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Inflation shakes India Inc: Survey
‘Sri Lanka has highest inflation in Asia’
M&M to pump in Rs 200 cr on used car biz
Indian firms slip in global ranking |
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SBoP revises deposit rates
Market Update
Tax Advice
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Inflation shakes India Inc: Survey
New Delhi, June 29 “Manufacturing inflation will go up in the months ahead and it would be a persistent trend throughout 2008,” the Federation of Indian Chamber of Commerce and Industry said after conducting a survey of business confidence, which has deteriorated in the last six months. Manufacturing has a weightage of 63.75 per cent in the whole price index. Inflation touched a 13-year high of 11.42 per cent for the week ended June 14. The results of the survey conducted between May and June showed that performance of the economy, industry and at the firm level has further weakened. “The current conditions index is at its lowest level because of moderation in growth, rise in inflation and input costs,” the chamber said. The pressure on industry on account of rising interest and input costs has breached the absorptive capacity for many companies that are being forced to revise prices upward. “India Inc has struck a note of nervous optimism and expressed deep concern at the current state of the economy,” it said. Assessment of current industry performance shows that nearly 38 per cent of the companies witnessed deterioration in performance over the last six months. This figure stood at 29 per cent in the last survey. The industry is, however, keeping its fingers crossed for recovery in the medium term. About 37 per cent of the companies have expressed optimism that economic conditions would improve in the near term as “economic trends may have reached their worst levels and one can now expect some improvement”. About 32 per cent feel the situation would further deteriorate over the next six months. Apart from heavy and light industry, where performance has declined, the services sector too is showing signs of moderation. “While the situation may improve somewhat in the near future, we will still fall short of the strong performance that was witnessed till about a year ago,” the chamber said. The relentless increase in prices since early 2008 has clouded the economic environment. With the further tightening the monetary policy, interest rates have started hardening and this would impact the country’s economic growth. In addition, global factors such as rising crude oil and commodity prices continue to remain a cause of concern. With the current conditions index and expectations index moving in the opposite direction, the overall business confidence index value has not seen any lateral movement and maintained its level at 55.3 as seen in the previous survey. While outlook for investments, sales and employment in the next six months has moderated, there is marginal improvement in outlook for exports. While depreciation of the rupee against the dollar has eased the situation for exporters, companies maintain that the effect of the rupee rise still continues. — PTI |
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‘Sri Lanka has highest inflation in Asia’
Colombo, June 29 Sri Lanka has the highest annual inflation in Asia with April figures touching 25 per cent while Vietnam at 21.4 per cent has the second highest inflation rate in the region during the month, London-based HSBC Bank in a report ‘Sri Lanka inflation: How high will it go?’ said. Going by the New Colombo Consumers Price Index, the study says, the country has a history of high inflation, averaging around 11 per cent year-on-year since 1990. The report said since Sri Lanka was a net importer of food and imports its entire petroleum requirement, a large part of the increase in inflation could be explained by surging international food, commodity and oil prices. However, it is strong demand at home that has allowed retailers to pass the cost increases on to the consumer, the Financial Times reported quoting the study. “From a longer-term perspective, we believe steps should be taken to boost the potential growth rate of the economy so that Sri Lanka can maintain a 7 per cent rate of real economic expansion without fanning inflationary pressures,” the report said. — PTI
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M&M to pump in Rs 200 cr on used car biz
New Delhi, June 29 “By 2013, our plan is to have 300 outlets with presence in 92 cities. This could entail an investment of Rs 200 crore,” FirstChoice Wheels CEO Vinay Sanghi said. The company currently has 70 outlets in 40 cities. FirstChoice had recently raised Rs 80 crore through private placement and preferential allotment, which was aimed at funding existing expansion programme. “As of now, we are looking at debt and internal accruals apart from the recently raised fund to finance our expansion. At the same time we are also looking at an IPO in three years time,” Sanghi said. —
PTI |
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Indian firms slip in global ranking
London, June 29 While 13 of the 14 present in the latest list have taken a dip in their rankings, four companies - Mukesh Ambani-led Reliance Petroleum, state-run IndianOil Corp, realty major Unitech and housing loan giant HDFC - have completely moved out of the league. The latest FT Global 500 list was published by the UK business daily Financial Times, is based on the companies’ market capitalisation as on March 31, 2008. Reliance Industries is top ranked 80th in the latest list, topped by the US energy giant ExxonMobil. Except for tobacco-to-consumer goods major ITC (ranked 484th), all other Indian companies have seen their rankings decline from the previous list. There were 17 Indian companies in the previous list and had a total market capitalisation of about $590 billion. In the country-wise ranking based on total market cap of all their companies present in the list, India has been placed 15th. The US is at the top with 169 companies worth a total $9.6 trillion, followed by the UK, China, France and Japan. In terms of the number of companies present in the list, India and Russia are jointly ranked ninth after the US (169), the UK (35), Japan (39), France (31), China (25), Canada (24) and Germany (22). Among the Indian firms, RIL is followed by two state-run firms ONGC and NTPC at 148th and 206th positions respectively. While RIL has slipped 15 positions from its 65th rank in the previous list, ONGC and NTPC have also moved down from their 115th and 163rd ranks previously. Other Indian firms include Bharti Airtel at 218th (down from 193), realty major DLF at 329th (down from 195) and RCom at 350th position (down from 252). However, ITC climbed six spots to the 484th place, even as its market cap fell to $19.38 billion from $20.8 billion previously. Realty major DLF saw the steepest market value fall of $40.66 billion, followed by the country’s biggest private sector lender ICICI Bank with a plunge of $38.51 billion and Steel Authority of India ($35.46 billion). — PTI
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Market Update
The outlook for the market remains grim for the near term as steaming inflation, record high global crude oil prices and high interest rates threaten the pace of growth in the world’s second fastest expanding major economy, driving investors to the sideline.
In order to rein in inflationary pressures, the Reserve Bank of India (RBI) had last week increased repo rate and CRR by 50 basis points. Meanwhile, inflation has climbed further to touch 11.42 per cent. FII’s (foreign financial investors) have continued to press the sell button and have now sold equities of over $ 2 billion in the month of June alone. In the current calendar year, FII’s have dumped stocks worth over Rs 24,000 crore. Crude, meanwhile, showed no signs of mercy and continued its northward march to hit a new high of $ 142 last week. This along with political factors weighed upon the market sentiment, last week, pulling the BSE Sensex down by over 769 points to close at 13,802, its 13-month low. Nifty closed at its 10 month-low of 4,136, down by 210 points. What lies ahead?
The various monetary and fiscal initiatives undertaken by the government to tame inflation are posing a serious threat of ‘over-moderation’ in the economic growth. In fact, there is a distinct possibility of the GDP growth moderating to sub-8 per cent levels in 2008-09. As a direct impact, the tightening monetary situation, rising cost of capital, and lower availability of credit might spell a further slow-down in the industrial capital expenditure (capex). In line with the increased risk of over-moderation, corporate earnings growth is at risk. The risk to primarily on account of weaker demand and decline in profitability. The threat to the profitability is quite widespread as multiple sectors are facing rising input costs, growing manpower costs, and slowing volumes. In many respects, the country is facing a situation similar to one that prevailed in the late 1990s. During late 1990s. India had witnessed a growth of around 7.5 per cent that was followed by a slump in the growth for the next six years. Further, the mid/late 1990s was also characterised by fears of overheating, higher interest rates, and soaring inflation. Political situation in 1996 was also largely similar to the one prevailing now. The global macro environment that time was muddied by emergence of the Asian crisis. Indian economy is, however, unlikely to see lower-than-sustainable growth rates (sub-6 per cent levels) as seen in the late 1990s, as India has developed strenth in various areas since then. A major area where India is better positioned at present is the higher savings rate. Savings rate has witnessed a robust growth in the recent years, leading to an increase in the savings’ contribution to the GDP. Higher savings is one of the key drivers of the strong economic growth in the recent years, But, however, in the near term, we will have to live with higher inflation rate and tighter monetary policy, both of which are adversely inpacting the economic growth. For equity markets, the situation implies that the upside potential is capped due to domestic and global concerns. On the downside, while the market risks have increased, the domestic markets should find support around 13 times the 08-09 earnings. which is the long-term average valuation multiple. All in all, it could be a tough time for equities in the immediate furture. Any meaningful revival is likely only in the second half of the year on the back of some easing in commodity rally, anticipated signs of bottoming-out of housing slump in the US and roll over of valuations to 09-10 earnings. |
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Tax Advice
Q. (a) Kindly give guidelines for making a will for the disposal of movable and immovable assets after death.
(b) Can blood relations, close relatives and friends, subordinates working in a workplace bear witness to a will? (c) Under what circumstances does it become essential to get a will registered? — B.R. Chaudhary, Gurgaon A. The answer to your queries is as under: (i) It is not possible to publish a sample of will in the newspaper due to the constraint of space. (ii) Any person who is a major can be a witness to a will. (iii) The will is normally registered so as to prove the authenticity of the execution of the will as also to date on which the same has been executed. The law does not require that the will should be registered. However, I have, come across a few cases where authorities have not given credence to a will which is not registered specially in cases where the transfer of immovable property in the name of the legal heirs is involved. It would, thus, be advisable to get the will registered. Income tax
Q. 1. My wife and me deposited Rs 12,50,000, Rs 7,00,000, Rs 7,00,000 and Rs 2,95,000 in the UTI-CGGF (UTI-children gift and growth funds) in the name of our son D.O.B. July 6, 89 in the F.Y. 1999-2000 on different dates as gifts in the above mentioned scheme in four different folios. 2. On April 1, 2004, the above scheme was discontinued by the UTI and money was switched over to UTI-children career plan (balanced fund). 3. In the above UTI-CCP fund there is no declaration of any dividend, only bonus is declared which is not fixed but is usually 10 per cent issued every year by March and reinvested in the units. 4. In this scheme (UTI-CC plan), the child can withdraw money only after attaining the age of 18 years (original amount plus added bonuses). But, the scheme closes after attaining the age of 21 years. Since the investment is in different folios, I was getting four different statements. 5. I withdrew one folio of the investment of Rs 12,50,000 completely in F.Y. 2007-08 with the maturity value of approximately Rs 31,00,000. 6. In F.Y. 2008-09 I want to withdraw another folio of Rs 7,00,000 with maturity value of about Rs 18,00,000. 7. Remaining two folios of original investment of Rs 7,00,000 and 2,95,000 are to be withdrawn later on. 8. My questions are a) What will be the tax status of my son on the above money received by him? Is it tax free or not and how much tax he is supposed to pay if any? My son has no other income except for about Rs 60,000 as interest income from bank FDRs in the F.Y. 2007-08 and 2008-09. — Dr. J.L. Garg, Nabha A. The facts given in the query are not complete. I am, therefore, explaining herein the position of taxability of any income arising to a minor. In accordance with the provisions of Section 64(1A) of the Act, there shall be included in computing the total income of an individual all such income as arises or accrues to the minor child not being a child suffering from any disability of the nature described in Section 80U of the act or the income as arises or accrues to the minor child on account of the any manual work done by him or activity involving application of a skill, talent or specialised knowledge or experience. The facts given in the query do not indicate the nature of bonus declared in respect of UTI-CCP fund i.e. whether the same is in the nature of dividend. If it is in the nature of dividend, the same being tax free would not be taxable and, thus, would not be includible in the income of the parent. In case it is not in the nature of dividend, the same shall be includible and taxable in the hands of the parent whose income is higher of the two so long as the child is minor. Similarly, it is not clear from the facts given in the query whether various funds are in the nature of equity-oriented funds. If these are in the nature of equity-oriented funds, the amount which is received in excess of the amount invested in a particular scheme would not be taxable and, thus, not includible in the income of the parent. However, in case the same are not in the nature of equity-oriented fund, the excess amount received on redemption would be treated as a long-term capital gain and taxable in the hands of the parent. However, after the attainment of majority such income would be taxable in the hand of the major and the amounts gifted to him would belong to him and he will have the right of disposition of these amounts according to his liking. DP accounts
Q. My brother-in-law desires to gift my daughter some shares of company. My daughter is an NRI living in the US for more than seven years, while her uncle lives in India. She holds demat accounts in an Indian DP that were opened in December 2004. These accounts are called NRI-non repatriable and NRI — repatriable. Fresh purchases have not been made in these DP accounts so far. These accounts were perhaps not opened by the DP under PIS. She also holds a PAN card as an NRI issued under the Income Tax Act. My queries are as under: 1. To which of the two demat accounts such gifted shares can be credited? 2. If she sells the shares, can she transfer the proceeds to her existing usual NRO/NRE bank accounts? 3. Can she transfer the funds equivalent to the capital gains on sale of these shares to the US? — A.K. Mittal A. The answer to your queries is as under: (i) The gifted shares would be credited to NRI — non-repatrible demat account. (ii) The sale proceeds will be credited to Non-Resident Ordinary (NRO) rupee account. (iii) A non-resident Indian is allowed to remit an amount upto $ 1 million per financial year out of the balance held in the NRO account. However, with regard to remittance of capital gain on sale proceeds of shares, the authorised dealer bank may require a certificate from a chartered accountant with regard to the payment of tax due on such capital gain. TDS refund
Q. I am a house wife. I have never file any return because my income from FDR is below slab and have no PAN. This time, from April 1, 2007 to March 31, 2008 the bank has deducted T.D.S. for Rs 4115 on interest of Rs 43,610. Please guide me how can I get this TDS refunded? Also, in future do I have to file the return or not? Bank told my 15G was late. — Kuljeet Kaur, Yamunanagar A. The refund in respect of tax deducted at source can be obtained only by filing the Income-tax return. For this purpose, you will have to apply and obtain the permanent account mumber. The applicable form in your case would be ITR-1. |
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