Economy of austerity - ministral spending to decrease for fiscal year 2011

(posted under - politics of austerity, finance ministry updates) - The Finance Ministry in the Budget Circular for 2010-11 said, "The estimates (RE 2009-10) must confirm to instructions, which stipulate a 10 per cent and five per cent cut in non-plan, non-salary expenditure and other economy measures."

For the next fiscal, the circular added, "It is necessary to review the existing expenditure budget to priorities the activities and schemes, both on the plan and non-plan side and identify those activities and schemes, which can be eliminated or reduced in size or merged with any other scheme."


As part of its economic drive, the Finance Ministry, earlier in the month, advised ministries and departments to cut by 10 per cent expenditure on travel, seminars, exhibitions and other office expenses. In case of other non- plan expenditure, the they were asked to reduce expenses by five per cent.

The austerity move also includes complete ban on holding conferences in five star hotels.

These measures were announced as the Centre faces increasing burden on its exchequer following economic downturn and drought.

"There was further need for economy and rationalisation of expenditure in view of the current fiscal situation and that arising out of insufficient rains in large parts of the country and consequent pressure on government resources," the Finance Ministry had said earlier this month.

The Budget circular asked all ministries and departments to ensure that all schemes that have been discontinued, do not find mention in revised estimates for 2009-10.

source - economictimes

Cheers - Advance tax collections increases by 20 percent

(posted under - Advance tax collection) - Mumbai accounts for almost 40 per cent of the country's total tax collection.

The growth is likely to come on the back of a higher collection from banking, oil and gas and auto sectors, an Income Tax source said.

"Banks, auto and oil and gas sectors have done well. In fact, some of the banks have exceeded our expectations," the source said.

India's premier bank, State Bank of India has shelled out Rs 1,838-crore as advance tax while the country's second-largest, ICICI Bank, has paid Rs 501-crore as advance tax for Q2, the source said.


Another private bank, Yes Bank, has paid Rs 58-crore rpt Rs 58-crore as against Rs 33-crore it paid as advance tax in Q2 of last fiscal.

Tata Group companies, Tata Steel and TCS also paid a higher advance tax in Q2 at Rs 400-crore and Rs 220-crore respectively, source said.

While Tata Steel paid Rs 230-crore as advance tax in Q2 of FY 09, TCS paid Rs 81-crore.

Indian Industrial output rises by 6.8 percent

(posted under - Industrial output, Economy of india) - Industrial output as measured by the index of industrial production (IIP) clocked an annual growth rate of 6.8% in July, making it the second consecutive month of buoyant industrial growth after a weak show that started last October, data released by the Central Statistical Organisation on Friday showed. The provisional IIP figure of 7.8% for June was revised upwards to 8.2%.

Analysts pointed out that a key reason behind the robust performance by the mining sector is Reliance’s KG basin facilities coming on stream during the first quarter of the current financial year. Within the manufacturing segment, the 8.8% growth in consumer goods, the highest in eight month, suggested that the domestic consumption story remains strong in India.

Inflation rises to -0.12 percent from -0.21 %

(posted under - Inflation updates) India's food prices jumped an annual 14.8 percent by end of August after a dry spell hurted crops, adding to concerns inflation could climb above the comfort zone of policy makers and herald an end to a soft monetary stance.

The widely-watched wholesale price index fell by a steeper-than-expected 0.12 percent in the 12 months to Aug. 29, its 13th successive fall, mainly due to statistical aberration caused by last year's high energy prices. The WPI figure compares with last week's 0.21 percent annual decline and a market forecast for a decline of 0.08 percent.

The food articles index accelerated to a 14.8 percent rise, from a year earlier, from 14.5 percent the previous week, as drought engulfed nearly half India's districts, hurting summer crops and forcing the government to intervene to bolster supplies and crack down on hoarding.

Finance minister says not to exceed borrowing target

India's government will not borrow more from the market than its budget target for 2009/10.

The government plans to borrow 4.51 trillion rupees ($93 billion) in the fiscal year to fund a fiscal deficit forecast at 6.8 percent of gross domestic product.

-economictimes

India to invest upto $10 bn in IMF

India is to invest up to $10 billion in the International Monetary Fund as part of a major thrust to wrest a greater say in the running of international financial institutions, Finance Minister Pranab Mukherjee said in recent BRIC countries meetings being held at london.

"India has decided to invest up to $10 bn of its reserves in notes issued by the IMF," Mukherjee said after a meeting of the finance ministers of Brazil, Russia, India and China (BRIC) in London.

The Indian pledge is part of a total of $80 billion that the four BRIC countries will invest into the IMF in order to replenish its fund aimed at helping out countries that are struggling in the current financial crisis.

China will account for $50 billion of this amount, and the rest will be borne by India, Russia and Brazil.

In return, the BRIC countries want a greater say in the running of the IMF and other international financial institutions such as the World Bank, including a larger share of quotas and voting, said Brazil's Finance Minister Guido Mantega.

Part of the BRIC meeting was joined by US Treasury Secretary Timothy Geithner in a move that Mukherjee described as "an acknowledgement of the group's emergence as a key voice in global economic and financial issues".

Cheers - no service tax on goods transported through trains

The government has withdrawn a proposal to impose a 10 per cent service tax on goods transported by rail, to check price increases of products such as steel, cement and coal.

The revenue receipts of the state-run Indian railways, which opposed new tax proposal, have been adversely affected since September last year due to economic slowdown and decline in exports.

During April-July period, railways' receipts from transport of commodities rose by 4.77 per cent to 182.75 billion rupees as against Rs 174.42 billion during the corresponding period last year.

Indian Exports decline by 28.4 perc

(posted under - Indian exports news & updates) - Yet another sign of prevailing economic crises is that indian exports fell by a whopping 28.4 percent to just $13.62 billion. Imports also fell sharply, with both oil and non-oil imports registering a decline during the month compared with the year-ago period, according to government data released on Tuesday.

A sharp 37% decline in July imports to $19.62 billion resulted in a steep fall in the trade deficit to $6 billion during the month, compared with $12 billion in July 2008. The commerce department, however, is not taking it as a positive development.

FIEO expects the export sops extended in the FTP announced last week to start showing results by the beginning of next year.

India's GDP for Q1 at 6.1 perc - meets expectations

(posted under - Indian GDP news) - India's economy grew 6.1 per cent in the June quarter from a year earlier, roughly in line with forecasts, as government stimulus measures helped spur demand, although a poor monsoon threatens to crimp growth later in the year even as it drives inflation.

The economy accelerated from its 5.8 per cent rate in the previous quarter, data showed on Monday, propelled by a pick-up in activity in the mining, manufacturing, electricity and services sectors from the previous quarter.

Credit flow for micro & medium industries to double in 5 years says PM

The government is committed to doubling credit flow to micro, small and medium enterprises, which employ 6 crore persons and contribute 45 per cent to India's manufactured goods, Prime Minister Manmohan Singh said on Friday.

"Credit is the lifeline of any business. The government is committed to double the flow of credit to MSMEs in five years," Singh said after giving away national awards to entrepreneurs in the sector here.

The Prime Minister, who reviewed the performance and difficulties of the sector with the industry representatives on Wednesday, said public sector banks increased lending to MSMEs by 25 per cent in 2008-09.

According to estimates, MSMEs are given credit of about Rs 1,50,000 crore by PSU banks per annum. There are 2.60 crore units in the sector which contribute 40 per cent to exports.

The Prime Minister has issued directions for constitution of a task force to look into the difficulties of MSMEs and recommend steps within next three months.

He said recent global economic slowdown has had an adverse impact on the growth of Indian economy. "Micro, small and medium enterprises have also not remained unaffected," he said, adding the government has been alive to the concerns.

Ministry of Roads transport to invite bids for 1500 kms of roads

The government will invite bids by this year-end for three mega projects worth around Rs 14,500 crore in the road sector, Road Transport and Highways Minister Kamal Nath said today.

"We will invite bids for three mega projects by the end of this year, we are looking at mega projects in which each project for building 500 km of road will be worth USD 1 billion," Nath told reporters on the sidelines of the SIAM annual convention here.

"We are going to put in place 11,000 km of roads worth Rs 1 lakh crore in 2009-10 under Work Plan I," Nath said, adding that challenges in capacity building will be addressed and all corrections will be made by September 30.

He said India's automobile industry should aim at producing 250 lakh vehicles by 2015 for which his ministry will build the necessary road network.

Earlier, he had said that 20 km of roads will be built in a day in the next two years amounting to an investment of Rs 2,00,000 crore.

Government extends sops for exporters - changes trade policy

(posted under - Indian Trade policy) - Extension of income tax holiday for export units for one more year and continuance of duty refund scheme till Decemer 2010 and enhanced assistance for the scheme for development of markets are among the measures in the FTP.

The aim of the policy, which would be reviewed after two years, would be to "arrest and reverse declining trend of exports," Sharma said.

Exports have been on a decline for the past 10 months. Exports in FY'09 amounted to USD 168 billion and the country hopes to maintain the same level this fiscal.

Expressing confidence that the country would be able to achieve a 25 per cent growth rate after two years, Sharma said, "By 2014, we expect to double India's exports of goods and services."

The long-term policy objective, he added, will be to double India's share in global trade by 2020. India's share in global merchandise trade went up from 0.83 per cent in 2003 to 1.45 per cent in 2008.

Finance Ministry confident of meeting fiscal deficit of 6.8 percent

In July, the government projected the fiscal deficit for 2009/10 (April-March) to be 6.8 per cent of the gross domestic product (GDP), a 16-year high, to be funded by a record high market borrowing of 4.51 trillion rupees ($93 billion). However, rain deficit in the June-September monsoon season, is feared to impact crops including rice and sugar and has already sent food prices higher by over 10 percent from the previous year.

"I don't think there is any reason to think that the 6.8 per cent will be crossed," Montek Singh Ahluwalia, deputy chairman of India's Planning Commission, told reporters. Farm Minister Sharad Pawar said food subsidy would top 600 billion rupees this year, about 15 percent higher than what was estimated last month. Economists estimate India's drought relief measures could push up fiscal deficit by $4 billion, or 0.5 percentage points.

Indian Prime minister is having a meeting scheduled for september 1 with economists and planning commision officials to review current economic scenario and after the meeting we might hear some updates about the fiscal deficit

Disinvestment updates - Govt to sell stake Satluj Jal vidyut

(posted under - disinvestment news) - The government may sell 10 percent of its stake through a public offering in power producer Satluj Jal Vidyut Nigam Ltd. The Himachal Pradesh government holds 25 percent stake in the firm, while the remaining 75 percent is held by the federal government. "

Himachal Pradesh government has given NOC (to the federal government) and we have supplied them a roadmap for disinvestment in seven months," the company official told reporters. The company currently has a capacity to generate 1,500 megwatt of hydro power and it aims to raise the capacity to 4,800 MW by 2017. He said the roadmap was supplied two months back to the Department of Disinvestment.

India has two economies - official and Black economy

According to the Annual Information Return (AIR) filed with the government, high-value transactions amounted to more than Rs 55.7 lakh crore in 2007-08, almost double the Rs 27 lakh crore for the previous year. But about 30% or roughly 1 million of the 3.3 million transactions were without PAN being cited.

The department regards many of the high-value transactions as suspicious. The proportion of cases where PAN is not cited is highest in property sales of a declared value of Rs 30 lakh or more. Barely one in four such sellers has provided PAN.

Similarly, almost two-thirds of those who have cash deposits of Rs 10 lakh or more in savings bank accounts have not provided a PAN to the bank. Over half the credit card transactions of Rs 2 lakh or more have no PAN tagged to them.

Even more shockingly, of the 3,100 transactions of Rs 5 lakh or more in RBI bonds, aggregating to Rs 3.52 lakh crore, about 10% were carried out without mentioning any PAN.

But PAN not being provided is not the only reason the department is suspicious. It is also because in thousands of cases where a PAN has been provided, it is unable to trace the transaction back to the beneficiary.

In some cases this is because the PAN provided has turned out to be fake. In others, there are two or more PANs being used by the same person. In one such case, when the I-T department investigated further it found that the lady holding the two PANs had an income of over Rs 40 crore but had disclosed no income in her return for that year.

Another interesting case is that of a prominent US-based bank. The data provided by the bank on credit cards it had issued showed that just four PANs accounted for thousands of crores of rupees of transactions. On being confronted with this, sources said, the bank explained it away as a case of faulty data entry.

The department's suspicions are further strengthened by the fact that the Rs 3.12 crore collected through income and corporate taxes in 2007-08 does not quite square with such a large volume of high-value transactions.

A thorough investigation and linking of the transactions to the actual beneficiary could make the treasury richer, it feels. However, the scale on which the investigations are needed is simply beyond its capacity given the manpower available, department sources confessed. This has been conveyed to the government.

The AIRs are routinely reported to the I-T department for further investigation. The components include cash deposits of Rs 10 lakh and above in savings bank accounts, purchase and sale of immovable property above Rs 30 lakh, purchase of bonds and debentures, share transactions of Rs 5 lakh and above and credit card expenditure of Rs 2 lakh or more.

All information in the AIRs is supposed to be assessed and analysed in I-T investigations and matched with the I-T return of assessees against the PAN numbers mentioned in these high value transactions.

source - economictimes