The Fiscal Sops Would Result In Revenue Loss - Feb 26, 2009

The Lok Sabha has approved the Interim Budget, including the Finance Bill 2009 by voice vote despite a walkout by the Opposition National Democratic Alliance and the Left parties.

Pranab Mukherjee, the acting Finance Minister said "The government is keen on restoring business confidence in the services sector. It is also our objective that the dispersal between CENVAT rate and the service tax rate is reduced with a view to moving towards the Uniform Goods and Service Tax."

The announced fiscal sops will be effective from midnight and will have revenue loss of Rs. 29,000 crore to the government. The fiscal sops would result in revenue loss of Rs. 14,000 crore in service tax, Rs 8,500 crore in excise duty and Rs 6,600 crore in customs duty. Mr. Mukherjee said that the full impact of the recession in other parts of the world, especially Europe and Asia, was yet to unfold. Due to the strong export linkages with these economies, it was likely that the Indian economy might feel further impact in the coming months. To counter any such effect, the United Progressive Alliance had taken these decision, he said adding that the Union Budget was just one of the instruments for addressing economic policy concerns and the government would take necessary measures as and when required, until the next regime took over.

He also said that the irregularities faced by suppliers to Special Economic Zones with regard to treatment of export profits will be addressed in the regular budget. As regards the States, Mr. Mukherjee said that as part of the stimulus package they had been allowed to borrow an additional 0.5% of the Gross State Domestic Product (GSDP). The exemption, he added, would continue in 2009-2010 with the possibility of further review.

Finance Minister Announces The Third Stimulus Package - Feb 25, 2009

The Finance Minister Pranab Mukherjee announced the much-awaited third stimulus package. The stimulus has offered across-the-board cut in excise and service tax rates to save and support the domestic economy. He said the general reduction in excise duty rates by 4 percentage points, from December 7, 2008 would extend beyond March 31, 2009.

The stimulus includes 2% cut in service tax rates to 10%. The minister announced that on goods that attract 10% excise duty will now be charged at 8%. However, excise rates on items that attract 8% and 4% excise duty will not be changed. Further the rate of excise duty on bulk cement has also been reduced from 10 per cent or Rs. 290 per tonne to 8 per cent or Rs. 230, whichever is higher. The customs duty on Naphtha will continue beyond March 31, 2009.

The government is keen on restoring business confidence in the services sector. It is also our objective that the dispersal between CENVAT rate and the service tax rate is reduced with a view to moving towards the Uniform Goods and Service Tax, the Minister said.The Lok Sabha later approved the Interim Budget, including the Finance Bill, 2009 and related Appropriation Bills, by voice vote, with walkout by the Opposition National Democratic Alliance and the Left parties. The fiscal sops given to provide stimulus to the slowing down economy will be effective from midnight and will have revenue implications of over Rs. 29,000 crore.

RBI Employees To Strike Today - Feb 20, 2009

The employees at the Reserve Bank of India (RBI) have called a one-day strike on Friday to protest against the pension policy. Therefore the normal operations, including the payment and settlement activities in the Reserve Bank, are likely to be affected today. The unions are going on a ''mass casual leave'' demanding the restoration of the updated pension scheme, which was withdrawn earlier to pre-November 1997 retirees, a union official said today.

"The Government and the RBI have been very rigid to our demands. We have decided to strike work," told Ajit Subedar, All India Reserve Bank Employees Association''s Vice-President. He also said that the central bank had recently issued an internal circular to withdraw the updated pension scheme at the behest of the Finance Ministry.

The circular announced a drastic reduction of pension to retired employees of RBI in comparison to that drawn by the government retirees of the comparable levels.

The central bank due to this strike conducted its daily liquidity adjustment facility auctions yesterday for five days.

Govt To Review Tax Exemptions - Feb 17, 2009

The government on Monday said it will review continuation of various tax concessions and duty cuts, which was announced earlier, before March 31 said the Finance Ministry.

It (Cenvat cut) runs out of time on March 31. Lets wait for March 31... government can always take a view on exemption, Revenue Secretary P V Bhide said at the customary post-budget interaction when asked whether the tax concessions would be extended beyond March 31.Noting that duty exemptions were neither given as a part of an interim budget nor budget, he said, I am not in a position to say what decision will be taken on March 31. He also said that the government to deal with the impact of global financial meltdown has been taking specific measures.

Finmin To Meet RBI On Govt Borrowing Tomorrow - Feb 10, 2009

The finance ministry and RBI will meet on Feb 10 to decide on the requirement of government''s borrowing to bridge the revenue and expenditure, which was inflated due to the impact of financial crisis as well as two rounds of stimulus for the economy.

"We are having a meeting of cash and debt management team tomorrow. The deputy governor (of RBI Shyamala Gopinath) is coming. After that we will finalize whatever is the amount, whatever are the modalities," Ashok Chawla, Economic Affairs Secretary told reporters.

There has been stimulus of Rs 1,50,000 crore by way of excess expenditure and about Rs 50,000 crore by way of loss of revenue in direct as well as the indirect taxes, Chawla said. He also added that there is a need for borrowing which will be commensurate with the requirements. According to the revised borrowing schedule, the government would raise Rs 50,000 crore.

Finance Minister Said On India Will Satisfactory - Nov 19, 2008

Finance Minister P Chidambaram said on Nov 18 that India will record satisfactory growth this fiscal and growth will rebound next year. The government will continue to balance the growth and inflation but the bias now is towards stimulating growth. Speaking at the India Economic Summit in New Delhi, Chidambaram said that the global recession threatens to be longer than earlier estimated and India is facing spill out effects of global recession. He added that there is no risk of recession in India though he admitted that a decline in world output would affect India''s exports.

The government will take steps to motivate the domestic economy, Chidambaram said. It would be ''good'' if interest rates trend down, he added. The finance minister also expressed hope that the direction of FII flows could reverse next month.

RBI Fully Geared To Tackle Inflation: Reddy

Concerned over ballooning inflation, the Reserve Bank on March 31 hinted at tighter monetary measures in its forthcoming credit policy, saying it was in full readiness for appropriate action to contain prices. Inflation is unacceptably high. We are very concerned and we are in full readiness to take appropriate action to contain inflation, Reserve Bank Governor Y V Reddy said, a month ahead of the credit policy, to be announced on April 29.Inflation spiralled to 6.68 per cent, much beyond the RBI''s comfort level of five per cent, prompting Finance Minister P Chidambaram to stress that the government would take all measures, monetary, fiscal and supply side, to combat it. Attributing the sudden spurt in inflation to a surge increase in prices, mainly of food, fuel and metals, Reddy said that some inflationary pressures were expected when the central bank reviewed its monetary policy in January.

''Populist'' PC Does A Poll Vault

New Delhi: The Finance Minister, making a populist move, raised the income tax exemption up to Rs 1.5 lakh for men and upto Rs 1.8 lakh for women. Senior citizens would now get tax upto Rs 2.25 lakh. However, there would be no change in the corporate tax.There would be no change in the STT rates, but short-term capital gain would now attract 15 per cent up from 10 per cent.

The Finance Minister said that there would be no change in peak customs duty; however, he reduced the excise duty to 14 per cent from 16 per cent.Customs duty on life saving drugs would now be 5 per cent and convergence products duty would be reduced to 5 per cent.The excise on small cars has also been reduced to 12 per cent from 16 per cent and that on two and three wheeler also by the same amount. Anti-aids drug would be exempted from excise duty.

CST Relief: States Disagree On Compensation Formula

Most analysts are betting that the Finance Minister P Chidambaram is going to cut the central sales tax (CST) rate to 2 per cent from the current 3 per cent but the government officials feel this could cause a sharp drop in their revenues and the centre must compensate for their losses. Last year state finance ministers had agreed for a cut in the central sales tax from 4 per cent to 3 per cent and from April 1 this rate is supposed to be cut further to 2 per cent. But states have raised disagreements on the terms and conditions of the compensation formula asking the finance minister to revise the whole package.

Not just this, as part of the compensation formula from April 1 states are supposed to raise the basic VAT rate from 4 per cent to 5 per cent and bring textiles under VAT. The states are now backtracking on all these counts. The government might be forced to double compensation paid to states to Rs 13,000 crore if it cuts the CST. Probably for this budget the finance minister might be able to pull off an announcement on reducing central sales tax. However, the government sources say it could be difficult for the finance minister to abolish the CST altogether unless it offers states a very substantial compensation package and that could be a hurdle on the road to a uniform goods and services tax.

Keeping Inflation Low High Priority: Chidambaram

Finance Minister P Chidambaram on Jan 25 said keeping inflation rate low, not high growth, was a priority for the government. At the moment, we are comfortable with inflation below four per cent and growth above 8 per cent.His statement comes amid fear that a possible recession in the US can affect economies of developing countries, including India. Between inflation and growth, what hurts the poor most is the inflation. India''s wholesale prices-based inflation rate grew by 3.83 per cent for the week ended January 12 compared to 3.79 per cent in the previous week, but was still under the Reserve Bank''s target of under 5 per cent for the fiscal. He said New Delhi would do everything to maintain the growth rate, while ensuring prices do not rise. He forecast India''s economy to expand by 8.5 per cent in 2008-09 fiscal