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World Bank–IMF Meet
‘US speculators responsible for price rise’
Inflation Market Scan |
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Tax Advice
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FM warns of ‘strong measures’
Tells sectors to behave responsibly
Washington, April 13 The government would not hesitate to take more fiscal measures even at the cost of sacrificing some badly needed revenues. He said. “We have taken fiscal measures ... We will not hesitate to take more measures even if it means sacrificing some revenues that are badly needed for social sector expenditure," the finance minister said in an interview. Describing inflation as “the current biggest worry”, he said: “... there could be unexpected political developments and there could be natural calamities. All other factors today, I think, are positive.” The Reserve Bank, the finance minister said, was the authority responsible for monetary measures “and I am sure the RBI will take appropriate monetary measures. The third leg of the triangle is the supply side. But its responses are not immediate. Supply side responses to a situation of high demand and shortages can only come in the medium term and a number of steps will be taken to enhance supply, especially food items. If these sectors behave irresponsibly, then the government would have to consider strong measures in order to moderate prices". “We can take satisfaction in the fact that our inflation is lower than the inflation in many countries. But that is of little comfort to those who suffer. India’s inflation is high today because of food prices, crude oil and commodity prices,” Chidambaram said at the end of his first day of formal Spring meetings of the IMF and World Bank. He said if India wishes to avoid volatility in food prices, the only option is to become self-sufficient. “Unfortunately we are not. We are a marginal importer of wheat; we are a large importer of edible oils and pulses and we are a very large importer of fertilisers, which are necessary to grow food. We are, therefore, vulnerable to very high prices of food. If that is the situation regarding food, the situation is only worse regarding commodities and crude oil,” he maintained. “Because our growth is high, we demand and we consume large quantities of crude oil and commodities. In a sense, therefore, we are importing inflation,” Chidambaram said disagreeing with the notion that high inflation is one of the downsides of solid economic growth. He said: “You can have high growth with moderate inflation. But the current phase of inflation is triggered largely by external factors over which India has very little control. That is why we are forced to take some rather extreme fiscal measures involving huge losses of revenue, as well as monetary measures that will have a negative impact on growth itself. In a situation like this, we have to balance growth and price stability.” He insisted if price stability means sacrificing a bit of growth, “then I am afraid we will have to sacrifice a bit of growth in order to maintain price stability.” — PTI
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‘US speculators responsible for price rise’
Mumbai, April 13 “The bulk of inflation which is substantially caused by commodities is not traded on our commodity exchanges. Fruits and vegetables which are presently driving inflation are also not traded on our exchanges,” FMC chairman B.C Khatua said. Rising food prices, apart from globally high oil and metals prices have pushed up India’s inflation to 7.41 per cent. Khatua said several hedge and PE funds were driving commodity prices higher in the US market and the US Commodity Futures Trading Commission, despite its experience and power, has not able to control this, he said. He stated that a few commodities such as steel were witnessing a strong price because of speculation by some hedge and PE funds.
The Indian market is entirely a retail market, driven by small hedgers, producers, exporters, importers, processors or small speculators.
— PTI |
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Relief likely in mid-May: Economists
Mumbai, April 13 “There is a likelihood of inflation declining in about a month’s time. But it will still be around the 6.4 per cent mark,” Bank of Baroda chief economist Rupa Rege Nitsure said here. The economists peg inflation’s yearly average (financial year 2009) at around 5.5 per cent, above the RBI’s comfort level of 5 per cent but considerably lower than the present level. “I see a cool down from May onwards. The government’s administrative measures should help pull down inflation by around 0.4 per cent. A cash reserve ratio hike by the RBI would further help dampen inflation,” Enam Securities chief economist Sachichidanand Shukla said. “If supply-side constraints also show an improvement as expected, inflation could reduce to around 6.25 per cent by mid-June,” Shukla said. Edible oils are already showing signs of easing. Food supplies should improve and with recession gripping several economies in the world, commodity prices too could begin to cool, he said. — PTI
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Good rabi crop can help: FinMin
New Delhi, April 13 “If the rabi crop is good, if international commodity prices stabilise, we should be able to manage inflation this fiscal within manageable limit,” finance secretary D Subbarao said. Referring to rising commodity prices, he said no country, including India, is completely decoupled with the global happenings. Generally, recession in the US is accompanied by a fall in commodity prices, but this has not happened so far, he said. However, if there is further downturn in the US, or recession, it should have a moderating impact on commodity prices,
he said. In the backdrop of soaring inflation, the finance ministry is also preparing itself for a moderation in economic growth this fiscal compared to the projected 8.7 per cent for 2007-08. He, however, exuded confidence that expansion would still be in the high path of over 8 per cent.
— PTI |
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Market Scan
During the last week, the Sensex registered a modest slide down by 0.53 per cent and closed at 15673.67. The stock market was rather flat responding to the movements in the global markets.
There has been some improvement in the US economy. Financial pressure on the Federal Reserve has somewhat eased. Direct borrowing from the Federal Reserve has come down. Goldman Sachs as well as Morgan Stanley are now somewhat optimistic. But the International Monetary Fund’s (IMF) latest report is rather disturbing. In its latest World Economy Outlook, the IMF sees a 25 per cent chance that the world economic growth could fall below 3 per cent this year and the next (equivalent to a global recession). The world economy is, however, expected to expand to 3.8 per cent next year. The global economy, according to this, will tip into mild recession in 2008 as a result of sub-prime crisis and economic deceleration. India’s economy, according to the IMF, is estimated to grow at 7.9 per cent this year down from earlier forecast of 8.44 per cent. In 2009, the growth rate may come up to 8 per cent. Indian economy
The wholesale price index (WPI) inflation rates for the last week of fiscal year 2007-08 stood at 7.4 per cent much higher than the Reserve Bank’s tolerance level of 5 per cent. This is higher than the WPI inflation rate during the previous week. It is rather disturbing. The gross domestic product (GDP) growth rate forecast for India in the fiscal year 2008-09 has been put by the IMF, as stated earlier, at 7.9 per cent. Citi Group puts it at 7.7 per cent. Morgan Stanley and JP Morgan Chase puts it at 7 per cent. However, the UBS puts it at 8.2 per cent and the Asian Development Bank at 8 per cent. UNESCAP put it at 9 per cent. For retail prices, inflation may be at least 2 per cent higher than the WPI. It would push up the food prices as well as higher input costs for industry and other commodities. It is expected that the Reserve Bank will soon announce changes in monetary policy while the cash reserve ratio may be raised and financial liquidity tightened. The inflation rate is not only looking up in India but is a part of global phenomenon. The upward movement of the inflation rate is generally attributed to the three main factors: high crude prices (which now stands at higher than $ 110 per barrel); reduced financial inflows in the global economy; and greater demand for higher price of commodities, particularly metals. In India, high demand and slow growth for electric power, untimely rains, which may affect the Rabi harvest, and high petro prices are the major factors. The annual results for the fiscal year 2007-08 are yet to pour in this and coming weeks. These results are likely to impact movement in the stock markets. There are indications that these results may be relatively lower than for the previous year. Indian IT and software firms are likely to show slower growth because of the slow-down in the US economy.
Wait and watch for the market movements before any fresh investment is made.
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Tax Advice
Q. I retired as an administrative officer from Haryana Power Generation Corporation Limited on June 30, 2004. I retained my GPF amount at my credit after retirement for the period of three years under Section 38 of the GPF
regulation. During the period of the retention of my GPF July 1, 2004, to June 30, 2007.
I have earned a sum of Rs 3,75000 as interest. After completion of three years, I applied for refund of the principal amount along with interest thereon of my GPF during July 2007 but the drawing and disbursing officer, Panchkula, has deducted Rs 60,000 as income tax on my interest amount accrued during the retention of my GPF assuming that the interest on GPF during retention is treated as fixed deposit receipt.
It has clearly been mentioned in the Income Tax Act that interest earned on GPF, PPF and EPF is fully exempted under Section 10 of the Income Tax Act. Please guide me whether on retention of GPF after retirement is taxable? If so, can they deducted the income tax on interest of GPF every year or at the time of withdrawal of the amount after three years in lump sum? A. The accumulated balance due and becoming payable to an employee participating in a recognised provident fund is generally excluded from the computation of the total income. However, in case the employee does not withdraw the said amount and retains the same with the trustees or any other authority managing the provident fund, the interest thereon is taxable under Clause 9 of the Fourth Schedule of the Act for the period of such retention. In view, thereof, the Disbursing Officer has correctly deducted tax at source on the interest earned on such accumulated balance. Form for IT return
Q. I am a govt. servant. I got salary Rs 49,000 in 2006-07, the rest i.e. Rs 1,62,000. I got this year as an arrear. I had not filled IT Return for 2006-07 (assesment 2007-08). I have only salary statement from previous office. (Form 16 not received by me). Guide me which form to fill and how? (I have a housing loan also). A. The salary of an employee is taxable on due basis and, therefore, you should have filed the return for the assessment year 2007-08 as your income from salary exceeded the minimum taxable limited up to which tax is not payable by an assessee. You can file a belated return for the said assessment year by March 31, 2009, to comply with the provisions of the Act. The applicable form in your case would be ITR-1 in case your income is from salary and interest. Tax on net income
Q. I am a private practitioner running my own clinic. My average total income is Rs 35,000 per month. After deducting expenses like electricity bills, assistants salary, instruments expenses, the net income comes out i.e. Rs.25,000 per month. How much tax I have to pay on the net income and at what rate? I am 35-years-old and have not paid tax for three years. A. Your total taxable income on the basis of computations given in the query works out at Rs.3 lakh for assessment year 2008-09. You are liable to pay a tax of Rs 40,170, including the education cess for the said assessment year. The last date for filing the return in your case would be July 31, 2008. The tax has been computed on the basis of the rate applicable to an assessee who is not a woman and is below the age of 65 years. You should file your return of income for the preceding years. Also, in case your income exceeded the maximum amount up to which tax is not chargeable so as to comply with the provisions of |
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Tells sectors to behave responsibly
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