Here are the highlights of Union Budget 2017

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Finance Minister Arun Jaitley presented the Union Budget 2017, his fourth annual budget, today. Here are the highlights of this year’s budget:

►Income Tax rate cut to 5 pc for individuals having income between Rs 2.5 lakh to Rs 5 lakh

►10 pc surcharge on individual income above Rs 50 lakh and upto Rs 1 cr to make up for Rs 15,000 cr loss of due to cut in personal I-T rate

►15 pc surcharge on income above Rs 1 cr to continue

►Of 3.7 cr individuals who filed tax returns in 2015-16, 99 lakh showed income below exemption limit

►Direct tax collection not commensurate with income and expenditure pattern

►Revenue deficit reduced to 2.1 pc from 2.3 pc for 2016-17

►Govt pegs fiscal deficit target at 3.2 per cent for 2017-18 and 3 per cent for next year.

► Monetary policy to be expansionary in major economies

► More steps will be taken to benefit farmers and the weaker sections; budget being presented during weak global economy

►Pace of remonetisation has picked up; demonetisation effects will not spill over to next year

►Functional autonomy of the railways to be maintained

►Demonetisation will help in transfer of resources from tax evaders to government:

►Merger of Railways Budget with General Budget brings focus on a multi-modal approach for development of railways, highways and inland water transport

►Only transient impact on economy due to demonetisation; long term benefit include higher GDP growth and tax revenue

►GDP will be bigger, cleaner after demonetisation

►Effects of demonetisation not expected to spill over to the next year, says Finance Minister

►Govt took two tectonic policy initiatives – passage of GST Bill and demonetisation

►Demonetisation was a continuation of series of measures taken by govt in 2 yrs; it is bold and decisive measure

►We are seen as engine of global growth; IMF sees India to grow fastest in major economies

►36 pc increase in FDI flow; forex reserves at USD 361 billion in January enough to cover 12 months needs

►CAD declined from 1 pc last year to 0.3 pc in first half of current fiscal: FM

►India has emerged as bright spot in the world: FM

►Uncertainty around commodity prices especially oil to have impact on emerging economies: FM

►Double digit inflation has been controlled; sluggish growth replaced by high growth; war on blackmoney launched: FM

►We have moved from discretionary based administration to policy based administration: FM Jaitley

► Agricultural sector is expected to grow at 4.1 per cent this fiscal, says Jaitley

►Demonetisation was a bold and decisive strike in a series of measures to arrive at a new norm of bigger, cleaner and real GDP

►Committed to double farm income in 5 years

►Plan, non-plan classification of expenditure done away with in the Budget for 2017-18 to give a holistic picture

►Mini labs by qualified local entrepreneurs to be set up for soil testing in all 648 krishi vigyan kendras in the country

►Budget presentation advanced to help begin implementation of schemes before onset of monsoon

►We will continue the process of economic reform for the benfit of poor.

►Spend more in rural areas, infra, poverty alleviation, while maintaining fiscal prudence as guiding principle of Budget

►Our agenda for next year is to transform, energise and clean India

►World Bank expects GDP growth rate at 7.6 pc in FY18 and 7.8 pc in FY19

►Allocation under MNREGA increased to 48,000 crore from Rs 38,500 crore. This is highest ever allocation

►Rs 9,000 cr higher allocation for payment of sugarcane arrears

►Target of agriculture credit fixed at Rs 10 lakh cr in 2017-18

►Tax administration honouring the honest is one of the 10 pillars of Budget 2017-18

►National Testing agency to conduct all examinations in higher education, freeing CBSE and other agencies

►133-km road per day constructred under Pradhan Mantri Gram Sadak Yojana as against 73-km in 2011-14

►Govt to set up dairy processing fund of Rs 8,000 crore over three years with initial corpus of Rs 2,000 crore

►1 cr households to be brought out of poverty under Antodya Scheme

►Participation of women in MNREGA increased to 55 pc from 45 pc in past

►Modern law on contract farming will be drafted and circulated to states

►Dedicated micro-irrigation fund to be created with a corpus of Rs 5000 crore

►Market reforms will be undertaken, states will be asked to denotify perishables from Essential Commodities Act

►Space technology to be used for monitoring MNREGA implementation

►Sanitation coverage in villages has increased from 42 pc in Oct 2016 to 60 pc, a rise of 18 pc, says FM

►We propose to provide safe drinking water to 28,000 arsenic and fluoride affected habitations

►To construct one crore houses by 2019 for homeless. PM Awas Yojana allocation raised from Rs 15,000 cr to Rs 23,000 cr

►100 pc electrification of villages to be completed by May 2018

►27,000 cr on to be spend on PMGSY; 1 cr houses to be completed by 2017-18 for houseless

►PM Kaushal Kendras will be extended to 600 districts; 100 international skill centres to be opened to help people get jobs abroad

►The allocation for rural agri and allied sector in 2017-18 is record Rs 1,81,223 crore

►In higher education, we will undertake reforms in UGC, give autonomy to colleges and institutions

►A system of annual learning outcome in schools to be introduced; innovation fund for secondary education to be set up

►Two new AIIMS to be set up Jharkhand and Gujarat

►New rules regarding medical devices will be devised to reduce their cost

► 1.5 lakh health sub centres to be converted to Health Wellness Centres

►National Housing Bank will refinance indiviual loans worth Rs 20,000 crore in 2017-18

►Rs 500 cr allocated to set up Mahila Shakti Kendras; Allocation raised from Rs 1.56 lakh cr to Rs 1.84 lakh cr for women & child welfare.

►Capital and development expenditure pegged at Rs 1.31 lakh cr for railways in 2017-18 from Budget

►Allocation for SCs increased from Rs 38,833 cr to Rs 52,393 cr, a rise of 35 per cent

►35 pc increase in allocation for SC to Rs 52,393 cr

►For senior citizens, Aadhaar based health cards will be issued

►Model Shops and Establishment Bill to open up additional opportunities for employment of women

► Select airports in tier-II cities to be taken up for operations, development on PPP mode

►New metro rail policy to be unveiled

►Railway tariffs to be fixed on the basis of cost, social obligation and competition

►Service charge on e-tickets booked through IRCTC will be withdrawn

►Delhi and Jaipur to have solid waste management plants and five more to be set up later

►Government proposes Coach Mitra facility to redress grievances related to rail coaches

►500 stations will be differently abled by providing lifts and escalators

►Unmanned railway level crossings to be eliminated by 2020

►Railway line of 3,500 km will be commissioned in 2017-18 as against 2,800 km in 2016-17

►Total allocation for rural, agri and allied sectors for 2017-18 is a record Rs 1,87,223 cr, up 24 per cent from last year

►Rs 1 lakh cr corpus for railway safety fund over five years

►A scheme for senior citizens to ensure 8 per cent guaranteed returns

►Dedicated micro-irrigation fund to be set up by NABARD to achieve mission of Per Drop, More Crop

►Digi Gaon will be launched to promote tele-medicine and education

►Crude oil strategic reserves to be set up in Odisha and Rajasthan apart from 3 already constructed

►Coverage of Fasal Bima Yojana to go up from 30 pc of cropped area to 40 pc in 2017-18 and 50 per cent next year

►For transport sector, including railways, road and shipping, government provides Rs 2.41 lakh crore

►Allocation of Rs 10,000 cr for Bharat Net project for providing high-speed broadband in FY18

►Allocation for national highways stepped up to Rs 64,000 cr from Rs 57,676 cr

►Budget allocation for highways stepped up to Rs 64,000 crore in FY18 from Rs 57,676 crore

►Dispute resolution in infrastructure projects in PPP mode will be institutionalised

►Rs 2,74,114 crore allocated for defence expenditure, excluding pension; This includes Rs 86,000 crore for defence capital

►Govt to further liberalise FDI policy

►Over 90 per cent of FDI proposls are now through automatic route

►FIPB will be abolished

►Trade Infrastructure Export Scheme to be launched in 2017-18; total allocation for infra at record Rs 3.96 lakh cr

►Second phase of solar power development to be taken up with an aim of generating 20,000 MW

►After demonetisation on Nov 8 last year, deposit of between Rs 2 lakh and Rs 80 lakh made in 1.09 cr bank accounts at an average of Rs 5.03 lakh till Dec 30

►More funds beyond Rs 10,000 cr for recapitalisation of banks will be provided if needed

►The shares of railway CPSCs like IRCTC and IRFC to be listed on various stock exchanges

►We are largely a tax non-compliant society

►New ETF with diverse stocks will be launched in 2017-18

►Of 76 lakh individuals who reported income of over Rs 5 lakh, 56 lakh are salaried

►Integrated public sector oil major to be created to match global giants

►Govt will amend the Multi-state Cooperative Act to protect the poor and gullible investors

►Urgent need to protect poor from chit fund schemes, draft bill placed in public domain

►Computer emergency response team to be set for cyber security of financial sector

► Govt to introduce two new schemes to promote BHIM App – referal bonus for users and cash back for traders

►Govt doubles distribution target under Mudra Yojana to Rs 2.44 lakh crore for 2017-18

►Over Rs 80 lakh deposits in 1.48 lakh cr at an average of Rs 3.31 cr per account

►Customs duty on LNG halved to 2.5 pc

►FPI to be exempt from indirect transfer provisions

►Political parties can receive donations in cheque, electronic mode; electoral bonds to be issued by RBI

►Maximum amount of cash donation a political party can receive will be Rs 2000 from any one source as part of effort to clean political funding

►Capital expenditure stepped up by 25.4 pc in FY18 over previous year

►Total expenditure in FY18 at Rs 21.47 lakh cr

►Duty exempted on various POS machines and iris readers to encourage digital payments

►Rs 7,200 cr revenue loss due to reduction in tax on smaller companies

►Govt mulling introduction of legal changes to confiscate assets of offenders, including economic offenders, who flee the country

►Govt to set up a web-based interactive platform for defence pensioners

►Head post offices to issue passports

►Govt considering option to amend Negotiable Instruments Act to ensure that holders of dishonoured cheques get payment

►FRBM review committee has recommended 60 pc debt to GDP ratio; 0.5 pc of GDP deviation from stipulated fiscal deficit targets

►Payment regulatory board to be set up in RBI to regulate electronic payments, replacing Board for Regulation and Supervision in Payments and Settlements System

►3 yr period for long-term capital gains tax on immovable property reduced to 2 years; base year indexation shifted from 1.4.1981 to 1.4.2001

►A proposal to receive all government receipts beyond a certain threshold through e-modes under consideration

►GST implementation to bring more taxes to Centre and states

►No transaction above Rs 3 lakh in cash will be allowed as suggested by SIT

►Customs duty on LNG to be reduced from 5 pc to 2.5 pc

►To make MSME companies more viable, govt proposes to reduce IT tax with annual turn over of Rs 50 core up to 25 per cent

►I-T for smaller cos with turnover of upto Rs 50 cr up to 25 per cent

►Not possible to remove MAT levied on advance tax for now; carry forward allowed for 15 yrs instead of 10 yrs

►Relaxation in norms for Start Ups for getting tax exemption

►Capital gains tax exempted for the land pooled to build new capital of Andhra Pradesh effective from 2.6.2014

►Increase in personal tax collections is 34.8 per cent in last three quarters. Demonetisation has played a role

►17 pc growth in direct tax revenue for the second year in a row in 2016-17

►As against 4.2 crore people working in organised sector, only 1.74 crore individuals filed income tax returns

►Solar tempered glass used for manufacture of solar cells/panels exempted from customs duty

►Import duty on aluminium ores and concentrates raised to 30 pc from nil presently

►Actual revenue loss on tax proposals Rs 22,700 cr; gain from additional resource mobilisation is Rs 2,700 cr

►Net revenue loss from direct tax proposals to be about Rs 20,000 cr

►Excise duty on pan masala containing tobacco (Gutkha) raised to 12 pc from 10 pc

►Excise duty on non-filter cigarettes of length not exceeding 65 mm raised to Rs 311 per thousand from Rs 215 per thousand

 

Source:http://economictimes.indiatimes.com/articleshow/56907865.cms

Union Budget 2017: Economic Survey says reforms to power India potential growth

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India’s economy could grow at 6.5-6.75% in the current financial year and might not gather significant momentum next year but that doesn’t warrant a fiscal/monetary easing, according to Economic Survey 2016-17 tabled in Parliament on Monday. Projecting a 0.25-0.5% demonetisation-induced reduction in the FY17 gross domestic product (GDP) growth relative to the 7% annual expansion the country would have otherwise reported, the survey cautiously estimated FY18 growth within a broad low-equilibrium range of 6.75-7.5%.

A clutch of states in India have suffered from an “aid curse” — that is, a negative effect on redistributive resource transfers on fiscal effort and governance quality — the survey noted and invited a debate on universal basic income (UBI) for households in these states.

Direct UBI transfers to the households could be a more efficient way to reduce poverty, cementing the recent gains in redistributive efficiency through the JAM (Jan Dhan, Aadhaar and mobile) platform, the authors of the survey felt, but they cautioned against UBI implementation until the tax-GDP ratio showed tangible rise.

“There is a big potential to improve the weak targeting of current (anti-poverty) schemes,” chief economic adviser Arvind Subramanian said, amid rumours that Wednesday’s Union Budget might launch a pilot UBI.

According to the survey, the short-term effect of the note ban on the economy will be less adverse than many others predicted: The International Monetary Fund (IMF), for instance, saw a 1 percentage point growth reduction in FY17; the Reserve Bank of India had pegged a 0.5% loss in growth. The IMF, Subramanian said, relied on an “over-optimistic baseline”.

Given that growth was 7.2% in the first half of this fiscal and the survey assumption is against the baseline scenario of around 7% FY17 growth, the forecast is that second-half growth, at worst, could be around 6%.

This is still a bit more optimistic than what many independent analysts prognosticated — Morgan Stanley Research, for instance, put H2 FY17 growth at 5.5%.

However, the survey appreciated the limitation of capturing informal activity in the national income data, suggesting the pain of note recall might have been more severe. A set of structural reforms could take the economy towards the potential real GDP growth of 8-10%.

As for FY18, exports, which are “recovering”, based on an uptick in the global economy — the IMF has projected global growth to rise to 3.4% in 2017 from 3.1% in 2016 — would be a significant growth driver, the survey said, but admitted that the outlook for private consumption was less clear (oil prices are a potential drag while low interest rates might help a smart recovery in spending on housing and consumer durables). It also said candidly that given the sticky TBS or twin balance sheet problem, private investment was unlikely to recover from the FY17 level (fixed investment, according to the central statistics office, declined 0.2% this fiscal and investment as a share of GDP is now seen at 29%, down 5 percentage points from FY12). Demand-driven remonetisation, a push to digital payments using incentives, bringing land and real estate into the goods and services tax (GST) net, lowering tax rates and stamp duties and improving the tax system would help take growth back to trend in FY18, it said. However, the threat of trade tensions among major countries prevailed, especially given the Trump administration’s proclivity to step into a protectionist groove.

Giving the fiscal outlook for the Centre, the survey warned that the increase in tax-GDP ratio of about 0.5 percentage point each in the last two years owing to the oil windfall would disappear in FY18: “Excise-related taxes will decline by about 0.1 percentage point of GDP, a swing of about 0.6 percentage points relative to FY17,” it said. According to Crisil Research, about a third of the likely excise revenue of Rs 2.3 lakh crore in FY17 could be ascribed to excise duty increases on petroleum products. There would be windfalls from cessation of the RBI’s liability with respect to demonetised banknotes not returned to banks and the new income disclosure scheme PMGKY. Revenue potential from GST could, however, take some some time to be fully exploited.

While a committee on fiscal consolidation is believed to have recommended some well-defined escape clauses to provide the fiscal support to consumption and investment in the near term, the survey noted that primary balance (obtained after netting interest payments from the fiscal deficit) needed more attention. “The vulnerability is the country’s primary deficit… Put simply, India’s government is not collecting enough revenue to cover its running costs, let alone the interest on its debt obligations.” Although the survey noted that there was nothing extraordinary about this (other emerging market economies too run primary deficits), given India’s rapid rates of growth, its primary deficit should have been much lower than others.

This is still a bit more optimistic than what many independent analysts prognosticated — Morgan Stanley Research, for instance, put H2 FY17 growth at 5.5%.

However, the survey appreciated the limitation of capturing informal activity in the national income data, suggesting the pain of note recall might have been more severe. A set of structural reforms could take the economy towards the potential real GDP growth of 8-10%.

As for FY18, exports, which are “recovering”, based on an uptick in the global economy — the IMF has projected global growth to rise to 3.4% in 2017 from 3.1% in 2016 — would be a significant growth driver, the survey said, but admitted that the outlook for private consumption was less clear (oil prices are a potential drag while low interest rates might help a smart recovery in spending on housing and consumer durables). It also said candidly that given the sticky TBS or twin balance sheet problem, private investment was unlikely to recover from the FY17 level (fixed investment, according to the central statistics office, declined 0.2% this fiscal and investment as a share of GDP is now seen at 29%, down 5 percentage points from FY12). Demand-driven remonetisation, a push to digital payments using incentives, bringing land and real estate into the goods and services tax (GST) net, lowering tax rates and stamp duties and improving the tax system would help take growth back to trend in FY18, it said. However, the threat of trade tensions among major countries prevailed, especially given the Trump administration’s proclivity to step into a protectionist groove.

Giving the fiscal outlook for the Centre, the survey warned that the increase in tax-GDP ratio of about 0.5 percentage point each in the last two years owing to the oil windfall would disappear in FY18: “Excise-related taxes will decline by about 0.1 percentage point of GDP, a swing of about 0.6 percentage points relative to FY17,” it said. According to Crisil Research, about a third of the likely excise revenue of Rs 2.3 lakh crore in FY17 could be ascribed to excise duty increases on petroleum products. There would be windfalls from cessation of the RBI’s liability with respect to demonetised banknotes not returned to banks and the new income disclosure scheme PMGKY. Revenue potential from GST could, however, take some some time to be fully exploited.

While a committee on fiscal consolidation is believed to have recommended some well-defined escape clauses to provide the fiscal support to consumption and investment in the near term, the survey noted that primary balance (obtained after netting interest payments from the fiscal deficit) needed more attention. “The vulnerability is the country’s primary deficit… Put simply, India’s government is not collecting enough revenue to cover its running costs, let alone the interest on its debt obligations.” Although the survey noted that there was nothing extraordinary about this (other emerging market economies too run primary deficits), given India’s rapid rates of growth, its primary deficit should have been much lower than others.

Source: http://www.financialexpress.com/budget/economic-survey-2017/union-budget-2017-economic-survey-says-reforms-to-power-india-potential-growth/531664/

Tax avoidance rules: POEM norms to take effect from April, 2017

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Confirming that India’s so-called POEM regulations — which are meant to ascertain the residential status of companies and use it to curb tax avoidance — will take effect from April 1, the Central Board of Direct Taxes (CBDT) on Tuesday issued the final guidelines in this regard. While the draft Place of Effective Management rules issued in December 2015 had caused a stir in the industry for being out of sync with transnational business realities (under pressure from businesses, Budget FY17 deferred POEM activation by one year), the new draft narrowed the scope of the tool and sought to allay most concerns of the investor community about its potential improper use/misuse.

The CBDT has made it clear that POEM’s intent is  not to target Indian multinationals, which have legitimate business activities outside India, but to pin down shell companies  and firms created for retaining income outside India although the real control is exercised from India.

In what would reduce the chances of an assessing officer invoking the POEM provision without proper evaluation, the new rules state that she will need approval of a three-member collegium of her senior officers for triggering the test. Also, it has now been clarified that POEM guidelines won’t apply to companies having turnover or gross receipts of Rs 50 crore or less in a financial year. The regulations, the CBDT said, would apply for assessment year 2017-18 (FY17) and further.

“The guiding principles issued by the CBDT seeks to address some of the practical issues which could arise in application of the POEM test. The guideline strikes the right balance between providing certainty to taxpayers as well as ensuring that offshore companies with no substance or activities, which are controlled from India, are subject to Indian tax jurisdiction,” Rajendra Nayak, tax partner, EY India, said.

The POEM principle — which has found traction with tax authorities in capital-exporting countries and the OECD — was included in India’s I-T Act via the Finance Act, 2015 with the express purpose of discouraging the creation of shell companies with Indian shareholders in foreign jurisdictions to avoid tax residency in India. If a company is treated as resident in India, its worldwide income is taxable here, while only the India-sourced income of foreign companies is taxed. Although the tax rate on foreign companies is higher (40% versus the marginal rate of 30% for domestic firms), subjecting worldwide income to taxation could potentially increase the tax liability of many MNCs with Indian stakeholders. In fact, the real reason behind POEM is the tax department’s intent to curb corporate structures allowing passive foreign income — royalty, dividend, capital gains, interest income and the like — of firms incorporated in foreign countries with Indian ownership, escaping the tax net here. Tuesday’s draft, analysts said, gives further guidance on “active business outside India” test especially with respect to determination of passive income, total asset base, number of employees and payroll expenses in India and outside.

The new norms provide that if board of directors delegates authority to make key management decision/commercial decision to the promoter or strategic/legal/ financial advisors, the place of effective management will be the place where such persons makes those decisions.

Rakesh Bhargava, director, Taxmann, said: “In the final guidelines the CBDT has provided adequate safeguards to ensure that POEM guidelines does not become an oppressive tool in the hands of revenue to harass genuine assessees. Now, assessing officer can ascertain the residential status of foreign company on the basis of POEM guidelines only after taking two-stage approval; first approval is required before initiating any proceedings and second approval is needed before giving any final finding on residential status of foreign company.”

Giving additional clarifications, the CBDT said the decisions made by shareholder on matters which are reserved for shareholder decision under the company laws are not relevant for determination of a company’s POEM. However, the circular added, the shareholder’s involvement can, in certain situations, turn into that of effective management. “Therefore, whether the shareholder involvement is crossing the line into that of effective management is one of fact and has to be determined on case-to-case basis only,” the circular said.

Furthermore, the guidelines stressed that day-to-day decisions taken by junior or middle management of a company wouldn’t be taken into account for determining POEM. However, in certain situations where the person responsible for operational decision is also the one responsible for the key management and commercial decisions, it will be necessary to distinguish the two type of decisions and assess the location where the key management and commercial decisions are taken.

Source: http://www.financialexpress.com/economy/tax-avoidance-rules-poem-norms-to-take-effect-from-april-2017/521170/

CBDT tightens screws on shell companies

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The Central Board of Direct Taxes (CBDT) on Tuesday issued the much-awaited “guiding principles” for determination of a Place of Effective Management (PoEM) of a company, scotching speculation that the Budget may see its removal from the statute book.

Put simply, PoEM means a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance, made.

The CBDT guidelines come barely two months before the end of fiscal year 2016-17, in which PoEM had become legislatively effective, giving little time for Indian multinationals to prepare for the new regime.

The main objective of introducing PoEM was to ensure that companies incorporated outside India but controlled from India do not escape taxation here. It also brings in the concept of residency of corporates with internationally accepted principles, say tax experts.

Girish Vanvari, National Head of Tax, KPMG in India, said that the guidelines stress on substance over form. “They attempt to differentiate between shareholder control, management control and routine decisions. Whilst the guidelines are comprehensive, they are subjective on substance and can be challenged for interpretation in many places,” he said.

Narrower application

Rohinton Sidhwa, Partner, Deloitte, Haskins & Sells LLP, said that what has been released has a narrower application than what was originally proposed. They are also supplemented with examples on isolated facts that will not lead to a PoEM as also illustrative interpretations. The legislative amendment was effective from April 1, 2016, whereas the guidelines are being released only today, Sidhwa pointed out.

Hitesh Sawhney, Partner — Direct Tax, PwC, said thatCBDT has clarified that the intent of PoEM provisions is to target shell companies/companies that are created to retain income outside India and not Indian MNCs engaged in business overseas.

Stress on substance

Aseem Chawla, Managing Partner, ASC Legal, a law firm, said that the finalised guidance relies on substance over form and that routine operational decisions shall not be relevant for PoEM determination.

“Also a panel of three commissioners is to affirm the proposed decision of the assessing officer on the PoEM of a foreign company. Hopefully, this will not impinge upon the right to appeal by the foreign company before a judicial forum,” he added.

Now that the final guidelines are out, will the government go ahead with a Controlled Finance Corporation (CFC) structure or not? Says Daksha Baxi, Executive Director, Khaitan & Co: “My personal view is that CFC is a better anti-avoidance provision, less prone to subjectivity and therefore less litigative.” It seems that at least for the current year, where PoEM is applicable, the government wants to ensure that the provision can be properly implemented, she said.

Rahul K Mitra, Head of Transfer Pricing & BEPS, KPMG in India, said: “With guidelines for PoEM out, it looks like they may not be introducing CFC.”

Jiger Saiya, Partner – Direct Tax, BDO India, echoed his thoughts, saying the “government seems inclined towards implementing the PoEM framework rather than introducing an alternative measure.”

Source: http://www.thehindubusinessline.com/economy/cbdt-tightens-screws-on-shell-companies/article9499358.ece

Demonetisation hits Indian economy; IMF cuts FY18 growth 100bps, 40bps on note ban alone, to 6.6%

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The downward revision, if it translates into reality, will let China temporarily reclaim the fastest growing major economy tag from India

The International Monetary Fund on Monday slashed India’s gross domestic product (GDP) growth forecast by 100 basis points (bps) to 6.6% in FY17 and by 40 bps to 7.2% in FY18, citing a consumption slump after the demonetisation of high-value notes.

The downward revision, if it translates into reality, will let China reclaim, albeit temporarily, the fastest growing major economy tag from India. China’s economy is now expected to grow by 6.7% in 2016, 10 bps higher than the fund’s October 2016 forecast. The communist country is expected to clock 6.5% in 2017, 30 bps higher than estimated earlier, again ceding the fastest growing economy status to India.

graph-10

“In India, the growth forecast for the current and next fiscal year were trimmed by 1 percentage point and 0.4 percentage point, respectively, primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative,” the IMF said in its latest World Economic Outlook Update.

The revision comes barely four months after it revised upward by 20 bps India’s FY17 GDP growth to 7.6% in October 2016. The IMF’s cut in growth outlook for India is sharper than the recent World Bank’s 60 bps reduction in its India GDP growth outlook to 7% for FY17. In its first advance estimate, India’s Central Statistical Office has projected that the economy will slow to 7.1% in the current financial year from 7.6% in 2015-16. Given the post-demonetisation hit to consumption and investment, many analysts said these might prove to be overestimates.

Global growth for 2016 is now estimated at 3.1%, in line with the IMF’s October 2016 forecast. Economic activity in both advanced economies as well as emerging market and developing economies is forecast to accelerate in 2017-18, with global growth projected to be 3.4% and 3.6%, respectively, again unchanged from the October forecasts.

Advanced economies are now projected to grow by 1.9% in 2017 and 2% percent in 2018, 0.1 and 0.2 percentage point more than in the October forecast, respectively. As noted, this forecast is particularly uncertain in the light of potential changes in the policy stance of the United States under the incoming Donald Trump administration.

Source: http://www.financialexpress.com/economy/demonetisation-hits-indian-economy-imf-cuts-fy18-growth-100bps-40bps-on-note-ban-alone-to-6-6/510822/

Tamil Nadu joins UDAY scheme

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The southern state, which became the 21st state to join Ujwal Discom Assurance Yojana (UDAY), is also one of four states with largest accumulated debt of over Rs 40,000 crore.

After having dithered for over a year, Tamil Nadu on Monday signed up for the center’s scheme for revival of financially stressed state-owned power distribution companies. The southern state, which became the 21st state to join Ujwal Discom Assurance Yojana (UDAY), is also one of four states with largest accumulated debt of over Rs 40,000 crore.

With Tamil Nadu on board, UDAY has now covered 92% of country’s discom debt. “Tamil Nadu would derive an overall net benefit of approximately Rs 11,000 crores through UDAY, by way of savings in interest cost, reduction in AT&C and transmission losses, interventions in energy efficiency, coal reforms etc,” the government said in a statement. Other states with huge debt burden include Haryana, Rajasthan and Uttar Pradesh, all of which are part of the scheme.

According to the scheme, the state government will take over 75%of debt amounting to Rs 30,420 crore from the discom. The scheme also provides for the balance debt to be re-priced or issued as state guaranteed discom bonds, at coupon rates around 3-4% less than the average existing interest rate.

“The state would have savings of about Rs 950 crore in annual interest cost through reduction of debt and through reduced interest rates on the balance debt,” the government said. It added that reduction in aggregate technical and commercial (AT&C) losses and transmission losses to 13.5% and 3.7% respectively is likely to bring additional revenue of around Rs 1,601 crores to the state distribution company.

UDAY was launched by the power ministry on November 20, 2015 with an aim to reduce financial distress among state discoms as it has been preventing them from buying power.

Source: http://www.financialexpress.com/economy/tamil-nadu-joins-uday-scheme/502490/

India’s share of global economy to increase: Lars Heikensten, Executive Director, Nobel Foundation

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“Digitisation is part of our lives and necessary but it does have consequences”.

India’s share of global economy to increase: Lars Heikensten, Executive Director, Nobel Foundation

Lars Heikensten, executive director of the Nobel Foundation, said he expects India’s share of the global economy to increase while commenting on the role of the country in the emerging world order, ahead of the biennial Vibrant Gujarat Global Summit.

“For decades, the western world has been standing up for democracy, science and facts. Now these values are being questioned. Democratic countries like India, which also have a growing role in the world, need to step up. I think the policies of India are important,” he said. “The world needs more of values that India has been building since the 40s.”

The investor summit will for the first time see the participation of a galaxy of Nobel Laureates apart from various heads of state and global corporate leaders. The Nobel Foundation is the institution that manages the Nobel prizes for physics, chemistry, medicine, literature and peace.

Heikensten emphasised the need for adequate infrastructure to connect people to the digital economy. “In my country Sweden, everyone is connected today. With more people being connected in India, you will see people shifting to digital transactions,” he added.

He also addressed the digital divide and the need to bridge this chasm. “Digitisation is part of our lives and necessary but it does have consequences,” he said.

Heikensten has been governor of the Swedish Central Bank and held various positions in the Swedish ministry of finance, including that of director general and head of the economic affairs department.

“There are risks (with digitisation) and IT policies need to address these issues,” he told ET. “This is not something that will solve itself. People have been left behind in the process and I expect we shall see more and more academic debate on how to keep fairly equal, at the same time we have good economic development… The populist movements in the western countries reflect that people are left behind.”

He said that Sweden, for instance, has become less equal over the years.

“This is not the whole story part but an important part of the story,” Heikensten said. “But it is still very equal compared to the United States where there are wider income differentials between people.”

The link between digitisation of the economy and inequality is not a straightforward one. However, he pointed out that this marks the way forward and said that “we will see more and more countries moving towards digitisation as lot less cash is being used now than before.”

He said that India was one of the countries buying notes from Sweden.

Source: http://economictimes.indiatimes.com/articleshow/56533782.cms