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SIVASIVA (FCA, Future CA) (4935 Points)

30 August 2010

30 AUG, 2010, 10.43AM IST, RISHI SHAH,ET BUREAU

Economists give thumbs up to 8.6% GDP growth in Q1

NEW DELHI: The economy may have expanded at close to 9% in the three months to June, its fastest pace in more than two years, driven by high industrial growth and increased private investments.

An ET poll of six senior economists revealed that the economy may have surpassed the 8.6% growth rate, recorded in the three months to March. The official growth figures for first fiscal quarter ended June will be released on Tuesday.

“We expect GDP growth to be 8.8% for the first quarter of the fiscal 2010,” said Mridul Saggar, chief economist at Kotak Institutional Securities. “Mining and manufacturing would stand out with growth rates of around 12%. Agriculture will grow at 2.6% and most services will do well with the exception of the social and personal services,” he said.

The government has already factored in high growth in the first quarter. The chief economic adviser to the finance ministry, Kaushik Basu, had forecast that the economy would grow at close to 9% in the first quarter, although it would ease to 8.4% in the full fiscal year. The government expects the economy to grow by 8.5% in the current fiscal, after growing at 7.4% in 2009-10.

Other economists surveyed by ET were equally optimistic. “We have a slightly more optimistic view and expect GDP to grow by 8.9% in the first quarter,” said Saugata Bhattacharya, senior vice-president and economist at private sector lender Axis Bank.

The Reserve Bank of India has pegged the real GDP growth in the first quarter of 2010-11 at 8.7%, up from its earlier forecast of 8.1%.

The RBI is exiting its loose monetary stance and has pushed up the policy rates by 100 bps this year to rein in inflation. With headline inflation at 9.97% in July, as well as the slowdown in industrial growth in June, the central bank is expected to adopt a wait and watch policy.

A strong performance by manufacturing will bring first quarter GDP growth close to 9%, according to DK Joshi, chief economist at rating agency Crisil.

The manufacturing sector has done well in the first fiscal quarter as measured by HSBC’s Purchasing Managers Index for India.

The PMI for the manufacturing sector had reached a 26-Month high in May coming down slightly in June to 57.3 due to some pricing pressures and running up again to 57.6 in July on account of increase in output. Manufacturing is expected to grow at above 10% levels.

source: https://economictimes.indiatimes.com/news/economy/indicators/Economists-give-thumbs-up-to-86-GDP-growth-in-Q1/articleshow/6458828.cms

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With Rs 75K crore stuck in disputes, tax department proposes e-solutions

NEW DELHI: The income-tax department has proposed a national e-management system for quick disposal of tax disputes, with more than Rs 75,000 crore, an amount close to a fifth of the government’s annual direct tax collections, locked in litigations.

The new system will allow the tax department to make optimum use of its workforce, reduce painful wait for the disposal of tax appeals and free up resources quickly.

The move is part of a series of steps planned by the government to make the tax system simpler. The new Direct Taxes Code Bill, cleared the Cabinet on Thursday, will be introduced in Parliament on Monday.

“A centralised system at the national level is proposed to be created to manage distribution of appeals within the apex direct taxes body,” said an income-tax department official.

This will be done by doing away with the watertight jurisdictions in appeals cases, something that has been already done away for processing of income tax returns.

Currently, tax officials are bound by their jurisdictions or areas assigned to them. For example, a commissioner appeals handling salaries cases has lesser number of cases but cannot look into corporate cases due to jurisdiction issues.

The idea of a centralised, jurisdiction-free appeals disposal system is likely to be one of the key recommendations of a panel set up last month to look into litigation.

The system would track the entire life cycle of appeals to ensure expeditious settlement through a more equitable distribution.

Legal experts however, feel this will not be enough. “If the government is serious about reducing litigation then reasonable checks and balances need to be employed at the first stage itself whether a matter needs to be pursued further or not,” said Aseem Chawla, partner, Amarchand Mangaldas, a leading law firm.

More than 1.78 lakh appeals were pending with commissioner appeals (income tax), the first level of litigation, as on February 1, 2010, with amounts locked up running into several thousands of crores.

The total outstanding tax demand against companies alone stood at Rs 75,509 crore, out of which only Rs 9,748 crore was recovered in 2009-10.

“There would be a good proportion of genuine tax in the total demand locked in disputes, which if available can bolster government revenues and bring down fiscal deficit,” said D K Srivastava, director, Madras School of Economics adding that the government should look for out-of-court settlement.

source: https://economictimes.indiatimes.com/personal-finance/tax-savers/tax-news/With-Rs-75K-crore-stuck-in-disputes-tax-department-proposes-e-solutions/articleshow/6458851.cms

Unconventional businesses: The 7 success stories

These were everyday people, but two things set them apart: the nudge of a new idea and a passion to excel. Egged on by venture capitalists, they broke new ground in their respective spaces: an online bus ticket booking service, selling insurance policies over the phone, a home away from home... Today, these seven businesses are on their way. Through this week, ET takes you through the success stories.

NetAmbit: A Phone Call Away

Girish Batra Chairman & Managing director

All salesmen don’t really sell, when they knock at customers’ doors. Most of the time, they’re identifying a need for a product. To Girish Batra, sales manager at Godrej, this was a colossal waste of field time.
Batra broke out of the system, and applied what he believed to be a more efficient selling technique: use the telephone to generate leads.

In 2003, he quit his job, borrowed Rs 1 lakh from his father, hired five undergraduates and approached ICICI Prudential to sell life insurance products. Soon enough, he started calling potential customers.

His experiment clicked. NetAmbit, the company he founded, is eyeing a turnover of Rs 180 crore this fiscal, and has grown from five people to over 4,000.

The company’s premium collection says it all. From direct marketing, for instance, companies earn an average fresh premium of about Rs 70,000 per month. NetAmbit, however, is able to get Rs 1.7 lakh to Rs 2 lakh fresh premium every month per work station, per agent.

The model attracted two venture funds — Bessemer Venture Partners (BVP) and Helion Venture Partners. BVP invested Rs 15 crore in 2007. In December 2009, NetAmbit raised Rs 50 crore — BVP invested another Rs 10 crore, while the remaining amount came from Helion.

NetAmbit is able to keep costs low not only by using phones to sell, but also by hiring undergraduates and putting them through a 21-day training. It covers about 250 cities across the country. NetAmbit sells life insurance for six companies and general insurance for Oriental Insurance, New India, Reliance and ICICI Lombard. Besides, it sells mutual funds and corporate FDs of M&M and Unitech. The company plans to set up a financial services supermarket.

HummingBird: A Place Like Home

Vivek Madappa & Vinod Thimayya Founders

The idea of “comfortable, intimate, affordable” apartments for executives was new, not just to the corporate landscape, but also to Vivek Madappa and Vinod Thimayya, who were both executives in big companies till they took the leap.

The brothers started HummingBird in 2005, and have grown to having over 750 customers, including IBM, Accenture, JP Morgan and Wipro. The company projects revenues of Rs 35 crore this year.

But the journey this far wasn’t easy. Banks didn’t give them money, and together, they had just Rs 3 lakh in savings. But they kept the dream alive, systematically working on its fruition. In 2008, Bangalore-based venture capital firm, Helion Venture Partners, invested $4 million in Hummingbird.

With its ‘no-frills’ approach to marketing, HummingBird doubled turnover in 2008-09, the year of the economic slowdown, from Rs 11 crore in the previous year. Today, HummingBird runs 285 suites in 25 properties across the metros.

Meru Cabs: Cool Cabs

Neeraj Gupta Managing Director

For lakhs of Mumbaikars who travelled to and from work everyday in the city’s muggy, worn out black-and-yellow cabs, commuting was a nightmare. In 2006, Meru Cabs’ air-conditioned taxi-on-call services brought in some fresh air.

The GPS-linked, electronic metered taxis were the brainchild of Neeraj Gupta, who was inspired by similar services in London and Singapore.

I-T ex-official seeks law on offshore assets

MUMBAI: The Supreme Court on Friday admitted a petition, filed by a retired chief commissioner of income-tax, which suggests that a legislation be made to make it mandatory for taxpayers to declare offshore bank accounts while filing annual returns. The premise behind the suggestion is to enable the government to take effective measures to seize wealth parked in Swiss and other offshore bank accounts by Indian residents.

The petitioner is KVM Pai, retired chief commissioner of income tax, Mumbai and the suggestion it contains is in consonance with the recent legislation passed in the US making it compulsory for US residents to declare their offshore bank accounts, even if such declarations do not yield any tax revenue. Mr Pai also pitches for the setting up of an intelligence unit under the auspices of the income-tax administration to help detect those who have illegal deposits in offshore banks and corroborate the data with the information furnished in their tax returns.

A division bench comprising Justices Sudarshan Reddy and Surinder Singh, allowed Mr Pai, to join an earlier petition filed by jurist Ram Jethmalani, who had moved the apex court last year to persuade the Centre to explore the possibility of retrieving unaccounted money deposited in tax havens.

Quoting a 1980 study carried out by International Monetary Fund (IMF), Mr Pai pointed out that Indians hold the largest share of deposits in Swiss banks. Referring to other studies quoted in the petition, he points out that there are deposits worth $11.6 trillion in tax havens. One such reference relates to Raymond Baker’s ‘Capitalism’s Achilles Heel’ which holds that half the world’ slush money lying in tax havens belong to Indians. Mr Baker has recently estimated the annual capital flight to tax havens at $1 trillion per year.

Mr Pai also states in his petition that the governments of France and the US have been successful in securing the release of huge unreported funds from Swiss banks belonging to US residents but the Indian government did not make any such serious effort except for scheduling meetings with Swiss authorities.

Recently, due to pressure from the US and the UK, the Swiss government agreed to disclose the names of account holders but only if the respective governments formally ask for it. It is understood that the Swiss government has agreed to provide France the details of 3,000 French customers who have deposits worth $4.3 billion in Swiss accounts and the US government with details of 4,450 customers having $18 billion in deposits.

The petitioner’s rationale for moving the court is that India badly needs the money.

He stated, “That most of the deposits lying in various tax havens are unaccounted and no taxes have been paid on the same, thus depriving the country of valuable revenue which could be utilised by the state for providing basic facilities to its citizens such as health care, food, education, social security, clean environment, housing, etc which have been held to be part of the right to life and personal liberty guaranteed under Article 21 of the Constitution of India.

Thus the issue raised in the present application regarding the unaccounted holdings of Indians in Swiss banks and other tax havens has a direct impact on the fundamental right to life as guaranteed under Article 21 of the Constitution.”