11.01.2008

• Tata Nano unveiled
• Looks like it is history unfolding right before our eyes!!
• The launch of this low cost (Rs. 1 lakh) car by Tatas is getting the top billing. Some of the salient features of this car are:
• A two cylinder 623 cc all aluminium engine. It means a lighter and more mileage giving engine.
• It cranks out anywhere between 30 and 46 bhp.
• India pips China in the PE sweepstakes
• Look at the top recipients of private equity during the year 2007:
• India - $9.9 bn
• China - $9.5 bn
• These two are followed by Taiwan ($5.8 bn), Australia ($5.7 bn), Singapore ($3.3 bn) and Japan ($3.2 bn).
• Looks like our poor performance on this front was in the not too distant past. Just last year we were at the fourth position with about $5.4 bn behind Australia, Japan and China. Now we bested them!!
• Gubernatorial posts get a hike in salary
• Salaries were hiked for President, Vice President and Governors by the Union Cabinet decision yesterday.
• President: Rs. 100,000 (Rs. 50,000)
• Vice President: Rs. 85,000 (Rs. 40,000)
• Governors: Rs. 75,000 (Rs. 36,000)
• The salaries of President and the Vice-President were revised last in 1998. The revision became necessary in view of the fact that the Members of Parliament were getting Rs. 68,000 every month, which is greater than the amount being drawn by the Vice-President.
• Global FDI
• Global foreign direct investment grew an estimated $1.5 trillion in 2007.
• GIC Chairman
• Yogesh Lohiya
• Government clears 28% divestment in RITES
• The government had earlier decided to increase the paid up capital of the company from Rs. 4 crores to Rs. 40 crores by issuing bonus shares to the government.
• Rites presently has a net worth of over Rs. 500 crores. The share value of the company has been split from Rs. 100 to Rs. 10.
• DTAA with Mauritius may stay; but reworked
• This controversial double tax avoidance treaty with the country is likely to survive despite pressure from the income tax authorities.
• The pact is crucial for FIIs investing in India, as they invest through the Mauritius route in India.
• Mauritius is keen to develop itself into a leading financial center of the world by offering attractively low tax rates. Substantial capital gains exemptions are available through this treaty. This is what makes the country the second largest source of foreign investment to India after the US.
• Foreigners are allowed to hold 100% equity in their local companies. Also residence permits and work permits for foreign investors and professionals have been combined into a single occupation permit by Mauritius. This permit is given in three days flat.
• Mauritius also has a CEPA (Comprehensive Economic Cooperation and Partnership Agreement) with India.
• Rig exploration holiday on the cards?
• The government is considering allowing a rig exploration holiday for three years, for oil companies that are exploring for hydrocarbons in India. This is because of the acute shortage of rigs in the international markets.
• Such a holiday is becoming inevitable because rigs are not available. Rentals for rigs have shot up to $500,000 per day for a deepwater rig.
• However, exploration firms may not be enthused by this because of the riders attached to it. The riders include:
• The holiday will be applicable retrospectively from January 1, 2007.
• Firms seeking the holiday have to pay a 100% bank guarantee in lieu of the value of the work programme that they have committed to carry out.
• Getting a macro view of the economy.
• I am an enthusiastic watcher of Parthasarathy Shome, who is relinquishing his post as Advisor to the Finance Minister to take up an assignment with the UK government. Have interest in getting a macro picture on the Indian economy from his perspective? Be my guest and read his interview here. Some gyan from that interview goes here:
• How do you explain the revenue buoyancy we are now witnessing?
• Much of it has been due to the high GDP growth, but not all of it. Right policies coupled with administrative efficiency have played a major supportive role. There has been significant improvement in taxpayer compliance which has also resulted in a good increase in the number of tax payers.
• Brazil, which is not as IT savvy as India has 98% of its tax payments through the electronic mode.
• Can India’s tax payer base be expanded considerably?
• This base is already good. If you just take out 30% of Indians living below or at the subsistence level, there are over 700 mn people, of which 140 million could be income-earners (supposing that one in an average household of five is an earning member). Of this 140 mn, over half have their income from agriculture which is not taxed. So, the potential number of taxpayers could be 50-55 mn, and we already have 35 mn of them in the net. (About 9 years ago, there were just 14 mn tax payers in India). The challenge now is to get the 20 mn or so into the tax net.
• Is a 30% income tax rate moderate or high for a country like India?
• At 30% it is less than that in many developed countries. On purchasing power parity basis, the rate is not low either.
• UN’s take on the world economy
• The world economic growth rate will moderate to 3.4% this year, following the trend line down from 3.9% in 2006 and 3.7% in 2007.
• The UN report has suggested coordinated stimulatory measures by governments along with a joint action by governments the world over to avoid a ‘rout of the dollar’. It feared that a disorderly descent of the dollar would have recessionary repercussions for the world economies.