Can India Overtake China’s GDP Growth?

Tuesday, 10 August 2010

My focus turns to India at a time when the US is struggling to maintain its GDP growth, GDP growth in Europe is also expected to remain sluggish and China is trying to prevent overheating of its economy. 

In the midst of all this, the Indian economy has witnessed fairly robust growth along with some smart action by the Central Bank in order to balance growth and inflation expectations. The inherent strength of the economy is reflected in the stock price movement of the Indian equities which have held up pretty well at higher levels.

Without doubt, if the global economy witnesses another slowdown, India’s growth will also be impacted and stock prices would also trend down. However, in my opinion, India’s GDP growth is all set to overtake China’s in the foreseeable future. Also, the upside growth potential for the Indian economy is far higher than China where several sectors are witnessing overcapacity. Therefore, it might be one of the best times to consider long-term exposure to India and enjoy the fruits of a prolonged period of double digit growth. 

In terms of becoming the fastest growing economy in the world, two scenarios might pan out:

1) China slows down significantly in the near-term making India the fastest growing economy in the world

2) Both India and China continue to grow at robust pace. However, India does relatively well in long-term starting from a much lower base than China

In my opinion, scenario one is likely in the very near term and scenario two is a big possibility over long term. Discussed below are some key sectors which might prop up growth of the Indian economy beyond 10 per cent and the possible investment opportunities. 

In terms of growth and investment, my first attention goes to a sector which employs around 60 per cent of India’s population and contributes to less than 20 per cent of the GDP. The agriculture sector in India has huge upside growth and development potential with agricultural yield per hectare still being half that of China. 

The Indian farm sector is likely to grow at 3-3.5 per cent annually during the 11th five year plan ending 2011-12. India’s GDP can grow at double digit pace even if this growth is pushed up to 5 per cent (very possible in my opinion) in the next five year plan. However, this needs investments in better technology and greater private sector participation (which is being witnessed in recent times).

Another major factor, which impedes India’s growth, is the control of key mining resources by the government. Just as an example, India has the fourth largest coal reserves in the world and still needs to import coal for its power needs. In India, 85 per cent of the coal mined annually is from a government enterprise (Coal India Ltd). The government needs to open up the sector and allow greater private sector participation. This will not only spur mining sector growth but also help in robust growth of the power sector. 

Large Indian companies are reluctant to enter the power sector with big investments due to the absence of abundant coal to run large scale operations. China happens to add more power capacity per year than India does in five years. This can only change if the government reduces its control of the mining sector. 

I would like to add here that the efficiency in the government sector as a whole needs to improve in order to achieve a growth rate of over 10 per cent in the long-term. In several states in India, it takes several months to approve a small private sector project. This kind of inefficiency discourages local as well as international companies to make big ticket investments. Therefore, it is not surprising to see much higher levels of foreign direct investment in China than in India (which holds almost equal growth potential). 

Coming back to the positives, another factor, which might place India ahead of China in terms of growth potential, is the level of urbanisation in the country. Urbanisation level in India is just at around 30 per cent as compared to over 45 per cent in China. As the level of urbanisation increases, growth in infrastructure, housing and consumption (India’s household savings rate is at 38 per cent) are bound to prop up growth.

Considering all these factors, India stands well placed to move to a higher growth trajectory. Investment themes such as infrastructure, agriculture, real estate and all consumption based themes are bound to give attractive returns over long-term. 

The most important thing to watch out for will be the likely changes in government policies in trying to make the scenario more investor friendly. This factor will decide how fast India overtakes China to become the fastest growing economy in the world.

Discretion: Root cause of Corruption

Corruption is part and parcel of our life. A common person is faced with this problem, almost every time he approaches Public authorities for any permission,exemption or for any other public benefit. There are numerous allegations against public authorities for corruption with respect to functions like permission for building a residential accommodation, opening up a restaurant or any other commercial activity, tax assessment, law enforcement, issuance of a ration card, passport or driving license, and even for providing public utilities like water, electricity or even a hospital bed. To eradicate this social evil of corruption, it is necessary to look into the root cause of this corruption and also into primary remedy available to the common citizens, the only victim of rampant corruption, against this menace of corruption.


Honesty is the best policy, but like every policy even honesty, as a policy is judged everyday in the prevailing circumstances of the society. It is important to examine whether prevailing circumstances of our society admit honesty as the best policy. In this context I would like to quote John Lachs, quote, “The remarkable thing is that we are not unable to recognise wrong acts or gross injustices when we see them. What amazes us is how they could have come about when each of us did none but harmless acts. We look for someone to blame them, for conspiracies that may explain the horrors we all abhor. It is difficult to accept that often there is no person and no group that planned or caused it all.” unquote. Society has a peculiar tendency to blame individual for its ills. Society, generally, lacks courage to accept blame on itself. This weakness of the society is the biggest impediment in finding reasonable solutions of many of the problems, including corruption. Further lately a disturbing trend is obvious in our society; it tries to legislate away the problems and thus abdicates its responsibilities.

The fundamental question is “why do people pay bribe.” And the answer is obvious. People pay bribe to the public authorities because they have “Discretion”, discretion given by law itself. This discretion is either to accept or reject the request of a person and sometime just to delay it. Many a times these discretion are unfettered, absolute, and without any accountability. Further the person, aggrieved by abuse of discretion has no effective remedy against abuse of this discretionary power.

Let us take an example; say a person is requesting some public authority for a license. The authority may grant the license or may reject the application. The authority may delay the processing of the request for long amount of time. They may decide to “fully scrutinise the request” which may take years. They may make the person visit the office of the authority quite a number of times. Sometime the request may get misplaced and many a times the authority may be waiting for some report to come from some other authority which may take quite a long amount of time. The person is bewildered as what to do. Every visit to an office has some cost in terms of time, money and inconvenience. And then he founds a tout roaming around who advises him just to pay some amount, euphemistically called “Suvidha shulka” or convenience fee. Another discretion may be called discretion to delay or “pocket discretion”. The applicant is expected to pay “speed money” so that the authority will not apply this discretion against him. The point which needs to be appreciated that in this whole exercise no illegal favour have been given to the applicant so there is no possibility that any audit can find out this form of corruption.

This discretion of authorities is generally without any accountability or without any time limit within which they are expected to process the request. Thus when a license is issued to an ineligible person, authority is not responsible and even less responsible when a license is not issued to an eligible person. Law, which provides for these discretions, generally, doesn’t provide a time limit within which the decision has to be made. Further the law does not make the authority responsible if the purposes of law is not achieved. For example, there are stringent building laws and its violations are evident whenever one passes through any street of any city of this country. No municipal authority, the discretionary authority in this case, has ever been held responsible for violations of construction norms. In this manner, it appears that power, authority and discretion has been given to authorities but whether desired result is achieved or is seldom audited. When we make law, we have a certain purpose in mind but there is no institutional mechanism to audit at later stages whether laws are fulfilling the needs for which they are formulated.

Rule of Law is the basic feature of our Constitution. The classical jurists opposed every form of administrative discretion as negation of Rule of Law. However modern juristic thinking allows some amount of administrative discretion. Hon’ble apex court held that discretion must not be “arbitrary, vague or fanciful”. When discretion is used arbitrarily it becomes discrimination which is against constitutional norm of equality. There is no doubt that, theoretically, arbitrary discretion may be challenged in the court of law but the remedy is not too effective. In Indian socio-economic context where vast majority of the people is uneducated and poor, it is understandable that many a times these abuses of discretion pass unchallenged.

It is this discretion, which is root cause of corruption. So it is necessary that even at the stage of formulation of laws, proper verifiable limitations be placed on these discretions and proper and effective remedy be given in the hand of affected citizenry so that abuse of these discretion and resultant corruption may be effectively checked.

Source: www.taxguru.in

Exclude coal from GST list: States to centre

Sunday, Nov 07, 2010 at 1528 hrs IST

New Delhi: State finance ministers have asked the Centre to exclude coal from the list of proposed Goods and Services Tax (GST), so as the tax rate does not increase on such an important fuel.

Besides, the empowered committee of state finance ministers has also said that opium, Indian hemp and other narcotics drugs could be kept out of GST list.

"After alcoholic liquor for human consumption, following may be added--coal, opium, Indian hemp and other narcotics drugs and narcotics but not including medicinal and toilet preparations containing these items," empowered committee of state finance ministers said recently in a letter to union finance ministry.

Orissa government was building up a case to exclude coal from the GST list. It was talking to coal-bearing states like Jharkhand, Chhattisgarh, Madhya Pradesh for creating pressure to keep coal out of the purview of GST.

India positive on multi-brand retail FDI: Anand Sharma

India positive on multi-brand retail FDI: Anand Sharma

INDIA has a positive mindset about opening up the multi-brand retail sector to foreign firms, but any democratic process takes time, commerce and industry minister Anand Sharma has said. 
    The US should be in a position to appreciate the process as generating support for a policy is not easy there either. “Getting a Bill passed in the US Congress is not like ordering breakfast. It is difficult,” Mr Sharma said. 
    Some sections including small retailers have expressed concerns about allowing foreign investments into multibrand retail that have to be duly addressed, the minister said. “The process has to be transparent, inclusive and democratic so that when we take it (policy formulation) to the next stage, the level of opposition goes down,” he added. 
    India allows foreign investment up to 51% in single brand retail, but has not opened up multi-brand retail to foreign players. The US has been pushing for opening up of multi-brand retail with giants like Wal-Mart and Carrefour waiting in the wings. US President Barack Obama made a case for opening up of the sector while addressing industrialists in Mumbai on Saturday.

CBEC order likely to slowdown ship acquisitions

CBEC order likely to slowdown ship acquisitions

Its circular has intimated owners and shipping companies to file bill of entry when they import ships

MUMBAI 1 NOVEMBER 

    The expected growth of the country's shipping tonnage, which, for the first time, managed to cross the 10 million gross tonnage mark, is likely to slowdown if you go by a recent circular issued by Central of the Board of Excise & Customs (CBEC), according to many a shipowner. 
    The September 13 circular has intimated owners and shipping companies to file bill of entry when they import ships. 
    The circular 'out of the blue', as one ship owner liked to term it, has given instances where 'certain shipowners of Indian flag vessels have imported vessels which are exempt from payment of duty, without filling bill of entry and import general manifest (IGM).' "In this connection, it stated that at the time of their import into India the status of these vessels, which are meant for plying on Indian ports as coastal vessels or as Indian flag foreign going vessels, etc, is the same as that of any other class of imported goods. 
    According to the circular, Section 2 (25) has defined "imported goods" as any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption. Further, it said, 'goods' has been defined under section 2 (22) as to include, inter alia, vessels, aircrafts and vehicles. Hence, it said, "these are subject to the same procedure i.e., filing of IGM, Bill of Entry, payment of duty, if any etc. as is applicable in case of other imported goods." 
    Accordingly, the circular also reminded the ship owners about the filing of these documents should be complied with even in cases, where goods are exempt from payment of any duty. 
    More importantly, CBEC has instructed jurisdictional commissioners not only to review the situation but also to take appropriate action for past cases, including appointment of a common adjudication authority, if so desired. 
    If, after the nerve wrecking economic downturn that unsettled even many of big players, Indian shipping companies are still trying to swim to the shore, the circular has left them gasping. What is troubling them is the stipulation to file bill of entry and its affect effects could further harm the industry at a time when the industry is frantically looking for funds to acquire vessels. 
    "With ships available at attractive valuations, thanks to the downturn-led slackness in demand, we are unable to make use of the opportunity. Even our repeated requests to the government for support have not yielded anything yet," said a shipowner. 
    Indian shipping, like the industry elsewhere, is down with fluctuating freight rates which are not likely to go up in the near future. In such a context, constricting rules like this could play havoc with the industry, they aver. 
    Insa, on its behalf, has written to CBEC for a meeting to discuss the issue. Expressing surprise at the circular, it has drawn attention to earlier enquiries into the subject where it was mandated that no bill of entry is required to be filled for vessels at the time of their import, though, it was required to be filled at the time of breaking the ship. "Even after the investigation, the member companies have continued the practice of not filling the bill of entry in case of ocean going vessels and similarly the Customs have accepted this practice," it said. 
    "It has always been the case of the shipowners that in the case of ocean going vessels there is no import for home consumption therefore no bill of entry is required to be filed. Various courts across India have also taken cognizance of the fact of this practice in their judgements and have mentioned that it is a consistent practice of the Customs authorities not to insist on a bill of entry in the case of ocean going vessels. 
    "Equating import of ships with cargo and subjecting deals to duties like Customs could dissuade owners and shipping companies from buying assets, even though they are available at a discount. Coming as it is, the circular will have a dampening effect on ship acquisition plans of shipowners, while the government is seen supporting, it at least morally," said another ship owner. 
    The shipowners' body has also requested the board not to initiate any action on the matter till the matter is decided. While INSA is waiting for an appointment, CBEC has remained silent on the issue. 
    (For more shipping stories, 
    visit www.shippingbiz360.com)

5 years later, Centre & states agree to stamp duty changes

8 NOV, 2010, 03.05AM IST


NEW DELHI: Decks have been cleared for sweeping reform of the stamp duties law with states agreeing to an overhaul that will see simpler nation-wide rules reducing incidence of taxation and making compliance easier. 

The Centre and states have concluded consultations on the contours of the new law that will drop several archaic provisions. “After several rounds of discussions spanning more than five years, the Centre and the states are looking at rationalisation in duty structure on a number of items including insurance,” a government official privy to the discussions said. 

Reforms in the century-old Indian Stamp Act are crucial as stamp duty has been kept out of the proposed goods and services tax (GST) that seeks to replace a plethora of state and central taxes. 

The existing stamp act, which gives powers to states to impose duties on various transactions, can undermine the nation-wide GST by dividing the market along state boundaries because of the difference in levies. 

For instance, Uttar Pradesh had, late last year, asked the Centre to change the duty rate structure for insurance products. 

Against the existing rate of 20 paisa per. Rs1,000 (0.02%) of sum insured on life products, the state wanted 0.5%. Other states have also demanded a similar duty structure. Stamp duty on property and capital transactions accounts for a substantial portion of states’ revenues. In 2009-10, all states together have budgeted to raise.Rs 48,218 crore under this head, or 13% of their total tax revenues and would not want to give up powers readily. 

So the success of recast would depend on the extent to which the states are willing to surrender their powers to levy stamp duty. The act still contains a number of provisions from the British era, which are proposed to be dropped as part of the overhaul. Apprenticeship deed, article of clerkship, award, cancellation deed, charter party that currently face duty may be exempted from the current draft. The draft has already been circulated to the states and will be finalised soon in line with their suggestions, the official said. 

Some states have sought a change in overall duty structure to change it from monetary value to a fixed percentage based rate system. Although the stamp duty on most instruments and transactions is imposed in percentage terms a number of instruments such as insurance still attract specific duty. 

The Centre is also trying to convince states to reform the stamp duty structure for financial instruments as a part of the current makeover exercise. 

Report of the Committee on Making Mumbai an International Financial Centre had even suggested that all transactions taxes such as stamp duties should be eliminated. While states are unlikely to admit to such a radical reform, a uniform structure would certainly help financial markets. 

The stamp duty reform in case of real estate is being tackled as part of the Jawaharlal Nehru National Urban Renewal Mission . Many states have already cut stamp duty on real estate transactions to avail of the incentives provided by the scheme. 

Parliament has the powers to prescribe stamp duty rates on instruments such as bills of exchange, cheques, promissory notes, bills of lading, letters of credit, insurance policies, transfer of shares, debentures and proxies. In the case of other instruments, the power to prescribe rates rests with the states.

The Big 4 Life in India – Life at Big Consulting Firms

Big 4 accounting firms are amongst the most coveted and renowned firms in India. Approximately 50 – 55 percent of the workforce comprises of charted accountants, 35-40 percent being occupied by MBA’s and Engineer’s and remaining by other specialized degree holders.

Getting Hired

Getting into a Big 4 firm in India is a difficult task. Barely 3-5 percent of the hiring in Big 4’s is done through company’s website and job portal’s, most of the hiring is done through internal referral programs and external consultants

Tips on getting your resume noticed1. Route your resume through an internal employee, higher the designation of the employee, more the chances of your resume being noticed.
2. Don’t clog your resume with excess clutter. Be to the point and precise. Focus on highlighting your leadership and teaming skills
3. Keep track of the financial cycles being followed in the big 4 firms, for example EY follows a July to July financial cycle. Hiring during the month of May and June is relatively less owing to budgetary constraints at the end of the year as compared to hiring in July, August where most teams are looking to filling in vacant spots.

Figuring out the Hierarchy

Though the basic hierarchy structure among the big 4 in India is pretty much the same, one may start as an intern and go upto the partner level. However, there are subtle differences.

For example, if you compare the hierarchy structure in EY and KPMG then you would realize that there is no Assistant Manager level in EY.

Not understanding the hierarchy structure before interviewing process can often lead to an individual being hired at the wrong level.

Service Lines

The services provided by the big 4 firms can be divided into

• Statutory Audits & Tax Advisory
• Internal Auditing
• Transaction Advisory
• Business Advisory
• Other niche consulting Area’s

It is imperative for new MBA’s to decide their area of interest prior to an interview. It is difficult to switch service lines at a later stage.

Working Culture

Though each big 4 claims to have an individualistic work culture, the enormity of these firms and the prominent trend of employees switching between the big 4 firms has led to development of what can be called as the big 4 culture, some of the key characteristics of the big 4 culture are

1. Working Hours - One can expect a typical working day of approximately 12-13 hours a day. However, the lengths of your  stay in office or at the client site is totally dependent on your engagement team and manager and work load.
2. Trainings form an integral part of the Big 4 culture, you can end up clocking approximately 10 -15 hours of training each month. These training comprise of both technical and soft skill’s trainings
3. Quality and risk management practices also take up a major portion of your time at big 4 firms, you could spend a significant number of your working hour’s filling up forms and taking approvals.
4. Individual vs. the Team – There is a strong focus on teaming at all of the big 4’s, however, individualistic traits such as taking up the ownership, making decisions is also encouraged.

கனவுகளை காப்பாற்ற

கனவுகளை காப்பாற்ற

கனவுகளே காணத் தெரியாமல்
இருந்த காலமுமுண்டு.
ஆசை துகள்களாக ஆரம்பித்து
கனவுகளாக உருவெடுத்தது.
கனவுகள் காலப் போக்கில்
லட்சியங்களாக மாறிக்கொண்டது.
வாழ்க்கைப் பாதையில் சேர்ந்தபின்
லட்சியங்கள் வடிவம் பூசப்பட்டது.
.
.
.
பல இன்பங்களை விட்டுக்கொடுத்து
எண்ணங்களை மாற்றியமைத்து
உடலை காயப்படுத்தி
உணர்வுகளை ஒருமுகப்படுத்தி
சொந்தங்களை தூரதள்ளி
நம்பிக்கையை தன்வசப்படுத்தி

என் சிந்தனைக்கு மட்டும் மதிப்பளித்து
வளர்ந்த பாதைக்கு முற்றுப்புள்ளியிட்டு
.
.
.
மீண்டும் விதையாகி, வேருன்றி,
கிளையிடத் துவங்கிவிட்டேன்... 

உன் பாதையில் எதை மிதிப்பது ? எதை தவிர்ப்பது ?

உன் பாதையில்

எதை மிதிப்பது ? எதை தவிர்ப்பது ? 

உன் பாதையில் விஷச்செடிகளா ?
நிறையக் காண்பாய்


எதை மிதிப்பது ?
எதை தவிர்ப்பது ?


உன்னை அளந்திடு
பாதை புரிந்திடு
செடிகள் புரியும்

சில சமயம்,
மிதிப்பதை தவிர்ப்பாய்
தவிர்ப்பதை மிதிப்பாய்


நின்று விடாதே
திரும்பிப் பார்


வந்த பாதை நீளம் தெரியும்
மேலும் ஒரு அடி சுலபம்
இதை அது உணர்த்தும்... 

Telecom sector - Article on GST impact

Please see the link to the article on GST impact on telecom sector.

"GST - A new caller tune for the telecom sector"

http://www.industrialeconomist.com/prev1/14.html

My Article on GST in industrial economist

Please see the link to my article on GST in financial magazine "Industrial economist"

http://www.industrialeconomist.com/prev2/18.html

Developing your career in Taxation

Introduction:

In Accounting field Taxation is an interesting, challenging area and also having good scope and future. If a person choosing the taxation filed should have the Strong knowledge in taxation and also he should have the knowledge about the implications of taxation in Accounts as well as Finance. We can have taxation as a practice or job also. In a practice we can act as tax consultants, valuer, certifying authority and as a job we can have responsibilities like Taxation manager in the field of Direct tax, indirect tax. In this article myself discussing the some points which essentially required to develop the career in Taxation.

1.       Expertise knowledge:

For developing a career in taxation, a person should have the expertise knowledge in the selected area. If he selecting the direct taxation, then he should have the strong knowledge from the fundamental to the assessment and appeal procedures, like that same as indirect taxation as well as International taxation.

2.      Update knowledge in  tax provisions:

Update knowledge is very essential in every field, but in taxation field it will be must, because the changes in tax provisions are usual. The person in taxation field should aware of the latest updated provisions. Otherwise, their work will be in deep trouble, also will make financial impact on their clients or employer.

3.      Interpretation skills:

For a person in taxation should have the skill to interpret the tax laws and act. Interpretation skills lead them to proper tax planning, tax savings and also avoid tax evasion. Some time the interpretation will differ from person to person that time, we can take opinion from the department officials also.

4.      Collections of notification & circulars:

All the Taxation acts have been one time enacted by Government, but the yearly changes will be there, in addition to this regular circular and notifications by the department will be there for smooth functioning of taxation issues. So we need to have all the notification and circulars in our hand, it will always help to a typical situation and proper decisions. 

5.      Collection of Latest Judgments:

Taxation having number of case laws and judgments, a taxation person has to aware of the important case laws & judgment which is related to his field of practice and working, it will help to improve our knowledge as well as confident level in taxation

6.      Guidance capacity:

In taxation career, a person needs to have capacity to guide the others person, this guidance capacity will come only you have the strong fundamental, theoretical, practical, analytical knowledge. Your guidance capacity will show your talent in taxation field to your client and Employer.

7.      Analyze the implication:

Person involving taxation should have analytical skills; we need to analysis the each and every implication regarding taxation, which relates to tax planning, tax savings decision. Each & every aspects of taxation need to be analyzed and effect on such aspects, impact on that decisions has to be tabulated and need to compare. This type of analysis will guide us to correct way and perfect decision.

8.      Maximize the tax savings:

A good tax consultant or taxation manager has to know and utilize the tax planning methods and tax savings schemes allowable under the tax laws and act. We need to plan accordingly the tax scheme applicable to the client or employer. Tax savings methods are not only minimize the tax burden also will help to generate high post tax returns and Government tax revenue. So, plan to maximize the tax savings.

             9. Discourage the tax evasion:

There is always difference between tax planning and tax evasion. Saving the tax under the allowable & applicable rules in the act called tax planning, avoid the tax which is not allowable and justifiable under the act is called tax evasion. As a consultant or Taxation manager, your decisions always lead to tax planning only, not for tax evasion. Discourage the tax evasion will help not only to become a good consultant also a good citizen yourself and your clients.

10.  Simplified tax procedures:

Your role as Tax consultant or Tax Manager, your procedures and process will be simple and understandable by the client or employer. Even though we are taking care about the tax provisions, as an assessee, they will be the final responsibility to the Government. So what ever the procedure we are implementing, it should properly communicated to assessee and make them understand.

11.  Ensure the compliances:

As a Consultant or Taxation manager, your decisions will ensure the statutory compliances and minimize the tax complications like, Interest, penalty, penal interest, default payment or return.

12.  Co-ordination with Assessee and Tax authorities :

As a tax person, we should be co-ordinate the assessee and tax authorities; it will lead a good relationship with clients or employer and tax authorities also help to good client and department relationship with us.

Conclusion:

All the points are discussed above not exhaustive, every tax persons having their own experience and values. Here myself discussed above points are essential and which can be useful to develop your career as a “Tax Consultant” or “Tax Manager”

 Source: www.caclubindia.com