The Tribune, Chandigarh, India

	APEC Summit Leaders caution against mounting protectionism Singapore, November 14 Singling out the US for trends “going in the opposite sense of free trade”, Mexican President Felipe Calderon said on Saturday trade protectionism was a major threat to the global economic recovery. Many countries were moving toward protectionism in practice even as they gave lip service to free trade in principle, Calderon suggested. That was a theme of many speakers at the meeting of the 21-member Asia Pacific Economic Cooperation (APEC) forum, including Russian President Dimitry Medvedev. In the US, “the old wrong idea of protectionism” was emerging in the Congress and among other policymakers, Calderon said, citing as an example increasing “buy American” clauses in US legislation. In a global economy of multinational companies, such policies do more harm than good, Calderon said arguing: “Protectionism is killing North American companies”. US President Barack Obama was due to arrive in Singapore on Saturday for the APEC summit after an overnight visit to Japan, where he also pledged support for trade liberalisation. ‘Continue stimulus policies’ Australian PM Kevin Rudd, urged the leaders not to give up the quest for a global trade deal in the Doha round of negotiations.“If we do not, then frankly we are denying ourselves globally an additional trillion dollars in economic activity,” Rudd told a news conference on Saturday. “Doha has the potential to unleash a further increment of global growth.” US Special Trade Representative Ron Kirk harped on the same theme at Saturday's APEC business leaders meeting. “APEC economies have both trading power and the collective potential to stimulate recovery and move global trade in the right direction, away from protectionism and toward a stronger, more open rules-based system,” Kirk said. Aside from endorsing further moves toward free trade, the leaders of APEC will agree to stick with economic stimulus policies until “a durable economic recovery has clearly taken hold,” according to a draft declaration to be issued at the end of the summit. — Reuters
	Inflation up at 1.34 pc in October New Delhi, November 14 Inflation more than doubled in a month to 1.34 per cent in October despite cheaper food prices, which analysts see would strengthen the case for Reserve Bank to tighten money supply. Strong showing by the industry in September has already added fuel to the debate for withdrawing fiscal stimulus. Inflation was 0.5 per cent in September, according to data from the government, which has switched to the monthly mode for measuring rise in wholesale prices. Among food items, vegetable prices declined considerably to 16.43 per cent from September level, but figures of the actual decline were not available. But onions and potato prices rose 29.88 per cent and 11.18 per cent, respectively. On a yearly basis, prices of potato have doubled since October last year, while onions were expensive by 37 per cent. With the RBI expecting inflation to touch 6.5 per cent by the end of this fiscal, analysts believe the Central bank might go full steam on ending its easy monetary policy, given the upswing in industrial growth and global recovery. “I expect CRR (cash reserve ratio) hike by 25 basis points in January policy. There could be some action on policy rates,” said HDFC Bank economist Jyotinder Kaur. With industrial production up by 9.1 per cent in September, after close to 11 per cent expansion in August, the RBI might not have to think twice, analysts said. The Central bank had already announced the first phase of the 'exit' from its easy money policy when it reviewed its monetary stance in October. — PTI
	Aviation Notes Money matters by K.R. Wadhwaney No matter what measures are envisaged, Air India's bankruptcy cannot be avoided. Damage is so huge that nothing can be done to save the ailing airlines from bankruptcy. It cam, at best, be deferred. The airline will be provided life-saving equity of Rs 2,000 crore at the rate of Rs 500 crore for four months (from December 2009 to March 2010) with a rider that it will reduce its losses by cutting expenses and strengthen its revenue earning muscle. The phased equity will be utilised in disbursing salaries to the staff. Analysts believe that losses will not reduce nor the earnings will improve, causing further turmoil in the already beleaguered sector. A Group of Minister (GoM) under the chairmanship of the Finance Minister met on November 12 and agreed to recommend to the Cabinet phase-wise infusion of funds for four months. The GoM, which will monitor the situation, will recommend further infusion if the progress is satisfactory. The analysts feel that improvement is unlikely to come about as plans are far from being upto the mark. The GoM will undertake a monthly review of the airline's performance but the analysts feel that it will be merely a paper exercise. Pruning needs to be done at the top. There is a suggestion that the productive-linked-incentives of top officials should be drastically cut, but it has not been accepted by the directors who will be affected by it. Whatever the situation, there is unrest among staff for operation of different sets of rules for employees. Instances galore of discontinue flying on profitable routes and continue operating flights on unprofitable routes. Realistic thinking is the essence of the problem.
	Fiscal stimulus to go gradually: Montek Tribune News Service New Delhi, November 14 Deputy Chairman of the Planning Commission Montek Singh Alhuwalia today sought to clarify on the issue of whether or not the government was looking at withdrawing the fiscal stimulus and said it would be phased out gradually which could happen in the next fiscal. The Planning Commission Deputy Chairman admitted that the country was facing the problem of inflation but said it would be completely wrong to give the signal that inflation was a big problem. Talking to Karan Thappar on CNBC TV18 Alhuwalia said in his view the inflation at the moment was only heading up to where “it should be heading”. “If you believe that your target is zero inflation then you should be taking action. If you think five per cent inflation is ok then all that inflation is doing is it is getting back to where it should be.” He agreed that food prices were going up, but said this was a global phenomenon and that there was a need to increase the minimum support price to give farmers the benefit. He, however, said there was a need to bring down the vegetable prices which had gone up in the last few months. This he said was as a result of the temporary disruption and would come down. To a specific question on the different notes struck by Prime Minister Manmohan Singh and Commerce Minister Anand Sharma on withdrawing the fiscal stimulus, Alhuwalia said: “Read carefully, the Prime Minister didn’t actually announce exactly what we are going to do. He was talking of the stimulus as a whole which, really means the fiscal deficit”. “It is next year that we must take a decision to reduce the fiscal deficit and if so by how much. What the Commerce Minister had in mind was a particular component of the stimulus which, is directed to the exports sector. So I am sure that he was concerned with that particular constituency. A stimulus doesn’t mean every single component of the stimulus, it means the overall stance of fiscal policy.” Further clarifying he said the logic of withdrawing the stimulus gradually was that you are going to reduce the fiscal deficit and added “how you reduce the deficit is entirely up to you”.
	Country’s first aerospace SEZ launched Belgaum (Karnataka), November 14 Aerospace and engineering major QuEST Global today launched the country's first aerospace special economic zone (SEZ) here for development and manufacture of aerospace precision engineering products. Inaugurating the SEZ, Civil Aviation Minister Praful Patel said India was set to emerge as a major destination in aerospace engineering after showcasing its strength in IT and engineering sectors. The SEZ has come up on a 300 acre site at an investment of Rs 150 crore. “Had India not notched up a faster growth in aviation sector and acquired a large number of aircraft, its capability in aviation engineering would not have been noticed. The offset clause of defence and civilian aircraft purchases had also helped foreign majors to look at us,” he said. Patel lauded the role played by Karnataka in promoting the aerospace industry saying: “Indian companies based in Bangalore and Mysore have taken up major works for leading international aviation companies". Chief Minister BS Yeddyurappa said the SEZ would act as a catalyst to foster economic growth in the region. “We are in the process of acquiring 5,000 acres of land to develop industrial clusters across the state,” he said. — PTI
	Investor Guidance No tax relief on company fixed deposits by A.N. Shanbhag Q I wanted to know whether investing in a company fixed deposit for five years or more is eligible investment under Section 80C? — Gupta A No, an investment in company fixed deposits does not attract any tax benefits. The tax benefit u/s 80C is limited to bank and PO FDs only. Bonus issue Q I hold some shares in a company that has announced a bonus issue. Can the notional loss on sale of original shares be adjusted against the gain on sale of bonus shares? — Sinha A The answer to this question would depend upon the date of acquisition of the original shares. If the original shares are over a year old, there will be long-term loss. Now, since long-term gains on equity are tax-free, the long-term loss cannot be adjusted against any other income. In other words, the long-term loss on sale of original shares cannot be adjusted against the short-term profit on sale of bonus shares. Direct Tax Code Q My question is regarding the application of the new Direct Tax Code (DTC) to PPF investments. I have opened a PPF account in February 2006. Will the amount due on maturity along with interest withdrawn be taxable or whether the balance at credit as on March 31, 2011, be exempt and only the balance taxable? — Vivek Vasishat A 1 DTC is in the discussion stage. It will become operative w.e.f. April 1, 2011, after incorporating some of the suggestions made by the public. 2 The balance to your credit as on March 31, 2011, will continue to be tax-free but the interest earned thereon will be taxed when it is withdrawn. 3 I hope the DTC will incorporate some amendment before it becomes a law to eliminate this provision . PPF account Q I opened a PPF account on March 31, 1990, that was subsequently extended for five years. Please let me know what is its maturity date? If it is March 31, 2011, the interest from April 1, 2010, to March 31, 2011, is being credit on April 1, 2011. Whether interest credited on April 1, 2011, will also be exigible to tax on account of the provisions of the new Direct Tax Code though it is for the FY 2010-11, but credited in FY 2011-12. — Sohan Singh Dhah A The language of the rules related with the dates of maturity, withdrawals and loans is quite complicated. We shall simplify the rules for you. The various dates depend upon the financial year and not on the date of its opening. Now, your PPF account was opened in FY 1990-91. Maturity: 1991 + 15 = 2006. Matures on April 1, 2006. You have extended the account by five years once. Therefore, your new maturity is on April 1, 2011. The interest is deemed to be credited to the account on the last date of the FY, i.e., March 31. It will not be liable to tax. Equity mutual funds Q Under the new tax code what will be the status of dividends declared by equity mutual funds. Will they be tax-free in the hands of investors? Will the dividends declared by equity mutual funds be subject to dividend distribution tax? — Ratan A Under the new tax code, capital gains from equity are fully taxable. Similarly, dividend distribution tax is payable on dividends. Once it is paid, the net dividend distributed is tax-free in the hands of the investor. The authors may be contacted at wonderlandconsultants@yahoo.com