Meaningful Minutes

Government working to 'put to sleep' pending tax issues

Investors highlighted concerns over retrospective taxation. Finance minister Arun Jaitley told them that the government was working to move on from pending tax issues. The minimum alternate tax (MAT) issue hurt the foreign institutional investor sentiment in August 2015. It is the minimum rate at which companies are taxed when their income is too low to be taxed at the regular rate. In this year's budget, the finance minister announced the abolition of MAT for foreign institutional investors (FIIs), starting next year. Soon after the announcement, the Income Tax Department sent notices to many FIIs, requesting them to pay their MAT dues for previous years. The Finance Minister assured to FIIs that they would no longer be required to pay MAT for previous years.

Common sense says interest rates should come down

Indicators used to determine the repo rate by the Reserve Bank of India are largely linked to the inflation expectation trend in the economy. The finance minister is of the view that since oil prices are down significantly, commodity prices are low and food grain stocks are high, it is logical that interest rates should trend down.

"If oil is selling at half the normal price, commodity prices are low, and we have stocks and stocks of food grain, then inflation is the least of our worries," he was quoted in The Economic Times.

India's economy to outpace 7.3% growth of last fiscal

With inflation trending down, the finance minister believes that with continuing reforms, India should outperform the 7.3% growth rate of 2014-15. He said this while addressing global fund managers. Overall, this indicates that the Indian government is confident of a stronger growth in 2015-16.

"Certainly, I think international investment is going to be a great source of resource for us and with all these economic activities (ongoing and fresh reforms) planned, even in the midst of somewhat gloomier global situation, I think India has the potential to stand out as a relative brighterspot," he was quoted as saying by the Press Trust of India.

20% safeguard duty on steel for 200 days

Indian steel makers are under great pressure. Already the demand is poor for Steel, while prices have trended lower for years. In such a scenario, cheaper imports from China, Korea and Japan are a big threat to Indian steel makers. In fact, the market share of imports doubled to 12% from 6%. Imports of total finished steel to India rose 50.8% over the April-August period on a year-on-year basis, according to data by the joint plant committee (JPC) of the steel ministry.
To counter this, the Directorate General of Safeguards (DGS) recommended an additional duty on steel imports. The finance ministry approved this recommendation.
"The government has imposed 20% provisional safeguard duty on certain categories of steel to protect domestic producers. The provisional safeguard duty on steel will continue for 200 days," Arun Jaitley said.

Rates should come down but RBI final authority

The inflation vs growth conundrum has continued for a while. The industry and markets want the RBI to cut rates to stimulate growth. The central bank, however, is worried about inflation. It is slated to review its credit policy in September end. The government too wants interest rates to fall. This could help improve demand for loans and investments in the country and spur growth.

"RBI historically has been a very responsible institution... Now, as somebody who wants India's economy to grow and who wants domestic demand to grow, I will want the rates to come down. But then, having entrusted RBI with this responsibility, I am sure they are certainly very well informed of the developments taking place within and outside the country. RBI will appropriately act with a sense of responsibility," Arun Jaitley said recently.