‘Instability can’t derail the economy’
NEW DELHI, May 15 — The Indian economy is fully insulated against the vagaries of political climate and no amount of political instability can derail the economy, an eminent economist and corporate leader, Mr K.N. Memani, says.

‘With continuity of policy, it doesn’t matter who rules’
LONDON, May 15 — India has reached a stage where commitment to liberalisation is an absolute necessity and coalition politics cannot be an excuse to “drag our feet,” Lord Swraj Paul has said.

IDBI Bank to pay 9 pc maiden
CHANDIGARH, May 15 — IDBI Bank Limited has declared impressive results during the year 1998-99. Its profit after tax increased by 53.42 per cent to reach Rs. 3076 crore compared with Rs 20.05 crore during the previous year.

Warehouse for duty free goods soon
NEW DELHI, May 15 — The Department of Tourism is setting up a warehouse for duty-free goods which will cater to neighbouring countries.

Bank norms hit SSIs
THE small scale industry has always been exploited by politicians. Amidst the deafening sound of lower or higher investment limit for SSI hardly any thing is audible about the bank credit availability and its cost.

Apparel summit begins
NEW DELHI, May 15 — Textiles Minister Kashiram Rana, today came heavily on the “increasing use of protectionist measures” in the national trade, and said the world needs “a WTO that works.”

‘Instability can’t derail the economy’
From T.V. Lakshminarayan
Tribune News Service

NEW DELHI, May 15 — The Indian economy is fully insulated against the vagaries of political climate and no amount of political instability can derail the economy, an eminent economist and corporate leader, Mr K.N. Memani, says.

The reason: there is a broad consensus amongst the political parties on the economic policies pursued since the advent of the liberalisation programme in 1991.

Mr Memani, who became the first Indian to be inducted into the three-member External Audit Board of the International Monetary Fund (IMF), along with representatives from the United Kingdom and Argentina this year, told The Tribune here that political instability could slow down the progress of reforms but there was no threat of the economy getting derailed.

Mr Memani, who is the Chairman of the Indian arm of the $10.9 billion Ernst and Young, said political fight going on the country had more to do with power sharing and personal egos and there were no major differences among the parties on the economic reforms programme as such.

This was one reason that one saw the Left parties joining hands with the Congress and several other parties supporting the Bharatiya Janata Party. There were no ideological differences among the political parties on the economic policies and the political alignments had to do more with occupying the seat of power.

Ever since the minority Congress Government led by Mr P.V. Narasimha Rao initiated the liberalisation programme in 1991, there has been a sea change in t he economic policies, financial business, legislation and the mindset of the people, including politicians.

Despite several governments coming in power in the last 10 years, the system of governance has been conducive to economic progress and of far-reaching consequences.

The intrinsic strength of the Indian economic system notwithstanding, it was unfortunate, however, that world perception about India had not changed in the same proportion. This was because the world over there was the perception that in developing economies both economic activities and politics were interlinked.

The other factor that has influenced slow foreign direct investments in India, in spite of the bullish image of the country, was the lack of decisiveness in bureaucracy, lack of coordination amongst the various implementation agencies and lack of guidance from the top.

Future growth has also been hit by the poor power situation in the country, lack of good transport system and lack of roads. The infrastructure sector is a victim of lack of governance and a strong Centre, Mr Memani said.

The recent bout of political fight at the Centre had however, brought out the distinctive features of the system and they are:

—Politics and economics are getting distanced. The passage of the Budget was one example of this.

—There was a general feeling among the people that whatever be the political scenario, the economy should not get influenced by that.

Mr Memani was of the opinion that since there was a consensus on at least 75 per cent of the economic reforms programme, the present government, even if it was a caretaker one, should continue to take important decisions to keep the economy on the growth path.

However, decisions like the passage of the Insurance Regulatory Authority Bill and the Companies Bill, which were before Parliament, should be taken only after taking the House into confidence.

The recent developments, after the fall of the Vajpayee government, had seen the stock markets going bullish, the economic activities taking a positive turn and the economy showing positive signs. This was indication of the fact that India has matured as a nation and its important activities were becoming independent of the political instability.

Economic growth in the country, despite the Asian crisis, the post-Pokhran developments and other negative factors, was on the upswing and a GDP growth of over five per cent was matched only by a few countries. “This gives a great positive image of resilience of the Indian economy”, Mr Memani said.

He attributed some of the current problems to the lack of demand for products commensurate with the capacities built by industry.

Mr Memani said the government needs to fill this gap by generating demand and improve infrastructure with the help of investments from India and abroad. With a sound infrastructure in place, the country can aspire for a growth rate of upto seven to eight per cent per year.

Regarding the export front, he said there should be an export-led growth in economy. With a large trade deficit and huge foreign debts to repay, the country’s economic growth could take a severe tail spin if we do not improve exports.

There was a need to improve infrastructure, keep currency rates comparable with other Asian countries and reduce cost of inputs of export goods like low rate of interest, good transport system, and right labour policies to make the country a leading exporter in the world.

‘With continuity of policy, it doesn’t matter who rules’

LONDON, May 15 (PTI) — India has reached a stage where commitment to liberalisation is an absolute necessity and coalition politics cannot be an excuse to “drag our feet,” Lord Swraj Paul has said.“It is customary now to condemn the working of coalition governance and talk about instability,” he said, adding what is happening in India is nothing new for the world.

The culture of coalition politics is evolving all over the world — in France, in Italy, in Germany and even in the USA where the Executive and the Legislature are controlled by different political parties, Lord Paul, Chairman of the £650 million Caparo group of companies said.

“We have to understand it, get accustomed to it, and learn that if there is continuity in policy it does not matter who holds office,” Paul said, while speaking at a panel discussion on “Integrating India with the global economy” at the London Business School recently.

“In fact, we have reached a state where our commitment to liberalisation is an absolute necessity, and changes in the composition of government should be no excuse for dragging our feet on implementation since the government has endorsed the overall concept,” he said.

“What we also need is a change of culture in the business community from that of seeking government favour to standing on their own feet, said Lord Paul, who is also Britain’s roving business ambassador.

Liberalisation was now a national consensus and whatever controversy existed was about the pace of it, not the principle.

In the past decade or so, some of the most fundamental changes in global economic history had taken place and the globalised economy had become a reality.

“We have moved from a world of super powers to a world of super markets. This is an intensely competitive universe in which economies and industries that cannot compete are doomed to slip into economic oblivion,” he warned.

“In India as elsewhere, we cannot divorce business from the social and economic environment in which it exists,” he said and cited three developments to buttress his argument — de facto devolution of economic decision-making to the States, the coming of the panchayati raj and the evolution of the culture of coalition government.

“Each of this will have a profound impact on business and investment. We will have to learn to live with it and, on balance, these can be positive evolutions.”

As Indian States become more empowered economically, they will have to compete with each other for inward investment.

“They will come to understand the character of competition — something that politicians and bureaucrats and even many Indian businessmen have not been too familiar with in the past,” he said.

“For the full benefits of liberal policies to unfold, and for the benefits to reach the masses, we have to move on with the process. Only then will we have the kind of competitive economy that can deliver benefits to all our people,” Paul said.

“At the moment we have only sectoral or piecemeal liberalisation, but this is not enough and we have to push on with much greater effort,” he stressed.

“...And if there is one lesson modern economics has taught us everywhere, it is this — governments are not very good at managing commercial enterprises. For well over a decade, countries all over the world have recognised this fact.

“We have to come to grips with it in India. As we do so, we have also to learn that privatisation must be genuine and broad based.

“If not, we will get an even worse situation where private monopolies will succeed government monopolies. This is a danger we have seen elsewhere and we have to be careful about in India,” Paul cautioned.

Turning to the problem of corruption, Paul said there was no use pretending that the “twin evils” of corruption and bureaucratisation did not exist.

The answer to the problem was simple, he said, stressing “the faster we liberalise, the faster we will reduce corruption and bureaucracy.”

Now bras with heart monitors

NEW DELHI, May 15 (UNI) —Facing stress or strain? No need to take any medicines, just wear a particular brand of innerwear and be relieved of the pain. This is not a figment of imagination or science fiction fantasy, but a new strategy adopted by the cloth manufacturers to improve sales in stagnant market conditions. Lingerie is being projected as an alternative health care system.

Crafted from special fabrics and treated with chemicals, these clothes are not only moisture-wicking, anti-bacterial, odour and mildew resistant but also enhance blood circulation through gentle friction. Thus, shorts, swimsuits, pantyhose and bras will soon be available as preventive medicines.

A New York based company, already selling shirts and socks made from teflon, which reduces blisters and hot spots, will unveil its blister-free bras and pantyhose, in autumn and certain kinks are being worked out of shorts and swimsuit prototypes, according to a report in “Worldwide Apparel Online”. Another company is working on bras with heart monitors while a French company has made available anti-static and anti-stress bras in the international market during this season.

New type of fibres like “Dorlastan Spandex” and “Coolmax Alta” are being developed that feature superior moisture management which can be used not only in performance wear but also in intimate apparel.

But it is the pantyhose that has got a health kick in full force and a trip to a legwear department is like a trip to the pharmacy, where a plethora of new hosiery lines offer all the benefits of over-the counter-drugs. Manufacturers are not selling legwear, they are selling health as today’s women want both fashion and function.

Most of its magical healing powers are centred around graduated compression technology, which features a snugger fit at the ankle that slowly lessens as it travels upwards, pushing blood towards the heart and promoting better circulation. Experts term this as the biggest development to happen to hosiery since the addition of Lycra 20 years ago.

IDBI Bank to pay 9 pc maiden
Tribune News Service

CHANDIGARH, May 15 — IDBI Bank Limited has declared impressive results during the year 1998-99. Its profit after tax increased by 53.42 per cent to reach Rs. 3076 crore compared with Rs 20.05 crore during the previous year. Interest income rose by 97.6 per cent and fee income by 63.8 per cent over last year a maiden dividend of 9 per cent has been recommended.

Deposits for the year ended March 31. 1999 increased by 49.08 per cent to reach Rs. 2751.28 crore compared to Rs 1845.53 crore during the previous year. Savings bank deposits during this period grew nearly five times over last year.

A notable feature on the assets side has been the substantial growth in the long substitute portfolio during the year 1998-99 to Rs 552.10 crore registering a 184.29 per cent compared to Rs. 194.20 crore the previous year. Overall, advances including credit substitutes grew by 56.81 per cent over the corresponding level last year. Core advances grew by 27 per cent over last year.

Warehouse for duty free goods soon

NEW DELHI, May 15 (UNI) — The Department of Tourism is setting up a warehouse for duty-free goods which will cater to neighbouring countries.

Director General for Tourism Ashok Pradhan said today a techno-feasibility report in this regard is under preparation in consultation with the Hamburg-based Gebr Heinamann and will be ready in a month.

The warehouse will also cater to requirements of all duty-free shops at the international airports within the country as well as downtown duty-free shops, Mr Pradhan said.

The Department of Tourism is also considering to stock duty-free shops with Indian handicraft items, he said while addressing delegates at a seminar on ‘’duty-free opportunities in the Indian subcontinent’’ organised here by the Britain-based Musafir International Publications.

The duty-free warehouse will be located in the national capital and start functioning by October, Mr Pradhan said. As airports across the country are corporatised, the private sector will be invited to run duty-free shops.

At present, they are managed by the Indian Tourism Development Corporation (ITDC).

He said the duty free trade in India is expected to rise in coming years as South-East Asia is likely to witness a boom in tourist arrivals.

At present, the Indian subcontinent comprises only 0.4 per cent of world duty free sales which totalled $ 20.5 billion (about Rs 88,150 crore) last year. In Asia, according to Generation Databank, duty free sales totalled $ 4.1 billion (about Rs 17,630 crore) of which the Indian subcontinent’s contribution was just 2.2 per cent.

The average sales per passenger at Indian duty free shops amounts to $ 1.92 compared with the world average of $ 13.37.

Ms Chandini Luthra, Vice-President of the ITDC’s duty free trade division, said India must take advantage when Europe’s duty-free industry is abolished. On July 1, the right to buy goods free of taxes and excise duties will vanish on any trip inside the European Union.

Bank norms hit SSIs
By P.D. Sharma

THE small scale industry has always been exploited by politicians. Amidst the deafening sound of lower or higher investment limit for SSI hardly any thing is audible about the bank credit availability and its cost. We cherish perverse environments whereas bigger units get every thing whereas SSI units have to remain content with empty words of sympathy.

The tightened bank regulations have suffocated SSI units in Punjab. Some recent ones have virtually brought these units to their knees. Media headlines display ever declining Prime Lending Rate (PLR) but rates being charged from SSI units remain under cover.

Punjab is the home of SSI units and the effect of these on the units can be fatal. It is a paradox that banks get almost double the profit in Punjab as compared to their country-level profit as bank transaction per employee is double were but borrowers are being fleeced through exorbitant interest rates.

The State Bank of India and some other banks have introduced Credit Risk Assessment (CRA) for SSI units also. In this method marks are allotted for profitability apart from various other ratios. The banks do not take into account the interest/salary paid or payable to partners as a part of profit which is quite illogical. In reality these deductions are made for income tax purposes and are not withdrawn in entirety. Accordingly the profit is reduced, the unit has to pay higher interest and the hike goes up to 2.5 per cent.

Profitability norm is misplaced. In these times of hard competition and long running recession bottom lines of industry have gone down. Higher interest shall lower them further to trigger a downward spiral. A recent CII survey of small scale industry has shown that profit margins of the industry have gone down.

Liquidity position of any business entity is very tight. Payments hardly come in time despite firm commitments. It is but natural that the bank accounts remain over-drawn and banks have been allowing 10 per cent over-drawing. The SBI has instructed its branches to charge penal interest of 2.5 per cent on the entire outstanding if the account remains irregular. There is no sense what-so-ever in charging the penal interest and on the entire amount makes it even more illogical.

The services of public sector banks are going down sharply but their service charges are going up. Banks purchase out-station cheques with heavy charges. The advice of the cleared cheques are not received for months together and demand draft limit of the account remains unvacated. Borrowers can not avail of the facility till advice is received. Thus, for all practical purposes the account becomes inoperative. As per bank norms penal interest is charged due to irregularity. Whose fault is it? Who is penalised and why?

The banks and the policy makers together make industry unstable. For instance spinning industry of Ludhiana is made sick by faulty Indo-Nepal Treaty. This treaty was signed in 1991 and duty free import from Nepal was allowed, provided such import had 80 per cent indigenous content. In 1993 this content was reduced to 55 per cent. Further in 1996 the clause was removed altogether. This resulted in large-scale dumping of material through Nepal. This has made the sector sick. In the case of steel sector wrong Central Excise and Power Tariff policies and large-scale evasions in some northern states made the steel sector in Punjab sick.

Banks and others blame SSI units for the mounting level of NPA’s. It is a fact that major amount involved in such NPA’s belong to a small number of medium and large units. On the other hand number is very large in the case of SSI units but amount involved is small.

In Punjab the industry makes maximum use of bank capital compared to other parts of the country. Investment in non-productive assets is very low in Punjab compared to industry in other parts. Some types of machines remain idle for most of the time in industrial units outside Punjab, but in the state the machines remain in use for full time by floating jobbing units.

Apparel summit begins

NEW DELHI, May 15 (UNI) — Textiles Minister Kashiram Rana, today came heavily on the “increasing use of protectionist measures” in the national trade, and said the world needs “a WTO that works.”

Inaugurating the two-day National Apparel Summit, jointly organised by the National Institute of Fashion Technology (NIFT), the SIDBI and the Apparel Export Promotion Council (AEPC) here today, Mr Rana called upon the governments of various nations to steel themselves to fend off protectionist lobbies.

Regretting the fact that the trade liberalisation process, utilising the vehicle of the WTO, for engineering growth in the global trade, had not proceeded on intended lines, the minister said that these were critical times for the WTO and for freer trade in general. A broad new push towards freer trade is must, he said.

by Praful R. Desai
Alterations affect value

Q: In case of eviction on the ground of unauthorised construction, is the object to prevent tenants from making indiscriminate alterations and additions without consent of landlord?

Ans: In S.M. Mohmed Meera Sha Partner, Golden Oils v E. Hyder Ali, Madras H.C. (1999(1) R.C.J. 203) said thus:

The H.C. observed that it is not possible to accept the petitioner’s case that so long as the utility of the building has not been affected, he could make any alterations and additions to the building. Having regard to the object of the provisions in S.10(2) (iii) of the Tamil Nadu Building (Lease and Rent Control) Act, 1960, that is, to prevent tenants from making indiscriminate alterations and additions without the consent of the landlord affecting the value and utility of the building, any alteration made by the petitioner which is likely to reduce the age of the building or its value, the respondent is entitled to an order of eviction even if the additions or alterations have added to the value and utility of the building, S.10 (L) (iii) in fact, talks of facts of waste.

Normally, waste will mean a spoil or destruction to houses, gardens, trees or other corporeal hereditaments and can be broadly divided into two divisions, voluntary waste and permissive waste. Voluntary waste is actual or commissive, as by pulling down houses or altering their structure, and permissive waste is a matter of negligence and omission as by suffering buildings to fall or rot for want of necessary reparations. In addition to the said two broad ‘divisions of waste’, it is also possible to divide it into ‘ameliorating waste’ and ‘equitable waste’. The former is such voluntary waste as improves the demised premises as a tenant puts a new front to his house. While the latter consists in acts of gross damage, usually the cutting down ornamental timber as a tenant.

It has been held by courts that turning two rooms into one or a bail into a stable, building a new house where there was none before, pulling down a house even though it be rebuilt afterwards are acts of waste. In that way, the order of eviction was confirmed and the revision was dismissed.

by R.N. Lakhotia

Q: Please clarify the following:

1. I have received certain amount as ‘bonus’ from post office at the time of maturity of six years monthly income scheme.

(a) Is this bonus tax free?

(b) If not, then is it to be counted as income in the year it is received.

(c) Or this bonus income is to be equally divided on full period of six years?

2. During last 2-3 years, I had given some loan to my son, daughter, son-in-law through cheques. Can I convert these loan into gift now, as gifts are totally free of tax from 1-10-98.

— S.K. Gupta, Karnal

Ans: Bonus income received from the Post Office at the time of maturity of six year monthly income scheme will be fully taxable. It is not exempted. The amount of bonus income received in the last year should be treated as income of the last year.

Q: I have been allotted a residential plot by PUDA and now paying the yearly instalments. Am I eligible to get rebate U/S 88 to the extent of Rs 10,000/- on these Instalments?

— Labh Singh, Ropar

Ans: You should be eligible to get rebate U/S 88 to the extent of Rs 10,000 on the house repayment instalment to PUDA because as per this section the rebate is permissible in respect of payment for purchase or construction of residential house and it includes payment of any instalment or part payment of the amount due under any self-financing or other scheme of any development authority/housing board/other similar authority or to any company/cooperative society of which assessee is a share holder.

Q: a) Whether ‘interest money’ received from UTI is fully exempt w.e.f. A.Y. 1999-2000 U/S 80L, net withstanding the overall Max. limit of Rs 15000/- (Rs 12000/- + Rs 3000/-)

b) Whether ‘dividend income’ received free UTI also, now, stands fully exempt. “dividend income ‘received from Indian companies, except that from UTI, was fully exempted U/S 10 (33) w.e.f. A.Y. 1998-99.

c) After deduction of exempted ‘interest/dividend income’ received from UTI, will the remaining income computed under the head “income from other sources” stand eligible for further deduction U/S 80L maximum up to Rs 15000/- (i.e. Rs 12000/- + Rs 3000/-).

— K.L. Tansen, Ludhiana

Ans: The interest money received from UTI for the Assessment Year 1999-2000 is not fully exempt U/S 80L and the maximum amount exempted would be only Rs 15,000 within the overall maximum exempted limit. Similarly, the dividend received from the UTI will not be fully exempt for the Assessment Year 1999-2000. Thus, the total maximum amount which is exempted U/S 80L in respect of dividend from UTI, bank interest, etc. is Rs 15,000 only. However, as per the Finance Bill, 1999 entire income received from any scheme of the UTI or any scheme of the Mutual Fund will be completely exempt from income-tax without any upper limit. Thus, all incomes of UTI received during the Financial Year 1999-2000 relevant to the Assessment Year 2000-2001 will be fully exempted from income-tax.

Q: I have taken Rs 5 lakh loan from HDFC for house construction. I construct two portion on 350 yard plot. I give one portion on rent for Rs 5000/- and one portion occupied by me. I am paying approx. Rs 15000/- principal and 65000/- interest to HDFC. What is my income tax liabilities.

— Narinder Kumar, Panchkula

Ans: In respect of repayment of loan to HDFC you would be eligible for tax rebate U/S 88 on the maximum extent of Rs 10,000 per annum. In respect of the interest payment by you to HDFC, the maximum amount allowed as a dedication for the Assessment Year 1999-2000 will be Rs 30,000 for the portion which is self-occupied and in respect of another portion which is given on rent from the rental income will be deducted the interest paid by you for that portion which has been let out.

IT returns
LUDHIANA, May 15 (TNS) — Tax deduction at source returns can either be filed on floppies or manually forms Mr K K Kapila, Commissioner of Income Tax here expressed these views at a meeting of the District Taxation Bar Association’s executive committee chaired by its president, Ashok Juneja.

Cancer seal
NEW DELHI, May 15 (TNS) — A cancer seal sponsored by Punjab and Sind Bank in aid of research activities to fight the disease was released today by the President, Mr K.R. Narayanan. By sponsoring the cancer seal, the bank has donated Rs 25 lakh to the Indraprastha Cancer Society and Research Centre here.

IEC Softwares
NEW DELHI, May 15 (TNS) — IEC Softwares Ltd has entered into a joint venture with University Putra Malaysia and an Information Technology firm, Global Knowledge Vision, in Malaysia.

Kangra bank
DHARAMSALA, May 15 (TNS) — Kangra Cooperative primary agriculture and rural development bank has been awarded the first prize for its best performance during 1996-1997 by NABARD.

Cricket quiz
NEW DELHI, May 15 (TNS) — Liberty has launched a special World Cup quiz programme titled “World Cup se World Cup tak,” and currently being aired on Star Sports, ESPN, Star Plus and Discovery Channels.