New Delhi, November 12
Global credit ratings agency Moody's, which cut the outlook for Indian banking system this week, will meet finance ministry officials on Monday as part of a review of the country's rating, a report said.

Moody's currently assigns a rating of Baa3 — the lowest investment-grade rating -— to Asia's third-largest economy.

"We’re meeting Moody's on Monday to discuss India's sovereign credit rating," a senior finance ministry official told PTI on Friday.

The meeting comes as India's economy passes through a rough patch, with the government expecting growth for this fiscal year to March 2012 to slow to 7.6 percent from 8.5 percent last year.

Investment houses are more pessimistic, with Goldman Sachs forecasting growth of just seven percent.

The Moody's officials were expected to talk about steps Prime Minister Manmohan Singh's government has taken to reduce the fiscal deficit, reform the taxation system and recapitalize the banking sector, PTI said.

Ratings are significant as they help a country borrow funds at competitive rates.

Economists say India's public finances are deteriorating with a rising subsidy bill, lower-than-expected tax revenues and privatization earnings, and mounting public debt. Adding to the gloom is perceived paralysis in the Congress government, which has postponed major economic reforms as it fights numerous corruption scandals.

On Wednesday, Moody's downgraded the outlook for India's banking system to "negative" from "stable", warning that slowing economic growth could hit the quality of bank loans and other assets as well as profits. But on Thursday, rival ratings agency Standard & Poor's revised India's banking industry risk assessment upwards, saying the sector had a "high level of stable, core customer deposits".

The Indian government has dismissed Moody's downgrade, saying the negative rating had "no significance". "Looking at how the global banks are faring, we’re much stronger," financial services secretary DK Mittal said. — AFP

Fudged profit and revenue figures, cancelled flights, abrupt and unauthorized airfare hikes on domestic routes during the holiday season and enormous inconvenience caused to passengers have led to turbulence in the Indian civil aviation sector.

Showing losses in the bottomline and canceling flights are but ploys that amount to arm twisting tactics to obtain the facility to defer payment of enormous dues to the government, the Airports Authority of India and fuel marketing companies. Taking advantage of the "open skies" and taking the plea of offsetting losses arising from fuel price hikes, private carriers keep raising fares. All this is being done because the Directorate General of Civil Aviation (DGCA) has virtually become a toothless tiger that only issues notices without taking any action against erring airlines.

In this scenario the hapless passengers have to face hardships, inconvenience and shell out extra money to airlines that, thanks to the government s laxity, seem to believe "heads we win, tails you (government) lose". The anarchy in the airline industry has become so rampant that some carriers immediately raised fares by 20 per cent even as one of them cancelled a number of flights.

Several individuals and groups of harassed passengers are reported to have lodged complaints with the civil aviation ministry against the high handedness obtaining in the airline trade. Does the ministry or the DGCA have the will to cancel the licence of the airline that enjoys political patronage?

According to the airline official, "the cancellations were made on loss making routes". If this is so the airline is expected to announce its cancellation of flights from the date fixed in advance and not abruptly, as has been done. According to tradition and rules, the date of operation of a flight is announced much in advance and, similarly, notice should be issued for cancellation instead of doing spot cancellation and cause insurmountable problems to passengers who have tickets in advance.

Private airline bosses are reportedly on the negotiating table with top officials of the ministry and the DGCA to increase fares to help in the carriers' survival. For private carriers any stick is good enough to hit Air India with. One senior airline official remarked: "Air India enjoys many advantages as it can dig into the government coffers to fund its way out of a crisis, an option not available to private airlines". In other words, he means to say the government should provide equity to loss-making carriers.

The fact is that many private airlines are "bleeding" due to unlimited overhead expenses and are finding the going increasingly tough. Civil aviation is rough sector and the government has to revise its "open skies" policy. There are too many airlines in Indian skies as less than one per cent of the one billion plus people are able to fly or can afford to fly. It is a case of one too many and some are facing natural death.

Q: I’ve recently completed 60 years of age and intend to open a Senior Citizens Savings Scheme account. I read somewhere that the interest paid against this account is exempted from income tax under section 80C. Is this correct? And if so, what is the limit? Is it Rs 70,000 as is applicable for Public Provident Fund (PPF), or is it the full amount of Rs 1 lakh allowed under section 80C?

— VV Desai

A: An investment up to Rs 1 lakh in the Senior Citizens Savings Scheme qualifies for section 80C deduction. However, interest from deposits in such a scheme is fully taxable. In other words, it is the capital amount invested that qualifies for deduction and not the interest earned.

Q: Recently I read in a newspaper about some amendment in the rules regarding the Post Office Monthly Income Scheme. However, the report concerned just mentioned a section number and the change in the wordings therein without going into details. Could you please throw some more light on the exact nature of the revised norm?

— Bhanuprasad

A: The amendment in the rules is with respect to post maturity interest. Where repayment of the maturity amount of the Post Office Monthly Income Scheme has become due but has not been paid, it is specified in the rules that simple interest at the rate applicable to a savings account shall be allowed on the amount due for a maximum period of two years from the date of maturity to the date of repayment of the amount.

Now, as per notification no. GSR 741(E) dated October 4, 2011, the above mentioned ceiling of two years has been dropped. Essentially this means that the interest on unpaid deposits will be paid from the date of maturity till the date of repayment, irrespective of the interval between these two dates.

Q: I came to know, for the first time, that I can claim house rent allowance even if I'm living in my own house for which I'm paying a loan in installments. However, I couldn't understand from where I'll get the rent receipts to show against the allowance. Is there any alternative process to claim HRA when I own a home?

— Sunny Tambi

A: Yes, you can claim house rent allowance and, at the same time, own a house in the same city where you reside or elsewhere. However, you cannot claim HRA deduction if you live in your own house. The basic principle behind claiming HRA deduction is that you ought to be paying rent. In other words, without paying rent you cannot get deduction on house rent allowance.

In your case since you live in a house owned by you, there is no question of paying any rent or producing any rent receipts. Therefore, the full amount of house rent allowance being paid to you will be taxable.

Islamabad, November 12
Pakistan has removed restrictions on the import of 12 items from India, including raw materials and machinery, as part of measures aimed at normalising trade relations between the two countries, officials said Saturday.

The decision to lift the restrictions on the 12 items was made yesterday during a meeting of the economic coordination committee of the cabinet, chaired by Finance Minister Abdul Hafeez Shaikh.

The meeting gave permission for the import of these goods from India on a one-time basis and approved proposed regulatory changes in the country's import and export policy order (strategic trade policy framework 2009-12), an official statement said.

The move came close on the heels of Cabinet's decision to normalise trade ties with India and to eventually grant the neighbouring country “most favoured nation” status.

The commerce secretaries of the two countries are set to meet in New Delhi on November 14-15 and Pakistani Commerce Secretary Zafar Mahmood has said he is hopeful of a "major breakthrough" in the upcoming talks. — PTI