The Tribune, Chandigarh, India

	RBI raises FII cap in G-secs, corporate bonds by $5 bn Mumbai, January 24 The Reserve Bank today hiked the investment limits for foreign institutional investors in government securities and corporate bonds by US $5 billion each, taking the total cap in domestic debt to $75 billion, with a view to bridging the current account deficit. Further liberalizing the norms, the three-year lock-in period for foreign institutional investors purchasing government securities (G-secs) for the first time has been done away with, the central bank said. The sublimit of $10 billion for investment by FIIs and long-term investors in G-secs stands enhanced by $5 billion, it said. The limit in corporate debt, other than infrastructure sector, stands enhanced from $20 billion to $25 billion, RBI said. With increase of $ 5 billion in each of the two categories, FIIs and long-term investors can now invest $25 billion in G-secs and $50 billion in corporate debt instruments, taking the total to $ 75 billion. The earlier FII investment limit in G-secs was $20 billion and for corporate debt it was $45 billion, including sublimit of $25 billion for infrastructure bonds. The RBI further said: "The residual maturity condition shall not be applicable for the entire sublimit (in G-secs)of $15 billion but such investments will not be allowed in short-term paper like treasury bills, as hitherto". The overall FII limit of domestic debt is distributed through a host of categories across government, corporate and infrastructure debt. Long-term investors include sovereign wealth funds, multilateral agencies, pension funds and foreign central banks. The government, which is battling a high current account deficit (CAD) — the gap between inflows and outflows of foreign funds —is trying to attract more foreign funds into the country. The CAD touched a record high of 5.4% in the July-September quarter of the current fiscal. In order to check outflow of foreign currency, the government recently hiked import duty on gold and also took steps to encourage mutual funds park their gold in deposit schemes offered by banks. As a measure of further relaxation, the RBI added that it has dispensed with the one year lock-in period on holding infrastructure bonds. — PTI Rupee recoups losses on debt limit hike The rupee recovered its early losses and ended almost unchanged at 53.68 against the US dollar today after RBI hiked the FII investment limit in certain debt instruments by US $5 billion each and removed lock-in period for overseas investors buying G-secs for the first time. The rupee commenced lower at 53.77 a dollar from previous close of 53.67 a dollar and declined further to a low of 53.
	Govt mulls raising taxes on the rich ahead of budget New Delhi, January 24 India should consider the argument for higher taxes on the "very rich", Finance Minister P. Chidambaram said in comments likely to fuel speculation about steps he may take in next month's budget to boost tax flows and narrow a yawning fiscal gap. In an off-the-record pre-budget meeting with Chidambaram and finance ministry officials on January 7, some economists pressed for higher taxes on the rich to make sure they are paying their fair share, alarming business lobby groups that warn such a move would stifle growth. The finance minister's comments come against the backdrop of a global debate, from the United States to France, about whether the very wealthy pay enough taxes. The growth rate of Asia's third largest economy is widely expected to slip to a decade-low in fiscal 2012-13 as the government grapples with ballooning budget and current account deficits and high inflation. Chidambaram wants to plug holes in the nation's finances by cutting expenditure and increasing revenues through improved tax collection. "I think we should have stability in tax rates but we should consider the argument that very rich should be asked to pay a little more on some occasions, but that is not the view I am expressing. That’s simply the argument I’ve heard and I am repeating," Chidambaram said in a TV interview aired on Thursday. Chidambaram offered no definition of the "very rich", but his comments are likely to please many in his centre-left Congress party who feel recent reforms to further liberalise the economy favour corporate India at the expense of the common man. The Congress party is facing a tough fight to hold on to power in a series of state elections this year and general elections due by May 2014. "It’s good electoral politics but economically doesn't make sense," said Venugopal Dhoot, who controls the diversified Videocon Group. It was not immediately clear if Chidambaram was referring to higher taxes on income, assets or capital gains in a regime that currently makes India a good place for the rich to live. At present the top income tax rate is 30%, which applies to earnings above Rs 1 million a year. There are just 35 million taxpayers in a country of 1.2 billion people, and of them about 1.5 million declare annual earnings of more than Rs 1 million, according to the finance ministry. There is no inheritance tax, an issue Chidambaram raised as a concern after being appointed finance minister last August. In 2009, his predecessor withdrew a 10% surcharge on the 30% rate paid on earnings above Rs 1 million. A government official with direct knowledge of the debate in the finance ministry said the focus is on plugging loopholes in the collection of income tax paid by individuals and companies. "There are options of revisiting the inheritance tax and surcharge on income tax paid by the individuals," the official said, declining to say if these were firm proposals on the table for the budget to be unveiled around the end of February. MILLIONAIRES AND BILLIONAIRES: "Even if they bring (back) the surcharge that will only add about Rs 15-20 billion, which is a drop in the ocean and will be lost in the decline of tax revenues that will arise due to lower compliance if tax rates are raised," said Surjit Bhalla, chairman of advisory firm Oxus Investments. India's richest people tend to own businesses and other assets and thus have comparatively little exposure to salaries tax. Billionaire Mukesh Ambani, for example, was paid salary and perks of Rs 150 million in the last fiscal year by Reliance Industries, which he controls. According to Forbes, Ambani is worth $21 billion. Azim Premji, founder of India's No. 3 software firm, Wipro, and India's third-richest person said in Davos, Switzerland on Wednesday that in principle he was not against higher taxes for the wealthy. — Reuters
	HDIL reassurances fail to halt stock slide Mumbai, January 24 An executive at Housing Development & Infrastructure Ltd, whose shares have plummeted on market speculation over its debt repayments, denied on Thursday it was in financial trouble. HDIL's share price tumbled anew by 22.7% after already falling 20.4% in the previous two sessions. The losses, triggered when HDIL said its vice chairman and co-founder cut his stake by more than half, has wiped Rs 19.5 billion from the firm's market value. "There have been lots of rumours in the market about bankruptcy and defaults, which we totally deny," said Hari Prakash Pandey, vice-president of finance at HDIL, on a conference call with investors. "We’re very comfortable with the debt repayment schedule and we are as per schedule," he added. The fall in HDIL's share price highlights concerns about the high debts at property developers, which are facing trouble paying back interest at a time of slowing sales. HDIL was also hit by worries about the widespread practice of so-called promoter pledging in India, in which controlling stakeholders of companies pledge their shares as collateral in exchange for loans or working capital. vice chairman Sarang Wadhawan sold 5 million shares worth Rs 570 million, reducing his stake to 0.99% from 2.19%, HDIL said Tuesday. The company is 37% owned by its founders including Wadhawan, with 98% of their shares pledged with banking and financial institutions. Pandey said Wadhawan sold his stake because the company had to meet immediate debt and principal repayments, as well as a final tranche of the payment for a land transaction in Mumbai. "We took certain decisions which have not gone down very well with our shareholders, and the promoters have assured that there will not be any further sale of shares," he added. A slowdown in home sales in Asia's third largest economy, caused by sticky inflation and high interest rates, is putting pressure on property developers who loaded up on debt during India's real estate boom of 2006/07. — Reuters
	IDBI AMC set to float fund for first-time investors Ruchika M. Khanna/TNS Chandigarh, January 24 IDBI Asset Management Ltd is all set to launch the first Rajiv Gandhi Equity Savings Scheme, targeted at taxpayers in the 20 per cent tax bracket. The scheme, announced by the government in the FY 2012-13 budget, will help bring in more people in the equity markets, with a lesser risk on their investments and help them get tax benefits. The company is also diversifying its product portfolio, bringing in more equity funds, corporate debt funds, asset allocation funds and hybrid funds, in a bid to capture more retail investors in its fold. In spite of the spate of redemptions in the mutual funds, IDBI AMC is upbeat that both the equity and debt funds will continue to receive investor attention. In the past one year, equity funds worth Rs 20,000 crore have been redeemed. Debasish Mallick, MD & CEO of IDBI Asset Management, said that the company has 11 product offerings in its portfolio. “Within the next ten days, we will be launching the IDBI Rajiv Gandhi Equity Savings Scheme, and we are hoping to get the early bird advantage and rope in a large number of retail investors. Under this scheme, any first-time equity investor with an annual income of up to Rs 10 lakh can invest Rs 50,000 and claim deduction for 50% of this investment (over the Rs 1 lakh income tax exemption limit). Since the funds collected will be invested in bluechip stocks and shares of PSUs, the risk profile is quite less,” he said. Asserting debt funds give a good return, Mallick said somehow retail investors were not keen on investing in these funds. “It is mostly companies, institutional investors and high net worth individuals who have been investing in debt funds, while retail investors continue to opt for equity funds. But debt funds allow the investor capital gains as well as interest, which assures a high return. He said IDBI has an investor base of 110,000. “In the next fiscal, we will be launching more equity funds, corporate debt funds, asset allocation funds and hybrid funds to increase our investor base”, he added.
	Tesco seeks clarity on multibrand retail policy New Delhi, January 24 The chairman of Tesco PLC met Trade Minister Anand Sharma, seeking clarifications on the country's decision to open its supermarket sector to foreign investors, the government said in a statement on Thursday. The government threw India’s doors open to foreign supermarket chains last year in the teeth of fierce domestic opposition, but attached strict conditions, including on sourcing, in the policy. In a meeting in Davos, Switzeland, the venue of the ongoing World Economic Forum meeting, Sharma told Tesco chairman Richard Broadbent that foreign investors would be provided "hand-holding" while entering the Indian market, and asked Tesco to put their concerns about the retail policy in writing, the statement said. — Reuters
	Suzlon to recast $1.8 bn debt Mumbai, January 24 Lenders to Suzlon Energy Ltd have approved the wind turbine maker's corporate debt restructuring plan for US $1.8 billion, the company said on Thursday. The deal would give the world's fifth-largest wind turbine maker, which defaulted on a $200 million convertible bond redemption in October, enhanced working capital facilities by $350 million, it said in a statement. State Bank of India is the consortium leader and has a Rs 3,500-crore exposure to the company, adds PTI) "The package includes a two-year moratorium on principal and term-debt interest payments, a 3% reduction in interest rates, six-month moratorium on working capital interest..." it said. Also, $270 million, or two year's interest payment during moratorium, will be converted into equity or equity-linked instruments over the next two years, the company said. — Reuters