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| Sunday, February
18, 2001, Chandigarh, India   
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Economy: what next? Govt
support must for IT sector Assocham
chief’s wishlist for Budget |
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Dealers
offer discount to woo car customers Maruti to
enter used car business Centre
clears 33 PSUs for disinvestment
Provide restraints to
hold riders to the seats
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Economy: what next? Q: In the post-earthquake situation, what do you expect from the Budget? The 2 per cent surcharge is not a bad move given the context of things. Maybe the government may think of raising funds by floating a tax free disaster relief bond for meeting exigencies similar to that of the Gujarat earthquake. Such bonds, I believe, will be readily subscribed to by the public as it will act as a useful tax saving instrument. Q: The Prime Minister has talked about 9 per cent growth rate. How realistic do you think is the target? The Indian economy has taken a beating from all sides in recent months. Despite comfortable foreign exchange reserves, there are several indications that everything is not so well on the economic front. The capital market appears to have lost quite a lot of its shine and the core infrastructure sector such as roads and ports have not really acted as an engine for growth which it was intended to be. India has been dubbed by several international agencies as a hotspot for Foreign Direct Investment (FDI). However, we must remember that the good benefits can be reaped only if the policies are consistent and the potential is implemented. Only if the pace of implementation is improved, can India achieve a growth of 9 per cent in the medium term. Also, the character of the rupee is interesting. I believe that a 10 to 12 per cent depreciation will have a significant impact in providing a boost to the country’s export sector which is so important in the global context. Q:
What are your expectations from the coming Budget? The Budget should focus on measures to revive demand, improve investment climate and work towards kick-starting the economy by creating an atmosphere of growth. The revival of demand would require that the government strives to reduce its fiscal deficit by bringing down its borrowing
requirements for financing current expenditure. This would serve to release resources which could be utilised for investment. The government would also do well to identify sectors such as housing and construction, roads etc. and consider providing tax incentives to such sectors as this would propel demand in
recession hit capital goods sector and thereby rev up the economy on a higher growth path. The Gross Domestic Capital Formation, which has declined in recent years, should be reversed. To mitigate the situation, the Budget should focus on encouraging new investment projects irrespective of whether it is in the public, private or the foreign sector. In fact, the most important objective of the Budget is to give a boost to new investment in industry, infrastructure and agriculture. Q: What measures would you suggest for mobilising resources for disaster management? One of the methods of mobilising resources for earthquake relief to meet the disaster management requirements would be through the introduction of low interest earthquake relief bonds, contributions to which would be fully exempt from tax. Q: What measures would you suggest for achieving 9 per cent rate of growth?
Achieving 9 per cent growth rate by the end of the Tenth Plan would indeed be the most formidable challenge for the government. A growth target of 9 per cent with the present structure of growth would require annual investment rates in the range of 36-39 per cent of GDP. And with our saving rates having declined from around 26 per cent in 1995-96 to around 23 per cent at present there is a likelihood of a widening of saving-investment gap. This would require a two pronged approach to increase savings — tap foreign savings by encouraging foreign direct investment and mobilise and channelise internal resources in productive avenues. This mobilising of internal resources would be made possible through tapping the saving of the household sector through attractive financial instruments and initiating the process of public sector disinvestment where the government savings are negative. Capital market also needs a boost so that household savings are channelised in this area. Government should consider providing tax incentives to induce fresh investment in the primary market. Infrastructure development, both physical and social, is a pre-requisite for moving along the path to achieve a 9 per cent growth rate. The requirement for funds would have to be met from the public besides contribution from the financial institutions and the insurance sectors. The government should consider the option of making a provision similar to that of 401 K of USA that provides for deduction of investments made with social security fund from taxable income. Funds so collected can be utilised for creation of infrastructure. This will help in building low cost infrastructure and generate income in the long term to provide social security to investors. Q:
What measures would you suggest to keep the fiscal deficit under check? The non-development expenditure mainly consists of interest, subsidy, defence and cost of administration. Except for subsidy, all other expenses are more inelastic. A major area which is posing a threat to curtailing fiscal deficit is the mounting subsidy burden comprising around 14 per cent of GDP. There is need to address the issue of subsidy especially with regard to waste and inefficiency in its allocation. This would require rationalisation and review of subsidy so that it reaches that section of the society for which it is targetted. Besides, there is need to reorient governance so that there is a leaner and efficient government in the future. Q:
Despite repeated efforts a full-fledged VAT regime is yet to take off in India. Your comments. The switchover to the VAT system would require an amendment of the Constitution as this would involve shifting from the Concurrent list to Central list. Besides, the major impediment to the introduction of full fledged VAT system is the general reluctance of the state governments to give up the powers to levy tax as they would have no say in the fixation of tax rate. It would also be difficult to integrate the entire tax regime of the state governments into a unified levy covering all segments of the economy — besides industry, agriculture, mining services. This would apply particularly to the unorganised sector having a wide range of activities which is sometimes difficult to quantify/formalise. Hence, though the switchover towards a VAT
system is desirable, such problems make it difficult to have a time frame for implementation.
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Govt support must for IT sector Chandigarh, February 17 In a communication, Ms Vinnie Mehta, Director, MAIT, has said that it is indeed very heartening that the Government of India has identified Information Technology as the key focus area. In one sense, the hardware industry units both economies — the old and the new, as it is part of both. Unfortunately, there has not been due recognition of this and the hardware sector is languishing. In fact, the situation is so alarming that at least 15 to 20 major hardware companies either close every year or shift to trading! She points out that India has just a little over two years to honour its commitment to the IT Agreement (ITA) of the World Trade Organisation (WTO) — to implement a zero duty regime for IT from 2003. The issue of utmost concern is even while the entire IT manufacturing sector will hit the zero duty regime, input component, especially those of dual usage, will not be liable to zero duty. This fails the entire logic of IT manufacturing. While in India the IT manufacturing sector is languishing, our counterparts in China continue to thrive — the exports volume of China’s hi-tech products crossed USD15.7 bn in the first six months of the year 2000 — up by 48 per cent over the last year; computer and telecom hardware alone accounted for 72 per cent of this. This has been made possible by the aggressive policy measures adopted by the Chinese Government for promoting IT investments. On the contrary, investors have been increasingly India-shy. Developing and developed countries around the globe have started harnessing IT and IT hardware for competitiveness. Today IT and electronics goods exports account for 47 per cent of Singapore’s GDP and 65 per cent of that of Malaysia. It accounts for 8.3 per cent of the US economy, while in India it is less than 1 per cent of the GDP. We estimate that the hardware industry in India has the potential to create a million jobs every year. Unlike the software industry, IT hardware sector creates job opportunities for semi-skilled people as well — an opportunity India can ill-afford to overlook. We strongly urge the government to take the following steps in order to prevent the exit of the IT manufacturing industry: — Immediately bring the customs duty on all imported ‘parts and components’ to nil, especially items of dual usage. The SEZ (Special Economic Zone) model for IT hardware could be a possible solution. — Minimum 10 per cent duty differential between ‘input parts and components’ and ‘finished goods’. — Simplify procedures to increase velocity of business through the process of ‘self-declaration’ based clearance for all IT imports and exports — Abolish the Special Addition Duty (SAD) on all IT products; reduce local levies — excise duty to 8 per cent and sales tax to nil to make IT affordable for the common man. — Promote IT technology (developed in India) exports:- — Exempt IT technology export royalty from corporate tax — Amend the bi-lateral treaties to exempt with-holding tax.
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Assocham chief’s wishlist for Budget New Delhi, February 17 Speaking to newspersons here today, Mr Mody said that the current domestic savings rate of 22 to 23 per cent was inadequate and called for fiscal and non-fiscal measures to reverse the trend. Mr Mody said that there was need to strengthen and deepen the financial infrastructure including capital markets, long-term debt market and pension funds, to channelise savings into investment projects. Underlining the need for greater foreign direct investment in the country, Mr Mody said that currently 80 per cent of the proposals have to be routed through Foreign Investment Promotion Board
(FIPB), which inordinatley delays the investment process.
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Dealers offer discount to woo car customers Chandigarh, February 17 Maruti sold nearly 4,500 cars in Punjab and Chandigarh during January as compared to 2,250 in December and 2,600 in November last year. Though as per the past trends, sales in the month of February are not able to come at par with the figures in January (the months buyers postpone buying decisions of December to get new models) , the company officials claim having already sold more than 2,000 cars in Punjab and Chandigarh only during the first fifteen days of this month. Hyundai, on the other hand has registered sales of more than 600 cars (Santro and Accent) in Punjab (458) and Chandigarh (150) in January, compared to a meagre of 88 cars (Santro and Accent) in the region during December last year. The company officials in Delhi expect February to see similar trends. “With budget round the corner and a hike in the prices on the cards, the demand for February has seen an increase this year”, said a company official. Though the rumours of a cut in excise duty on small cars are doing the rounds, a hike in the prices is what the market experts predict owing to the Gujarat quake. Dealers in the region and several companies , in order to make the most of an increasing trend in the demand are trying every trick to woo the customers by offering them heavy discounts and attractive schemes. Daewoo Motors India has come forward with a scheme for its buyers whereby the company promises to repay an amount equivalent to the excise duty cut if it comes about in the forthcoming budget. The company promises to return the money to those buyers who have bought Daewoo cars between February 5 and February 28. Dealers of Daewoo’s fellow Korean rival Hyundai Motor India too are offering discounts even more than Rs. 20,000 on Santro models and on the Accent one can get discounts up to Rs 25,000. On a Santro GS (metallic) Rs 4,20,457 , dealers are offering discounts upto Rs 20,000. Maruti Udyog dealers are offering discounts which would entitle them to larger margins. Buyers can easily get a discount Rs 15,000 on Wagon LXI of Rs 10,000 on Wagon VXI, Rs 3,000 on Maruti 800 and Rs 3,000-6,000 on Zen. Zero per cent discounts , free gifts are other allurements being offered by dealers and companies by arrangements with finance companies and dealers. Anbros Motors, a local dealer for Fiat Siena is offering a Kinetic scooter free with purchase of every Fiat Siena car this month. While attractive discounts and schemes including those for financing doing marvels for the dealers, many regard the move only as a market gimmick. “Though companies have been trying to spread rumours of an expected decline in prices laying emphasis on an excise duty cut, it is merely a market gimmick to postpone the buyer’s decision till the prices are really up”, said an official from Maruti. While the automobile industry is not expecting sops for the small cars in the forthcoming budget, the demand for relaxations has not subsided. Apart from price increase, the lifting of quantitative restrictions on imports is also likely to hit the automobile industry badly. “Market has not done so well in the past and if the industry is to look up there has to be some relaxation by the finance ministry”, says a local dealer . |
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Maruti to enter used car business Chandigarh, February 17 The company has sent a number of Maruti dealers from different parts of the country to Japan to learn used car business in that country and to study the related issues. Mr Anil Malhotra, Director of Ludhiana-based Stan Autos Ltd., who has been recognised as the No. 1 Maruti car dealer in Punjab, was among those who toured Japan earlier this month and visited seven used car dealers to learn the tricks of the trade. He told TNS here today that used car business was a very flourishing and profitable business in Japan. In India, auto business had become very competitive following economic liberalisation. The needs of the customers for automobiles were also changing very rapid. In a city like Ludhiana or Chandigarh, where people have ample money to fulfil their luxurious demands, cars were the ultimate luxury. He said that due to a shift in people’s earning power, there was an equally and directly proportional shift in the demand for new as well as used cars.
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Centre clears 33 PSUs for disinvestment Chennai, February 17 Echoing Prime Minister A.B. Vajpayee and Finance Minister Yashwant Sinha’s view that disinvestment would be delinked from the country’s financial deficit, he, however, declined to divulge how much the Centre expected to mop up by selling its shares. ‘It is not a distress sale’, he said. Of the 175 bids received for eight ITDC hotels, 125 had been
shortlisted. PTI |
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by Pushpa Girimaji Provide restraints to hold riders to the seats IMAGINE swinging to a height of 50-60 feet in a boat shaped structure without seat belts secured around you! Even Tarzan would feel insecure in it! Yet, children and adults who visited the Arts and Crafts Mela at Surajkund (Haryana) near Delhi were offered rides on this giant ‘rainbow swing’. To say that those who provided this ‘amusement’ and those who permitted it without thorough safety checks were irresponsible would be an understatement. Those who got on to that ride last Sunday would not have imagined what was to come even in their worst nightmares. One moment they were in the cradle, being jacked up to a height of over 50 feet and the next, cruelly hurtled to the ground as the carriage suddenly capsized, unseating them. One moment their screams denoted their thrill and the next, their shriceks mirroered the horror of it all. At the time of writing, four people have died while 14 others have received varying degrees of head, spinal and pelvic injuries. I have written in my earlier columns on the absence of mandatory safety regulations for amusement parks and rides and its possible consequences, but am forced to come back to the subject again. Unless the government is prepared to accept responsibility and ensure the safety of these rides through stringent safety laws and their enforcement, it should not allow such contraptions at all. Each one of these rides is meant to thrill and set your heart pounding with excitement and fear as it takes you at hair-raising speed to great heights and sharp descents. Those who love such rides may well call it a tribute to modern technology and man’s innovative powers. But what one should not forget is that each of these rides requires exacting quality control and precision engineering, be it in the manufacture of the parts or the fabrication of the final product or its subsequent maintenance. The wear and tear caused by the speed, the vibrations, the weather, everything has to be carefully studied to ensure the safety of these rides. It is equally important to know the effect of the speed, the twists, the turns and the torque, besides the gravitational forces, on the rider. The safety bars, latches, waist straps, shoulder restraints, everything has to be provided for and maintained in good condition. In the US, Houston’s Astro World, for example, had to add head rests on to “Texas cyclone” following an injury caused to a 16-year old rider. The speed of the ‘cyclone’ whipped the boy’s neck so fast that it ruptured a vein, leaving him half paralysed by a stroke caused by a clot in his brain. Similarly, a year and a half ago, 16 children were injured at the Canadian National Exhibition in Toronto, when a ride collapsed after its four ‘lifting ropes’ broke. Fortunately the injuries were not life threatening. The ride, called the ‘wave swinger’, had a capacity to carry 48 passengers in a circular swing ride. Apparently, the owners had replaced the original ropes with those manufactured locally and they were not of the same quality and specifications. Coming back to Surajkund, the exact cause of the accident has not yet been identified. Nor do we know details such as the age of the ride, its manufacturer, its track record, its maintenance portfolio, etc. It could be improper installation, poor maintenance or bad repairs or a manufacturing defect, but one being thing is clear. If only it had adequate restraints to hold the riders to the seat, the casualty would not have been so high. But it seems like the authorities are slowing waking up to the dangers inherent in their casual attitude towards such rides. The police in Delhi have said that they will get experts from the Indian Institute of Technology to examine the amusement parks in the capital. While that is welcome, what we need is a national legislation to regulate all amusement parks and mobile rides for safety. We also need an autonomous national safety commission to which all accidents and investigations involving these rides are reported. Such information would also help the safety commission in sending ‘ride alerts’ to other states and coordinating all safety efforts in the country. Now as a first step, all those running similar rides in the country should be asked not to operate them till the investigations into the accident at Surajkund are completed and the exact cause of the problem identified and corrective action, where necessary, taken. Corrective action should include additional restraints to hold the riders to the seat. State amusement ride officials in the United States, who inspect the rides regularly and investigate into accidents can also give valuable information to investigating officers here in identifying unsafe rides and rectifying defects or inadequacies. In the meanwhile, the victims of the Surajkund tragedy should immediately file a class action suit before the National Consumer Disputes Redressal Commission, seeking damages for the loss and injuries suffered.
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by A.K. Sachdeva Q: We are registered as a dealer both under the provisions of the Haryana General Sales Tax Act, 1973 and the Central Sales Tax Act, 1956. Our business involves purchase and sale of medicines and pharmaceutical preparations. After buying medicines and other related products on payment of first stage tax from within the state, we sell them in the course of inter-state trade or commerce on which 4% Central Sales Tax is realised from the customers against form ‘C’. Rule 24-A has been omitted statedly from October 19, 2000 and the benefit of adjustment of sales tax has been withdrawn in case of trading activities. It has come to our notice that the official gazette containing the notification was released to the public in the last week of December, 2000. Now therefore the question is from which date the new law will be deemed to have effect as far as claim of benefit of tax adjustment or refund is concerned? Kindly advise. —Alik Sharma, Sonepat Ans: It is true that as per the official gazette the date of the notification is October 19, 2000 from which the provisions of rule 24-A of the Haryana General Sales Tax Rules, 1975 have been omitted from the statute book. But the effective date for the purpose of operation of the said notification would be 24th December, 2000 when the copies of the official gazette were made available to the public. The date of publication does not mean mere printing of the statutory notification in the official gazette but the notification comes into force only when it is made public. It is on record that the copies of the official gazettee had been circulated in the last week of December, 2000 and therefore the assessees under the sales tax laws will be fully entitled to the benefit of sales tax adjustment or refund, as the case may be until the date of circulation of the official gazette. 
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