Economy
FY13 to be turnaround year for Indian economy says Pranab

Following a disappointing economic growth of nine-year low of 6.5% in FY12, there have been concerns that India's expansion rate this fiscal may slip further

New Delhi: Dismissing concerns that India's growth rate may drop below 6.5%, Finance Minister Pranab Mukherjee on Monday said 2012-13 would be the turnaround year for the economy, reports PTI.

Addressing a conference of top officials of the Income Tax (I-T) Department, he said steps are being taken to put India back on path of high economic growth.

"We are taking all necessary steps to ensure that we come back to the path of the targeted GDP growth. Of course it will take some time...but from this year we expect to make a turn around," Mukherjee said.

In the Budget 2012-13, the government had pegged 2012-13 GDP growth at 7.6% (plus, minus 0.25%).

Following a "disappointing" economic growth of nine-year low of 6.5% in 2011-12, there have been concerns that India's expansion rate this fiscal may slip further.

Mukherjee said that after the 2008 economic crisis, the GDP growth slipped to 6.7% in 2008-09, but bounced back to 8.4% in the following two financial years.

Highlighting the positives in the economy, Mukherjee said interest rate cycle has been reversed and there is growth in mining sector, turnaround in investment growth rate and there are predictions of normal monsoon, besides decline in crude oil prices.

"All these factors should help in recovery of domestic growth momentum," he added.

On direct tax collection target of Rs5.70 lakh crore ($103 billion) for the current fiscal, he said it was achievable. "I do feel this target is moderate and can be achieved," he said while asking the tax officials to work "relentlessly" to improve tax collection.

In 2011-12, the direct collection at Rs4.95 lakh crore was marginally down from the revised target of Rs5.05 lakh crore.

Mukherjee said that while renewed growth momentum will help improve direct collection, there are several challenges before the I-T Department.

He expressed concern over decline in tax-GDP ratio and asked the officials to reverse the trend. The tax-GDP ratio has dropped to 10.5% in 2011-12, from 12% in 2007-08.

Mukherjee said the Direct Tax Code (DTC) Bill will be introduced in Parliament in the forthcoming Monsoon Session and would be affected from next fiscal.

"I am hoping that DTC will be effective from 1 April 2013," he said, adding that the time has come for the I-T Department to prepare itself for the transition from the Income Tax Act, 1961 to the new direct tax regime.

The Finance Minister further said the department has been striving to check the menace of black money and tax evasion, which eat into the vitals of the economy and pose threats to national security through linkages to money-laundering and terrorism.

He said the government has commissioned a study on unaccounted income and wealth and it is likely to be completed in September.

Also, a report of a committee on strengthening of existing laws relating to black money is being examined by the government.

"I hope that these two studies will help in identifying the gaps in present legislative and administrative framework and shall help us in checking the menace of black money through an effective policy response," Mukherjee added.

He also said introduction on the Benami Transactions (Prohibition) Act, 2011, currently being scrutinised by a Parliamentary Standing Committee, will further help in "our resolve to reduce the menace of black money".

Amid undeclared assets held by Indians abroad being a matter of "intense debate recently", Mukherjee said that to encourage and facilitate real time exchange of information on cross-border transactions with other jurisdictions, India has set up 8 more Income Tax Overseas Units (ITOUs).

After a comprehensive review of the existing network, steps are being taken to augment the reach of the ITOUs in more jurisdictions, he added.

Enlarged network of ITOUs, with an enabling legislative framework in the form of Double Taxation Avoidance Agreement (DTAA) and Tax Information Exchange Agreement (TIEAS), will help in receiving valuable information in future, he said.

On promoting voluntary compliance of tax laws and role of children, Mukherjee said there was a need to educate them on the importance of taxes for the nation building process.

He said the I-T Department has partnered with NCERT to introduce information in this regard in school textbooks.

He, however, expressed concern over rising litigation with tax payers and amount locked up in appeals before CIT (A), ITAT and different courts.

A whopping over Rs4.36 lakh crore was locked in about 2.59 lakh cases as on December 31, 2011.

The main reason for pendency of cases before CIT (A), he said, appears to be slower disposal rate vis-a-vis the pace of cases being filed. On an average, it takes about one and half years to dispose of a case.

"The Department needs to ensure that after proposed cadre restructuring sufficient manpower is deployed to reduce the time taken for disposal of appeals and that it is not more than six months" he added.

Mukherjee said he has been directing the I-T Department to reduce all avoidable litigation with the taxpayers as well as with employees.

"I have also asked CBDT to ensure that no charge sheets are filed on the last date of retirement," Mukherjee said.

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Air India should decide if they want to retain striking pilots says Singh

It is for the management of Air India to decide for how long can they keep striking pilots on their payroll when they are not working, the government says

New Delhi: With Air India considering further crackdown on the striking pilots, the government on Monday said it is for airlines management to decide for how long to keep them on their payroll when they are not working, reports PTI.

It "is for the Air India management to take action now. These pilots have not come to work for more than 30 days....It is an illegal strike. They have defied the High Court," Civil Aviation Minister Ajit Singh said.

"We have requested them again and again to come back to work. So, it is for the management to decide for how long can they keep them on their payroll when they are not working. And they have no intention of coming back," he told reporters.

Around 400 Air India pilots owing allegiance to Indian Pilots Guild (IPG) have been on strike since 7th May and the services of 101 pilots have already been terminated.

Sources in the state-owned airline have said "tough action" would be taken against the remaining 300-odd pilots and have given indications that they could be sacked.

Earlier, on Wednesday Singh had said that for him, the strike was over and he did not see any point in the striking pilots coming back.

He has said that the decision to withdraw the stir lay with the pilots "as I had already said that the strike is already over from our side."

"If management has to take any action, they will take as per the labour law," he said.

Earlier, the minister had said alternative plans were being made to ensure that operations of the state-run carrier were normalised within two-three months so that the revival plan could be put in place.

Observing that there were about 500 expat pilots in the country, he said the management was in touch with them.

There are about 60-odd expat pilots, trained on wide-bodied aircraft like Boeing 777s or Airbus A-300s, whose contracts with Jet Airways have ended or are about to expire.

Kingfisher Airlines is also facing trouble and the government is hoping that there would be sufficient trained pilots looking for job prospects elsewhere.

Maintaining that the strike by the pilots was illegal, Singh slammed the agitators for resorting to strike during the peak season without any notice.

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COMMENTS

PPM

4 years ago

India to improve, Congress part to be totally annihilated without any traces and then it may be possible.

REPLY

Noni Chawla

In Reply to PPM 4 years ago

It is really sad that the party that, in many ways, led the struggle for freedom is now nothing but a self-serving family business.

Can Notplace

4 years ago

kudos, sucheta...fine article on how business history repeats itself ...PERHAPS THE "VS" IN THE TITLE SHOULD HAVE BEEN "AND" ...and "full circle", should have been "fools circle"...

Noni Chawla

4 years ago

Sucheta,
I have a suggestion. Would you consider organising a "scenario building" workshop, like Shell used to do (or, may be, still does). I know that Arun Maira (of the Planning Commission) has also done something like this, which is mentioned in his book "Shaping the Future". You could invite a group of highly enlightened people who would build possible scenarios about the future of India. You probably know more about the scenario building technique than I do, so I will say no more about that. The group would build different scenarios and about the future of India, and also agree on what is likely to be the most likely scenario. Such an exercise, apart from peeping into the future, could also help us to develop strategies to avert a catastrophic future.

REPLY

Nagesh Kini

In Reply to Noni Chawla 4 years ago

I do believe India does have a great future, if, and only when, we have in place at the Centre really dedicated governance, with a totally new set of imaginative set of across parties netas and babus not tied down by coalition compulsions.
Yes, I'm inclined to agree wholeheartedly with Noni that MLF consider a tet-a-tet of enlightened Indians, beginning with the first in its Knowledge Centre and possibly later in other metros to come out with feasible strategies to Shape India's Future.

Joey

4 years ago

Well written. The sahara group is a mystery yet to be unfold. Reliance group claims wealth creation for its investors, but there are reports and cases with SEBI, where it is apparent that more wealth is created for the promoters. I think there is no easy way out until some catastrophe strikes.

dayananda kamath k

4 years ago

the expose of the scams and how decisions are taken has emboldened the businessmen/corporate houses to adopt the new technics.indian corporate world has benefitted from licence raj they benenfitted from reforms which were forced on india by international agenceis due to mis manangement of the economy by corrupt politicians as well as greedy corporates and individuals. and they again flourished. india has that nack of adopting to the situation that is why we survive even after so many attacks on india. the meeting of power companies with prime minister just before up elelctions and forcing coal india to sign supply agreements through presidential order shows how the decisions are managed at the cost of public money and everything is done in public interest.god save this country

Jayant Shetty

4 years ago

Well written article. An eyeopener on the economic situation in the country! Really Incredible India!

anantha ramdas

4 years ago

Ms Dalal has presented the state of affairs of the present circus; and the
only thing, missing, if I may say so, are the clowns, in the form of Godmen, who are conspicuous by
their absence.

Keep up th good work, madam.

MehtaSK

4 years ago

Aanalysis is brilliant. Many of us understand the truth but it is twisted by the exploiters to the exploited as their benefit.In a govt. style like ours how can we hope for truth to prevail.Please write about ways to implement what you write

Krishnaraj Rao

4 years ago

Hear, hear!!

malq

4 years ago

Thank you for this blunt article, and I do hope readers and others forward it around as much as possible, especially to the regional media who are quite often more fearless than the usual MSM.

One ray of hope, as I see it, is from the direction of the younger civil servants. The old adage that civil servants can not be agents of change does not hold true, especially with what appears to be a core of really intelligent and aware bureaucrats steadily moving up the ladder.

The other ray of hope I see is from the rural economy, which is, very simply, moving ahead of the urban economy by leaps and bounds.

It is my submission that much of the angst by the corporates and existing political formation duopoly in Delhi is because of this.

Maybe, with some luck, this angst on the part of the corporate chiefs is because they see this loss of "control" coming?

Just hoping. Sometimes, one feels that it can not get darker than it is now. The only way out is towards the light and upwards.

I hope.

rgds/VM

Ketan Shah

4 years ago

You are saying that Kumar Mangalam Birla, Sunil Bharti Mittal, Vittorio Collao and Jon Fredrik Baksaas were shuttling between various ministries, desperately trying to explain how the telecom regulator’s recommendations would kill the Indian telecom industry. But TRAI is only following dictates of Supreme Court and Team Anna vision of auction of scarce resources. This may kill entire industries. WHY are you calling 2G a scam? This is contradiction and hypocrisy of the chattering classes who have no knowledge of economics. Don't blame Govt for all ills. You had invited Subramanium Swamy who also advocates auction of spectrum. Please stop your hypocrisy.

REPLY

K B Patil

In Reply to Ketan Shah 4 years ago

Just one question Mr. Shah - If, in this country, where ministers are probably as powerful as Gods, why did Mr. Raja sit in jail for over a year. Do you mean to say that Supreme court Judges have no capacity to think for themselves? The way Mr. Raja manipulated policies speaks for itself. There is not an iota of doubt that this is a scam, except probably for beneficiaries of the scam and their followers.

Satish Gupta

In Reply to Ketan Shah 4 years ago

You are right. The empowered group of ministers on spectrum headed by finance minister Pranab Mukherjee is reported to have decided to set maximisation of revenue proceeds as the objective of the proposed spectrum auctions.

It is vital that the government recognise revenues in an holistic fashion, rather than with the fabled foresight of the man who killed the goose that laid golden eggs. One way to look at revenues in the context of telecom is to see only the revenues coming in directly from telecom.

The Comptroller and Auditor General took this view and, following its example, the Supreme Court and much of the commentariat.

The more sensible view is to appreciate that telecom spread can transform the economy's productivity and step up the growth rate of the economy itself. The value of output in the economy serves as the tax base. If that tax base goes up, tax collections will go up.

Further, greater and cheaper spread of telecom will enable greater, faster data processing and computing efficiency. Deployment of rising levels of information technology in India's tax administration has played a big role in improving tax collections.

But the scope for sharing of data drawn from diverse sources across the country and processing it to identify potential tax sources has barely been tapped.

We need faster and reliable broadband to spread everywhere for this to happen. For that, telcos must have money to invest. Once we recognise that the revenues to be maximised are economy-wide revenues and not just those derived directly from telecom, the equation changes.

Direct revenues are a linear function of spectrum prices: the higher the spectrum price, the greater the revenue. Economywide revenues arising from higher efficiency and faster growth are inversely related to spectrum price: the lower the spectrum price, the higher the telecom spread and economy-wide gains. Nor does low spectrum price mean windfall gains for operators.

Provided the level of competition is kept high, the low cost will be passed on as consumer benefit by way of cheap tariffs and investment in faster rollout of broadband.

MDT

In Reply to Satish Gupta 4 years ago

Dear Ketan/Satish,
Thanks for your comments. We understand, you are same person, who do not want to reveal his/her identity. Is it to do with your employer?
The article talks about various things, but you chose to comment only on telecom. Vested interests?????
Kindly restrain yourself from using 'nasty' words, else we may have to reveal your original identity, IP address and name of your employer.

Kamal Shah

In Reply to Satish Gupta 4 years ago

Will Sucheta Dalal comment on this??

Sucheta Dalal

In Reply to Kamal Shah 4 years ago

There is nothing to comment on my part. This article is not about 2G and its auction at all. If Mr Ketan alias Satish has chosen to go off at a tangent its his choice.

sohan modak

4 years ago

Great, Sucheta. You have basically summarized the looters and loot mechanisms. There is yet another one that concerns foreign government supported foundations and Trusts. For example, we discovered that at the Alliance Francaise de Poona, registered as a charitable Trust, the French Director has been transferring lakhs of rupees illegally via HSBC to the Alliance Francaise de Paris, France which is directly under the French Ministry of Foreign Affairs. We registered an FIR with Pune police, who have cleverly skirted the issue and given the French Director and the present Trustees of the AF-Poona a clean chit. Our complaint to RBI was chanelled to Enforcement Directorate who has been losing files and sittin g on it. there is a rumour that considerable money is being paid under the table to simply let the matter die away in favor of the French. I wonder whether this also has to do with the great favour the French are doing on defence deals. The fact is, as the present French Director of A.F. Poona declared in a minuted meeting that we have been transferring funds earned by the local Trusts worldwide to France and we never had any problem,. the fact is that in India we have different set of rules set by RBI and that the funds transferred by the French from AF.Poona and most possibly other AF.s in India run into crores. Indeed, it is likely that the French run their Alliance programme strinctly from illegal earnings abroad.
I won't be surprised if many other NGOs operate in the same fashion and mode and that the so called ,'aid' is synonymous to 'loot'!

Anil Agashe

4 years ago

Very well written. Corporate India including IT Czars have lobbied for favors from politicians. What they gave in return we may not know.
Sahara group is the biggest mystery. team Anna and its brilliant lawyers and Ex-IRS, Ex-IPS guys don't talk about it why?
India pr-1991 was a cozy arrangement between so called socialist government and died in wool Capitalists who were actually Monopolists. The format has changed today but coziness is still there. Till death us Apart! It is the best love story of the world!

Nagesh Kini FCA

4 years ago

If I remember right Dr MMS, then FM went on to say that he'd not spend 'sleepless nights' over scams.
He then become an appointed - not elected PM, an utterly ineffective one at that. Now he is to be kicked even up to the country's top office of rubber stamping papers put up to him.
The Gianiji, Zail Singh, took the easy way of sitting on bills rather than sign the dotted line.
All these are subtle management practices how not to do things that are not palatable!

REPLY

anil agashe

In Reply to Nagesh Kini FCA 4 years ago

I think he said he won't lose over the SENSEX. Not over scams if I remember correctly.

rajendra

4 years ago

Manmohan Singh has shown that he is not an academician but a real politician who keeps on clinging to the chair at any cost.

IATA criticises India for 346% hike in airport charges

South Africa allowed a 161% increase in airport charges that was outdone by the Indian regulator which allowed a 346% increase in Delhi, making it among the world's most expensive airports

Beijing: India on Monday came under sharp attack for the recent hike in charges at Delhi airport and major delays in building new airports and strengthening infrastructure, with airlines' body the International Air Transport Association (IATA) saying this was "clearly unacceptable" and the government should encourage the aviation sector for overall economic growth, reports PTI.

Observing that the Airports Economic Regulatory Authority of India (AERA), allowed a whopping 346% hike in Delhi airport charges, IATA director general and chief executive Tony Tyler said "this is clearly unacceptable".

"The Delhi International Airport Ltd (DIAL) has to pay 46% of its revenue to the government... This is neither in the interest of the airlines nor of the airport".

Addressing the annual general meeting of the IATA in Beijing, Tyler said he would be holding discussions with Indian authorities on this issue soon, expressing hope that "there might be some common ground" which could be found to protect airlines' and consumers' interests.

"Governments often miss the mark with economic regulation of infrastructure supplies... The (airport) regulator in South Africa allowed a 161% increase in airport charges...This was outdone by the Indian regulator which allowed a 346% increase in Delhi, making it among the world's most expensive airports," he said.

Both the Indian and the South African airport regulators "failed to protect the public interest", though they followed the prescribed guidelines to allow the massive hike in airport charges and user development fees for passengers.

On aviation infrastructure in India and other parts of the world, Tyler lamented that "Mumbai's much-needed new airport (at Navi Mumbai) will not open as scheduled in 2014 construction has not even started."

"Airlines need infrastructure to grow. Just like taxes and regulation, some governments understand and reap the benefits. Others don't and the economy suffers the consequences," the IATA chief said.

He said the governments must build regulations that support jobs and economic growth by keeping the cost of connectivity reasonable.

Releasing the global industry outlook, Tyler said the global airline profits were expected to be $3 billion this year, significantly down from $7.9 billion in 2011 and $15.8 billion in 2010.

The major challenges were high jet fuel prices and economic uncertainty, particularly in Europe that was affecting Asia-Pacific region.

"This will be the second year of declining returns since airline profits peaked in 2010," he said, adding that the projected industry profit of $3 billion industry would yield a net profit margin of "just 0.5%".

Compared with the previous forecast in March, North American and Latin American carriers are expected to see improved prospects. The outlook for African carriers is unchanged.

But the outlook for European, Asia-Pacific and Middle Eastern carriers has been downgraded, with European losses now expected to be $1.1 billion, which is nearly double the previously forecast $600 million loss, the report said.

Asia-Pacific airlines are expected to make the largest contribution to industry profits of estimated $2 billion, which is less than half the $4.9 billion profit that the region delivered in 2011.

The slowdown in the Indian and Chinese economies was a factor in the slow growth environment, the IATA report said.

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