While the FDI inflows from all the sources declined by 25% in 2010-11, the drop was steeper at about 33% to $6.98 billion from Mauritius and inflows from Cyprus were down by 44% to $913 million
New Delhi: Amidst pressure on the government to tighten the screws on inflow of funds from tax havens, India's foreign direct investment (FDI) from Mauritius and Cyprus, dropped significantly in 2010-11.
While the FDI inflows from all the sources declined by 25% in 2010-11, the drop was steeper at about 33% to $6.98 billion from Mauritius. Likewise, the inflows from Cyprus were down by 44% to $913 million, according to the official figures.
In 2009-10, FDI from Mauritius stood at $10.37 billion again a decline from $11.22 billion in 2008-09. FDI inflows from Cyprus stood at $1.62 billion.
Mauritius has been a preferred route for both FDI and foreign institutional investors (FIIs). However, despite the fall, Mauritius still accounted for 42% of the country's total FDI of $19.42 billion in the previous fiscal. In 2009-10, the country attracted FDI worth $25.83 billion.
India has a 30-year old Direct Tax Avoidance Agreement (DTAA) with Mauritius which has been used by the third country investors to avoid taxes. Under the DTAA, the capital gains tax can be subjected only in one of two countries. As it is nil in the island nation, investors manage to avoid it altogether.
"The reasons for decline in FDI from Mauritius include review of DTAA and proposed introduction of General Anti Avoidance Rules (GAAR)," KPMG executive director Krishan Malhotra said.
The government has begun reviewing the DTAA with several countries as it faces the heat on the issue of black-money from the Supreme Court.
To strengthen the DTAA, the government is considering incorporating GAAR clauses in DTAA to prevent unaccounted black-money.
Commenting on the India Services PMI, Leif Eskesen, chief economist for India & ASEAN at HSBC said, "Services are showing signs of resilience, with business activity and new business improving over the previous month, despite policy tightening and high inflation"
The seasonally adjusted HSBC Business Activity Index—which measures service sector activity—posted 56.1, from 55 in May. Indian service providers reported a sharp increase in new business received last month, attributing this to continuing improvements in general market conditions and a strengthening of demand.
The HSBC India Services PMI is based on data compiled from a survey of purchasing executives in around 350 private service sector companies.
Growth of new work intakes regained momentum from May's seven-month low and was in line with the long-run trend for the series. The increase in new orders received by manufacturers was substantial, but slowed to the weakest in six months.
While companies in both the manufacturing and service sectors indicated increased requirements for staff, only the service sector translated this in to a rise in staffing levels. Shortages of available labour to fill vacant positions led to an overall reduction in employment at manufacturers.
June data implied that Indian service companies remained optimistic that activity levels would rise in the next twelve months. Furthermore, the degree of positive sentiment strengthened to a four-month high. Analysts commented that they expect ongoing improvements in general economic conditions and increased marketing initiatives to support a rise in new business and, therefore, activity.
Commenting on the India Services PMI survey, Leif Eskesen, chief economist for India & ASEAN at HSBC said: "Services are showing signs of resilience, with business activity and new business improving over the previous month, despite policy tightening and high inflation. While input costs and prices charged grew at a slightly slower pace, inflation pressures remain significant and persistent. The Reserve Bank of India (RBI), therefore, has little choice but to continue its tightening cycle."
The court further said that till DoT gives its permission to Idea to use the licences of the Spice Communication, the "overlapping licences of Spice shall forthwith stand transferred with DoT. The spectrum allocated for such overlapping licences shall also forthwith revert back to DoT"
New Delhi: In a big setback to Aditya Birla group firm Idea Cellular, the Delhi High Court on Monday said the six licences of Spice Communications would not be transferred to Idea, which acquired it in 2008, as the company did not comply with the licence and merger guidelines, reports PTI.
The court also slapped a fine of Rs1 crore for not giving the correct information to the court.
Passing the judgement on the merger application of Idea and Spice, the high court said Idea had not put the rejection letters by the Department of Telecommunications (DoT) on merger of licence and did not place on record the relevant documents.
"It is directed that notwithstanding anything stated in the sanctioned scheme and in the order dated 5 February 2010, the six overlapping licences of the Spice would not stand transferred or vested with Idea till prior permission of DoT is obtained," said justice Manmohan in his 51-page order.
The high court further said that it is "of the view that costs should be imposed on Idea for not bringing to the notice of this court the rejection letters dated 7 January 2010 and 18 January 2010 issued by DoT and for not placing on record relevant and material documents like licence, merger guidelines and correspondence exchanged between the parties."
Directing Idea to pay Rs1 crore to DoT within six weeks, the high court said, "The suppression of documents was not an innocent act especially in view of petitioners own understanding of licences and merger guidelines as reflected in the contemporaneous correspondences."
The company bench of the high court further said that till DoT gives its permission to Idea to use the licences of the Spice Communication, the "overlapping licences of Spice shall forthwith stand transferred with DoT. The spectrum allocated for such overlapping licences shall also forthwith revert back to DoT."
It further said that as Idea has used the overlapping licences without any prior permission of DoT from 5 February 2010 till date "in contravention of the licence and merger guidelines, it is directed that it shall be open to DoT to pass any order for such breach."
The court also directed DoT to ensure that the customers of two circles-Punjab and Karnataka-where the licences of Spice were operational shall not suffer due to interruption of service.
The high court's order came over an application filed by the DoT requesting it to recall and stay its earlier order allowing the amalgamation of Spice Communication with Idea Cellular.
Earlier on 5 February 2010, the high court sanctioned the merger scheme of Spice with Idea. However, after DoT made an application, it stayed the entire scheme on 30 March 2011.
Later, Idea and Spice moved applications to vacate the order. However, keeping in view of the urgency of the matter, the high court directly started the final hearing on the dispute.
Spice had six licences at the time when Idea bought it for Rs2,176 crore in June 2008, the BK Modi-promoted Spice and two were overlapping with the Aditya Birla group firm.
DoT has submitted that merger was impermissible as some of the overlapping licences are less than three years old.