolutely, ill informed. I want to assure every union in everyone of these banks to please recall what I have said last Friday. When we spoke about amalgamation of banks I have very clearly underlined the fact that there shall not be one employee removed. Not at all”, she said at a press conference.

On Friday, Sitharaman had unveiled a mega plan to merge 10 public sector banks into four as part of plans to boost government’s $5 trillion economy dream. On the same day, Central Statistics Office (CSO) released figures that showed the India’s gross domestic product (GDP) grew at just 5 per cent, the slowest in six years.

The All India Bank Employees Union has said the merger would lead to closure of banks and job losses.

The Bharatiya Mazdoor Sangh (BMS), labour wing of the RSS has also criticised the bank merger plan saying it was done without any study would only protect interests of corporate houses.

Ahead of Sitharaman’s assurance to bank employees, former Prime Minister Manmohan Singh said the state of the economy was deeply worrying and insisted that last quarter’s GDP growth rate of 5% signals that the country is in the midst of a prolonged slowdown. The senior Congress leader also blamed “all-round mismanagement by the Modi government” for the economic slowdown.

 

 

 

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