New Delhi, Aug. 13: It is official that India’s GDP growth will witness a significant slowdown this fiscal. The Prime Minister’s economic advisory council (EAC) in its review has projected that the economy will grow by 7.7 per cent this fiscal against nine per cent last year. In the last three years, the Indian economy had witnessed an unprecedented growth of nine per cent. Now, the EAC has projected that agriculture growth will slow down to two per cent as against 4.5 per cent growth in the last fiscal. Industry will grow by 7.5 per cent against 8.5 per cent last year. Whereas, services will grow by 9.6 per cent against 10.8 per cent last fiscal.
“Centre’s major focus is to control inflation as a result the growth is likely to suffer,” said the new EAC chairman, Mr Suresh Tendulkar. The EAC said that a number of factors inimical to growth have intensified in 2008. Mr C. Rangarajan, the outgoing chairman of the EAC, said that external environment globally is not conducive for the growth. He said that financial crisis in US, high commodity price particularly in case of oil have an impact on the Indian economy.
On inflation, Mr Rangarajan said that there is also a possibility that inflation could even touch 13 per cent in the coming days. He said that co-ordinated policy action can bring down inflation to eight to nine per cent by March 2009. “A lot of effort will have to be made to bring inflation to these levels,” said Mr Rangarajan. The EAC said that tight monetary stance is necessary to control inflation.
“Implementation of the rural employment guarantee programme and Sixth Pay Commission’s report, we think, will take total deficit to five per cent. This is a very large fiscal deficit,” Mr Rangarajan said. The EAC had earlier in January projected a growth rate of 8.5 per cent for 2008-09, while the RBI in its recent policy forecast a growth rate of eight per cent. EAC said that savings will be lower this fiscal due to worsening government finances and erosion in corporate profit.
However, the finance minister, Mr P. Chidambaram, showed confidence that GDP will grow close to eight per cent this fiscal. “If the Prime Minister’s EAC pegs it economic growth at 7.7 per cent, I can confidently say it will be close to eight per cent,” said Mr Chidambaram.
New Delhi, Aug. 13: A drop in global crude prices does not offer the government any immediate scope forῠ reduction in domestic fuel prices, although India’s crude basket price has fallen over eight per cent in two months.ῠ “It (fall in crude prices) is a happy sign. It is a welcome development. But there is no scope for reduction in domestic retail prices,” the petroleum minister, Mr Murli Deora, toldῠ reporters. Crude oil prices have fallen to below $113 a barrelῠ this week from all-time high of $147 per barrel witnessedῠ last month. The basket of crude oil India buys averaged $109.88 per barrel, down from $119 a barrel price on June 4 when petrol, diesel and domestic cooking gas prices were raised. However, the retailers Indian Oil, Bharat Petroleum and Hindustan Petroleum continue to lose money on fuel sales, Mr Deora said.ῠῠ
New Delhi, Aug 13: Interest rate hikes by public sector banks will not impact existing and new home loans up to Rs 30 lakhs, as also auto and education loans, the finance minister, Mr P. Chidambaram, said on Wednesday.
“Banks have said almost unanimously that it (increase in BPLR rate) will not impact all existing house loans, house loans given prior to the RBI’s announcement, all home loans up to Rs 30 lakh, all existing auto loans and educational loans,” he told reporters after meeting with the chairpersons of public sector banks.
He said after the announcement of monetary policy by the RBI, most of the public sector banks have increased their bank prime lending rates (BPLR) by 75 to 100 basis points, but agreed not to raise interest rates on existing home loans.
New Delhi, Aug 13: Interest rates in India have almost peaked, the chairman of the State Bank of India said on Wednesday, a day after it raised its prime lending rate by one percent. The Reserve Bank of India (RBI) last month raised its key lending rate to its highest in seven years at nine per cent to combat a surge in inflation, now at a 13-year peak of 12 per cent.
The State Bank took its lending rate up to 13.75 per cent on Tuesday, following other banks which have also raised interest rates.ῠ “They have almost peaked,” Mr O.P. Bhatt, said ahead of a meeting of heads of state-run banks with the finance minister. He cited softening oil prices, a good monsoon and lower prices of commodities except steel, as factors pointing towards a peak in interest rates.
“The demand pull from Beijing Olympics is also over, the global economy is slowing down. So there seems enough reasons that it has peaked or near peaked unless there is any further cause for action by external factors or by the RBI,” he said. International crude oil prices steadied above $113 per barrel on Wednesday, more than $30 off a peak above $147 hit in July.
Genpact plans India, US buys
BPO company Genpact is looking at acquisition of companies in the US and India in the range of $50 million to $400 million, CEO, Mr Pramod Bhasin, said on Tuesday. The NYSE-listed company is also looking at expanding its off-shore capacity in Guatemala to serve the US market, he said. “We are looking at all sorts of companies – BPO, technology, captive BPO and possibly IT companies also – the range could be $50 million to $400 million. We are interested as a lot of companies are available for sale,” Mr Bhasin said.
Insure rural India, says IRDA chief
The newly-appointed Insurance and Regulatory Development Authority chairman, Mr J. Harinarayan, emphasised on the combination of life and non-life insurance policies in order to tap the grossly under-covered rural market. “There’s a need for greater customisation and offering greater choice to people in the low-income segment. The industry needs to show greater sympathy towards the under-privileged,” he said, while launching Max New York Life’s new insurance policy, Max Vijay, targeting the rural and semi-urban population. The firm has tied up with the Confederation of NGOs of Rural India, wherein CNRI will help create awareness about the policy amongst the rural masses.
Oracle India eyes small Pune firms
Oracle India Pvt Ltd, the Indian arm of the US software giant Oracle Corp, is now looking at Pune-based small and medium enterprises (SMEs) to expand its client base. “Pune now has a large presence of IT companies, BPOs and logistic enterprises. These SMEs today need products like ours to expand their business quickly, compete better in the Indian and global markets,” Oracle Direct regional manager, Mr Vinod Subramanian, said. Oracle, famous for data base management system applications and enterprise resource planning (ERP), could help these SMEs grow profitable and get better results from their IT investments, he added.
HRA benefit for employees only
By Kamal Rathi
Q. I was an employee of a private limited company and retired on August 31, 2007. While in service I was getting house rent allowance as per company rules. After retirement, I stay in a rented premises. I have income after retirement from post office monthly income scheme, interest from bank deposits, etc. Can I claim deduction under Section 80GG for the period between September 1, 2007, and March 31, 2008, in respect of the rent paid? How is the quantum of deduction to be computed? Can long-term capital gains be treated as part of total income after computing deduction under Section 80GG?
M.V. Radhakrishnan, Via email
A. You shall not be eligible to claim deduction under Section 80GG for the period mentioned by you. The deduction under Section 80GG is available to an individual or Hindu Und-ivided Family (HUF). The quantum of deduction available under this section is to the extent of the least of the following:
*ῠExcess of rent paid over 10 per cent of the total income. * Rs 2000 per month. * 25 per cent of the total income.
The deduction is available provided a declaration is filed in Form 10BA and further provided the following conditions are fulfilled:
* If the assessee is an individual , the assessee or his spouse or his minor child does not own a residential accommodation in that place.
* If the assessee is an HUF no member of the family owns a residential accommodation in that place.
* The assessee is not in receipt of HRA.
Since you have been in receipt of HRA during the previous year for the said period, it appears that the benefit of Section 80GG cannot be claimed for the financial year 2007-08.
It may also be mentioned that total income for this purpose means, the total income computed after all the deductions under Chapter VI-A other than deduction under this section.
Long term capital gains will not be taken into account as part of the total income for the purpose of Section 80GG as Section 112 provides that the long term capital gains is to be excluded for the purpose of computing deductions under Chapter VI-A.
(Kamal Rathi is a chartered accountant, representingῠ Rathi & Malani, a Hyderabad-based accounting firm. Readers can mail their queries on income-tax email@example.com)
Vienna, Aug. 13: Traders bid oil higher on Wednesday amid mixed signals on the strength of the US dollar and ahead of weekly US crude inventory data expected to show a slight increase in oil supplies . A weakening dollar has helped boost oil prices this year, because dollar-denominated commodities are often used as hedges against inflation and a falling US currency. The euro rose on Wednesday to $1.4919 but the yen was weaker against the greenback, trading at $1 to 108.93 yen.
Light, sweet crude for September delivery rose 23 cents to $113.24 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. The contract dropped $1.44 overnight to settle at $113.01 a barrel. Nymex crude is down about $33, or 22 per cent, from its high of $147.27 on July 11.
Investors are waiting for a report by the US energy department’s Energy Information Administration on US oil stocks for the week ended Aug. 8 later in the day.ῠ The petroleum supply report was expected to show that crude stocks rose by 500,000 barrels, according to the average of analysts’ estimates in a survey by energy research firm Platts.ῠ Investors “have taken profits as they’ve seen demand destruction in the US and they’re seeing it spread a little into Europe,” said Mr Jonathan Kornafel, Asia director for brokerage Hudson Capital Energy in Singapore.
The Platts survey also showed that analysts projected gasoline inventories to have fallen 2.2 million barrels and distillates to have risen 1.9 million barrels during last week.Any fall in gasoline supplies would come despite indications that the high price is putting a crimp in demand.
New Delhi, Aug. 13: Gold prices recovered sharply by Rs 230 to Rs 11,620 per 10 gram in the bullion market here on Wednesday on emergence of buying by stockists and jewellery fabricators influenced by firming global trend. Gold, which experienced an intra-day free fall by losing over Rs 900, recovered sharply due to spurge in buying activity by jewelers and stockists on heavy marriage and festival demand. Market sentiments turned bullish on reports that gold has rebounded from a seven-month low in London due to revival in jewellery and investment demand after the fresh fall, traders said.ῠ
Mumbai, Aug. 13: The Securities and Exchange Board of India (Sebi) has reduced the timeline for completing the rights issue from 109 days to 43 days, revised the pricing norms for qualified institutional buyers and directed mutual funds to distribute annual reports within four months of the closing of the year instead of six months.
The Sebi chairman, Mr C. Bhave, said “The decisions taken by the board of Sebi will benefit the investors and it will improve efficiency.” Announcing the decisions taken by the Sebi board on Wednesday, Mr Bhave said the changes made in timeline for the rights issues follows the board’s decision in March that the efficiency in the primary market should improve in line with that of the secondary market.
Mr Bhave said that regarding the pricing norms for Qualified Institutional Pla-cement (QIP), the floor price will be based on the two weeks average for making a QIP or for making preferential allotment to qualified institutional buyer as against six months. He said “in a volatile market it is not practical to decide prices on an average of six months. In other markets in the world pricing is based on the day on which the issue is made.”
The Sebi board has also approved the modification to clause 41 of listing agreement to change the time limit for submission of financial results to stock exchanges. Now, all companies will have to submit standalone financial results within one month of the end of quarter or it may submit consolidated financial results within two months from quarter end, he said. The Sebi has approved the proposal which will require mutual funds to dispatch the annual reports to unit holders within four months instead of six months.
Asked if any decision was taken on Participatory No-tes, he said it was discussed but no decision was taken. The board also approved the opening of western regional office of Sebi in Ahmedabad, which will be operational during the financial year 2008-09. Its jurisdiction covers Gujarat and Rajasthan, said Mr Bhave.
The Sebi had received applications for trading in currency futures from NSE, BSE and Multi Commodity Exchange.ῠ It has approved NSE’s application in principal on Tuesday but had not accepted BSE’s proposal as it feels that the BSE is not at a stage where it can be given approval. Regarding the MCEX, the Sebi chairman said that it needed to get an approval for it name in order to be registered.
New Delhi, Aug. 13: The Union finance ministry on Wednesday asked the telecom ministry not to finalise 3G guidelines as it has not been consulted on clauses with financial implications. The telecom minister, Mr A. Raja, had announced the 3G guidelines with much fanfare two weeks back. “I am writing with reference to the guidelines issued on August 1 by the department of telecommunications on auction and allotment of spectrum for 3G and broadband wireless access (BWA) services. The guidelines contain clauses with financial implications such as determination of the spectrum acquisition price and reserve price for auction, fixation of spectrum usage charges and penalties for hoarding of spectrum. However, ministry of finance has not been consulted in the matter,” said the finance secretary, Mr D. Subbarao, in a letter to the telecom secretary, Mr Siddharth Behura, on Wednesday.
Mr Subbarao said that the transaction of the business rule clearly prescribes mandatory consultation with the finance ministry as a pre-condition in respect of all issues which have financial implications. “Moreover, the Cabinet in its meeting on October 2003 had decided that spectrum pricing would need to be decided mutually between DoT and finance ministry so as to provide incentive for efficient use of spectrum and disincentive for sub-op-timal usage,” it said. “The issue of guidelines without any consultation with the finance ministry either within the forum of telecom commission or out side is inappropriate,” it said.
New Delhi, Aug. 13: Global miner Rio Tinto will sign an agreement this month withῠ NMDC to prospect for iron ore, the chairman of the Indian mining firm said on Wednesday. “We will sign a memorandum of understanding. It is for prospecting of mainly iron ore. They (Rio Tinto) will look to prospect in India,” NMDC chairman Rana Som said. NMDC’s shares rose more than 3.3 per cent after the news of the agreement, which Mr Som said would be signed on August 18. The agreement is to prospect outside of India as well as in the subcontinent.
Mumbai, Aug. 13: Real estate companies are eyeing the huge market for low cost houses and are buying up land for projects on the outskirts of tier I and II cities across India. To making these projects economically viable, they are also cutting down the amenities and reducing their profit margins. According to the experts, fast delivery of the flats are the mantra for the success of affordable housing projects.
Benagluru-based real estate major Puravankara Projects Ltd has announced the launch of its 100 per cent owned subsidiary, Pro-vident Housing and Infrastructure Ltd (PHIL). Addressing a press conference here, PHIL managing director, Mr Jaykar Jerome, said the company is planning to build 64,500 houses in five cities in phase one at a cost of Rs 8,000 crores over the next five years. The company is targeting this segment as there is a huge demand and supply gap.
In the first phase, projects will be undertaken in the cities like Bengaluru, Chennai, Hyderabad, Coimbatore and Mysore. PHIL chairman, Mr Ravi Puravankara, said the company will raise funds from internal accruals, private equity and advances against sales of the flats. The key for success in this type of business model is to complete the project in a timeframe of 15 to 18 months, he said. If the project completes according to the schedule the volatility in the cost of raw material can be taken care off, he said.