Beijing, October 9
China's economic growth is expected to weaken to 7.8 percent this year, the International Monetary Fund said on Tuesday as it warned of risks to emerging Asia if the euro zone crisis worsens and the United States does not avoid its "fiscal cliff".

However, the IMF said several Asian countries had fiscal room to support their economies if needed and it reiterated a long-standing view that some regional countries, including China, have weaker currencies than desirable.

The IMF sharply lowered its forecasts for India and predicted "less buoyant" growth in the near- and medium-term for Asia as a whole, cautioning any cool down in China's investment surge will add to the drag on regional and German manufacturers.

"The balance of risks to the near-term growth outlook is tilted to the downside," the Fund said in its semi-annual World Economic Outlook.

It predicted China's economy, the world's second-biggest, will "soft land" by growing 7.8% this year and 8.2% next year, boosted by interest rate cuts in June and July. Beijing has targeted growth of 7.5% this year.

In July, the IMF had forecast 2012 growth of 8% and 2013 expansion of 8.5%.

"In the short term, a further escalation of the euro area crisis and failure to address the US fiscal cliff are the main external risks," the Fund said.

Europe and the United States are the two biggest buyers of China's exports, which are growing at a single-digit pace — the weakest in three years — as western shoppers tighten their belts.

The IMF's China forecast has fallen into line with private sector economists. A September poll by Reuters showed they expect the world's growth engine to grow 7.7% this year, its weakest in 13 years.

The economic headwinds for Asia could worsen, the IMF said. The US economy could sink into recession if congress does not avert a "fiscal cliff" of automatic tax rises and deep federal spending cuts before a yearend deadline.

In that vein, the IMF said China, South Korea and emerging nations in Southeast Asia have room to loosen fiscal policy and shore up economic growth, if needed.

SLACKENING INDIA: The IMF said India, Asia's third-largest economy, is expected to grow 4.9% this year, down from a forecast in July of 6.1%. It pencilled in 6% growth next year, compared to an earlier 6.5% projection.

It cited red tape, weakening business sentiment, a rising current account deficit and rupee depreciation for the cuts in forecasts.

And unlike the rest of Asia, where inflation is expected to fall, the IMF said price pressures in India were elevated.

"Monetary policy should stay on hold until a sustained decrease in inflation materializes," it said.

The Reserve Bank of India left interest rates on hold in September after wholesale price inflation rose to 7.55 per cent in August.

Expectations for a twin slowdown in China and India led the IMF to shave its growth projections for developing Asia to 6.7% from 7.1% in July. The growth forecast for next year was trimmed to 7.2% from 7.5%. — Reuters

New Delhi, October 9
India and United States have agreed to expand cooperation in the areas of capital markets, infrastructure financing, financial regulation and to combat money laundering and terrorist financing.

This was announced in a joint statement released after the 3rd annual meeting of the India-US economic and financial partnership held between Finance Minister P. Chidambaram and US Treasury Secretary Timothy Geithner. RBI governor D. Subbarao and Ben Bernanke, chairman of the US Federal Reserve, also participated in the discussions.

The statement said the two countries discussed ways to further lower barriers to trade and investment to facilitate stronger growth and job creation. It was also decided to deepen cooperation at global forums like the G20 countries to contribute towards steering the global economy out of uncertainties.

On the opportunities for investments, it was pointed out that the 12th Five Year Plan aims at investments of US $1 trillion in the infrastructure sector.

Infrastructure debt funds and other recent capital market reforms offer huge opportunities for American businesses and investors.

Geithner described India's recent reforms initiatives as "very promising" and said it would have positive outcomes for the country's economy. It may be recalled a few months back US President Barack Obama had in an interview said that there are too many restrictions in the Indian economy for investors.

"The reforms outlined by the government of India offer a very promising path to improving growth outcomes for the Indian economy," he said at a joint news conference with Finance Minister P. Chidambaram.

Later in the day, during an interactive session with industry body Confederation of Indian Industry Geithner expressed his optimism on the India’s growth story in the future. “It’s highly encouraging to see the current wave of economic reforms being initiated by the Indian government as they would help in restoring investor confidence thus reviving growth too”, he said.

On global recovery, the US Treasury Secretary noted that most of the revival is contingent on how the developments in Europe pan out as the latter remains the biggest uncertainty. He further added though India and the United States havehistorically had good economic ties, they needed to be further strengthened in order to face the current bout of economic challenges.

The principal test of economic policy is to create an enabling environment in order to create more job opportunities, Geithner said. Showing his confidence in the recent slew of reforms initiated by the Indian government, he added the impact and direction of reforms have been powerful.

New Delhi, October 9
The second round of review of underdeveloped coal blocks allocated to companies got under way here on Tuesday with state-owned firms holding these blocks making a presentation before the Inter Ministerial Group (IMG).

Reports said of 31 coal blocks which have to be reviewed by the IMG headed by additional coal secretary Zohra Chatterjee over the two days, cases for 13 coal blocks were presented by the various PSUs including firms like Jharkhand State Mineral Development Corp and Chhattisgarh Mineral Development Corp.

Presentations on rest of the 18 coal blocks would be made tomorrow. IMG is likely to finalise its recommendations with regard to the PSU mines by October 20 and forward them to the Coal Ministry for adequate action.

Coal Secretary S K Srivastava had recently conveyed it to Public Accounts Committee that the recommendations of the IMG as far as coal blocks allocated to public sector firms would be finalised by October 20.

The coal ministry had earlier issued notices to Jharkhand State Mineral Development for sitting idle on coal blocks like Sugia Closed mine and Rauta and Buarakhap small patch closed mine, among others.

The notices were also issued to Chhattisgarh Mineral Development for not developing mines like Gare Palma sector-I, among others.

New Delhi, October 9
Air India pilots, who were demanding immediate payment of their salary arrears for the past four months, had drawn hotel bills worth Rs 141 crore in the last fiscal. This was stated on Tuesday by Civil Aviation Minister Ajit Singh at the Economic Editors' Conference. He also claimed the airline had been paying salaries to staff, including the pilots and "was only one or two months behind the schedule".

Among the measures taken by Singh to improve the work culture of the organisation includes rationalisation of pilots' place of postings. Henceforth, pilots will be posted to places from where they are flying out. So that they could save travel time and also the cost of their stay and transport.

The pilots had criticized other decisions, including those on implementation of flight duty time limitation and flight time limitation. But Singh said they had helped increase equipment usage to 11 hours instead of the earlier 5.9 hours.

Notably, terming the recent hue and cry by pilots over pending salaries a “misinformation”, an official said the management on an average was giving Rs 8.79 lakh to commander and Rs 3.65 lakh to co-pilot of a wide-bodied aircraft and Rs 5.5 lakh and Rs 2.53 lakh to co-pilot of a single aisle plane. In a letter to Singh, pilots said "things at Air India were not too different from Kingfisher Airlines."

"Our salaries and flying allowances too are pending for months and the uncertainty regarding the schedule of payments has become unbearable," ICPA general secretary Capt. T. Praveen Keerthi wrote.

Meanwhile, Singh said it would ask German airline Lufthansa to adhere to its original plan of including Air India in global airline group, Star Alliance. Star Alliance had put off Air India's entry into the global alliance as the airline was facing labour and integration issues at that time. In fact it expressed some interests in rival Jet Airways.

However, Lufthansa, a founding member of the Star Alliance, was accorded a lot of benefits for mentoring Air India to join the grouping. "I believe a lot of facilities were given to the airline (Lufthansa) so that it would mentor AI to join Star Alliance. They were given a lot of flights it was made almost open skies for them," the minister admitted.

Air India chairman & MD Rohit Nandan, however, said the Star Alliance had not responded to his letter about AI being as good as any other Indian carrier.

New Delhi, October 9
The Directorate General of Civil Aviation has asked Kingfisher Airlines to stop selling tickets following reports that it had started accepting bookings from Friday, a day after it proposes to end its lockout. "We have sent a notice to the airline to stop bookings," a top DGCA official said.

Soon after Kingfisher extended its lockout till October 12, travel agents said ticket sales had resumed for flights starting this weekend. The lockout was declared after a strike by engineers and pilots over delay in payment of salaries.

The airline got some reprieve as bankers agreed to release funds of up to Rs. 60 crore from escrow accounts for the carrier to make salary payments. But employees said they have not received any payment so far.

On October 5, the aviation regulator issued a “show cause” notice to the Vijay Mallya-owned carrier asking why its flying license should not be suspended or cancelled as it had grounded its entire fleet and failed to offer safe, efficient and reliable service. The DGCA has given the airline 15 days to file its reply. — PTI

New Delhi, October 9
In a relief for Vodafone like transactions, the Parthasharthi Shome committee on taxation on indirect transfers has recommended that such tax provisions should be applied prospectively and not retrospectively as it was announced in the annual budget.

It said that in case the government decides to apply such provisions retrospectively then no penalty or interest should be charged from the concerned companies.

The panel report on indirect transfers was made public by the Finance Ministry today had earlier submitted a report on GAAR in September asking it to be deferred by three years. The Finance Ministry has invited comments on the report and will take a final view after that. The ministry is likely to accept the recommendations of the Shome Committee as GAAR retrospective taxation were seen as two steps that had soured the investor sentiment in the markets and industry.

The panel said in its report that the language and scope of the amendments led to apprehensions about the certainty, predictability and stability of tax laws in India. "The legislation with retrospective application in particular obviating an earlier Supreme Court decision on the matter of indirect transfer was not expected and thus perceived in negative light," it said. It may be recalled that the Supreme Court had struck down the government's tax levy on Vodafone following the retro amendment was moved.

Based on inputs received from various stakeholders and the committee's own analysis, the committee is of the view that, as a matter of policy, the government should best avoid introducing fundamental changes in tax provisions without consultations and thus not anticipated by the taxpayer. The panel concluded that retrospective application of tax law should occur in exceptional or rarest of rare cases.

New Delhi, October 9
The government has decided not to proceed for the divestment through an initial public offer of 10% of Rashtriya Ispat Nigam Limited (RINL).

According to the statement of the Finance Ministry, the government remains committed to the disinvestment programme and will evaluate the decision in due course keeping in view all relevant factors.

RINL had earlier proposed to make an initial public offer of 48.8 crore shares of Rs 10 each by way of an offer for sale by the President, acting through the Ministry of Steel.