Singapore, September 16
India today ticked off IMF Chief Economist Raghuram Rajan for his attack on India’s Special Economic Zones, which, he said, was being set particularly in the IT sector to take advantage of tax concessions impacting the economy.

“IMF should get its facts right. They should go to the field and not sit in Washington and criticise,” India’s Commerce Minister Kamal Nath said, strongly reacting to the IMF Chief Economist’s criticism on Thursday here at the ongoing annual World Bank-IMF meeting.

Special Economic Zones are a success, said Mr Nath, a strong advocate of SEZs for boosting exports and manufacturing in the booming Indian economy that has been clocking over 8 per cent economic growth making the success story of India and China as focus of discussion at the annual meeting.

Detractors of Special Economic Zones, a policy initiative taken last year, have been critical of the concept saying they would be revenue rip-offs and feared that ultimately industrial units elsewhere in the country would shift to SEZs to take advantage of the tax holiday given to them.

Mr Nath said there was no justification in saying that there would be revenue loss as it was notional. “When there is no levy how can you say it could lead to revenue loss,” he added.

The Government has already approved over 160 SEZs in the country and the Board of Approval is scheduled to meet in the third week of this month to clear 225 pending applications for the zones in the country.

He cited the example of Nokia SEZ in Chennai and said one should go and see the kind of economic activity SEZs were generating. Eight to 10 SEZs have already been established in a short period of time in the country and the results were there for everyone to see.

The Special Economic Zones concept led to a tug of war between Commerce and Finance Ministries on whether SEZs cost the Government exchequer, resulting in an Empowered Group of Ministers headed by Defence Minister Pranab Mukherjee stepping in to resolve the differences.

Mr Rajan had on Thursday asked India to “very carefully” look at the much-touted special economic zones, saying the give-aways and tax sops to the zones could divert industrial activity from the rest of the country.

“Overall, it (tax sops for SEZs) becomes yet another give-away which the government cannot afford,” the IMF Chief Economist had said.

India also set at rest the speculation that it preferred regional and bilateral trade agreements in the face of the stalled WTO talks, saying there can never be “trade-offs” between regional and multilateral pacts agreements, which would exist side-by-side.

“It cannot be either, or. There are no contradictions,” Mr Nath told a seminar at the annual World Bank-IMF meeting here.

The ’90s was a decade of globalisation and ever since WTO came into being in 1995, there has been a rise in regional trade agreements like NAFTA and the European Union.

He said nearly 50 per cent of the world trade was through regional and bilateral trade agreements but this did not mean multilateral trading system has lost its relevance.

The global economic architecture was undergoing a change as certain trade could be done only through bilateral agreements, while at the same time rule-based multilateral trading system was equally important.

There are as many as 300 trade agreements in various stages of agreements, which more than double the member-countries of WTO, Mr Nath said emphasising it was in the interest of both developed and developing countries that the stalled Doha Development Round was put back on track at the earliest.

He, however, said it was not correct to say that the stalled WTO talks have failed. “Doha is on. The Doha Round was on track. There may be some setbacks but I am confident that it would be completed... Let us not be obsessed (about) when it is completed. Let us be obsessed with its content and completion,” he added. — PTI

India’s rapid economic growth is at the risk of tripping if the country does not curb corruption and enforce rule of law, the World Bank has warned in a report.

The world’s second most populous nation ranks 47th in a list of 213 countries measured for their quality of governance in a new World Bank report — Governance Matters 2006: Worldwide Governance Indicators.

World Bank Global Governance Director Daniel Kaufmann, who termed the ranking as “not in the right zone,” said that the country must “pay priority to these issues” to maintain its rapid GDP growth.

Neighbouring China, with whom India is often compared to, ranked 31 in the list of the corrupt nations and prompted Kaufmann to warn that “a country could get away in the short term, and that short term could be 10 years.”

In political stability, India was ranked 22, voice and accountability (56).

As regards regulatory quality, it scored 44th percentile.

Riding on big investments and likely increase in agriculture output, Indian economy may grow at an average 9 per cent in the next five years, Planning Commission Deputy Chairman Montek Singh Ahluwalia said today.

“There has been big investments in private corporates...

It’s in response to entrepreneurial (skills) unleashed by reforms),” he said at a seminar.

The country is seeking to double agriculture growth in the next five years, he said at the seminar, held on the sidelines of the World Bank and IMF meetings here.

Agriculture growth bounced back to 3.9 per cent during 2005-06 from a meagre 0.7 per cent in 2004-05.

Last fiscal, Indian economy grew at 8.4 per cent.

The International Monetary Fund on Thursday had raised its projections for Indian economic growth to 8.3 per cent for 2006, against earlier forecast of 7.3 per cent.

Bangalore, September 16
Karnataka today announced US-based companies were set to invest around Rs 2,000 crore in the state and that a number of delegations from the US would be visiting the city from next week onwards to hold discussions with the State government on various investment opportunities.

Disclosing this here today, Minister for Major Industries Katta Subramanyam Naidu said the delegations from the US were the result of a number of presentations made by a high level delegation from the state, which had visited the US from August 31 to October 10. The delegation was led by Deputy Chief Minister B S Yediyurappa.

Discussing the projects, Mr Naidu said chip manufacturer Intel alone was planning to invest Rs 1,000 crore on software parks in Bangalore and Mysore in the next two years besides the $1 billion investment planned for India. The company planned to strengthen its research and development and invest in telecom and technology start-ups, besides its development centre in Bangalore, he said.

Similarly Nortel was set to establish a 35,000 square foot facility in the city, which would employ more than 100 highly skilled engineers by the end of this year. He said other companies who had evinced interest in starting up ventures in the state include ICICI Ventures, Tishman Speyer and TSI Ventures.

The Karnataka government had held presentations at the Rockefeller Centre in New York besides Baltimore and San Francisco.

The state government is also in the process of appointing ambassadors of industry abroad to help it in current investment drive, he added. 

Q: I invested through a broker and he maintains my Portfolio for the past 16 months; He used to send me monthly statement of account. Of late, he has not only stopped sending the monthly statements but does not respond to my emails. I am in a fix. I do not know how to proceed. His phones are either busy or out of order!! How to know the real state of affairs? Any suggestions?
— Mehta

Q: I am a 44 year old woman. My husband is working in a bank. In the banks records, I am dependent on him. I am primarily a housewife. However, over a period of last 6-7 years, I have earned some money (not regular) on my own by engaging in some irregular works like taking tuitions, conducting cooking classes and yoga classes at different times. The amount earned varies from Rs 30,000 - Rs 40,000 per year. It was my own effort on account of my professional competence. At times, I have also received small amounts as gift from my father. I have affidavit to this effect from my father. A good part of these earnings was invested by me in KVP and Mutual Funds. I also have a PAN. However, I have never filed IT return as my income was never above the threshold exemption limit.
I now want the following clarifications from you —
What I understand is that the amount earned by me by virtue of my professional competence, cannot be clubbed with my husband’s income for income tax purpose. I will be liable to pay tax and file return if my income crosses Rs 1.35 lakh p.a. as per present exemption limit for women. My husband is a income tax payee and he pays the tax without including my income. I think this is legally correct. However, some persons have advised me that the income earned by me because of my professional competence will be clubbed with my husband’s income because I am dependent on him. Please clarify.
— Nandita Rajput

A: Your understanding is perfect. For clarity, we reiterate that what ‘some persons’ have told you is entirely wrong. You can have some earning of your own and still be dependent. Only the income earned by you from the corpus gifted by your husband will be clubbed. Another clubbing provision is applicable in case you receive a salary from your husband on an assignment for which you do not have any expertise and specialised knowledge. But the money actually earned by you is not taxable in his hands.