Feb. 27 – India’s commerce and Industry minister Kamal Nath has set an export target of US$200 billion during the fiscal year 2009-10. Due to poor economic conditions the government has also lowered this fiscal year’s export target from US$200 billion to US$175 billion. India’s export sector grew 30 percent from January 2008 to September, however in January this year the sector was down 16 percent from the year earlier. Experts estimate the slowdown in exports to continue until March this year.
By way of offering exporters 26 additional sops on Thursday, including interest rate subsidies on export loans, enhanced reimbursement of duties, and a longer period to fulfill export obligations etc. the government hopes to decrease the burden on exporters. Nath also said that the most affected industries leather and textile would get a special package of Rs 325 crore (US$64 million) and the threshold limit for recognition as premier trading house would be lowered from Rs 10,000 crore (US$1.9 trillion) to Rs 7,500 crore (US$1.5 trillion). Continue reading
Feb. 26 – A parliamentary panel released a report on Wednesday stating that the Commonwealth Games scheduled to be held in New Delhi in October 2010 would need nothing short of a miracle to be completed on schedule. At a time when India and China are competing neck and neck for Asian dominance, India seems drastically under prepared for what the country hails as India’s Olympics. According to the report, only half of the 30,000 extra hotel rooms and most of the sporting venues needed would be completed by October.
The panel blames the lackadaisical attitude on the poor coordination between the various government agencies. "The 2010 games are drawing near and so many projects are yet to be initiated, let alone being completed," the AFP quoted the report by the panel on transport and tourism headed by federal lawmaker Sitaram Yechury. Continue reading
Feb 25 – Doling out incentives to win more votes before the general elections this year the central government cut factory gate duties by two percent to eight percent and service tax to 10 percent, a cut of 2 percent.
While the move is meant to boost sentiments in the most severely affected industries before the elections, it will also put a strain on the fiscal deficit, which is burgeoning to one of the largest in the world.
Economic Affairs Secretary Ashok Chawla said the duty and service tax cuts would result in a revenue loss of 300 billion rupees (US$6 billion) or 0.5 percent of the GDP in the next fiscal year. This follows the announced loss of 400 billion rupees (US$8 billion) already announced by P. Chidambaram. Higher civil servant wages, sops to the agricultural and education sectors, have already helped swell the federal fiscal deficit to 6 percent of gross domestic product in 2008/09. Continue reading
Feb. 24 – On Monday, the Indian government finally gave their nod to Japan’s NTT DoCoMo buying a 27.3 percent stake in Tata Teleservices Ltd the country’s sixth-largest mobile operator for 129.24 billion rupees (US$2.6 billion). The deal will also allow NTT DoCoMo to acquire 20.25 percent in Tata Tele's listed unit Tata Teleservices (Maharashtra) Ltd, for 9.45 billion rupees (US$188 million) the government said. The twin investments make this one of the largest foreign direct investments to flow into India in the past year and NTT DoCoMO's largest overseas invetsment in eight years.
This marks the Tata Group’s third major international deal. In 2007, Tata Steel bought the Corus Group Plc for US$13 billion marking India’s largest takeover. Last year the conglomerate’s automobile arm Tata Motors bought Jaguar and Land Rover for US$2.3 billion. Continue reading
Feb. 23 – Foreign firms looking at investing in Indian companies on an installment basis now have more clarity. A Foreign Investment and Promotion Board official recently clarified regulations for FDI via partly paid up equity. According to the clarification, the FIPB will allow Indian companies to issue partly paid up capital to foreign companies if the foreign companies agree to fully pay the requisite equity within 18 months.
The clarification means that there is no longer any disconnect between the Foreign Exchange Management Act and the Companies Act. Earlier, the FEMA didn’t allow issue of partly paid-up shares to non-residents while the Companies Act permitted it. This created ambiguity in the law leading FIPB officials to decide on partly paid up capital on a case by case basis.
As the financial crisis grips India tighter, the country is opening its doors wider to FDI. The Cabinet Committee on Economic Affairs (CCEA) recently released a statement that equity investments routed through companies in which a majority ownership and control is in the hands of Indians would be treated as fully domestic equity. The move effectively made room for millions of dollars of FDI to pour into the country. Continue reading
Feb. 20 – India’s technology prowess and large consumer market is attracting transfers in both technology products and services. While India encourages both the transfer of technology and technical services it lays down certain ground rules for the import, sales and export of technology from Indian soil.
Below are some of the rules and regulations governing technology collaborations for foreign firms in India:
a. Technology Licensing
Technology licensing to Indian companies is permitted and encouraged under Indian exchange control regulations. Payment of royalties up to certain limits is permitted without any prior regulatory approvals. These limits are lump-sum royalties of US$2 million, and recurring royalties of 5 percent on domestic sales and 8 percent on export sales, based on the net ex-factory sales price of the products. Continue reading
Feb. 19 – Foreign companies looking at a presence in India can set up five different kinds of entities depending on how they want to be represented in India. Companies wishing to maintain their foreign company status can set up a Liaison Office, Project Office or a Branch Office. Those companies that wish to operate as an Indian Company can set up a Wholly-owned Subsidiary or a Joint Venture Company. Due to ease and scope of work allowed most foreign companies decide to open a wholly owned subsidiary. The following enumerates shareholding and scope of work under the specific entities: Continue reading
Feb. 18 – Just ahead of the auspicious wedding season gold prices in India have soared to an all time high topping US$950 an ounce or Rs. 15,000 for 10 grams. India is the world’s largest consumer of the metal and demand usually piques ahead of the wedding season.
Experts believe the high prices can be attributed to several factors. Indians usually buy gold as the safest form of investment. Economists feel that due to the economic crisis Indian banks and financial institutions have been hedging gold which has led to the sky high prices. A weakened Indian rupee and high prices are also believed to have hit demand this year.
“Record prices have seriously hurt demand,” Rajesh Mehta, chairman of Rajesh Exports Ltd., India’s biggest jewelry producer and exporter, told Bloomberg in a telephone interview from Bangalore. “The economic slowdown isn’t helping demand either.” Continue reading