QBiz: Maha Entangled In Farm Loan Web; RBI May Opt for Status Quo
The Quint’s roundup of the top business news of the day.
1. GST Anti-Profiteering Clause: Firms Found Guilty Could Be Asked to Deposit Amount in Consumer Fund, Says Hasmukh Adhia
Although the final shape of the anti-profiteering authority and its functioning is still not clear, revenue secretary Hasmukh Adhia said that it may involve the guilty entity depositing the amount made through profiteering into the consumer welfare fund, a provision for which is made under section 57 of the Central GST Act. Speaking at an event organised by The Indian Express, he added that clear rules and framework under the anti-profiteering clause was work under progress. Adhia said:
There are companies that are oligopolies with a huge market share in a particular product which has seen a reduction in tax incidence under GST. Now if these companies don’t pass on the benefit to the consumers then we can ask them to reduce their prices, However, if they don’t do it, we can also ask them to despots the entire amount amassed through profiteering into the consumer welfare fund.
2. In Charts: Maharashtra’s Farm Loan Crisis Worse Than It Appears
Maharashtra’s farm loan malaise is deeper than it appears. The waiver announced by the state will cover only half of the Rs 58,500-crore distressed agri borrowings in the state, the third to forego such loans after Uttar Pradesh and Telangana. These loans are either overdue, have been restructured or classified as bad debt as on 9 March, according to data obtained by BloombergQuint from the co-operation department of Maharashtra.
A third of the total farm loans worth Rs 1.17 lakh crore in the state were overdue as on 9 March. Around 9 percent have been restructured, while 11 percent have turned into non-performing assets, according to the data.
3. RBI May Opt for Status Quo on Interest Rates Today
Reserve Bank of India (RBI) governor Urjit Patel-led monetary policy committee (MPC) on Tuesday began its bi-monthly interest rate review amid the government pitching for a reduction in borrowing cost to help push private investments. Most analysts, however, expect no change in interest rates in view of more than $60 billion of excess liquidity in the system.
Those seeking a cut in interest rates cite consumer price inflation slowing down to 2.99 percent in April, economic growth during the last fiscal at its slowest pace in two years and weakest loan demand since at least 1992. Finance minister Arun Jaitley on Monday made a case for cut in interest rates, saying inflation has been under control for long and is likely to remain so on the back of good monsoon while there is no likelihood of a spike in oil prices.
4. Finance Act 2017: ESOPs, FDI Deals Exempted From LTCG Tax
The Central Board of Direct Taxes (CBDT) on Tuesday notified a series of exemptions to the anti-abuse provision introduced in the Finance Act 2017 to curtail money laundering through securities transactions. The provision was aimed at preventing the misuse of long-term capital gains (LTCG) tax exemption through such transactions.
Relief given to genuine transactions is based on suggestions received after the CBDT, the apex direct tax policymaking body, brought out a draft notification in April. Tuesday’s announcement says the bona fide acquisition of securities on which the securities transaction tax (STT) is not paid, including employee stock options (ESOPs), foreign direct investment and court-approved transactions, will be exempt from LTCG tax.
5. Government May Look at Merger of IIFCL, IFCI
The government may explore merger between two state-run financial institutions India Infrastructure Finance Company Ltd (IIFCL) and IFCI Ltd. Both are primarily financing the infrastructure sector.
"It is a better to have one large institution which caters to the demands of the infrastructure sector, rather than two firms when both of them are primarily non-banking financial companies (NBFCs)," a government official said, adding that discussions were still exploratory and no proposal had been firmed yet.
"We have had informal discussions at various stages. The government is committed to have a few largescale financial institutions, which are more efficient," the above quoted official said. IFCI Ltd said they had no knowledge of such discussions.
Source: Economic Times
6. New Mechanism To Clear Foreign Investments In 60 Days As Sun Sets On FIPB
The new mechanism for approving foreign investment proposals will require ministries concerned to take a decision within 60 days after an application is filed, as the Foreign Investment Promotion Board now ceases to exist. This would be part of a standard operating procedure which the Department of Industrial Policy and Promotion will issue to guide administrative ministries to clear such proposals with transparency and uniformity across sectors. The Ministry of Finance notified the abolition of FIPB on Tuesday. The notification said:
The SOP will also recognise that ordinarily FDI applications, including those related to Non Resident lndians/Export Oriented Unit (EOU), food processing, single-brand retail trading and multi-brand retail trading proposals, should be decided in sixty days.
7. Sensex Seen Scaling 34,000 in a Year's Time
Where do Indian markets go from here? Up another 9 percent, says Jonathan Garner, the chief Asia and emerging markets equity strategist at Morgan Stanley. The investment bank has set a Sensex target of 34,000 for June 2018. Garner cited an upbeat corporate earnings outlook and strong economic growth as reasons for the prediction. On Tuesday, the benchmark 30-stock Sensex closed at 31,190.6 points, 0.38 percent lower than the previous close. The gauge has climbed 17.1 percent since January, trailing only the broader Nifty and Hong Kong’s Hang Seng index.
Foreign investors have bought $7.81 billion in Indian stocks this year, betting on growth in Asia’s third largest economy. The optimism has continued despite data released last week that showed India’s economic growth slowed for the fourth consecutive quarter in the three months ended March, mirroring the impact of demonetization on key sectors including construction and financial services.
8. Indian Infrastructure Market to Overtake Japan by 2023: BMI Research
With large residential and non- residential projects in the pipeline, the Indian infrastructure market is forecast to overtake Japan’s in next five years, says a report. The report by BMI Research said:
India’s infrastructure market is the third-largest in Asia, and is forecast to overtake Japan’s in nominal value terms by 2023.
Although demonetisation had a negative impact on construction activity in 2016 as most construction workers’ wages were paid in cash, the Fitch group company said that it believes that:
Robust growth will return in 2017 as work resumes on the large pipeline of infrastructure, residential and non-residential projects in the country.
9. HDFC Bank to Charge for UPI Transactions From 10 July
HDFC Bank Ltd, one of India’s largest private sector banks, will start charging its customers for transactions made via the Unified Payments Interface (UPI) from 10 July. HDFC Bank sent emails to its customers late on Monday informing them about the new fees to be imposed on all outward UPI transactions as well as the benefits of using UPI for transferring funds.
According to the email, for a transaction amount of up to Rs 25,000, the fee will be Rs 3 plus taxes, and for a transaction amount of Rs 25,001 to Rs 1,00,000, the bank will charge Rs 5 plus taxes. UPI, a payment system launched by National Payments Corporation of India (NPCI), facilitates instant fund transfers between two bank accounts on the mobile platform. It can be used for making both person-to-person (P2P) and person-to-merchant (P2M) transfers.
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