New Delhi, July 6
Mauritius is seeking to address India’s concerns on the bilateral tax treaty but has said domestic legislations like the General Anti-Avoidance Rules (GAAR) should not override bilateral agreements.

Mauritius Foreign Minister Arvin Boolell, who is on a visit to India, said Friday Mauritius was seeking certainty, clarity and stability to the Double Taxation Avoidance Agreement (DTAA) between the two countries.

He said Mauritius was ready to cooperate with India on exchange of information and curbing of round tripping that have been a concern on foreign investments coming into India. Round tripping refers to money going out of India and then being routed through so called tax havens to prevent payment of taxes.

Mauritius is concerned that implementation of GAAR, which is aimed at preventing foreign inflows from tax havens without paying taxes may hurt its financial services base as the bulk of foreign direct investment and FII flows into India are routed through Mauritius.

Mauritius said it has shared tax-related information in over 170 cases and is taking steps to curb round-tripping and even sharing of banking information that is outside the purview of DTAA.

Boolell has met Prime Minister Manmohan Singh and External Affairs Minister S.M. Krishna and discussed various issues including revision of DTAA and implications of GAAR on FIIs and other investors registered in the island nation. India has been in dialogue with Mauritius to revise DTAA since 2006 to curb the problem of tax evasion by companies and foreign financial institutions registered in the island nation.

Under DTAA, a firm registered in Mauritius is required to pay capital gains tax in the island nation on capital gains from investments in India. As Mauritius does not levy capital gains tax, the firms are not taxed anywhere. Most of the investment in India is routed through Mauritius to avail of this benefit and lately the Indian government has been seeking changes in the bilateral tax treaty to plug revenue losses.

“GAAR’s implementation in its current form will adversely impact Mauritius, which shouldn’t be singled out in this treatment as it’ll be beneficial for other countries”, Boolell said. He stressed domestic legislations like GAAR could not override a bilateral tax treaty.

Chandigarh, July 6
The depreciation of rupee by almost 30 per cent in the past one year, has led to a spurt in inward remittances in India. With rupee depreciating against the dollar, persons of Indian origin settled abroad have been sending in more money in the country.

Sources in the remittances business say the latter is seeing a significant spurt in inward fund transfers after the rupee devaluation since April last year.

However, more than the amount of remittances, it is the volumes that have risen significantly. Inward remittances totalled US $64 billion in 2011, compared with around $58 billion in 2010. This year, the total remittances are expected to log at $70 billion.

Sudhesh Giriyan, head, Xpress Money Services, a global money transfer company, said the rupee fall and a rise in the number of white-collar migrants to other countries, has led to the spurt in inward remittances. “We are witnessing a jump of 15- 20% in inward remittances because of rupee devaluation. The top receiving states for remittances continue to be Kerala, Tamil Nadu, U.P. and Punjab,” he added.

The upward revision to flows to India in 2011 (by $5.8 billion) is mainly due to a weak rupee and robust economic activity in the Gulf Cooperation Council countries, which are the major destinations of migrants. The maximum inflow of remittances are coming in from West Asian countries like UAE and Saudi Arabia, besides Europe and Australia.

Giriyan said that the recent RBI move to raise the number of remittances to a single individual from 12% to 30%a year, will also lead to more remittances. He, however, warned the government move to tax remittances by 12.36% would be a retrograde step.

S. Paul, chief of Paul Merchants, the largest agent for Western Union Money Transfer, too agreed the volumes of transactions have gone up.

“We’re witnessing a spurt in volumes of remittances by almost 5 per cent. However, the total inflow of foreign currency remittances hasn’t increased,” he noted. 

Solan, Himachal Pradesh, July 6
The world’s largest cosmetic and beauty company, the €19.5 billion L’Oreal Group, will soon come up with a Rs 350 crore manufacturing facility located in Himachal Pradesh’s industrial hub of Baddi-Barotiwala-Nalagarh.

This will be the French-based multinational’s second plant in India with the first one being at Pune, where it produces various cosmetics products.

Company officials have submitted a proposal to the state industries department to set up the plant, which will provide employment to at least 500 people directly and an equal number indirectly.

Himachal Industry Minister Kishen Kapoor said the state’s investor-friendly policies had facilitated the entry of L’Oreal. “Apart from this, another major group — Indo Rama — has also invested in Baddi”, he added.

Tilak Sharma, deputy industries director at Baddi, said his department had contacted L’Oreal officials after learning the company planned to set up a facility in north India. “A subsequent meeting of Kushal Lokhande, industrial director at Loreal’s Pune plant, with Chief Minister P.K, Dhumal helped us in finalizing this plant”, he added.

With 27 global brands and products distributed in 130 countries, L’Oreal has 613 patents filed in 2011.

The management L’Oreal’s Indian unit is now in the process of identifying a suitable site for setting up the new plant. It is also learnt the company may take over some sick unit in the Baddi area to commence manufacturing operations.

New Delhi, July 6
The Indian economy could see a slower growth at 5.6-6 per cent in the current fiscal if the monsoon remains poor, global financial services major Citigroup has said.

The estimate is much lower than Citi's earlier growth projection of 6.4 per cent for India, which saw its economic expansion touch a nine-year low of 6.5 per cent last fiscal.

"A poor monsoon could result in GDP coming in at 5.6-6 per cent," Citi said in a report on Thursday.

The cumulative rainfall in June was about 30 per cent lower than normal.

"Despite the changing composition of GDP (share of agri at 15 per cent against 30 per cent) and mitigating factors such as the NREGA (National Rural Employment Guarantee Act) scheme, growing share of winter crop, use of gold as collateral, the economy is not yet water-proof," the report noted.

About one-half of India’s workforce is into agriculture and only 36% of the country's land is irrigated. After clocking 8.4% growth for two consecutive financial years, the Indian economy expanded just 6.5% in the last fiscal.

"As is well known, the interplay of the four deficits (current account, fiscal, liquidity and governance) has taken its toll on the India story with growth slowing to a nine-year low," Citi said.

According to the report, small fuel price hikes, coupled with measures that are largely execution in nature, could make the environment conducive for investment. — PTI

New Delhi, July 6
In view of the deteriorating global economic situation over the last one year, achieving average growth rate of 9% in the next five years is not possible, and it may be 8-8.5%, Planning Commission deputy chairman Montek Singh Ahluwalia said Friday.

"It is not possible to think of an average of 9% (in the 12th Plan, 2012-17). I think somewhere between 8% and 8.5% is feasible," Ahluwalia said on the sidelines of a conference of state planning boards and departments.

Last year, the Planning Commission got the approval for the 9% annual average economic growth target under the approach document for the 12th Plan from India’s apex decision making body, the National Development Council (NDC), headed by the PM with all the chief ministers and cabinet ministers on board.

"When I say feasible...That will require major effort”, he said, adding "I think given that the world economy deteriorated very sharply over the last year...The growth rate in the first of year of the 12th Plan (2012-13) is 6.5 to 7%."

He also indicated he would soon share his view with other commission members to choose a final figure on the economic growth target to put before the NDC for its approval. — PTI