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Modi’s speech a balm for demonetisation pain, PM doles out sops for weaker sections

Prime Minister Narendra Modi has announced interest rate subsidy for housing of the poor and also waived off interest rate for farmers, in an effort to address the pain endured by the weaker sections of the society following his demonetisation decision. However, Modi did not provide any clarity on the note ban exercise or its impact on the economy.

Narendra Modi gestures as he addresses the nation on New Year's Eve, PTINarendra Modi gestures as he addresses the nation on New Year's Eve, PTI

Narendra Modi gestures as he addresses the nation on New Year’s Eve, PTI

In a televised address on Saturday evening, Modi praised the spirit shown by Indians and their sacrifice in fighting black money. “The problems which the people have faced for the betterment of the country is an example in itself,” Modi said, in the speech aired all over the country.

The demonetisation of Rs 500 and Rs 1,000 currency notes from 9 Novmeber — as much as 86 percent of currency in circulation — created a cash crunch in the country, as the government and RBI were not ready with the replacement currency.

Even after 51 days, banks and ATMs are still not replenished with enough cash to meet the demand from the customers. The non-availability of cash in hand has resulted in a slump in the economy, as scores of informal sector jobs have been lost and consumption declined.

The sops announced on New Year’s Eve may come in this context.

In an effort to balance out the pain for the poor, who have been the worst-hit, the prime minister announced two new housing schemes. According to the first scheme, for home loans up to Rs 9 lakh in urban areas, an interest rate subsidy of 4 percent will be given, and for loans up to Rs 12 lakh, the subsidy will be 3 percent.

Secondly, for the rural poor, Modi announced a 3 percent interest subvention for loans up to Rs 2 lakh.

Apart from this, for farmers, the government will bear a 60-day interest for loans taken from primary credit societies and district cooperative banks.

The third scheme is the increase in the credit guarantee for the small traders to Rs 2 crore from Rs 1 crore. The note ban has broken the MSMEs as the sector has witnessed a decline in business post the demonetisation announcement. The increase in the credit guarantee is an effort to address their pain.

First Published On : Dec 31, 2016 20:56 IST

Demonetisation: RBI ups ATM withdrawal limit to Rs 4,500/day from 1 Jan

The Reserve Bank on Friday late night increased the withdrawal limit from ATMs to Rs 4,500 per day from the current Rs 2,500 from 1 January. However, there has been no change in the weekly withdrawal limit, which stands at Rs 24,000, including from ATM, for individuals (Rs 50,000 in case of small traders).

“On a review of the position, the daily limit of withdrawal from ATMs has been increased (within the overall weekly limits specified) with effect from January 1, 2017, from the existing Rs 2,500 to Rs 4,500 per day per card,” the central bank said in a notification.

atm-queueatm-queueFollowing demonetisation of old Rs 500/1000 notes from 9 November, limits had been imposed on withdrawal of cash from banks as well as ATMs.

The Reserve Bank’s notification further stated “there is no change in weekly withdrawal limits” and such disbursals “should predominantly be in the denomination of Rs 500”.

Earlier in the day, the RBI had permitted White Label ATM Operators (WLAOs) to source cash from retail outlets.

Most of the White Label ATMs are running dry since demonetisation as the operators were facing difficulties in sourcing cash from their sponsor bank(s).

Friday was the last day to deposit the invalid currency notes in banks. However, people still have time to exchange the currency notes at designated RBI counters till March 31 after giving valid reasons for not depositing defunct notes in their accounts by December 30.

However, it remains to be seen whether the relaxation in cash limits will be of any help to the customers as, according to media reports, banks do not yet have enough cash to supply to the ATMs.

A report in The Indian Express on Friday said only 40 percent of the 2.2 lakh ATMs in the country have cash to serve the public.

The report quotes Ramaswamy Venkatachalam, managing director, India and South Asia, Fidelity Information Services (FIS), as saying that banks are not meeting the “full cash requirement” to operate ATMs round the clock.

The RBI and the government also seem to be clueless about when the cash situation will return to normalcy, though they insist there is enough notes to dispense.

Even on the 50th day of demonetisation they have not been able to provide the update the details of the new currency issued and also the deposits of old notes received.

The last press release on the cash situation was on 21 December from the RBI. As of 19 December, the banks have issued Rs 5.93 lakh crore to public either over the counter or through ATMs. That is a nearly 40 percent of the cash sucked out of the system on 9 November, when the demonetisation came into effect.

In this backdrop, while the public and the authorities are remain clueless about when the cash situation will improve, the increase in withdrawal limit from ATMs would mean little for the customers.

With PTI

First Published On : Dec 31, 2016 09:41 IST

Demonetisation, staff crunch: Why the I-T dept is struggling to complete scrutiny assessment

With less than 36 hours for the 31 December deadline, the Income Tax (I-T) department staff and officials are burning the midnight oil to complete the scrutiny assessment.

Advancing of the scrutiny deadline, demonetisation and verification of lakhs of bank accounts — all have compounded into an unprecedented workload which the department is grappling with.
The direct tax department’s offices at Civic Centre on Minto Road, CR Building at ITO, Aaykar Bhawan at Laxmi Nagar in New Delhi to name a few are abuzz even after midnight, as the officials are busy in the disposal of time-barred assessment cases, which was 3.66 lakh as on 1 April.

Scrutiny assessment is the examination of the I-T returns by giving an opportunity to the assessee to substantiate the income declared and the expenses, deductions, etc claimed in the returns with evidences. The purpose of the I-T department is to verify whether the assessee has correctly shown his/her income or not.

Despite assessment, verification, search and seizures being a routine job, why has it become a Herculean task for the I-T department to meet government’s demand this time?

Five key reasons

1. Advancing of the assessment deadline: Earlier, the last date of disposal of scrutiny cases was 31 March, which has been changed to 31 December from this year.

Representational image. AFP

Representational image. AFP

2. Demonetisation effect: After PM Narendra Modi announced demonetisation on 8 November, the I-T department got down to verifying bank accounts where large sums of money have been deposited. After 31 December, the banks will compile details of accounts where cash has been deposited and hand over a CD to I-T department by January end. “There are 25 crore Jan Dhan accounts and money has been deposited in these accounts. Now the department besides its routine work, will also have to verify the suspected accounts, send notices, follow it up…large number of cases will come up. It’s going to be a mammoth job,” an I-T official said.

3. Staff crunch: According to the I-T department, there’s shortage of staff at multiple levels. “There’s 35% shortfall at staff level. The department is top heavy, with more number of chief and principle commissioners, whereas there’s acute shortage at deputy and assistant commissioner and assessment officer levels. Due to shortage of inspectors, field work is getting badly affected. Now, post-demonetisation, pressure on staff will increase multifold,” Ashok Kumar Kanojia, president, Income Tax Employees Federation (ITEF), New Delhi said.

4. Infrastructure bottleneck: “Government promised laptops but has not yet been given. Privacy is a problem as two officers have to share a single room and an assessee would not like to talk in presence of another officer. Besides, the department has to do online scrutiny, but the capacity of the server is so low that often an officer has to wait for long to download information. Internet bandwidth is very low in comparison to the workload, so it takes long hours to dispose cases,” added association’s general secretary Ajay Sharma.

5. Jugglery of numbers: Out of nearly 25 crore Permanent Account Number (PAN) registered with the I-T department, only 5.6 crore file I-T Returns. According to I-T department, nearly 3 crore people pay taxes. The department conducts scrutiny on 1% of the total cases of declarations. “As on 1 April, there were 3.66 lakh scrutiny cases, which has increased by more than a lakh as on date. This itself speaks about the gigantic proportion of workload,” an official remarked.

Tough days ahead…

The tax officials have predicted 2017 as a tough time for them.

“The workload will increase in days to come as the I-T officials would now deal with the information coming from banks. The department has been facing staff crunch for quite some time and it’ll have to manage with the existing staff,” added former chairperson, Central Board of Direct Taxes, Praksah Chandra.

“The department staff and officials have been working without any weekly-offs to meet the deadline. For the last three months large number of staff members hasn’t even taken any leave. It has become cumbersome due to shortage of staff and lack of adequate infrastructure. Several times we’ve communicated it to the government, but to no avail. We don’t have any magic wand to complete this humongous workload,” added Kanojia.

Meanwhile, the Confederation of Central Government Employees & Workers and Income Tax Employees Federation have given a one-day strike call on 15 February. The 21-point charter of demands of the joint call includes the problems being faced by the tax department.

…Yet hopes are alive

“There are hurdles, staff crunch, etc, but as the department is accountable towards disposal of time-barring cases, every case will be completed within deadline, how difficult it may be. Despite mounting pressure, we know the department staff will ultimately perform,” said general secretary, IRS Association, Jayant Mishra said.

First Published On : Dec 30, 2016 18:29 IST

Demonetisation ordinance: Minimum Rs 10,000 fine for holding old notes, no jail term

New Delhi: Government has made holding of more than 10 junked Rs 500/1000 notes a penal offence punishable with a minimum Rs 10,000 fine, but the harsher four-year jail term has been dropped.

The Specified Bank Notes Cessation of Liabilities Ordinance, approved yesterday by the Cabinet headed by Prime Minister Narendra Modi, allows individuals to hold no more than 10 notes of the old currency. It allows 25 such currencies to be held by research scholars.



Top sources said the ordinance, which will be sent to the President for his assent shortly, will come into effect from December 31.

It provides for making holding of old 1,000 and 500 rupee notes after March 31 a criminal offence that will attract a fine of Rs 10,000 or five times the cash held, whichever is higher.

Furnishing wrong information while depositing the old currency between January 1 and March 31 — a window provided only for exigencies — will attract a fine of Rs 5,000 or five times the amount, whichever is higher.

The ordinance also provides for amending the Reserve Bank of India (RBI) Act to provide legislative support for extinguishing the demonetised banknotes that are not returned. The 50-day window for depositing the old notes in bank accounts and post offices expires tomorrow.

While the high-denomination currency ceased to be a legal tender from midnight of November 8, 2016, a mere notification was not thought to be enough to end the central bank’s liability and avoid future litigations.

Currency notes carry RBI’s promise to pay the bearer the amount of the value of the note, a pledge that can be nullified only by legislation after giving due opportunity to everyone to return old notes.

Sources said the proposal for a four-year jail term for anyone possessing large number of demonetised currency after March 31, 2017 was not approved.

The ordinance, which will have to be converted into proper legislation by passing of a law in Parliament within six months, makes possession, transfer or receiving an amount of over Rs 10,000 in the now-demonetised 500 and 1,000-rupee notes a punishable offence.

Sources said while the deadline for the deposit of old currency in bank or post office accounts expires on Friday, time till March 31 is available for doing so at select RBI counters with stiff conditions. This facility is for people who were abroad, armed forces personnel posted in remote areas or others who can give valid reasons for not being able to deposit the cancelled notes at banks till December 30.

While announcing the demonetisation of the old currency on November 8, the government had allowed holders to either exchange them or deposit in bank and post office accounts.

In 1978, a similar Ordinance was issued to end the government’s liability after Rs 1,000, Rs 5,000 and Rs 10,000 notes were demonetised by the Morarji Desai-led government.

Sources said the legal amendments are needed every time the government decides to scrap any legal tender to put an end to its promissory note.

Of the Rs 15.4 lakh crore worth of currency that was scrapped, about Rs 14 lakh crore has been deposited in banks or exchanged.

First Published On : Dec 29, 2016 19:43 IST

Note ban policy: RBI’s autonomy under threat, say experts

New Delhi: Has the Reserve Bank of India (RBI) under its new governor, Urjit Patel, surrendered its hard-fought autonomy? Many experts feel so, particularly after the manner in which Prime Minister Narendra Modi‘s government has handled the demonetisation drive.

Former Prime Minister Manmohan Singh, also a former governor of the RBI and a finance minister, lamented in Parliament recently that constant modifications in the country’s banking system following demonetisation was not good for the country or the RBI.

RBI Governor Urjit Patel. PTIRBI Governor Urjit Patel. PTI

RBI Governor Urjit Patel. PTI

“That reflects very poorly on the Prime Minister’s office, on the Finance Minister’s office and on the Reserve Bank of India,” he told the Rajya Sabha last month. “I’m very sorry the Reserve Bank of India has been exposed to this sort of criticism, which I think is fully justified.”

What is unclear in this whole exercise is how much say the country’s central bank — the apex monetary policy authority, established on April 1, 1935, following the enactment of the Reserve Bank of India Act, 1934 — had in the policy decision.

“The government said the RBI has recommended the demonetisation. I do not know whether the government has forced the RBI to ask or the RBI took the call on its own,” RBI’s former Deputy Governor K.C. Chakrabarty told IANS over phone from London.

“I’ll not be able to say (on RBI’s views being valued) unless the minutes of the board meet is shown,” he added, alluding to some interference by the government, since RBI’s position has always been against demonetisation.

“That was the consistent view of the Reserve Bank in the past,” Chakrabarty said.

In a reply to Bloomberg, on a right-to-information query, the apex bank said that the decision to withdraw the legal tender character of the Rs 1,000 and Rs 500 notes was taken by the RBI board at 5.30 p.m. on November 8 — less than three hours before Modi announced it to the country.

Overnight, Rs 15.44 lakh crore or 86 percent of the currency in circulation was declared illegal. Norms were announced by the Prime Minister on how people could deal with such currency in their possession — which were subsequently changed on an almost daily basis.

Regarding autonomy, Chakrabarty said: “You must understand the autonomy that the RBI was getting from the government was because the government was to give the autonomy to the institution. If the government does not want to give anybody autonomy, the RBI cannot do anything.”

West Bengal Finance Minister Amit Mitra was more direct.

“Most eminent people in India have been RBI governors, including the present governor (Urjit Patel). He is a good economist. Now the same autonomous institution has lost its teeth. It has been issuing notices and withdrawing notices as per government’s instructions,” Mitra told IANS.

“What is very dangerous regarding demonetisation has gone unnoticed. The deeper issue is that fundamental institutions of India of historic nature are being undermined and emasculated. Therefore, the faith in them by the people is under question today,” he added.

The money that was declared illegal is yet to be replaced in any substantial measure — at last count, the RBI said Rs 5.93 lakh crore of new Rs 2,000 and Rs 500 have been issued. Since November 10, most ATMs across the country have remained shut and those which do open their shutters run dry of cash very quickly. Bank cash counters have the same woes, despite restrictions on the amount that individuals or companies can withdraw.

Many bankers too seemed to have lost faith on the towering apex institution.

“Yes, the RBI seems to have lost its autonomy in the issue of demonetisation which has been totally mismanaged,” a chief executive of a bank told IANS, declining to be named.

“The RBI should have advised the government on the ground reality about withdrawing 86 percent of the currency notes in circulation and the logistical issues,” he added, suggesting that the central bank should have stuck to its ground.

In fact, Duvvuri Subbarao, former RBI Governor and Finance Secretary, has been rather candid about his relationship with the government and the finance minister (P. Chidambaram at that time) when he was at the helm at Mint Street, the headquarters of the RBI in Mumbai.

“Both have the same objective of growth, but RBI looks at long-term growth and the government looks at short term growth that results in different priorities for both. There is no way out,” Subbarao told IANS.

“It all depends on the chemistry between the finance minister and the governor,” he said.

But experts hope the question of autonomy could come under less pressure, now that a Monetary Policy Committee (MPC) has been named and has started functioning — with three representatives each from the government and the RBI, and the veto power with the Governor.

“I support formation of MPC, though it will curtail the decision-making powers of the RBI Governor,” said Subbarao. “The Governor will discuss and listen to all stakeholders in the committee, so he will not be solely responsible for the decision on interest rates.”

But some domain experts like M.R. Sivaraman, former Union Revenue Secretary and former Executive Director at the International Monetary Fund, don’t think demonetisation exercise, at least, reflects loss of the RBI’s autonomy. On the contrary, they feel it is RBI that should have handled the situation better.

“Demonetisation will curb black money, eliminate fake currency and bring out unaccounted cash stashed away into the banking system,” said former Infosys board member T.V. Mohandas Pai, dismissing suggestions about loss of independence.

First Published On : Dec 29, 2016 19:26 IST

Demonetisation impact: Double-digit growth in India’s tax collection figures, says Arun Jaitley

New Delhi: Union Finance Minister Arun Jaitley on Thursday said that the impact of demonetisation is clearly visible with tax collection figures seeing double-digit growth.

Finance Minister Arun Jaitley. PTIFinance Minister Arun Jaitley. PTI

Finance Minister Arun Jaitley. PTI

“The impact of demonetisation on tax revenue and collection is already visible. There has been a 26.2 percent increase in central indirect tax collection till November 30,” he said at a press conference here, adding till 19 December, direct tax collection increase has been to the extent of 14.4 percent against a growth rate of only 8.3 percent previous year.

Till 19 December, the net increase in direct taxes has been 13.6 percent after factoring in the refunds, he said.

“In the central indirect taxes there is an increase of 26.2 percent till 30 November. Excise duty is up by 43.5 percent, service tax by 25.7 percent and custom duties up by 5.6 percent,” Jaitley said.

“Notwithstanding the critics, it is a very significant increase in all indirect taxes till November 30,” he added.

Life insurance, tourism, petroleum consumption, flow of mutual fund investment have all increased during this period, the Finance Minister said.

Jaitley said demonetisation has brought a large part of money into the formal banking system which has increased the ability of the banks to lend.

On the liquidity situation in the markets, he said that a major part of the demonetised currency has been replaced with new notes and circulation of Rs 500 has increased.

First Published On : Dec 29, 2016 16:51 IST

Government appoints Viral Acharya as RBI deputy governor

Government appoints Viral Acharya as RBI deputy governor


The government has appointed Viral V. Acharya, a professor of economics at New York University, as one of the Reserve Bank of India’s four deputy governors for a term of three years, according to a statement on Wednesday.



The RBI had a vacancy for deputy governor after Urjit Patel was promoted to Governor earlier this year.

The statement did not mention which portfolio Acharya would be assigned. Patel had headed the prestigious monetary policy, which is now overseen by RBI Deputy Governor R. Gandhi as part of a widened remit.

Acharya teaches at the Stern School of Business in New York university. According to his resume, he has research interests in regulation of banks, corporate finance, credit risk and asset pricing.

First Published On : Dec 28, 2016 13:45 IST

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Ratan Tata-Cyrus Mistry spat: Here’s the timeline of biggest corporate battle of 2016 in a graphic

The Ratan TataCyrus Mistry boardroom battle was easily the biggest corporate spat of 2016. It started on 24 October, when Tata in a surprise and unexpected move, dismissed Mistry as the chairman of Tata Sons.

Mistry was appointed as the chairman of the Tata group holding company in December 2012.

Ever since the ouster, the Tatas and the Mistrys of the closely held Shapoorji Pallonji group have been sparring in the public. While the Tatas have said Mistry was ousted, as the board of the company lost its confidence in him, Mistry has maintained that the Tatas were afraid of his clean-up drive which resulted in his dismissal. Mistry has also raised various corporate governance issues in the Tata Group since his expulsion.

The Tatas also called up extraordinary general meetings of the shareholders of the listed group companies to oust Mistry from their boards. However, Mistry himself resigned from the boards after TCS and Tata Steel shareholders voted him out.

However, a day after resigning from the boards of six listed Tata firms, he took the legal route by filing a suit in the National Company Law Tribunal against Tata Sons.

In response, Tata Sons on Tuesday slapped a legal notice on Mistry, alleging breach of confidentiality by making public sensitive company documents including minutes of board meetings, financial information and data.

One thing is clear, there is no end in sight to the boardroom battle.

Here’s a time line of the developments in one single graphic:


PTI graphic

First Published On : Dec 28, 2016 13:33 IST

Demonetisation: ED arrests Kotak Bank manager for alleged links with Parasmal Lodha

The Enforcement Directorate on Wednesday morning arrested a manager of the Kotak Mahindra Bank for his alleged links with hawala trader Parasmal Lodha and Delhi-based lawyer Rohit Tandon.



Sources in the ED said that Ashish Kumar, the manager at the Kasturba Gandhi Marg branch of the bank, was arrested for allegedly converting over Rs 25 crore in demonetised notes linked to industrialist J. Sekhar Reddy and lawyer Rohit Tandon.

On 23 December, the income tax department had carried out raids at the branch.

Ashish, a resident of Haryana, would be produced in a Delhi court on Wednesday afternoon.

Lodha, a leading businessman with interests in real estate and mining, was intercepted at the Mumbai airport while he was trying to flee to Malaysia.

Meanwhile, the bank said in a statement that it has already suspended the services of the employee and that it proactively informed the Financial Intelligence Unit (FIU) about the suspicious transactions.

“The Bank on its own, on observing the nature of transactions in these accounts, proactively filed a report with FIU for further investigations well in time. On subsequent investigation by the Income Tax authorities, the Bank, as per their instructions, has deposited the entire amount that was credited with these accounts with the Income Tax department,” the bank said in a statement.


First Published On : Dec 28, 2016 12:14 IST

Economy in year 2016: Brexit, Trump victory, demonetisation turn conventional wisdom around

Year 2016 was a fairly turbulent year for both the world economy and India not so much because there were any great surprises in terms of economic events or extraneous shocks but on accounts of forced developments which will have a long lasting impact.

When the year started, the question really was as to when the world economy would turnaround as there were differing signs emanating from different countries. The direction of movement of the Federal Reserve was more or less known while the ECB was to continue to maintain status quo while Bank of Japan was to reflate. The world economy has been moving along expected lines and the Chinese recovery was also almost on course. Therefore there did not seem to be any perverse sign to think otherwise.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

Two major developments however have changed the perception not so much from the point of view of things going wrong this year, but more from a futuristic perspective. These are the BREXIT followed by Donald Trump’s victory, which though unexpected has been convincing with the Republican Party having a majority in the Congress and Senate. BREXIT is symptomatic of the world turning towards becoming more closed and the dictum of free trade and investment is being questioned seriously today. While the referendum in Britain could have termed a ‘one off case’, similar undercurrents prevail also in France and Italy where public opinion is veering towards movement away from the Union and probably at some time from the euro currency.

Countries have started thinking more of isolationism as it is believed that globalization progressively impedes growth as the benefits could be leaning more towards the rest of the world. USA for example believes that the major challenge today is jobs and that they are being lost to outsiders at both the unskilled and skilled levels. This was probably one reason why Donald Trump succeeded. When dealing with the strongest economy, there is always a case of the weaker countries benefiting more than the former, and this perception has led the Americans to believe that they have been losers. This has given a shot to pro-protectionist policies.

BREXIT does not mean the end of ties with the EU but Britain no longer has to accept the goods and people of the continent based on these water tight agreements. Quite clearly conventional wisdom is being turned around now and while presently no singular action has been taken, the future of the world economy is going to be far from normal once these ideologies are implemented. In fact, even the progress made by the WTO which is always a conflict between developed and developing countries will be questioned within the former set of nations as they compete with one another. The latter would also tend to be reinforced through trade barriers once it is realized that they are disadvantaged on the basis of restrictions in export of services.

Closer back home, the growth story had been building quite firmly with even the second quarter corporate results giving one the impression that things were turning around. The consumption story was being told rather convincingly with the pre Diwali sales laying the road of optimism. This was when the government embarked on the big demonetization exercise. While the entire nation has welcomed it unequivocally, there have been doubts raised in terms of the economic impact and it is almost certain that growth will slow down and that it will take two to three quarters for recovery – which will be mid 2017 at the earliest. While the objectives of dealing with black money and forcing the public to be technology-savvy are localized issues, from the point of view of the economy, things have been pushed backwards.

The impact on growth has been debated and while the numbers are a matter of subjective conjecture, the fact is that jobs have been lost and consumption buffeted mainly due to absence of currency which still dominates 90 percent of our transactions. Arguably, the impact would, be of a temporary nature as money is only a means of payment and is a facilitator rather than a commodity on its own. Therefore the production processes will continue as before once normalcy steps in. However, specific industries have taken a major blow like real estate, consumer goods, automobiles, tourism, transport, hospitality to name a few. The timing of the bounce back will vary but for sure will take a couple of quarters.

Hence, we too are ending the year on an uncertain note, though there is the feel good factor that black money has been slayed or at least an attempt has been made to do so. This would, also be an interesting phenomenon to watch out for in the New Year whether we change, what the economist Alfred Marshall have said, our ordinary business of lives.

The major concern however, for the entire world is the decision taken by OPEC to cut back output. Presently it does not seem to be an issue, but given that the last two to three years have been very hospitable as oil prices have been depressed, this may be a warning. It is still uncertain whether the OPEC nations will stick to their targets as there are signs of desperation as these countries which run only on oil may be tempted to ‘cheat’ to improve their incomes which could make this decision self-defeating. This can be a defining event for the world in 2017 as higher crude prices have always pressurized economies in terms of higher inflation and lower growth prospects. As most countries are on the anvil of such a turnaround, higher oil prices can delay the process.

Hence, the world will have to look at what the European countries do and what Donald Trump actually does when he becomes President. Will he drive immigrants out or dilute the free trade agreements and turn fully protectionist? It is hoped that what he has promised is political rhetoric and would get moderated along the way. But the dollar has become stronger as have the stock indices which mean that the markets are positive about these outcomes. Back home in India, the final numbers of growth will tell the story but for sure the deferment of the certainty of high growth due to the twist in tale on account of demonetization will remain a contentious issue for discussion.

(The writer is Chief Economist, CARE Ratings. Views are personal)

First Published On : Dec 28, 2016 07:32 IST

Air safety incidents at Delhi and Goa: Is it ‘human’ factor or shortage of staff at ATC?

New Delhi: Two air safety incidents on a single day, at Delhi and Goa airports, have led many of us to once again question India’s air safety record. Remember, India was downgraded by the Federal Aviation Administration (FAA) of the United States in 2014 for failing to have enough safety personnel, and a restoration of the rating took several months. Though it won’t be clear till a probe is completed on what lead to incidents this morning at Goa and Delhi, the fact is that manpower shortage in critical air functions could be a factor in frequent air incidents.

Take the critical ATC function – the Air Traffic Control (ATC) is still short staffed. Sources tell us the manpower needed is 3,600 personnel and only about 2,900 have been recruited till now. “These positions are being filled,”said an Airports Authority of India (AAI) official. A short staffed ATC apart, this story from Bloomberg quotes data from India’s safety regulator DGCA to say that air safety incidents, which prompted regulatory action, reached 280 this year till August, beating the 275 all of last year. It went on to predict that “At this pace, the number may rise to more than 400 by the end of 2016, making it the worst in three years for aviation safety”.



India is one of the fastest growing aviation markets across the globe and any increase in safety-related incidents is obviously a cause for worry. DGCA officials say there is no cause for worry and incidents sometimes happen due to the “human” factor. They also add that the country is following all internationally mandated safety protocols.

Earlier this month, West Bengal Chief Minister Mamata Banerjee and her party TMC had created a furore by alleging that an IndiGo flight carrying the CM was not allowed priority landing at Kolkata airport despite the pilots seeking emergency landing due to fuel shortage. This was stoutly denied by the airline, which said there was probably a miscommunication between the flight crew and the ATC about how much fuel the flight was left with. Instead of seeking an explanation from the ATC personnel, aviation regulator DGCA grounded IndiGo pilots in this case.

Meanwhile, early this morning, 9W 2374 Goa-Mumbai Jet Airways’ flight “veered off the runway while aligning for takeoff”, the airline tweeted. It later said 12 passengers had sustained injuries and still later, it said all but five have been discharged. This incident made Goa’s Dabolim airport inoperational for a few hours.

A regulatory source told Firstpost that the Goa incident is being treated as an accident and a team from Air Accident Investigation Bureau (AAIB) will reach Goa by the evening to begin inquiries. This person also said a preliminary idea about what caused the aircraft to turn 180 degrees will be there only by Thursday.

Civil Aviation Minister A Gajapathi Raju tweeted that “thorough time-bound investigation and corrective action shall be ensured. Action will also be taken in case there is violation of procedures”. The second incident involved a just-landed IndiGo flight and a ready-to-take-off Spicejet aircraft, with some news reports describing the two aircraft coming “Face to face”.

The regulatory source quoted above said as per preliminary findings, the ATC at Delhi allowed the SpiceJet flight to take off from the same taxiway where an IndiGo aircraft had landed minutes earlier. This indicates the possibility of it being an ATC error, though like we said earlier, the final picture will emerge only after the probe by DGCA is completed.

The regulatory source further said it could be a case of human error too. SpiceJet said in a statement that “SpiceJet flight SG 123 operating Delhi-Hyderabad was following ATC instructions at all times at the Delhi airport. While taxiing, the SpiceJet crew observed another aircraft on the same taxiway in the opposite direction. Acting promptly, the SpiceJet crew immediately stopped the aircraft and intimated the ATC. Safety is of utmost and primary concern at SpiceJet. At no stage the safety of passengers, crew and aircraft was compromised. All concerned authorities were immediately informed.”

And IndiGO also said in a statement that flight 6E 769 Lucknow-Delhi observed another aircraft in front of it while taxiing. “The Captain took the decision to switch off the engine and reported the incident to ATC. All 176 passengers and crew are safe…..flight was observing ATC instructions all the time at the Delhi airport”. According to data provided by MoS Civil Aviation Jayant Sinha in Lok Sabha earlier this month, there were 409 safety violations by the crew of scheduled, non-scheduled and general aviation aircraft in the last three years.

First Published On : Dec 27, 2016 16:59 IST

Budget 2017: Brace for higher short-term capital gains tax, dividend income

The Union Budget 2017 is still over a month from now but the stock market is known to exhibit wild swings in the weeks before the D-day. While investors take a view about various sectors and what budget could mean for the industry, this time they need to be more worried about their own backyard if things are anything to go by.

According to a Business Standard report, the government is looking at the possibility of increasing the short-term capital gains tax or STCG on profits made on sale of shares in less than a year.

Currently, the short-term capital gains tax is fixed at 15 percent, but the BS report suggests that the rate could be increased to 20 percent during this year’s budget announcement.



With regard to long-term capital gains tax on shares sold after 12 months which at present is nil, the government is mulling with the idea of increasing the period to 36 months i.e. an investor can enjoy tax exempiton, if shares are sold only after 3 years and not the current one year period, the BS report said.

Further, based on the tax slab, the government may even look at taxing the dividend income. Currently, companies pay dividend distribution tax, and individuals earning more than Rs 10 lakh as dividend income in an financial year are taxed at 10 percent. This tax rate may go up to 30 percent for individuals coming under high-tax bracket.

As it is, stock market players are already dealing with securities transaction tax (STT) and any move to increase tax rate on short-term capital gains could severely dent the sentiment, caution investors.

For several years, capital market industry experts are lobbying the government to completely abolish the securities transaction tax, but the government has not paid any heed to their demand. The government collects Rs 7,400 crore as STT every year.

Recent developments indicate that government could take stern measures in next year’s budget to increase tax rate on returns made by stock market investors.

Prime Minister Narendra Modi on Saturday in a veiled threat indicated that the government may look at investors deriving huge income from stock market returns.

Calling for wider inclusion, Modi had said our markets must show that they were able to successfully raise capital for projects benefiting the vast majority of our population, particularly related to infrastructure.

“The true measure of success (of the stock markets) is in its impact in villages, not on Dalal Street or Lutyens Delhi. Sebi should work for closer link between spot markets like e-NAM and derivatives markets to benefit the farmers,” Modi urged.

A day after the PM’s statement Union Finance Minister Arun Jaitley clarified on Sunday that there is no plan to impose long-term capital gains tax on securities investments, after a statement by prime minister raised such a suspicion.

“This interpretation is absolutely erroneous. The Prime Minister has made no such statement directly or indirectly. I was present at the function in which this speech was given. I wish to absolutely clarify that there is no occasion or opportunity to anybody to reach such a conclusion because this is not what the Prime Minister said nor is it the intention of the government as has been reported in some section of the media,” he said.

First Published On : Dec 27, 2016 13:14 IST

Demonetisation: Farmers to get 60 additional days for repayment of crop loans, says RBI

Mumbai: The Reserve Bank of India (RBI) on Monday said that in view of demonetisation of Rs 500 and Rs 1,000 notes, farmers, whose short term crop loan repayment date falls between 1 November and 31 December, will get an additional 60-day grace period.

Representational image. Reuters

Representational image. Reuters

“In view of the constraints faced by farmers for timely repayment of loan dues on account of withdrawal of legal tender status of Specified Bank Notes (SBNs), it has been decided by the government to provide an additional grace period of 60 days for prompt repayment incentive of 3 percent to those farmers whose crop loan dues are falling due between 1 November and 31 December,” RBI said in a notification.

Currently, according to the existing crop loan interest rebate scheme for 2016-17, apart from the two percent annual rebate, an additional interest rebate of 3 percent is also provided if the farmer repays the loan up to the actual date of repayment or the date fixed by banks for repayment, whichever is earlier.

This benefit does not accrue to those farmers who repay after one year of availing such loans.

If the farmers, whose crop loan repayment date falls between 1 November and 31 December, repay the crop loan within 60 days from their loan repayment date, the additional three percent interest rebate will continue to apply, it said.

First Published On : Dec 26, 2016 20:56 IST

PM Modi’s Black money hunt: From religion to cricket, there are many missing links in the battle

Three speeches over the weekend within barely 24 hours, two by Prime Minister Narendra Modi and one by Finance Minister Arun Jaitley sandwiched between the two, appear to give contradicting signals on the war against black money. Does this mean that South Block and North Block are working at cross purposes? Certainly not, in principle, but there are finer details that would make it appear that like the demonetisation drive that Modi launched on 8 November, there may be holes in the process that may invite more criticism than praise.

Modi said on Saturday at a function organised by the Securities and Exchange Board of India (Sebi), the capital markets regulator, that those who gain from capital markets must contribute to nation building. Jaitley was forced to clarify that this was not a hint that long-term capital gains taxation, which currently stand at zero for equities, was set to be raised or strengthened.

File photo of India Prime Minister Narendra Modi. Reuters.File photo of India Prime Minister Narendra Modi. Reuters.

File photo of India Prime Minister Narendra Modi. Reuters.

Then again, on Sunday in his weekly “Mann Ki Baat” speech, Modi officially declared a war on “benami” property — assets held in the name of front persons or fictitious persons — citing a 1988 law given fresh lease of life earlier this year through suitable amendments.

It is quite possible that both these gentlemen are ignoring not one but quite a few elephants in the room.

The first is that the illegal act of tax evasion may be only a small portion of the legal business of tax avoidance in which de-facto evasion takes place without much of a fuss. This happens through religious and charitable trusts or seemingly public entities. The most glaring one in the public’s eyes has been the case of the Board of Control for Cricket in India (BCCI) that merrily lords over hundreds of crores of rupees. Efforts were made during the UPA rule in 2009 to check this, but it is worthwhile to ask whether there has been any progress on the issue. On the face of it, it doesn’t seem so as illustrated by how temples and charities abuse donations to game the system.

Sadly in India, God is drawn in as an accomplice in tax evasion and money laundering. It seems more than a coincidence that Tamil Nadu business baron J Sekhar Reddy, from whose premises income tax officials unearthed more than Rs 100 crore in cash, was also a prominent member of the Tirupati temple board.

Between cricket and religion, India’s most popular activities, there is a lot for the taxman to worry about. Add to this the complicated abuse of family trusts, which the National Institute of Public Finance and Policy has discussed at length, the game becomes murkier.

Now, long-term capital gains are also an easy way to launder money for many. India did this year sign a double taxation avoidance agreement with Mauritius, which has been for years a source for money laundering but the changes take only prospective effect from 2017 in a limited way. Nothing can be done about the laundering that has been legitimised for decades through what is called “round-tripping” of local black money.

Without going into such international routes — which usually helps only foreign investors and the big boys of crony capitalism — even the local exemption from long-term capital gains tax can be used smartly to avoid taxes. Curbing the use of penny stocks to evade tax has been discussed within the government but Jaitley’s clarification over the weekend suggests nothing can be done about it or is being done about it. Indeed, there are serious issues on how penny stocks can be seen as a separate category for tax computation. Price-rigging — very easy when one person sells shares to another in a volatile market, is the key issue and it is not an easy one to police for the government.

In essence, we could say that the government faces a benami tsunami — and a lot of the measures taken by the NDA government can at best check prospective tax evasion. Maybe Sebi can crack the whip on some transactions but it is not an easy game. Modi’s war cry is welcome, but what he faces is not a battlefield but a labyrinth. When wars are announced from the South Block but battles have to be fought from across the street, the game is complicated.

(The author is a senior journalist. He tweets as @madversity)

First Published On : Dec 26, 2016 14:49 IST

Modi warns “dishonest” of ruin, says market participants should pay more taxes

Mumbai: Warning of “ruin” for the “dishonest” after 30 December, Prime Minister Narendra Modi
on Saturday said his government will not shy away from taking difficult decisions in the interest of the country and favoured more taxes from capital markets.

Addressing public events, he also asked the dishonest not to underestimate the mood of the country against corruption.

Prime Minister Narendra Modi  addressing at the inauguration of new campus of National Institute of Securities Markets (NISM), at Patalganga, in Mumbai on 24 December 2016. Image courtesy PIBPrime Minister Narendra Modi  addressing at the inauguration of new campus of National Institute of Securities Markets (NISM), at Patalganga, in Mumbai on 24 December 2016. Image courtesy PIB

Prime Minister Narendra Modi addressing at the inauguration of new campus of National Institute of Securities Markets (NISM), at Patalganga, in Mumbai on 24 December 2016. Image courtesy PIB

“Dishonest people, you should not underestimate the mood of 125 crore people. You will have to be afraid of it… Time has come for ruin of dishonest people. This is a cleanliness campaign,” Modi said just with a week to go for the expiry of the December 30 deadline when the scrapped Rs 500 and Rs 1,000 notes can be deposited in banks.

“After 50 days (from 8 November), the troubles of honest people will start to reduce and the problems of dishonest people will begin to increase,” Modi said at MMRDA ground in the Bandra Kurla Complex (BKC) in Mumbai after laying the foundation of various big-ticket infrastructure projects.

Earlier in the day at a Sebi function, Modi promised more “sound and prudent economic policies” which would be “not for short-term political point-scoring” but for “larger national interests.

“Let me make one thing very clear: This government will continue to follow sound and prudent economic policies,
to ensure that we have a bright future in the long-run. We’ll not take decisions for short-term political point-scoring. We’ll not shy away from taking difficult decisions if those decisions are in the interest of the country,” Modi said.

He favoured increasing the tax contribution from various market participants in a “fair, efficient and transparent way”.

Asking the regulators and taxmen to think about the contribution of market participants to the exchequer, Modi
said, “The low contribution of taxes may be due to the structure of our tax laws. Low or zero tax rate is given to certain types of financial income.”

The Prime Minister’s remarks assume much significance ahead of the Budget to be presented on 1 February.

“We took a big decision against black money and corruption on 8 November and 125 crore Indians endured pain
but did not stop supporting me. I want to assure people of the country that this battle won’t end till we win it,” he said.

Hitting out at parties opposing demonetisation, he said, “This is not a simple battle. Those who have consumed
malai (cream) did not leave any stone unturned to foil this (demonetisation).”

Modi said, “The corrupt have made all efforts to defeat the decision (demonetisation). They even thought of managing bank officials to get their black money converted into white. And that’s how many of them got caught.”

“I said there will be pain for 50 days (after demonetisation announcement),” he said, adding people are ready to bear the pain in the country’s interest.

The Prime Minister inaugurated a new campus of capital markets regulator Sebi’s National Institute of Securities
Markets (NISM) at Patalganga on the outskirts of Mumbai at an event also attended by functionaries of the Maharashtra government led by the governor and the chief minister, Union Finance Minister Arun Jaitley and Sebi chairman UK Sinha.

Describing the 8 November announcement of cancelling as much as 86 percent or Rs 20.51 trillion worth of currency in circulation as a “difficult decision”, he said, “Demonetisation has (brought about) short-term pains, but it
will bring in long-term gains.”

On the need to increase levies on the capital markets in the light of amendments to the many of the bilateral
investment and taxation treaties, Modi said, “Those who profit from financial markets must make a fair contribution to nation-building through taxes…. We should consider methods for increasing it in a fair, efficient and transparent way.

“… Now it is time to re-think and come up with a good design which is simple and transparent, but also fair and
progressive,” Modi said, adding for various reasons, contribution of tax from those who make money on the markets
has been low due to illegal activities and frauds or due to the structure of our tax laws which offers low or zero tax rate is given to certain types of financial income.

The Prime Minister said his government has brought back the economy to good health from the brink when it was saddled with high fiscal and current account deficits and high inflation and falling rupee, since he took over in May 2014.

He further said that when the global economy is fighting lingering slowdown, “India is being seen as a bright spot.

“Our growth is projected to remain among the highest in the world.”

First Published On : Dec 24, 2016 20:54 IST

GST council meeting: FM Jaitley ‘trying best’ for 1 April rollout even as logjam continues

GST council meeting: FM Jaitley ‘trying best’ for 1 April rollout even as logjam continues



New Delhi: Finding no common ground on the issue of dual control or cross empowerment that deals with assessee jurisdiction, the Goods and Services Tax (GST) Council’s 7th meeting that came to an end on Friday raised grave concerns about its 1 April implementation date while Finance Minister Arun Jaitley saying that he was trying his best.

Finance Minister Arun Jaitley. PTI file photoFinance Minister Arun Jaitley. PTI file photo

Finance Minister Arun Jaitley. PTI file photo

“I am trying my best (on deadline of 1 April). I don’t want to hasten the process of discussion and don’t want to delay the implementation,” Jaitley said at a press briefing after the Council meet ended.

The Finance Minister however said: “There was no issue raised on dual control today as we were working on legislations.”

The drafts of Central GST (cGST) and the compensation law have been mostly approved with the only portions relating to dual control being left out, he added.

Jaitley said that the two principle issues that still remain before the Council are Integrated GST (iGST) and cross empowerment.

“In iGST, definition of territory of states is pending. And the division of authority between assessing authorities of Centre and states is pending. The two issues will be taken up together at the next meeting on January 3-4,” he added.

First Published On : Dec 23, 2016 18:05 IST

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Exclusive: After demonetisation, Narendra Modi sets sights on benami properties, deals

It may not be a happy new year for benami property holders. Come 2017 and Income Tax (I-T) sleuths may be knocking at their doors. And if proved a “benamidar” (benami property holder), one is likely to face rigorous imprisonment from one year up to seven years.

Prime Minister Narendra Modi has given enough indications on various occasions about his intention to combat the black money menace in India by adopting stringent actions against people involved in benami properties and transactions.

And, to make it successful, unlike in the past, the Modi government has already cleared the ground making amendments in the original Benami Transaction (Prohibition) Act, 1988.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

The provisions of the amended act came into force on 1 November 2016. It has given more teeth to the I-T Department to get cracking on benami properties and transactions, with a comprehensive tracking, identifying and finally taking stringent action against offenders.

Looking back at the Benami Transaction Act

More than two decades ago, in 1993-94 and 1994-95, two alternative budgets were presented by Delhi-based Citizens’ Parliament comprising 230 eminent citizens, including politicians from diverse political parties barring the Congress and the BJP.

The author of the two budgets was Professor Arun Kumar, a noted economist who holds authority on black money. The former professor of Economics at Jawaharlal Nehru University (JNU) had suggested levying wealth tax and property tax on all properties.

“Nothing much has happened in taking action against benami property holders since 1988, when the Benami Transaction Act came into being. We had suggested in our alternative budget to levy wealth tax and property tax on all properties above 25 square yard (20.9 square metres). This will bring every property under the tax net,” Kumar told Firstpost.

“According to my estimate, 62 percent of our GDP — that is Rs 93 lakh crore is the black economy. Given the situation, identifying the benami property holders is a tough job. Will the tax department be able to do it?” said Kumar.

Amended Benami Transaction Act

The legal framework for dealing with benami transactions in the old Benami Transactions Act was weak and nothing much was achieved. Now, the amended act empowers the I-T Department to inquire into any person, place, documents or property during an investigation into any matter related to a benami property transaction.

“The amendments have made the act stricter. Apart from imprisonment and penalty up to 25 percent, the benami property will be confiscated. The property rights would go directly to the Centre, and the government can make use of the property as it wishes purportedly to help rural development plans. Now action will be taken against both the actual owner and the property holder under a bogus name,” a senior I-T official said.

The benamidars invest black money in buying land and houses through multiple channels and use bank accounts of different people. The real owner always remains unidentified. From politicians to bureaucrats — properties like land and flats are bought by floating bogus companies in the name of other people while the actual face behind benami transactions get away unnoticed, untracked.

“It was not easy to track the unknown entities in the past. But after the introduction of permanent account number (PAN) and filing of I-T Returns, the tax department has been able to collect information. Now, information from property registration office, online registration records, Annual Information Report filed with the tax department, the municipal corporation record, etc, have made tracking easy. The amended Benami Transactions Act will make escaping tougher for offenders. Punishment is now stringent,” said chartered accountant Abhishek Aneja.

What is an offence under the new Benami Transactions Act?

Any transaction made under a fictitious name; transaction made without the knowledge of the owner; person who owns the property is not traceable; amount paid to buy property from an unknown source; on records the owner is another person, whereas benefits go to the one who paid for the property yet doesn’t show up in the record of the purchase will be considered a benami.

Benami transactions could be a property or any other asset — movable, immovable, tangible, intangible, any right or interest, or legal documents. Gold or finance securities, stocks and shares can also fall under benami transaction if the requirements mentioned in the act are not met.

However, property held in the name of spouse or children, paid from known source or joint ownership of property with siblings or relatives, paid from known source — are exempted.

Tracking mechanism to be used
According to sources at the Central Board of Direct Taxes (CBDT), increasingly it’ll be immensely difficult for those having benami properties or going for benami transactions to escape from I-T radar.

The tax authority now has new tools to track benami property holders. Besides, 360-degree profiling of people who file tax returns, the Intelligence and Criminal Investigation wing of the Income Tax at CBDT receives information from multiple sources such as Financial Intelligence Unit (FIU), banks, Registrar of properties, annual information report (AIR) from banks, hotels, grand weddings, tours and travel agencies, high-value purchases like house, cars, jewellery, consumer durables, payments made through cards, and from transactions that attract tax collected at source (TCS) and tax deducted at source (TDS).

The database prepared from the information gathered by collating manual and electronic intelligence goes to the data warehouse unit for analysis. A new Non-Filers Management System (NMS) matches the data being obtained from various sources.

“The non-intrusive surveillance capabilities of the I-T Department have been enhanced. There is a huge database with the I-T Department. Parameters have been set to select cases automatically. Based on it, the creditworthiness of the owner of a property is also matched with the I-T returns. The crackdown will be on all those who have been avoiding paying taxes and show their actual income,” a CBDT source said.

“Though it’s tough and challenging for the I-T Department to determine legal and illegal holdings, it’s not impossible now, unlike in the past. The government might also come up with a scheme giving the benami property holders a chance to voluntary declare their hidden assets. In case that happens, and a person doesn’t comply and is caught later, he/she will face stringent punishment,” the source added.

First Published On : Dec 23, 2016 08:35 IST

Modi govt lobbied hard for ratings upgrade from Moody’s, but US agency didn’t budge

New Delhi: India criticised Moody’s ratings methods and pushed aggressively for an upgrade, documents reviewed by Reuters show, but the US-based agency declined to budge citing concerns over the country’s debt levels and fragile banks.Winning a better credit rating on India’s sovereign debt would have been a much-needed endorsement of Prime Minister Narendra Modi‘s economic stewardship, helping to attract foreign investment and accelerate growth.

Since storming to power in 2014, Modi has unveiled measures to boost investment, cool inflation and narrow the fiscal and current account deficits, but his policies have not been rewarded with a ratings upgrade from any of the “big three” global ratings agencies, who say more is needed.

Previously unpublished correspondence between India’s finance ministry and Moody’s shows New Delhi failed to assuage the ratings agency’s concerns about the cost of its debt burden and a banking sector weighed down by $136 billion in bad loans.In letters and emails written in October, the finance ministry questioned Moody’s methodology, saying it was not accounting for a steady decline in the India’s debt burden in recent years.



It said the agency ignored countries’ levels of development when assessing their fiscal strength.Rejecting those arguments, Moody’s said India’s debt situation was not as rosy as the government maintained and its banks were a cause for concern, the correspondence seen by Reuters showed.Moody’s and one of its lead sovereign analysts, Marie Diron, declined to comment on the correspondence, saying ratings deliberations were confidential. India’s finance ministry did not respond to requests for comment. Arvind Mayaram, a former chief finance ministry official, called the government’s approach “completely unusual”. “There was no way pressure could be put on rating agencies,” Mayaram told Reuters. “It’s not done.”

Debt burden, bad loans

India has been the world’s fastest growing major economy over the past two years, but that rapid expansion has done little to broaden the government’s revenue base. At nearly 21 percent of gross domestic product (GDP), India’s revenues are lower than the 27.1 percent median for Baa-rated countries. India is rated at Baa3 by Moody’s, the agency’s lowest notch for debt considered investment grade. A higher rating would signify to bond investors that India was more creditworthy and help to lower its borrowing costs.

While India’s debt-to-GDP ratio has dropped to 66.7 percent from 79.5 percent in 2004-05, interest payments absorb more than a fifth of government revenues. Moody’s representatives, including Diron, visited North Block, the colonial sandstone building in the Indian capital that houses the finance ministry, on 21 September for a discussion on a ratings review. The atmosphere at the meeting with Economic Affairs Secretary Shaktikanta Das, one of the ministry’s most senior officials, and his team was tense, according to an Indian official present, after Diron had told local media the previous day that a ratings upgrade for India was some years away.

On 30 September, Moody’s explained its methodology to Indian officials in a teleconference.

Lobbying for an upgrade

Four days later, the finance ministry sent an email to Diron questioning Moody’s metrics on fiscal strength. The government cited the examples of Japan and Portugal, which enjoy better ratings despite debts around twice the size of their economies. “Given that countries are on different stages of economic and social development, should countries be benchmarked against a median or mean number (as is done by Moody’s)” the email asked.

In India’s case, “while the debt burden lowered significantly post 2004, this did not get reflected in the ratings”, the ministry argued. New Delhi urged Diron to look at improvements in the factors – better forex reserves and economic growth – that Moody’s had considered when handing India its last ratings upgrade in 2004. In a reply the next day, Diron said that, not only was India’s debt burden high relative to other countries with the same credit rating, but its debt affordability was also low. She added that a resolution to the banking sector’s bad loan problems was “unlikely” in the near-term.

In a last-ditch effort on 27 October, Economic Affairs Secretary Das sent a six-page letter to Singapore-based Diron, addressed to Moody’s New York headquarters. Reiterating points on India’s fiscal strength, Das asked Moody’s for a “better appreciation of the factual position”. Das dismissed Moody’s concerns on India’s public finances as “unwarranted” and told the agency that there was “scope for further lowering” the political risk perception to “very low”.

“In the light of stable external debt parameters and the slew of reforms introduced in the realm of foreign direct investment, you may like to reconsider your assessment on ‘external vulnerability risk’,” he wrote. Moody’s on 16 November affirmed its Baa3 issuer rating for India, while maintaining a positive outlook, saying the government’s efforts had not yet achieved conditions that would support an upgrade.

First Published On : Dec 23, 2016 00:45 IST

ED raids Axis Bank’s Ahmedabad branch, detects Rs 89 cr worth illegal transactions

There seems to be no end in sight to the woes of private sector Axis Bank. According to a report in India Today, the bank’s Ahmedabad branch has now been raided and the Enforcement Directorate (ED) has put transactions worth Rs 89 crore under scanner.

The raid was conducted at Mayamnagar branch of the bank and the ED scrutinised 19 accounts, the report said.

Axis Bank logo. ReutersAxis Bank logo. Reuters

Axis Bank logo. Reuters

According to I-T officials quoted in the report, these accounts, which allegedly have lax KYC compliance, saw Rs 89 crore worth of investment after the demonetisation announcement, and the amount was later transferred to beneficiary accounts. Four bank officials are also under the scanner, said the report.

The bank had been in the news in the last few days after authorities found certain branches had opened fake accounts to help tax cheats to launder their ill-gotten wealth.

The ED has already registered a money laundering case in the alleged forging of a customer’s identity to conduct huge illegal transactions in the branch of Noida for conversion of black money into white post demonetisation.

The individual, identified as N Paswan, in his complaint filed with the police has claimed that his identity has been forged and a current and a savings account was opened in his name in the said branch which was allegedly used to launder crores of rupees post demonetisation.

The bank branch, in sector 51 of Noida, is also under scanner of the income tax department owing to alleged dubious transactions using shell companies.

In the Noida case, the ED probe involves a laundering of Rs 60 crore. The officials of the agency had told PTI that they are probing more than two dozen accounts in the bank there which could have been used to perpetrate the crime of money laundering.

The bank, according to a PTI report, had suspended 24 employees and 50 accounts after the I-T raids unearthed such illegal activities.

“We are embarrassed that this has happened, but these are isolated incidents given that we have more than 3,000 branches and 50,000 employees.We have had many of our customers writing to us that the bank has done a great job and, therefore, it is disappointing that a handful of people have let us down,” MD and CEO Shikha Sharma had told The Economic Times in an earlier interview.

First Published On : Dec 22, 2016 14:02 IST

Assam: Locals resist privatisation of oil fields in Geleki amid fear of losing benefits

Civil society organisations in Assam have vowed to resist the privatisation of oil fields at Geleki in the Shivsagar district of the state fearing it may have a negative impact on the interests of natives and the development of the region.

Speaking with Firstpost, Aswini Chetia, advisor to All Assam Tai Ahom Students Union (AATASU), a students body that is a part of a joint committee of the eight groups that are opposing the privatisation, said, “As per existing policy of the Oil and Natural Gas Company (ONGC), Assam is provided with corporate social responsibility fund for socio-economic development of the region. We want the Government of India to make clear its stance on what will happen to those benefits after the new arrangement comes into force.”

Representational image. Reuters

Representational image. Reuters

The resistance has come at a time when the Government of India is envisioning a target of reducing its dependency on oil and gas import by 10 percent by the year 2022.

Chetia also said that the civil society organisations have been repeatedly demanding the Ministry of Petroleum and Natural Gas to clarify its stand on the issue, but have not received any reply so far. He also asserted that unless the Central government assures to protect the interests of the natives, the resistance movement will not be lifted.

Anupam Borgohain, president of the Geleki Sangrami Joutha Mancha, a joint committee formed to protest the privatisation of the oil field said, “On 19 December, the committee made a decision to resist the exploration of crude oil from the Geleki oil field. But, on Wednesday, the ONGC invited us for a discussion on the issue. The ONGC officials told us that the company has not signed any agreement with any private party to privatise the Geleki oilfield till now.”

However, the ONGC has reportedly entered into a production sharing agreement with Schlumberger, one of the world’s biggest suppliers of technology and services in the oil and gas industry to work on an ageing ONGC field in Assam.

Borgohain said that the joint committee has demanded that ONGC should make its stand public on the issue. “We have given ONGC three days time to make its stand clear on the issue of privatisation (of the Geleki oil field) and the rights of the locals, or else we will resist any exploration in the Geleki oilfield,” he added.

Crude oil exploration has long been an integral part of Assamese identity politics aimed at economic self-determination through exercising the indigenous population’s rights over natural resources.

The historic Assam Accord of 1985 that was signed after the Assam agitation is considered a guiding document of Assamese identity politics. It led to the creation of Numaligarh Refinery that manages the state’s crude oil resources besides standing as a symbol of Assamese pride.

There is a growing discontent among many in Assam that the crude oil rich state is receiving a raw deal from the two major oil extracting giants Oil India Limited (OIL) and ONGC in terms of royalty to be paid to the state on oil extraction.

It was only recently that the Oil and ONGC paid Rs 1,450 crores to the state as royalty on a pre-discounted price and that too after much persuasion by the state government.

“The only benefit of oil extraction that goes directly to the hands of the local people is the corporate social responsibility fund,” says Ashwini Chetia.

Apart from spending millions of rupees in education and health care sector in the state, thus leading to the creation of indirect employment, the ONGC’s social responsibility fund has created more than 4,000 direct employment in the self-help group sector, says a research conducted by Prof PK Halder and Bidhu Kanti Das.

However, in June 2016 Dharmendra Pradhan, Minister of State for Petroleum and Natural Gas declared that privatisation of 12 small oilfields in Assam will add Rs 4,000 crores as revenue to the state coffers.

The oil industry has also contributed in creating downline industries and services in Assam that are contributing to the state’s gross domestic product (GDP).

“But this set up tends to get disturbed if the oil fields are privatised, which is why we are against such privatisation. But if the government has to privatise the oil fields then the rights of the locals have to be protected,” Chetia told Firstpost.

Borgohain informed Firstpost that apart from AATASU, the joint committee protesting the privatisation of the Geleki oil field also includes All Assam Students Union, All Assam Tea Tribes Students Association, Brihottar Asomiya Yuba Mancha, the local committee of Asom Jatiyatabadi Yuba Chatra Parishad, Geleki Byabosaee Sanstha and AJYPP.

First Published On : Dec 22, 2016 09:15 IST

Blackmoney: IDS disclosure figures to be revised lower to Rs 55,000 cr

New Delhi: Government is likely to revise downwards the disclosures made under the black money amnesty scheme to about Rs 55,000 crore as one Hyderabad-based realtor and his associates have defaulted on tax payments after declaring more than Rs 10,000 crore unaccounted income.

The Hyderabad-based real-estate businessman had declared a black money of Rs 9,800 crore in the Income Disclosure Scheme (IDS) that closed on September 30. Two or three more persons associated with the realtor had declared Rs 2,000-3,000 crore.



“All of them have failed to deposit the first instalment of tax which was due on November 30,” a senior government official said.

Soon after the default, the Income-Tax Department launched search on the premises of the defaulters.

“While the Income Tax Department will take necessary actions, we will revise the total black money declared in IDS,” he said.

The declarations by the realtor and his associates were included in the revised Rs 67,382 crore declarations under IDS announced by the government.

“The declarations will come down to about Rs 55,000 crore,” the official said.

Earlier this month, the Finance Ministry revised upwards black money disclosed under Income Declaration Scheme (IDS) to Rs 67,382 crore from Rs 65,250 crore estimate announced previously. The revised number would have got the government a little over Rs 30,000 crore in tax.

The revised number had not included Rs 13,860 crore declared by an Ahmedabad-based businessman Mahesh Kumar Champaklal Shah and Rs 2 lakh crore by a Mumbai-based family.

“We did not take on record the two declarations as they looked suspicious as it was filed by persons of small means. Background checks including scrutiny of their previous income tax returns revealed that they did not have the means to disclosure such a huge income,” the official said.

Soon after the four-month IDS closed, the government had on 1 October announced that 64,275 declarants had declared Rs 65,250 crore of black money. After final reconciliation the revised figure of actual declarations received and taken on record was Rs 67,382 crore made by 71,726 declarants.

The revised declarants taken on record included the Hyderabad-based realtor and his associates, the official said, adding that the realtor alone was supposed to pay Rs 1,100 crore of first instalment of tax by 30 November which he failed.

The IDS, announced in the Budget, gave opportunity to holders of illegal wealth to come clean by paying a total 45 percent tax on the so far hidden assets.

Government had given the option to the declarants of paying tax amount in three instalments up to 30 September, 2017. The first instalment of 25 percent was due on 30 November.

“Most of the declarants have paid the first instalment,” the official added.

First Published On : Dec 21, 2016 15:37 IST

Demonetisation: Job losses mounting; MSME sector could take atleast 3 quarters to rebound

New Delhi: Demonetisation and its impact on India’s economy have been discussed in detail since 8 November, the day PM Modi made the shock announcement by invalidating over 80 percent of Indian currency. Based on their political affiliations, economists have differed widely on the impact of this step but most are unanimous on at least one point: This single move will contract one of the world’s fastest growing economies. Former PM Manmohan Singh, also an economist, had said in Parliament that demonetisation could contract the GDP by as much a 2 percent though he did not give a timeframe for this prognosis. Brokerage Ambit Capital has already created shock waves by predicting that GDP growth will fall to 5.8 percent in 2017-18 from the 7.3 percent estimated earlier.

It follows then that job creation, which has been Modi government’s biggest headache even before the demonetisation move, will slow down further as economic growth tapers off. The clearest indication of a direct link between job losses and demonetization came from CPIM’s Sitaram Yechury, who claimed in Parliament last month that since 8 November, four lakh jobs have vanished.



And more than 31.9 million people employed in the textile sector or “government” sectors have not been getting wages. There is no way to authenticate what Yechury said but we must remember one simple fact: an overwhelming 94 percent of India’s jobs lie in the informal sector. This means more than 9 in 10 Indians are employed here without any job security, most likely without even being paid minimum wages and almost all wages are in cash. This is the segment of the economy which has been the hardest hit after demonetization.

Rituparna Chakraborty, Executive VP of Teamlease says it is impossible to quantify job losses this soon into the demonetisation situation. “I can say that there would be a 5-7 percent negative impact in the formal sector but it is quite impossible to fathom the impact demonetisation would have on the informal sector jobs”. She also counted out sectors where demonetisation has actually driven up hiring demand – these include digital payments, fintech and banking infrastructure. “The formal sector jobs will bounce back in 4-5 months but for the informal sector, pickup will take longer. The MSME sector has seen the maximum impact on jobs due to demonetisation and this sector could take at least three quarters to bounce back”.

A slowdown in manufacturing activity in at least the automobile sector is evident from this report which says Maruti Suzuki, Hyundai Motor, Honda Motor, Mahindra & Mahindra, Ford Motor and Renault-Nissan have scheduled shutdowns of a week to 15 days. Honda Cars India and Mahindra are suspending production for to correct inventory as demand is slow; some larger auto makers routinely shut production at year end. D L Sachdeva of All India Trade Union Congress (AITUC) says when factories fall silent, it is the casual workers who suffer since their wages are not paid and sometimes, prolonged shutdowns lead to job losses. Even in some other organised sector industries like e-commerce, cash-on-delivery accounts for two-thirds of sales and this segment has seen a massive slowdown post demonetisation.

Not just automobiles, construction and allied sectors, jewellery, textiles and real estate are some sectors where job losses, if not already happening, are imminent. B N Rai, President of the Bhartiya Mazdoor Sangh (affiliated to the BJP), had said earlier “Workers who are employed as contract labour, those working in construction and other infrastructure sectors, daily wagers and those getting wages weekly are definitely affected by this demonetisation drive. I do not have estimates but many jobs have vanished in these sectors”.

Sachdeva of AITUC says close to half the workers engaged in the MSME sector have been rendered jobless due to the ongoing cash crunch. He said this has lead to reverse migration – they are now returning to their villages – while pointing out that 2/3rd of India’s workforce or 25-30 crore workers are employed in sectors which offer only minimum wages. “If one were t o say that 20-25 percent of this workforce has lost jobs due to demonetisation, then crores of people have lost their livelihood”.

The NDA government has already been in a bind over the extremely slow pace of job creation under its tenure. In November, Labour Minister Bandaru Dattatreya said in Lok Sabha that the unemployment rate increased significantly last fiscal, from 2.2 percent in 2011-12 to 3.7 percent in 2015-16. Dattareya went on to say that employment generation was a key priority of the government and the 12th Five Year Plan projects five crore new job opportunities to be generated in the non-farm sector besides also providing skill certification to an equivalent number of people. What has the government’s job creation record been so far? In calendar 2015, only 1.35 lakh new jobs were created in the eight labour intensive sectors that the Labour Bureau was studying for its quarterly quick estimates. This compares quite poorly with even the 2014 stats, when close to 5 lakh new jobs were created, and belied the election promised or crores of new jobs being created each year.

So what about specific impact on jobs by through demonetistion? Dattaterya answered one such question in Rajya Sabha by quoting stats from the last Labour Bureau Survey for the December quarter of 2015!

In a paper titled Demonetisation: Impact on the Economy, NIPFP has said that if the extinguished cash (through demonetisation) was used as a medium of exchange in financing unaccounted income generation or income in the informal sector, “demonetisation would result in these activities closing down and a corresponding reduction in the incomes and employment associated with these activities. The spillover effect would be felt by the organised sector as well since the consumption from the incomes generated would extend to the formal sector as well.”

NIPFP cites the example of the real estate sector which is sure to be impacted by demonetistaion. “With contraction in demand from one set of agents – say agents who have earned unaccounted incomes and placed them within the real estate space – either prices within this segment would fall or transactions would cease to happen. While of itself, this would be considered a positive development and evidence of a correction in the unaccounted incomes, it could lead to a compression in investments in the construction sector which can have adverse income and employment consequences for the economy.”

This piece speaks of roughly a fifth of the almost 32 million people employed in the textile and garment sector (who are paid wages either daily or weekly) being hit. While some of them have already lost their jobs, many are apprehensive of such a fate. A majority of garment industry workers, especially in hubs like Tirupur, do not have a savings bank account as 70 percent of them are migrant workers from the north and northeastern parts of the country.

Similarly, 20-25 percent of the roughly 2.5 lakh workers in the leather industry have been adversely affected as they are daily wage workers. The industry has been hit particularly hard as 90 percent of the units are small and medium enterprises. In the jewellery sector, 15-20 percent of workers, who are paid daily, have been affected.

First Published On : Dec 20, 2016 16:34 IST

Demonetisation: Why PM Modi shouldn’t have offered another scheme for tax cheats

The new scheme for tax cheats that is in force now shows the desperation of the Narendra Modi government to somehow show demonetisation has indeed worked well in trapping the black money in the system.

This was necessitated as close to Rs 13 lakh crore has already returned to the banking system through deposits out of the Rs 15.4 lakh crore demonetised on 8 November.

It is anybody’s guess how much of these deposits will turn out to be ‘black money’ at the end of this whole exercise. Much depends on the taxman. Under this scheme Pradhan Manrti Garib Kalyan Yojana, evaders get another opportunity to bring out their ill-gotten wealth by paying 50 percent tax and penalty and by parking a quarter of their illegal assets in a scheme for four years.

Representational image. CNN-News18Representational image. CNN-News18

Representational image. CNN-News18

This is the last such scheme, the government has said, for black money holders — something they had said even when the first IDS (income declaration scheme) scheme for domestic black money holders was launched a few months ago.

That time, the government warning was that post September, there will be big crackdown and no chance will be given for anyone to come clean again. But here we are again with yet another black money scheme .

This, in all likelihood, will give an idea to the tax cheats that the ‘last chance’ for black money holders will keep returning periodically. The latest amnesty-like scheme tells us one clear thing. This is born out of the government’s growing realisation that demonetisation may not be an effective tool on the black money hunt.

Hence, the government was forced to once again offer incentives to tax cheats to get some money out of the shelves. The taxman has, so far, not found much luck in unearthing the illegal cash from raids, which is evident from the numbers given by the CBDT chairman last week. The department has so far conducted searches and seizures in about 291 cases, carried out surveys in 295 cases, where it has seized over Rs 316 crore including Rs 80 crore in new notes in raids, besides jewelry of Rs 76 crore, totaling Rs 393 crore, the chairman said.

The department has also sent over 3,000 notices on the basis of deposits in bank accounts. One needs to see how much illegal money is unearthed post this exercise. The other side of this exercise is that the honest taxpayer will feel foolish with repeated amnesty schemes for tax cheats.

In fact, the last black money scheme was even better for the evaders. Those who declared black money under the scheme had the option to pay the 45 percent tax in three easy installments — 25 percent by 30 November, another 25 percent by 31 March 2017 and the balance amount by 30 September 2017. The 45 percent penalty black money holders need to pay include tax, surcharge and penalty.

If someone with unaccounted money didn’t use such easy an installment scheme then, he is either a fool or someone who knows to fool the taxmen for the rest of his life. The chances that this time the tax amnesty scheme, which is open until 31 March 2017, may not yield much since the evader, who skipped the attractive September scheme, will now have to pay 50 percent of tax/ penalty and lock quarter of his deposits for four years. Rather, he would look for alternative ways such as benami channels.

Including the first scheme for foreign black money holders, this is the third amnesty the Modi government has offered to tax cheats. There is an obvious danger in rolling out back to back amnesty schemes. In the BJP Parliamentary meet, PM Modi mentioned the 1971 K N Wanchoo Committee report to support his ongoing demonetisation move.

But, the same report and the Shankar Acharya Committee in 1985 had also pointed out the ill-effects of announcing black money voluntary declaration schemes unless there is a compelling reason to do so. “Resorting to such a measure during normal times and that too frequently, would only shake the confidence of the honest taxpayers in the capacity of the government to deal with the law breakers and would invite contempt for its enforcement machinery,” the Wanchoo panel had said in 1971.

Whether the scenario, under which Modi announced demonetisation and black money declaration scheme for tax cheats falls under the description of ‘normal times’ or not is a matter of debate. But, PM Modi will do well revisiting the Wanchoo report for clues on the consequences of back-to-back black money declaration schemes.

First Published On : Dec 20, 2016 16:11 IST

Demonetisation: Govt allows use of old notes for tax payment under PMGKY

New Delhi: The government today allowed use of junked Rs 500 and Rs 1,000 notes till 30 December for paying tax on disclosures made under the tax evasion amnesty scheme.

Representational image. PTIRepresentational image. PTI

Representational image. PTI

After the shock demonetisation of high value notes on 8 November, the government allowed the banned currency to be deposited in bank accounts.

Those with unaccounted cash were offered a chance to come clean by paying 50 percent of it as tax, penalty and surcharge, while parking an additional 25 percent in a
non-interest bearing deposit for four years.

“An opportunity has been given to the public to make the payments towards tax, penalty, cess/surcharge and deposit under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) 2016 with the old bank notes of Rs 500 and Rs 1000 denomination up to December 30, 2016,” an official statement said.

Explaining the provision, an official said a holder of unaccounted cash in Rs 500/1000 notes can now deposit half of it in any of the 29 scheduled bank that are entitled to accept income tax on behalf of the government.

A quarter of the amount can be deposited in cash in the non-interest rate bearing PMGK Deposit Scheme 2016. The remaining 25 percent can then be deposited in individual bank account.

After 30 December, tax as well as the deposit will have to be made through cheque or RTGS transfer.

The government has allowed holders of the scrapped notes to deposit them in their bank accounts till 30 December. No scheduled bank will accept them after that date.

The official said the tax authorities are collating information about deposits made in banks post demonetisation and will send notices if any unaccounted income holder does not make disclosures under the amnesty scheme.

While some 3,000 tax notices have already been issued, more will be sent next month after the deposit deadline of 30 December closes.

Those whose bank deposits do not match their income would be asked to explain and offered a chance to come clean under the amnesty scheme, which closes on March 31.

Tax at the rate of 30 per cent of the undisclosed income, surcharge of 33 percent of tax and penalty of 10 percent of such income is payable besides mandatory deposit of 25 percent of the undisclosed income in the PMGK Deposit Scheme.

Income declared under the Scheme will not be included in the total income of the declarant under the Income Tax Act for any assessment year.

Not declaring the black money under the scheme now but showing it as income in the tax return form would lead to a total levy of 77.25 percent in taxes and penalty. In case the disclosure is not made either using the scheme or in return, a further 10 per cent penalty on tax will be levied followed by prosecution, he added.

First Published On : Dec 19, 2016 17:48 IST

Demonetisation rule change: You can make more than Rs 5,000 deposit only once per a/c before 30 Dec

The finance ministry and the Reserve Bank of India have put in place new restriction on deposits of old Rs 500 and Rs 1,000 until 30 December in another effort to curb money laundering.

According to a finance ministry notification (read here), deposits of the demonetised notes above Rs 5,000 can be made only once until 30 December, the last date for banks to take deposits of old notes. However, there is no restrictions on depositing cash under the Pradhan Mantri Garib Kalyan Yojana, a black money declaration scheme under amended taxation laws.



“Tenders of SBNs (specified bank notes) in excess of Rs 5,000 into a bank account will be received for credit only once during the remaining period till December 30, 2016,” the RBI said in a notification to banks posted on its website.

The central bank has also said in such cases the notes will be credited to deposits “only after questioning tenderer, on record, in the presence of at least two officials of the bank, as to why this could not be deposited earlier and receiving a satisfactory explanation”.

“The explanation should be kept on record to facilitate an audit trail at a later stage. An appropriate flag also should be raised in CBS to that effect so that no more tenders are allowed,” the RBI has said.

However, banks can allow deposits of up to Rs 5,000 in value to be credited to bank accounts in the normal course until 30 December.

Moreover, if you have made deposits smaller that Rs 5,000 your account, and if such deposits taken together on cumulative basis exceed Rs 5,000 then they may still have to face the questions from the banks officials. In such cases, you may not be allowed to make more deposits thereafter until December 30.

Also deposits above Rs 5,000 shall be credited to only KYC compliant accounts and if the accounts are not KYC compliant the limit for deposits stays at RS 50,000.

However, these rules are not applicable to deposits under the Taxation and Investment Regime for the Pradhan Mantri Garib Kalyan Yojana.

First Published On : Dec 19, 2016 13:53 IST

Demonetisation: Cashlessness sting still painful on day 41

New Delhi: There was no respite in sight for cash-strapped people on Monday as queues outside banks and ATMs for withdrawing money continued across the city with rising anger and pain.

Representational image. PTIRepresentational image. PTI

Representational image. PTI

An IANS correspondent who visited about 10 banks and ATMs across the city, found over 150 people outside Punjab National Bank and State Bank of India in Kalkaji area of south Delhi.

Similar conditions were witnessed outside the Indian Overseas Bank, ICICI Bank and Axis Bank in Preet Vihar area in east Delhi.

Jaswant Sharma, a security guard with a law firm and resident of Kalkaji extension, told IANS: “Since the day I got my salary I am looking for an ATM to withdraw some cash. Three of my attempts have gone in vein as the ATM machine runs out of cash before my turn comes.

Asked if he supports the government’s move of scrapping the old Rs 500 and 1,000 notes, Sharma said: “I have nothing to do with the government decision, I just want to withdraw some cash as I am left with only Rs 10 in my pocket. Cash is the necessity.”

“I have borrowed the bicycle from one of my friend to reach here,” he rued.

There were around 300 people outside the Yes Bank and HDFC ATM kiosk in Kalkaji area around 12.30 a.m. which was dispensing cash till early morning.

Balkishan, a lawyer who had arrived at the ATM to withdraw cash with his 12-year-old son, told IANS: “At most of the places people in the queues do not allow withdrawal from multiple cards. So I have come with my son to withdraw money from two cards.”

“We cannot stand in bank or ATM queue everyday, what comes in mere Rs 2,500,” he asked.

However, similar situation was witnessed outside the banks on Monday morning, which opened after Sunday. Hundreds of people were seen waiting for their turn.

Balwinder Singh, a resident of South Extension Part II who was standing outside Punjab National Bank in south Delhi, told IANS: “It is completely mismanaged show.”

“The government has made the middle and working class people suffer. Today I have skipped my office for the third time since demonetisation to withdraw cash.”

“Is government going to pay me for the days I have skipped my office to withdraw some cash?” he said.

Echoing similar opinion, Neha Sharma, an IT professional working with an MNC in Noida, said: “We cannot skip office everytime by giving the excuse that we need to withdraw some cash.”

“The government has set the limit of Rs 24,000 a week, but the bank officials are only giving Rs 4,000,” she rued.

“How do we manage our expenses for whole month in just Rs 4,000,” she asked.

Serpentine queues have been witnessed across the country after the government’s November 8 decision to spike higher currency notes to curb “black money and corruption”.

First Published On : Dec 19, 2016 12:32 IST

Punit Goenka receives Business Today Best CEO award

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Punit Goenka, Managing Director and CEO of Zee Entertainment Enterprises Ltd (ZEEL) was awarded on Saturday the Business Today Best CEO award in the media and entertainment category for 2016.The award was presented by Minister of Law & Justice and Electronics & Information Technology Ravi Shankar Prasad, India Today group Chairman and Editor-in-Chief Aroon Purie and Wave Group Vice Chairman Manpreet Chadha.Accepting the prestigious award on behalf of ZEEL Chairman Dr Subhash Chandra and the Zee team, Goenka said, “We have consistently grown ahead of market, expanded our network viewership share and experienced growth of our product bouquet, both in India and internationally. As we approach our Silver Jubilee, I am confident that driven by innovation and creativity, we will move one step closer towards achieving our ambition of becoming the world’s leading media company from the emerging markets.”The other prominent recipients of the BT Best CEO Awards for the current year were Sunil Bharti Mittal, Chairman of Bharti Airtel, C P Gurnani, CEO & MD of Tech Mahindra and Sunil Duggal, CEO of Dabur.The methodology used for selection of the Best CEO Awards entailed an extensive study of a company’s operational performance and returns to its shareholders. This exercise was carried out by BT’s Knowledge partner PwC India. The business magazine first used the BT500 list of most valuable Indian companies as a base and then analysed three-year data, using parameters such as growth in total income, total shareholder returns and profit before interest and tax (PBIT).“Based on this analysis, an independent jury comprising renowned business leaders, Nimesh Kampani, Founder and Chairman, JM Financial Group; Kalpana Morparia, CEO of JP Morgan India; Haigreve Khaitan, Senior Partner, Khaitan & Co; and Sri Rajan, Chairman, Bain & Co. India. then chose the final winners for this year,” said the statement issued by the ZEEL.The company reported a 21.76 per cent increase in its consolidated net profit at Rs 216.96 crore for the quarter ended June 30 compared to net profit of Rs 178.18 crore in the same period of previous fiscal.

Demonetisation: CBI arrests two RBI officials in currency conversion case

New Delhi: CBI has arrested two employees of cash department of Reserve Bank of India in Bengaluru in connection with alleged conversion of Rs 1.99 crore of demonetised currency with specified bank notes of Rs 2,000 and Rs 100.

CBI sources said Senior Special Assistant Sadananda Naika and Special Assistant A K Kavin were arrested for unauthorised exchange of the currency and have been booked under charges of criminal conspiracy and cheating besides provisions of Prevention of Corruption Act.

Both the accused have been sent to four days of CBI custody by a special court in Bengaluru, they said.

Representational image. AFPRepresentational image. AFP

Representational image. AFP

“It is alleged that both the accused and other unknown officials of RBI, Bengaluru entered in criminal conspiracy with unknown others,” CBI spokesperson Devpreet Singh said.

She said in furtherance with the criminal conspiracy, the accused, along with other unknown officials, who were entrusted with the responsibility of new currency notes, “fraudulently” gave away new notes to the tune of Rs 1.99 crore to RBI officials and others.

It is alleged that the exchange was done in violation of exchange limits imposed by the Bankers’ Bank.

CBI had earlier arrested another employee of RBI in a separate case in which currency worth over Rs six lakh was converted by him using his influence over officials of State Bank of Mysore.

First Published On : Dec 17, 2016 18:39 IST

Black money hunt: Why protect political parties and harass the common man?

On a day the Narendra Modi government laid out the contours of new black money declaration scheme for tax cheats, it also left a big loophole that could potentially cause the entire exercise to fall apart— exempting deposits made by political parties from tax scrutiny and subsequent investigation.

This move is absurd, lacks logic and raises a big question on the very intent of the Modi government to unearth black money in the system at any cost.

Reason: The opaque political funding is the foundation of black money in any economy. It is that evil that feeds and nurtures all other forms of illegal cash in the system. Unless political funds are brought under tax scrutiny, everything else the government does in the name of black money hunt will be seen with suspicion.

PM ModiPM Modi

PM Modi

The government move also show how there is a clear double standard for the common man and political parties when it comes to black money hunt. The aaam aadmi is supposed to bare it all, answer questions, face harassment even if his money is legit but politician enjoys a God-given immunity.

Take a look at what the revenue secretary Hasmukh Adhia told reporters.

“If it is a deposit in the account of a political party, they are exempt. But if it is deposited in individual’s account then that information will come into our radar. If the individual is putting money in his own account, then we will get information.”

The Section 13A of the Income Tax Act, 1961 is what gives immunity for political parties in respect of their income from house property, other sources, capital gains and income by way of voluntary contributions received from any person.

Political parties will merrily use this opportunity to put their black money (money for which there is no real source or income that is not taxed) on the table and would say that they got it all from small donors (cash donations less than Rs 20,000 does not need any source). It is not difficult to make backdated donation receipts. This defeats the entire purpose of black money operation.

Analysis by Association for Democratic Reforms (ADR) and National Election Watch in past few years shows that about 75 percent of the sources of funds to political parties remain unknown. Here is where the real problem lies.

When political parties arte party to accepting black money, how do one expect an honest action from them against the very same black money?

It is not a surprise that none of the opposition parties, including principal opposition party, Congress and its (occasionally) fiery leader Rahul Gandhi hasn’t uttered a word on political black money and hasn’t offered to give an example by daring to give own party’s financial details or declining any law-given immunity. That’s understood because all drinks from the same pot and it taste sweet.

But the larger question is why is it that always the common man suffer and the rich and powerful get away?

Why the double standard?

The ongoing demonetisation exercise, originally launched to counter black money and fake currency, has inflicted maximum pain on the poor, not the rich and powerful. The layman waits for hours in ATM/bank queue, face unemployment and financial loss, commits suicide because he couldn’t find enough cash for his daughter’s wedding amid the black money fight of the government, while the rich smiles all the way to the backdoors of banks.

Even in the post-demonetisation era, they have lavish weddings and joy of seeing bundles of new currency notes in their backyards, while it is a miracle for the aam aadmi even if he get hold of a few pieces of new currency.

PM Modi certainly owes an answer to 125 crore Indians, of which a good number are hard working middle class, on the government’s double standard to the common man and the political parties when it comes to the issue of black money.

First Published On : Dec 17, 2016 12:53 IST

Demonetisation: Black money disclosure under PMGKY scheme to kick start tomorrow

In order to fight black money that has been rampant in our economy, the government today announced that voluntary black money declaration under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) will begin starting tomorrow i.e 17 December. People with unaccounted cash can disclose it under PMGKY scheme by paying 50 percent tax and penalty before 31 March, 2017, said Revenue Secretary Hasmukh Adhia.

“We want people to join PM Garib Kalyan Yojana and through this scheme they contribute to welfare of the people. Unaccounted cash can be disclosed under PMGKY that comes with 50 percent tax and penalty starting from tomorrow till 31 March, ’17,” said Revenue Secretary Hasmukh Adhia.

Hasmukh Adhia, Revenue secretary.Hasmukh Adhia, Revenue secretary.

Hasmukh Adhia, Revenue secretary.

In this regard, the President also cleared amendment to the taxation laws.

Meanwhile, CBDT chairman Sushil Chandra also said they have issued around 3,000 notices to people based on the details of deposits in bank accounts. Further, the tax department also conducted searches and seizures in about 291 cases and carried out surveys in 2915 cases, said CBDT chairman.

So far, the tax department through several raids have seized over Rs 316 crore, including Rs 80 crore in new notes besides jewelleries worth Rs 76 crore, taking the total to Rs 393 crore, added CBDT chairman.

The Lok Sabha, which passed the Taxation Laws (2nd Amendment) Bill, 2016, on 29 November, said it proposes to levy a total tax, penalty and surcharge of 50 percent on the amount deposited post demonetisation while higher taxes and stiffer penalty of up to 85 percent await those who don’t disclose but are caught.

Finance Minister Arun Jaitley had said the bill was brought after it came to the government’s notice that some people were trying to illegally exchange the demonetised Rs 1,000 and Rs 500 currency notes. Jaitley said as per the amendment proposed, those caught illegally converting money will have to cough up 60 percent tax plus penalties, which will come to 85 percent.

Those who disclose black money to banks will have to pay 50 percent tax, including surcharge and penalty. While they will get back 25 percent immediately, the rest 25 percent will be returned after 4 years.

First Published On : Dec 16, 2016 17:43 IST

DigiDhan Mela: IT Min to run digital payment fair on 17-18 Dec , open bank a/c

New Delhi: Ministry of Electronics and Information Technology will organise two-day event in Delhi to create awareness about digital payments and also help people open bank accounts and enroll for Aadhaar.

A shop assistant uses an eftpos system at a Specialty Fashion Group owned Katies store in Sydney December 11, 2012. Australia is being invaded by a swathe of foreign retailers, piling pressure on a local industry already battered by weak consumer spending and ruthless internet competition. Picture taken December 11, 2012. REUTERS/Tim Wimborne (AUSTRALIA - Tags: BUSINESS FASHION) - RTR3BNKDA shop assistant uses an eftpos system at a Specialty Fashion Group owned Katies store in Sydney December 11, 2012. Australia is being invaded by a swathe of foreign retailers, piling pressure on a local industry already battered by weak consumer spending and ruthless internet competition. Picture taken December 11, 2012. REUTERS/Tim Wimborne (AUSTRALIA - Tags: BUSINESS FASHION) - RTR3BNKD


“DigiDhan Mela is being organized by the Ministry of Electronics and Information Technology (MeitY) at Major Dhyanchand National Stadium, Delhi to create awareness about the benefits of Digital Payment option,” an official statement said.

During the two-day event (17-18 Dec, 2016), MEITY will handhold users in downloading, installing and using various digital payment systems for carrying out digital transactions. The initiative plans to enable citizens and merchants to undertake real time digital transactions through the DigiDhan Bazaar.

“…help will also be extended to citizens for opening their bank accounts, to enrol them into Aadhaar and to enable their existing accounts into AEPS (Aadhaar enabled payment system) accounts,” the statement said.

The event will witness participation from banks, telecom companies, mobile wallet operators, transportation network companies, Department of Post, merchants (through marketing associations), co-operatives like Kendriya Bhandar and organised retail fruits and vegetable chains like Safal, milk booths, agricultural produce marketing committees etc.

Citizens who wish to be enrolled in Aadhaar will need to carry a proof of identity with name and photo, proof of address, proof of date of birth.

Besides, citizens should carry their bank account details to enable the apps and merchants will need to carry the company proof, pan card of the propreitor and the company, address and identity proof, bank account details.

The fair will provide free WiFi to enable citizens to download and install mobile apps for aiding on the spot digital payments, the statement said.

First Published On : Dec 16, 2016 12:17 IST

Yahoo under scrutiny after latest hack, Verizon seeks new deal terms | Reuters

By Greg Roumeliotis and Jessica Toonkel

NEW YORK Yahoo Inc (YHOO.O) came under renewed scrutiny by federal investigators and lawmakers on Thursday after disclosing the largest known data breach in history, prompting Verizon Communications Inc (VZ.N) to demand better terms for its planned purchase of Yahoo’s internet business.Shares of the Sunnyvale, California-based internet pioneer fell more than 6 percent after it announced the breach of data belonging to more than 1 billion users late on Wednesday, following another large hack reported in September.Verizon, which agreed to buy Yahoo’s core internet business in July for $4.8 billion, is now trying to persuade Yahoo to amend the terms of the acquisition agreement to reflect the economic damage from the two hacks, according to people familiar with the matter.The U.S. No. 1 wireless carrier still expects to go through with the deal, but is looking for “major concessions” in light of the most recent breach, according to another person familiar with the situation.Asked about the status of the deal, a Yahoo spokesperson said: “We are confident in Yahoo’s value and we continue to work towards integration with Verizon.”Verizon had already said in October it was reviewing the deal after September’s breach disclosure. Late on Wednesday, it said it would “review the impact of this new development before reaching any final conclusions” about whether to proceed. The company declined to comment beyond that statement on Thursday. Verizon has threatened to go to court to get out of the deal if it is not repriced, citing a material adverse effect, said the people familiar with the matter, who asked not to be identified because the negotiations are confidential.No court in Delaware, where Yahoo is incorporated, has ever found that a material adverse effect has occurred that would allow companies to terminate a merger agreement. Nevertheless, the threat of a court case on the issue has been successfully used by companies to renegotiate deals, and experts said that some concessions from Yahoo are likely, given the magnitude of the cyber security breaches.

Renegotiating the deal’s price tag would be the simplest but also least likely scenario because the impact of the data breaches will not be apparent for some time, according to Erik Gordon, a professor at the University of Michigan’s Ross School of Business. A more likely concession would be for Yahoo to agree to compensate Verizon after the close of the deal, based on the liabilities that occur. The two companies may also agree to extend the close of the deal to allow for more time for information to come in on the impact of the breaches, Gordon suggested.Verizon shares rose 0.4 percent to close at $51.81, in line with the S&P 500 Index .SPX. Yahoo closed down 6.1 percent at $38.41. BIGGEST BREACH

Yahoo said late on Wednesday that it had uncovered a 2013 cyber attack that compromised data of more than 1 billion user accounts, the largest known breach on record. It said the data stolen may have included names, email addresses, telephone numbers, dates of birth, hashed passwords and, in some cases, encrypted or unencrypted security questions and answers.The announcement followed Yahoo’s disclosure in September of a separate breach that affected over 500 million accounts, which the company said it believed was launched by different hackers. The White House said on Thursday the U.S. Federal Bureau of Investigation was probing the breach. Several lawsuits seeking class-action status on behalf of Yahoo shareholders have been filed, or are in the works.Meanwhile, Democratic Senator Mark Warner of Virginia said he was looking into Yahoo’s cyber security practices.

“This most-recent revelation warrants a separate follow-up and I plan to press the company on why its cyber defenses have been so weak as to have compromised over a billion users,” he said in a statement.Warner, who will become the top Democrat on the Senate Intelligence Committee next year, described the hacks as “deeply troubling.” New York Attorney General Eric Schneiderman urged anyone with a Yahoo account to change their passwords and security questions and said he is examining the breach’s circumstances and the company’s disclosures to law enforcement. Germany’s cyber security authority, the Federal Office for Information Security (BSI), advised German consumers to consider switching to safer alternatives for email, and criticized Yahoo for failing to adopt modern encryption techniques to protect users’ personal data.”Considering the repeated cases of data theft, users should look more closely at which services they want to use in the future and security should play a part in that decision,” BSI President Arne Schoenbohm said in a statement.The latest breach drew widespread criticism from security experts, several advising consumers to close their Yahoo accounts.”Yahoo has fallen down on security in so many ways I have to recommend that if you have an active Yahoo email account, either direct with Yahoo of via a partner like AT&T, get rid of it,” Stu Sjouwerman, chief executive of cyber security firm KnowBe4 Inc, said in a broadly distributed email. A Yahoo spokesperson, in response to criticism of the company’s security measures, said on Thursday: “We’re committed to keeping our users secure, both by continuously striving to stay ahead of ever-evolving online threats and to keep our users and platforms secure.” (Reporting by Greg Roumeliotis and Jessica Toonkel in New York and Dustin Volz in Washington; Additional reporting by Liana Baker, Anna Driver and Eric Auchard; Writing by Jim Finkle and Jonathan Weber; Editing by Bill Trott and Bill Rigby)

This story has not been edited by Firstpost staff and is generated by auto-feed.

First Published On : Dec 16, 2016 00:58 IST

Demonetisation: NITI Aayog announces reward schemes, to spend Rs 340 cr to boost cashless

Aimed at promoting digital transactions, the government think tank Niti Aayog has announced two schemes – Lucky Grahak Yojana and Digi Dhan Vyapari Yojana – involving a rewards programme based on lucky draws, entailing a spending of Rs 340 crore.

“Our objective is to make the digital payment mode a mass movement,” announcing the scheme NITI Aayog CEO Amitabh Kant said.

The Lucky Grahak Yojna is targetted at consumers and the Digi Dhan Vyapari Yojna at encouraging merchants to transition to digital payments.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

As part of Lucky Grahak Yojna, the National Payments Corporation of India (NPCI) will announce 15,000 winners of Rs 1,000 each for 100 days starting 25 December.

There will be 7,000 weekly awards, with a maximum award of Rs 50,000 each for merchants, under Digi Dhan Vyapari Yojna.

Digital payments Mega awards2Digital payments Mega awards2

According to Kant, the intention of the schemes is to make all people across India move towards digital payments.

Kant also said there has been a spurt in digital payments since demonetisation but much more can be done.

Digital payments Mega awardsDigital payments Mega awards

In the wake of scrapping of old Rs 500/1,000 banknotes, Niti Aayog had asked NPCI to frame a new scheme to incentivise digital payments.

All modes of digital payments – USSD, AEPS, UPI and RuPay Cards – will be eligible under the scheme. For merchants, transactions made on the POS machines installed at their locations would be considered.

Digital payments Mega awards1Digital payments Mega awards1

NPCI is a not for profit company which is charged with a responsibility of guiding India towards being a cashless society.

Earlier, on 8 December the government had announced a slew of measures to incentivise cashless payments. As part of the measures, petrol, railway tickets and insurance policies of PSU companies will cost less if bought through debit/credit cards or other digital modes.

It also waived service tax for payments up to Rs 2,000 made through cards and decided to do away with transaction fee for payment to central government departments and PSUs.

With PTI

First Published On : Dec 15, 2016 15:59 IST

Fed rate hike: Emerging markets vulnerable to fund outflow but may benefit from strong US, says Moody’s

New Delhi – The interest rate hike by the Federal Reserve reflects a strengthening US economy that will benefit emerging market economies but also make them
vulnerable to volatile capital flows, Moody’s Investors Service has said.

“A resurgence of heightened cross-border capital flow volatility in response to the Fed’s tightening could have negative spillovers for those with large external funding needs, high leverage, macroeconomic imbalances, or uncertainties around politics and policies,” it said.

The interest rate hike reflects a strengthening US economy that should continue to expand through 2018 and emerging markets exporters will benefit if US growth translates into higher import demand.



“While the impact of the rate increase on the US economy will be negligible, emerging market economies with large external funding needs and macroeconomic imbalances could be vulnerable to capital outflows,” it said.

Moody’s expects the Fed to tighten rates at a very gradual pace, with two to three more increases pushing the fed funds rate to around 1.25 per cent to 1.5 per cent by the end of

“The impact of a higher fed funds rate will likely be more noticeable in some emerging market economies than in the US,” said Madhavi Bokil, Vice President and Senior Analyst at

While emerging market economies could benefit from a strengthening US growth if it stimulates demand for exports, they could also suffer if higher US rates lead to a more sustained re-pricing of financial assets and tighter global financial conditions.

“The most direct impact will be felt in those economies that have high external financing needs relative to their foreign exchange earnings and reserves,” it said.

Moody’s also said that the spillover effect may manifest itself in different ways. For instance, in some cases, a pronounced currency depreciation could lead to higher inflation, which along with the threat of sustained capital outflows, could force central banks to raise interest rates.

With economic growth picking up since the middle of the year, the US Federal Reserve raised interest rate yesterday — the second time in a decade. It had last hiked rates in December 2015.

First Published On : Dec 15, 2016 11:59 IST

US Federal Reserve lifts rates, sees faster pace of hikes in Donald Trump’s first year

Washington – The U.S. Federal Reserve raised interest rates by a quarter point on Wednesday and signalled a faster pace of increases in 2017 as the Trump administration takes over with promises to boost growth through tax cuts, spending and deregulation.

The rate increase, regarded as a virtual certainty by financial markets in the wake of a string of generally strong economic reports, raised the target federal funds rate 25 basis points to between 0.50 percent and 0.75 percent.

U.S. bond yields moved higher and the dollar rose against a basket of currencies after the Fed’s unanimous policy decision. U.S. stocks were trading marginally lower, but selling picked up speed during Fed Chair Janet Yellen’s subsequent news conference.

The Federal Reserve building in Washington. ReutersThe Federal Reserve building in Washington. Reuters

The Federal Reserve building in Washington. Reuters

Yellen indicated the central bank was, at the margins, adapting to Trump as “some of the participants” on the rate-setting Federal Open Market Committee began shifting fiscal policy assumptions.

“We are operating under a cloud of uncertainty … All the FOMC participants recognise that there is considerable uncertainty about how economic policy may change and what effect they may have on the economy.”

Partly as a result of the anticipated changes, the Fed sees three rate hikes in 2017 instead of the two foreseen in September. Yellen called that a “very modest adjustment” driven by strong job gains, evidence of faster inflation, and the expected impact of Trump’s policies.

But she also said Wednesday’s rate increase should be “understood as a reflection of the confidence we have in the progress the economy has made.

In addition to its policy statement, the Fed issued fresh economic forecasts that indicated the current once-a-year pace of rate increases will accelerate next year. Markets and the Fed appeared to be close on their rate outlooks, with Fed futures markets pricing in at least two and possibly three hikes in 2017, up from one to two prior to this week’s meeting.

With President-elect Donald Trump planning a simultaneous round of tax cuts and increased spending on infrastructure, central bank policymakers shifted their outlook to one of slightly faster growth, lower unemployment and inflation just under the Fed’s 2 percent target.

The Fed’s projected three rate increases next year would be followed by another three increases in both 2018 and 2019 before the rate levels off at a long-run “normal” 3.0 percent.

That is slightly higher than three months ago, a sign the Fed feels the economy is still gaining traction.

“They didn’t mention the fiscal stimulus but typically their aggressiveness does indicate that there’s a little more confidence that they can get away with three hikes next year,” said Aaron Kohli, interest rate strategist at BMO Capital Markets.

The Fed continued to describe that pace as “gradual,” keeping policy still slightly loose and supporting some further improvement in the job market.

It sees unemployment falling to 4.5 percent next year and remaining at that level, which is considered to be close to full employment. The economy is projected to grow 2.1 percent in 2017, up from a previous forecast of 2.0 percent.


US bond yields had already begun moving higher following the Trump’s 8 Nov victory and as expectations of the Fed rate increase solidified. By the start of this week, trading in fed funds futures assigned a greater than 95 percent likelihood to a rate hike, according to data compiled by the CME Group.

All 120 economists in a recent Reuters poll had expected a rate hike on Wednesday. In the weeks following the election, Fed policymakers have said Trump’s proposals could push the economy into a higher gear in the short run.

Even though the details of the Republican businessman’s plans remain uncertain, Wednesday’s statement marked a rare case in the post-crisis era in which the Fed moved its interest rate outlook higher.

Risks to the outlook remain “roughly balanced” between factors that could slow or accelerate the economy beyond what the central bank anticipates, the Fed said, no change from its assessment last month.

The rate increase was the first since last December and only the second since the 2007-2009 financial crisis, when the Fed cut rates to near zero and deployed other tools such as massive bond purchases to stabilise the economy.

First Published On : Dec 15, 2016 07:40 IST

Income tax department warns of penal action if I-T returns ‘drastically’ changed

New Delhi: In a stern warning to assessees trying to misuse the provision of revising I-T returns, CBDT today said those “drastically” altering the forms to revise income will face scrutiny and penal action.

income taxincome taxIt said that post demonetisation announced on 8 November, some taxpayers may misuse this provision to revise the return filed by them for the earlier assessment year for manipulating income with an intention to show the current year’s undisclosed earnings in the earlier filing.

“The provision to file a revised return… has been stipulated for revising any omission or wrong statement made in the original return of income and not for resorting to make changes in the income initially declared so as to drastically alter the form, substance and quantum of the earlier disclosed income,” CBDT said in a statement.

The Central Board of Direct Taxes (CBDT), the policy making body of the income tax department, further said if the department notices any manipulation in income in previous year’s ITR (income tax return), it will conduct scrutiny.

“Any instance coming to the notice of the I-T department which reflects manipulation in the amount of income, cash-in-hand, profits etc and fudging of accounts may
necessitate scrutiny of such cases so as to ascertain the correct income of the year and may also attract penalty and prosecution in appropriate cases as per provision of law,” it said.

Under the Section 139(5) of the I-T Act, a revised ITR can only be filed if any person who has filed a return discovers any omission or any wrong statement therein.

First Published On : Dec 14, 2016 16:28 IST

Cyrus Mistry ouster: TCS was easy for Tatas but other companies may prove trickier

New Delhi – Moral victory for Cyrus Mistry or a vote of trust in Ratan Tata? The ouster of Mistry as chairman of the Tata Group’s cash cow, TCS, yesterday was a foregone conclusion as the Tatas hold about 73% stake in the company and had moved a resolution seeking his ouster.

According to a filing with the stock exchanges, an overwhelming 93% votes were on favour of the resolution, which ultimately led to Mistry being removed. But the same filing also noted that almost 11.77 crore valid votes were cast against the resolution. This amounted to less than 7% of the total votes cast but by itself, this is not a small number.

Cyrus Mistry. Reuters file photoCyrus Mistry. Reuters file photo

Cyrus Mistry. Reuters file photo

Calling the results a big moral victory, Mistry’s office said today that almost 20 per cent of shareholders of TCS — that accounts for more than 70 per cent of non-promoter shareholders — supported him by voting against the resolution or abstaining, which meant they were expressing disapproval of the promoters’ actions.

Whether Mistry’s interpretation of the EGM outcome is correct or not, one must note that shareholders raised several uncomfortable questions at the same EGM in Mumbai – clearly showing that while a majority voted for the resolution out of loyalty and respect for Tata, the group has a lot to explain on the arbitrary way in which it has ousted Mistry from the board of group holding company Tata Sons.

Another noteworthy development in the TCS EGM was the decision of LIC, an institutional investor, to abstain from voting. Though LIC holds just over 3% stake in TCS, should the decision to abstain be seen as a clear signal from the government that it is not taking sides – yet – in the battle between Tata and Mistry? This article in the VCCircle recounts how the governments in the past have not shied away from preventing hostile boardroom battles by prepping up the state-owned insurer to take sides, such as in the case of L&T and Escorts’ takeovers.

LIC’s vote either way may not have mattered much in TCS but it holds far more importance in some other group companies where insurers (LIC and private insurers) hold a higher stake and whose EGMs are coming with a resolution similar to TCS – seeking removal of Mistry from their respective board of directors.

According to proxy advisory firm Stakeholders Empowerment Services (SES), if LIC votes against the resolution to remove Mistry, the resolution could face defeat all across Tata group companies, with the exception of TCS. LIC and other insurers together hold over 10 percent stake in group companies Tata Motors, Tata Steel, IHCL, Tata Power, Tata Chemicals and Tata Global. They hold over 21% of Tata Power.

According to this report in the Business Standard, many shareholders asked for an explanation at the TCS EGM on reasons for removing Mistry from the TCS board.

Here are some questions the shareholders threw up:

1) What are the actual reasons for removing Mistry from the chairmanship of Tata Sons? Specially since TCS was doing “well” under Mistry

2) Of the 38 shareholders who spoke at the EGM, 34 supported the resolution to remove Mistry but also suggested both Tata and he to resolve the issue amicably, instead of fighting like “cats and cobras”.

3) Many shareholders suggested that Tata take help from other business heads such as Anand Mahindra, Kumar Mangalam Birla or Rahul Bajaj as mediators.

4) The annual report shows all decisions were taken unanimously by the board. Then, why is Mistry is being singled out, one shareholder wanted to know

5) This report quotes shareholder Dinesh Kotecha saying Mistry had raised some valid and pertinent points. “He is specific, he is humble. He has drawn attention to at least 50 issues and I think of those at least 40 points require deliberations.”

It is clear from these questions and reactions of shareholders that though the move by Tata Sons to oust Mistry as chairman of this holding company and the subsequent move to remove him as chairman of group companies may well succeed, it will not be an unqualified success.

As proxy advisory firms and other market watchers have noted in the past, the biggest question which still begs an answer is the reason or reasons for removal of Mistry as chairman of Tata Sons. Shareholders want to know what were the parameters for evaluating the performance the chairman of Tata Sons, whether they had been laid down previously and were these violated by Mistry?

Many shareholders also rightfully want the entire Tata-Mistry battle to be amicable, instead of becoming an ungainly public spectacle. And some others want a clear succession/leadership plan for Tata Trusts – which hold the largest stake in Tata Sons.

In summary, the Tatas may well succeed in removing Mistry from group companies after a prolonged process of shareholder approval and perhaps some legal challenges, but they would do well to put an institutional structure in place for future chairmen of the group.

First Published On : Dec 14, 2016 11:25 IST

Demonetisation impact: Will it help the economy and reverse jobless growth?

So what is demonetisation? Is it, as former finance minister P Chidambaram declared on Tuesday, “the biggest scam of the year”? Or is it, as Prime Minister Narendra Modi has been at pains to insist, a move that will curb black money, bring more into banking sector, widen the tax net and push us towards a more digitised economy? Does this, as the former finance minister claimed during a news conference, make poor people even poorer or will it, as Modi promised, create more jobs and diminish poverty?

In the heat and dust of a debate, often the larger points remain unnoticed while we squabble over perceptions. Demonetisation has unleashed a beast so strange and powerful that politicians, economists, media and every other stakeholder have since turned into blind men trying to describe an elephant.

S Gurumurthy. File photo. Reuters

S Gurumurthy. File photo. Reuters

While economists remain sharply divided over its impact (Amartya Sen and Larry Summers, for instance, have trashed it while Jagdish Bhagwati and Ken Rogoff see it as a bold, audacious move and a major reform), politicians bicker and commentators get tethered to their prejudicial divides, an interesting perspective has been offered by RSS ideologue S Gurumurthy.

A chartered accountant by profession and a commentator on matters economic and political in his own right, Gurumurthy, who is said to have the prime minister’s ear, has presented demonetisation as a much-needed remedy against “economic mismanagement” of the UPA years where sharp growth was accompanied by a rather strange fall in jobs.

His contention is that the economy under former prime minister Manmohan Singh, a noted economist and a former RBI governor, was fuelled by asset inflation that resulted in the creation of huge amount of black wealth. This unmonitored cash, according to him, drove up the real estate prices, stock market and gold that eventually pushed up the GDP but did little to create jobs and hence was not beneficial for the common man.

Speaking to CNN-News 18 during the sidelines of a seminar on Monday, Gurumurthy said that under Singh and Chidambaram, “the quantum jump in illicit cash in the economy fuelled an asset price bubble in gold, stocks and real estate, which reflected as high GDP growth in the UPA years and continuing till now. However, that growth couldn’t create jobs because it was black money spirited out of India and round-tripped back in the form of investment in assets,” he said.

In his column for Tuesday’s edition of The Hindu, the research professor of legal Anthropology at SASTRA University provided some figures to elaborate on his theory a little more, comparing the economies under NDA government led by Atal Bihari Vajpayee and UPA 1 under Manmohan Singh.

“During the NDA rule (1999-2004), real GDP grew by 27.8 percent, annually 5.5 percentage points. Annual money supply, that fuels inflation, by 15.3 percent. Prices by 23 percent, annually 4.6 percent.” He then goes on to calculate the rise in various metrics: stocks 32 percent; gold 38 percent and a “phenomenal” rise in jobs by almost 60 million. Under Manmohan Singh‘s UPA, however, says Gurumurthy, “real GDP grew by 50.8 percent, annually 8.4 percentage points — one-and-a-half times that of NDA’s,” but only 27 lakhs jobs were generated as against 600 lakhs during NDA’s 5 year-term, he writes.

He explains this jobless growth arising out of “asset price inflation, not production,” and goes on to add that stock and gold prices recorded a three-fold jump whereas property prices “doubled every two-three years.”

In his critique of demonetisation in Friday’s column for The Hindu, Singh had admitted that India’s cash to GDP ratio “is very high vis-à-vis other nations.”

What explains this high circulation of cash? Gurumurthy puts it on a rise in high denomination notes (HDNs) which make it easier to generate black wealth. He writes that while in 1999 cash with the public was 9.4 percent of nominal GDP, by 2007-08 it had jumped to 13 percent. This is an unusually high figure because rising bank and digital payments should have made the figure come down. HDNs in the hands of public, he writes, shot up from 34 percent in 2004 to 79 percent in 2010 and touched 87 percent the day Modi announced the decommissioning of notes.

During the Nani Palkhivala Memorial Lecture in Chennai on 30 November, Gurumurthy had cited celebrated French economist Thomas Piketty to say that the economic growth during 2004-2014 did not improve the lives of the poor because of “Piketty effect” and the higher GDP failed to haul people out of poverty,” according to another report in The Hindu.

How accurate is the RSS ideologue’s contention that Indian economy during UPA years was awash with “unmonitored cash”? Is it true that these years actually saw a fall in jobs despite high growth?

The Institute of Applied Manpower Research (IAMR), a think-tank of the Planning Commission, in a research paper published in 2013, found that not only did India witness jobless growth during the UPA tenure, it also saw millions pushed to become casual labour with little social security.

The authors, according to The Times of India report, revealed through their research that despite a phenomenal 8.5 percent growth in GDP, “employment in total and in non-agricultural sectors” did not grow. “This jobless growth in recent years”, they found, “was accompanied by growth in casualisation and informalisation”.

According to the study, as cited by The Times of India report, manufacturing sector saw the loss of 5 million jobs between 2005-10. The services sector witnessed only 4 million additional jobs in 2005-2010 (as compared to a massive growth of 18 million jobs during 2000-2005). This, the report said, was odd considering the growth period is often called that of ‘service-led’ growth.

If this points to a crippling problem that falsified growth while making it jobless, by sucking out extra, unmonitored cash, demonetisation may help the economy do a much-needed course-correction.

So the choice before the Modi government was to either maintain status quo — a combination of illicit cash fuelled high GDP and joblessness — or to reboot the economy through demonetisation that would trigger initial hardships but eventually restore real growth and jobs. Gurumurthy feels the government did the right thing by choosing the latter option.

As Columbia University Professor of Economics and Law Jagdish Bhagwati pointed out in his article (co-authored by Pravin Krishna and Suresh Sundaresan) for The Times of India, “Although the process is inconvenient, and subjects many households to hardships, it forces the cash from the black economy to be deposited into the banking system, potentially increasing transparency and expanding the tax base and revenues to the government from taxes and surcharges.”

The jury is still out on perhaps India’s most disruptive reform. But just as it would be foolish to tout demonetisation as a magic bullet, it similarly makes little sense to call it India’s biggest scam.

First Published On : Dec 13, 2016 17:16 IST

Tirupati temple may have to get FSSAI license to serve, make laddus

Soon, your Tirupati laddu may come with a food safety mark. A report published in The Hindu said that the Triumala Tirupati Devasthanam, which runs the renowned temple will have to obtain a license from the Food Safety Association of India (FSSAI).

Suneeti Toteja, director of the Food Safety and Standards Authority of India (FSSAI), a central body which regulates manufacturing, processing, distribution and sale of food in India, has written to the food commissioner of Andhra Pradesh, stating that the temple authority must adhere to the safety standards prescribed the Food Safety Standards Act, 2006.

Tirupati temple. AFPTirupati temple. AFP

Tirupati temple. AFP

Since laddu is a “food” under the act, the temple administration has to buy a license to distribute it, the letter continued. TTD is officially a Food Business Operator (FBO), as per the Act and is bound to follow the safety standards, the letter added.

Toteja letter had come in response to a Right To Information (RTI) application filed with the FSSAI complaining about the alleged unhygienic conditions under which the laddus are made by the TTD, the board which runs the renowned temple, The Hindu report said. Bengaluru-based T Narasimhamurthy had submitted the application.

According to food safety act, only those wearing clean clothes and not suffering from any kind of infections shall be allowed to manufacture and pack food, a Bangalore Mirror report stated. Narasimhamurthy has said that the laddus must have a expiry date, while a bill must be provided when it is purchased.

The Tirupati laddu has a 300-year history behind it, and is believed to have been invented in the 18th century. The laddu, offered to devotees as prasadam, is known for its unique taste, the tabloid added.

However, according to latest reports, the TTD has refused entry to food inspectors on the grounds that the temple kitchen is an auspicious place. The board also refused to consider the laddu as a food, since it believed devotees cannot be considered customers.

Narasimhamurthy is waiting for a reply from the food inspectors regarding the hygiene conditions in the kitchen.

First Published On : Dec 13, 2016 16:58 IST

Provident fund body likely to hike monthly wage ceiling to Rs 25,000 on 19 December

New Delhi: Retirement fund body EPFO is likely to approve a proposal to hike wage ceiling for coverage under its social security schemes to Rs 25,000 per month from the existing Rs 15,000 on 19 December.



The move can bring in 50 lakh more formal sector workers into the social security net of the Employees’ Provident Fund Organisation (EPFO) in addition to its existing subscriber base of around 4 crore organised sector workers.

The apex decision making body of the EPFO — the Central Board of Trustees (CBT), headed by the Labour Minister — is scheduled to meet on Monday (December 19).

“The CBT is likely to discuss and approve the proposal to increase the monthly wage ceiling to 25,000 for coverage under social security schemes for providing provident fund, group insurance and pension in the its trustees’ meet at Bengaluru on 19 December, 2016,” a source said.

The source added that back of the envelop calculations suggest that 50 lakh additional formal sector workers would be covered after the ceiling is hiked to Rs 25,000 per month.

The source also said that the wage ceiling hike is imminent because Employees State Insurance Corp (ESIC) which provides health insurance to formal sector workers has already increased the monthly wage ceiling to Rs 21,000 from Rs 15,000 from 1 October, 2016.

The EPFO and ESIC run social security schemes for formal sector workers and are under administrative control of the Labour Ministry.

Earlier this month, Labour Minister Bandaru Dattatreya had told the Lok Sabha, “A proposal for increase in the wage ceiling from Rs 15,000 per month to Rs 25,000 per month for coverage under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 has been submitted by the Employees’ Provident Fund Organisation (EPFO). No decision in this regard has been taken.”

EPFO had increased the wage ceiling to Rs 15,000 per month from Rs 6,500 on 1 September, 2014 in view of price rise and pay revisions in the formal sector.

Besides the wage ceiling, the issue of exempting textile sector from meeting mandatory EPFO norms could come up for discussion.

On 7 December, the Union Cabinet had given its approval to reforms to boost employment generation and exports in the made-ups sector (part of the textile sector).

The Union Cabinet made it optional for employees earning less than Rs 15,000 per month to contribute towards EPFO schemes.

At present, employees are required to contribute 12 percent of their basic wages towards social security schemes run by the EPFO.

First Published On : Dec 13, 2016 12:06 IST

Demonetisation: ED arrests 7 middlemen; seizes Rs 93 lakh new notes in Karnataka

Bengaluru: Unearthing a racket involved in illegal conversion of demonetised notes, the ED has arrested seven alleged middlemen and seized Rs 93 lakh in new currency in Karnataka as part of its money laundering probe.



Officials said the agency placed the seven, including the relative of a government official, under arrest late yesterday under provisions of the Prevention of Money Laundering Act (PMLA).

Rs 93 lakh in new notes of Rs 2000 have been seized in the case, they added.

Officials said the action was taken as part of a probe in a case where the Income Tax department had recently seized Rs 5.7 crore cash in new currency and the Enforcement Directorate had booked a money laundering case against a government engineer and others based on a CBI FIR in the case.

The modus operandi adopted by the alleged middlemen, officials said, was unearthed after ED officials launched a special operation and themselves posed as ‘customers’ looking to get old currency changed illegally, after paying commission to the said middlemen.

Officials said the probe by the agency found that these alleged middlemen were reportedly charging a commission between 15-35 per cent and were executing the racket of
illegal conversion of new notes in alleged connivance with bank officials.

They said the agency suspects that there is a chain of middlemen involved in converting black funds into white even as they added that the probe in continuing.

The accussed are expected to be produced in a local court here for further custody.

First Published On : Dec 13, 2016 11:38 IST

Tata-Mistry battle: Nusli Wadia hits back, says Ratan Tata using ‘muscle power’ to remove him

Mumbai – With Tata Sons seeking to remove him as director from main listed group entities, Nusli Wadia on Monday hit back saying he has been targetted for his “independence of
mind and action” and he is not required to act in their interest as he does not not serve the Tata group in any capacity.

In a letter to the shareholders of Tata Steel, which has convened an EGM on December 21 to consider a resolution by Tata Sons to remove Cyrus Mistry and him as directors, Wadia said several allegations levelled against him were false, unsubstantiated and baseless.

Terming the allegation that he has acted in concert with Mistry as “totally false and baseless”, he wrote: “My actions as an independent director are totally independent and not linked to any individual.”

Nusli WadiaNusli Wadia

Nusli Wadia

Stating that he is the only Independent director that Tata Sons has sought to remove from Tata Steel, Tata Chemicals and Tata Motors, Wadia said: “The reasons for which I am being sought to be removed as director is my independence of mind and action…”

Reacting to the allegation that he was acting against the interest of the group, he said: “I do not serve the Tata group in any capacity and I am not required to act in their interest. The statement is irrelevant to my position as an Independent Director of Tata Steel. It is also baseless and unsubstantiated.

“I have a fiduciary responsibility to act as an Independent director in the best interest of the companies on whose board I serve, no more or less.”

He further said, “My independent stand has aggravated Tata Sons and my removal is being sought because I chose not to follow their diktat. My fiduciary duty is to your company and not to an unidentified Tata group.”

Wadia further said Tata Sons’ principal allegations against him “are unsubstantiated, baseless, false, motivated, defamatory and libellous and have been made with the intention of harming my reputation.”

He also claimed that it was “the first time in the history of corporate India that a promoter is using his muscle power with false and vindictive allegations to remove an Independent director”.

“Although it is my removal that you are being asked to vote upon, the real ‘person’ on trial is the institution of the independent director itself and not me,” he said.

Underlining his actions as an independent director, Wadia recalled that he differed “strongly” with Ratan Tata “in the acquisition of Corus but a decision was ultimately taken by

Further, Wadia said he “differed strongly providing continuous financial resources towards Tata Steel Europe from the year 2012 prior to Tata stepping down. From that date to now the capital employed in the business has risen by around Rs 25,000 crore with nil return.”

Any return on investment to the shareholders of Tata Steel from its investments in Tata Steel Europe looks a near impossibility, he said.

“The shareholders of Tata Steel have already suffered a serious impairment of approximately Rs 35,000 crore and are likely to have further substantial impairments in future,” Wadia claimed.

Alleging violation of insider trading regulations, Wadia said: “I believe that Mr Ratan Tata, Mr Noshir Soonawala and the Board of Tata Sons even post notification of the insider trading regulations (January 25m 2015) sought access to information and documents of Tata Steel, Tata Motors and other Tata companies.”

Recalling that he joined Tata Steel as a director almost four decades ago when JRD Tata invited him, Wadia said at that point of time JRD encouraged freedom of thought and expression.

“It is both sad and unfortunate that Tata Sons and its interim Chairman Ratan Tata are not only not practicing this great tradition but effectively destroying it,” Wadia wrote.

Last month Wadia had sent a legal notice to Tata Sons stating “the special notice for EGM of Tata Steel shareholders are aimed at defaming me as the content of the notice are false, frivolous, and per se defamatory, which are now established to be unsubstantiated for which I shall be compelled to initiate legal proceedings to protect my interest.”

First Published On : Dec 13, 2016 08:59 IST

Demonetisation: Uttar Pradesh garners maximum deposits under Jan Dhan

New Delhi: Uttar Pradesh tops the list of states with the most deposits in Jan Dhan accounts, followed by West Bengal and Rajasthan.

Representational image. PTIRepresentational image. PTI

Representational image. PTI

The total deposits in Jan Dhan accounts stand at Rs 74,610 crore as of 7 December, as per Finance Ministry data. UP has about 3.8 crore Jan Dhan accounts with deposits of Rs 12,021.32 crore. It is followed by West Bengal with 2.44 accounts and deposits of Rs 9,193.75 crore.

Rajasthan comes in third with 1.9 crore accounts and Rs 6,291.1 crore deposits, followed by Bihar (2.62 crore accounts, Rs 6,160.44 crore deposits).

Total deposits in Jan Dhan accounts surged by around Rs 28,973 crore in about a month after the announcement of ban on old Rs 500 and Rs 1,000 currency notes.

Despite the surge, about one-fifth of these accounts still have no balance.

Last week, the government said that inflows into Jan Dhan accounts have come down significantly after it warned people not to allow their accounts to be misused for converting black money into white.

After setting a cash deposit limit of Rs 50,000 in these accounts, the government had on November 18 cautioned account holders that they will be prosecuted under the I-T Act for allowing misuse of their bank accounts through deposit of black money in Rs 500/1,000 notes during the 50-day window till December 30.

The directive came against the backdrop of reports that some people were misusing other persons’ bank accounts to convert their black money into new denomination notes.

First Published On : Dec 12, 2016 19:19 IST

Demonetisation: ‘Agriculture sector will be transformed with better credit facility for farmers’

As cash is the primary mode of transaction in agriculture sector, demonetisation is bound to cause temporary stress in the system. But as they say ‘No pain, no gain’, for I believe this historic move has the potential of bringing about transformational changes in the sector like better access to credit for farmers, elimination of middlemen, direct transfer of subsidies to farmers and ultimately linking the Indian farmer to the global agricultural market.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

However, in the short term, the sector has to brave several storms before it realises the true fruits of demonetization. In the transitional phase, farm produces with limited shelf-life like fruits and vegetables, which significantly contribute to overall farm output, will be hit due to cash crunch. Similarly, payment of wages to farm laborers and rentals for farm implements will too become difficult considering the limited access of service providers to the banking system. The steep decline in transactions at various states APMC’s (up to 70 percent as per reports) in the aftermath of the decision is a testimony to this fact.

But despite these initial hiccups, demonetization can potentially address the perennial problem of credit in farm sector. With banking system glowing with liquidity, there can be increase in investments in farm sector, which is the only way to get out of the vicious circle of subsistence farming. Despite being declared as a ‘priority sector’ credit availability to typical farmers for investment in their own lands are far from adequate. This has forced farmers to rely on non-institutional credit, which further aggravates the problem.

A market-driven, intense farming practice is must for bringing about positive change on ground. India’s agricultural sector provides more jobs and sustainable incomes than all other sectors put together. Despite high-population density, per capita arable land availability in India is among the best in the world; it the only country in the world capable of growing almost any grain, fruit or vegetable in abundance. Unknown to many, India’s agricultural products fetches higher earnings than trade in services or manufacturing.

With proactive support, India can further enhance its farm exports and contribute to its prosperity. Development of agriculture will also address other glaring social problems like town planning, migration and access to basic health care and nutrition. Better access to credit for farmers will help them gain sustainable incomes and invest in their assets for better returns.

Farming communities across India have been very supportive to the cause. Despite inconveniences, farmers are willing to play their part for country’s development. An essential ingredient for the success of demonetization is internet penetration in rural India. Mobile wallets can play a cardinal role in dealing with cash crunch. They can be helpful in reimbursing labourers and providing farm implement rentals. Yet mobile wallets, net-banking are to a large extent dependent on internet connectivity; despite wide mobile coverage, internet connectivity and its stability remain dicey in rural areas.

Seeds, fertiliser and labour are the largest contributor to farmer’s expense in the sowing season. Direct subsidy transfer for farmers for fertiliser purchase will be very beneficial in the current scenario. Banking provisions like over-drafting, disbursement of working capital/micro credit are the need of the hour.

Demonetization will empower India’s farming communities and bring them at par with city dwellers. Access to institutional credit has the potential to change the very nature of Indian agriculture, post successful implementation of demonetization. The advent of GST regime and access to better credit can revitalize agro-processing in an unprecedented way.

The biggest challenge of this entire exercise lies in reaching out to marginalised farmers with negligible/nil landholding and to those outside the banking and social security net. Decline in arrivals at mandis signals temporary distress in small farmers. From hiring trolleys, to unloading of crops, scarcity of cash has emerged as bottleneck in this sowing season. Our company is already taking steps to reach out to such marginalized farmers and address their problems.

The government and industry must come together to help farmers and make this initiative a thumping success for the farm sector.

(The writer is Founder and Managing Director, Ruchi Soya Industries Ltd

First Published On : Dec 10, 2016 14:34 IST

Manmohan Singh’s warning to Narendra Modi: Is demonetisation already a ‘mammoth tragedy’?

The choice of words of Manmohan Singh, former prime minister and an economist, for his column in The Hindu on demonetisation impact on India’s economy, beginning with the title, Making of a mammoth tragedy, should worry the average Indian. Even if one tend to discount the politics of Singh’s article, the former RBI governor’s warning on an impending economic crisis, that according to him, will mainly hit the poor, is worth paying a great deal of attention by his successor in PMO, Narendra Modi.

Singh begins the piece by lauding Modi’s intention—addressing black money, fake currency problems—but later goes on to say that what he has done to achieve this task will not only work but its ‘unintended consequence’ will harm the poor greatly. Singh said. “All black money is not in cash, only a tiny fraction is. Against this backdrop, the decision by the Prime Minister is bound to have obverse implications by causing grievous injury to the honest Indian who earns his/her wages in cash and a mere rap on the knuckles to the dishonest black money hoarder.” Singh, who had just recently warned about a 2 percent GDP decline following demonetisation, ends his article saying “It is my humble opinion that we as a nation should brace ourselves for a tough period over the coming months, needlessly so.”

Prime Minister Narendra Modi. AFPPrime Minister Narendra Modi. AFP

Prime Minister Narendra Modi. AFP

Is the former PM overstating the short-term pain caused by the demonetisation calling it ‘a mammoth tragedy’, launching a political attack intended to bulldoze a massive economic reform shouldered by his political rival–something and a missed opportunity for his government? Or is it an important caution from an economist-cum former central banker that should be an eye-opener even to his political enemies and the finance ministry?

It is too early to talk about the actual impact on the economy and its various stakeholders from the artificial cash crunch that is a consequence to PM Modi’s massive currency crackdown that has parallels in India only to the 1978 currency ban by Morarji Desai Government. But, some indications have begun to flow in, which indeed shows things have taken a bad turn for the economy though no one is sure how things will pan out from this point.

Let’s look at the available data so far and try understanding Singh’s caution.


The demonetisation announcement happened on 8 November. The only real numbers that gauge the economic activity in the month of November that is out is the Nikkei India Services Business Activity Index for manufacturing and services sectors. This is an important index economists and central bank track to fathom the trends in these key areas. The services sector PMI sharply fell to 46.7 in November from 54.5 in October—that is the biggest monthly drop since November 2008, just two months after the global financial crisis hit the economy following the US investment bank Lehman Brothers going bust in September. A reading of PMI above 50 typically shows economic growth, while a figure below 50 indicates contraction. “The latest set of gloomy PMI figures for the Indian service sector shows that companies were heavily impacted by the 500 and 1,000 rupee notes ban. Cash shortages resulted in fewer new business intakes, which in turn caused a fall in activity and ended a 16-month sequence of expansion ,” said Pollyanna De Lima, Economist at Markit and author of the report.

A decline, though not to this extent, was seen in the manufacturing PMI as well with the index shrinking to 52.3 in November from October’s 22-month high of 54.4. But, the PMI numbers do indicate both manufacturing and services have taken a major hit in November. One needs to wait and watch how things will pan out from here on when more data comes.

November auto sales

Then we have the auto sales numbers, which is a good indicator to know what is happening on the ground. According to PTI report, the vehicle sales across categories registered a decline of 5.48 per cent at 15,63,665 units, from 16,54,407 in November 2015. It is the steepest decline in 43 months when total sales had declined by 7.75 per cent in March 2013. Two wheelers and commercial vehicles are the segments that are hit most. According to Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales last month were at 2,40,979 units, as against 2,36,664 in November last year. Domestic car sales ticked up to 1,73,606 units as against 1,73,111 in November last year while that of commercial vehicles (CVs) was down 11.58 per cent at 45,773 units in November, SIAM said. According to this report, total two-wheeler market sales dropped by five per cent, with market leaders like Hero MotoCorp and Bajaj Auto witnessing major fall. Hero MotoCorp sold 4,79,856 units of two-wheelers in November, marking a fall of around 12.9 percent year-on-year, while Bajaj Auto saw sales dropping by 12 percent in November, and others reported a flat growth.

The RBI cues

The RBI’s approach to the demonetisation impact on the economy is bit perplexing, but the obtrusive caution is hard to ignore. In its latest bi-monthly policy review, the central bank has already cut the FY17 growth forecast to 7.1 percent from 7.6 percent, but not taking into account the full impact of demonetisation shock. “The withdrawal of SBNs could transiently interrupt some part of industrial activity in November-December due to delays in payments of wages and purchases of inputs, although a fuller assessment is awaited,” the RBI said.

The RBI indeed acknowledges that there’ll be ‘short-run disruptions in economic activity in cash-intensive sectors such as retail trade, hotels & restaurants and transportation, and in the unorganised sector’. But the RBI’s larger assumption seems to be that there will be a recovery beyond short –term pain of cash-crunch. “ If the impact is transient as widely expected, growth should rebound strongly.”

But the central bank too only ‘expects’ that the demonetisation effect is ‘transient’ but it is not fully sure on the actual impact. “The outlook for GVA growth for 2016-17 has turned uncertain after the unexpected loss of momentum by 50 basis points in Q2 and the effects of the withdrawal of SBNs (specified bank notes) which are still playing out.” In short, the RBI has no clue at this stage what the demonetisation will do to the economic growth. It primarily attributes the loss of growth momentum in second quarter to the downward revision and to the as yet unclear effects of note ban. This means, if things turn bad, the 7.1 percent growth projection could be revised downwards even further to 6-6.5 percent.

Job losses

There are indications of severe hit to the employments in the informal sector post after the government announced Rs 500, Rs 1,000 notes as illegal tender on 8 November. As Singh points out in his Op-ed, “more than 90 per cent of India’s workforce still earn their wages in cash. These consist of hundreds of millions of agriculture workers, construction workers and so on”. The pain and suffering of these segments, which constitute the majority is not quantifiable, but no government can shun the responsibility of massive losses in the country that is a consequence of a “well thought-out”, conscious policy action, which according to RBI governor Urjit Patel, “wasn’t done in haste”. We don’t have reliable figures on job data. But, according to a report in Financial Express, which quotes unnamed industry officials, “As many as 4 lakh people, mostly daily wagers, may have either lost their jobs or shunned work temporarily due to the lack of payment so far, and the number is only going to grow if the cash crunch persists.”

Even the Bharatiya Mazdoor Sangh, the labour wing of BJP’s ideological parent, Rashtriya Swayamsevak Sangh has raised an alarm about the huge hit on job losses. “”Under the new government, 1 lakh and 35 thousand job opportunities have been created so far but 20 lakh people have lost their jobs,” Baij Nath Rai, president of the Bharatiya Mazdoor Sangh, told The Telegraph. This is a serious situation indeed in a country where job creation is already a massive challenge. The onus, yet again, falls on the Modi-government here.

The big question is how long the pain will last. There is no clarity on this either from the government and the central bank. PM Modi talks about 50-days, his finance minister, Arun Jaitley speaks of two or three quarters and the RBI doesn’t seem to have an answer except assuring the public that there is enough cash out there and things are under “constant review”.

There are no two thoughts on the intentions behind the demonetisation exercise but when ultimately a cost-benefit analysis is done, and if the government finds little luck on recovery on unaccounted cash, the cost of this whole exercise will be enormous, far outweighing the gains that may include more people moving to non-cash transactions. PM Modi’s big task now is to ensure demonetisation doesn’t end up as a tragedy.

Data support from Kishor Kadam

First Published On : Dec 9, 2016 14:59 IST

Demonetisation: Who knew? Modi’s black money move kept a closely guarded secret

Prime Minister Narendra Modi handpicked a trusted bureaucrat, little known outside India’s financial circles, to spearhead a radical move to abolish 86 percent of the country’s cash overnight and take aim at the huge shadow economy.

Hasmukh Adhia, the bureaucrat, and five others privy to the plan were sworn to utmost secrecy, say sources with knowledge of the matter. They were supported by a young team of researchers working in two rooms at Modi’s New Delhi residence, as he plotted his boldest reform since coming to power in 2014.

When announced, the abolition of high-value banknotes of 500 and 1,000 rupees came as a bolt from the blue.

Hasmukh Adhia, Revenue secretary. Image courtesy PIBHasmukh Adhia, Revenue secretary. Image courtesy PIB

Hasmukh Adhia, Revenue secretary. Image courtesy PIB

The secrecy was aimed at outflanking those who might profit from prior knowledge, by pouring cash into gold, property and other assets and hide illicit wealth.

Previously unreported details of Modi’s handling of the so-called ‘demonetisation’ opens a window onto the hands-on role he played in implementing a key policy, and how he was willing to act quickly even when the risks were high.

While some advocates say the scrapping of the banknotes will bring more money into the banking system and raise tax revenues, millions of Indians are furious at having to queue for hours outside banks to exchange or deposit their old money.

Labourers have also been unpaid and produce has rotted in markets as cash stopped changing hands. Not enough replacement notes were printed in preparation for the upheaval, and it could take months for things to return to normal.

With India’s most populous state, Uttar Pradesh, holding an election in early 2017 that could decide Modi’s chances of a second term in office, there is little time for the hoped-for benefits of his cash swap to outweigh short-term pain.

Modi has staked his reputation and popularity on the move.

“I have done all the research and, if it fails, then I am to blame,” Modi told a cabinet meeting on 8 November shortly before the move was announced, according to three ministers who attended.

Direct line to Modi

Overseeing the campaign, with support from the backroom team camped out at Modi’s sprawling bungalow in the capital, was Adhia, a top finance ministry official.

The 58-year-old served as principal secretary to Modi from 2003-06 when he was chief minister of Gujarat state, establishing a relationship of trust with his boss and introducing him to yoga.

Colleagues said he had a reputation for integrity and discretion.

Adhia was named revenue secretary in September 2015, reporting formally to Finance Minister Arun Jaitley. In reality, he had a direct line to Modi and they would speak in their native Gujarati when they met to discuss issues in depth.

In the world’s largest democracy, the demonetisation was revolutionary: it called into question the state’s promise to ‘pay the bearer’ the face value on every banknote.

At a stroke, Modi scrapped money worth 15.4 trillion rupees ($220 billion), equal to 86 percent of cash in Asia’s third-largest economy.

The idea is backed by some economists, although the speed of its implementation is widely seen as radical.

“One is never ready for this kind of disruption – but it is a constructive disruption,” said Narendra Jadhav, a 31-year veteran and former chief economist of India’s central bank who now represents Modi’s party in the upper house of parliament.

Modi, in his TV address to the nation, cautioned that people could face temporary hardship as replacement 500 and 2,000 rupee notes were introduced. Calling for an act of collective sacrifice, he promised steps to soften the blow for the nine in 10 Indians who live in the cash economy.

Biggest, boldest step

Immediately after the address, Adhia sent a tweet: “This is the biggest and the boldest step by the Government for containing black money.”

The boast harked back to Modi’s election vow to recover black money from abroad that had resonated with voters fed up with the corruption scandals that plagued the last Congress government. Yet, in office, he struggled to keep his promise.

Over more than a year, Modi commissioned research from officials at the Finance Ministry, the central bank and think-tanks on how to advance his fight against black money, a close aide said.

He demanded answers to questions such as: How quickly India could print new banknotes; how to distribute them; would state banks benefit if they received a rush of new deposits; and who would gain from demonetisation?

The topics were broken up to prevent anyone from joining the dots and concluding that a cash swap was in the offing.

“We didn’t want to let the cat out of the bag,” said a senior official directly involved. “Had people got a whiff of the decision, the whole exercise would have been meaningless.”

Under Adhia’s oversight, the team of researchers assembled and modeled the findings in what was, for it, a theoretical exercise.

It was made up of young experts in data and financial analysis; some ran Modi’s social media accounts and a smartphone app that he used to solicit public feedback.

Yet, for all the planning, Modi and Adhia knew they could not foresee every eventuality, and were willing to move swiftly.

The announcement caused chaos, with huge queues forming at banks when they reopened after a short holiday.

New 2,000 rupee notes were hard to come by and barely any new 500 rupee notes had been printed. India’s 200,000 cash dispensers could not handle the new, smaller, notes and it would take weeks to reconfigure them.

Filling ATMs with the 8 trillion rupees ($117 billion) in new banknotes that the Finance Ministry reckons are needed to restore liquidity to the economy is even trickier.

In a best-case scenario, in which India’s four banknote presses churned out new 500 and 2,000 rupee notes designed to replace the abolished ones, it would take at least three months to hit that target.

Secrecy paramount

Secrecy was paramount, but clues had been left.

Back in April, analysts at State Bank of India said that demonetisation of large-denomination notes was possible.

The Reserve Bank of India, the central bank, also disclosed in May that it was making preparations for a new series of banknotes that were confirmed in August when it announced it had approved a design for a new 2,000 rupee note.

The printing presses had only just started turning when the media finally started to run with the story in late October.

“The plan was to introduce it around 18 November, but there was a clear sign that it could get leaked,” said one person with direct knowledge who asked not to be named due to the sensitivity of the matter.

Some officials in the Finance Ministry had expressed doubts about scrapping high-value notes when the idea came up for discussion. They now feel resentment at the secrecy in which Adhia rammed through the plan on Modi’s orders.

They also say the plan was flawed because of a failure to ramp up printing of new notes ahead of time.

Other critics say the Adhia team fell prey to a form of ‘group think’ that ignored outside advice.

In the words of one former top official who has worked at the Finance Ministry and central bank: “They don’t know what’s happening in the real world.”

First Published On : Dec 9, 2016 09:21 IST

Mick Jagger a dad again at 73 | Reuters

NEW YORK Rolling Stones frontman Mick Jagger became a father for the eighth time on Thursday when his ballet dancer girlfriend gave birth to a son in New York, his publicist said.”Melanie Hamrick & Mick Jagger’s son was born today in New York and they are both delighted.”Mick was at the hospital for the arrival. Mother and baby are doing well and we request that the media respect their privacy at this time,” Fran Curtis, the long-time publicist for the Rolling Stones, said in a statement.

The 73-year-old singer already has seven children with previous partners, as well as five grandchildren, and he became a great-grandfather in May 2014.

Jagger and Hamrick, 29, began dating about two years ago, according to media reports.

(Reporting by Jill Serjeant; Editing by Jonathan Oatis)

This story has not been edited by Firstpost staff and is generated by auto-feed.

First Published On : Dec 8, 2016 21:58 IST

Exclusive: Bangladesh panel finds insiders negligent in central bank heist | Reuters

By Serajul Quadir

DHAKA A Bangladesh government-appointed panel investigating the cyber-heist of $81 million from its central bank in February found five officials at the bank were guilty of negligence and carelessness, the head of the panel told Reuters on Thursday.In his first detailed comments on the inquiry since a report was submitted to the government in May, former central bank governor Mohammed Farashuddin said the officials were low to mid-level and were not directly involved in the crime. “They were negligent, careless and indirect accomplices,” he said in an interview in his office. “The committee came to the conclusion that the heist was essentially committed by external elements.”Bangladesh has so far refused to make the inquiry report public saying it wanted to deny perpetrators knowledge of the investigation into one of the world’s biggest cyber-heists.It was not immediately known if Bangladesh had shared the report with the U.S. Federal Bureau of Investigation, the main agency investigating the crime.Farashuddin did not name the officials he found were negligent. A senior central bank official, speaking on condition of anonymity, said no action had been taken against any employee since the inquiry report had not been made public.Bangladesh Bank spokesman Subhankar Saha declined comment.

Although over 10 months have passed since the heist, there have been no arrests and no word on who carried out the complex heist. Hackers used stolen credentials to try to transfer nearly $1 billion from Bangladesh Bank’s account at the Federal Reserve Bank of New York through the SWIFT transaction system. Many of the transfer orders were blocked or reversed but $81 million was sent to accounts in a branch of Rizal Commercial Banking Corp (RCBC) in the Philippines.The money eventually went into the sprawling casino industry in the Philippines and most of it remains untraced.

Like Bangladesh police investigators, Farashuddin said the inquiry panel also found the hackers may have exploited loopholes in the bank’s online security when technicians hooked up the central bank’s local money transfer system with SWIFT’s international payments network late last year. SWIFT has denied charges that its technicians were responsible for exposing Bangladesh Bank’s systems to hackers.Reuters has reported earlier that Bangladesh Bank had not protected its computer system with a firewall, and used second-hand $10 electronic switches to network computers linked to SWIFT, weaknesses that the hackers may also have exploited.Farashuddin said that RCBC was responsible for allowing the stolen funds to be withdrawn and disbursed into the casino industry. Bangladesh has said it wants RCBC to compensate it for its losses.

RCBC has said Bangladesh Bank was “negligent” in letting the initial security breach take place there, and hence the Manila-based bank need not pay any compensation. So far only about $15 million of the stolen funds have been recovered.Farashuddin said his personal opinion was it would be better to make the inquiry report public, since it would make clear that some local officials were negligent but not responsible for the heist.”If the government would publish, then Bangladesh Bank’s position would be strengthened,” he said.Bangladesh’s law minister said earlier this week that his government would share the findings of the inquiry with Philippine authorities. (Writing by Krishna N. Das; Editing by Raju Gopalakrishnan)

This story has not been edited by Firstpost staff and is generated by auto-feed.

First Published On : Dec 8, 2016 20:51 IST

RBI Monetary Policy: Here are the five key takeaways

The December credit policy was an eagerly awaited event as it came just after the demonetization scheme that was announced last month. Almost every word mentioned by the Reserve Bank of India (RBI) on interest rates, growth, inflation and demonetization was to be analyzed threadbare. Quite ironically, the stance taken by the RBI was neutral and the basic rates were left unchanged, which was contrary to expectations.

What are the main takeaways from this policy?

First, the RBI had announced that the incremental 100 percent Cash Reserve Ratio (CRR) imposed on deposits after 11 September, would be revoked from 10 December. This was expected since the RBI had announced earlier the hiking of the limit for issuance of MSS bonds to Rs 6 lakh crore which will address the issue of handling excess liquidity with banks.



Second, the lowering of repo rate was expected, though it was not, theoretically speaking, on. This is so because the banks had already started lowering their deposits and lending rates once deposits started flowing in after demonetization. Hence the transmission effect was strong due to extraneous forces. Therefore, lowering rates at this point of time was not really required. The expectation was more from the point of view of assuaging banks and improving sentiment at a time when the morale was low given the impounding of the deposits through incremental CRR requirement. In this context, the RBI has also cleared doubts over the role of Fed rate hikes by stating clearly that all such decisions are based on domestic factors and are not linked with the Federal Reserve’s actions.

Third, the RBI has settled the debate over the use of currency that disappears from the system. There has been considerable discussion as to what should be done to currency which disappears from the system which will happen if the holders cannot deposit the same due to absence of any justification. The amount spoken varied between Rs 3-4 lakh crore. It has been argued that the RBI can transfer the same to the government as surplus which can be used for productive purposes. There has been counter arguments put forward that this would not be the best practice to follow. The RBI, in its policy has clarified that no such thing will be done and that the liability will reside on its book without booking it as a cash surplus.

Fourth, the RBI has brought down the GVA growth forecast to 7.1 percent fr om 7.6 percent, though it has clarified that this has been motivated more by the lower Q2 performance rather than a serious dent in Q3 growth. This may not be too convincing, and in case there is higher slippage in the third quarter then the overall growth process will get retarded further and could slip to less than 7 percent.

Fifth, the RBI has also been conservative with the inflation forecast of 5 percent by March end which is quite pragmatic. Prices of some food products have come down sharply post demonetization as farmers are unable to sell in the market. However, there would be a reversal when the rabi crop arrives next year as there are problems with farmers when it comes to procuring seeds and fertilizers. Also with international prices of crude oil and metals tending to firm up, there would be progressively pressure on prices and hence an unchanged target appears to be in order.

What is the way forward? The RBI has kept all options open for rate cuts in future depending on the economic and liquidity conditions. Liquidity should largely not be an issue till March as the problem is more about dealing with surpluses rather than inducing the same. The reverse repo instrument will become more important than the repo rate, and an unchanged rate structure will be beneficial for banks which are converting deposits into GSecs through this window. On the other hand, more securities in the market though the MSS will decrease the price of bonds thus pushing up yields.

But the important question is whether or not demand for credit will increase or will lacklustre conditions continue to generate excess liquidity? Demand for credit depends on fresh investment as well as higher borrowing for working capital requirements. Now, with production slowing down in several sectors such as auto, FMCG, white goods, cement, housing etc. there will less enthusiasm for investment. One segment which showed high rate of growth in credit was home loans. Here, too, the ambivalence in expected impact has slowed down demand for homes which in turn has led to lower credit requirement.

Hence, with growth slowing down in these two quarters, demand for credit would take back seat, which in turn means that banks will have to learn to live with higher liquidity which will tend to lower interest rates on both deposits and loans. MSS bonds and reverse repo auctions are more often to find mention in the market than credit growth. This could be the story for the next four months.

First Published On : Dec 8, 2016 07:42 IST

Nearly 100 killed, hundreds hurt as quake strikes Indonesia’s Aceh | Reuters

PIDIE JAYA, Indonesia Nearly 100 people were killed and hundreds injured in Indonesia on Wednesday when a strong earthquake hit its Aceh province and rescuers used earth movers and bare hands to search for survivors in scores of toppled buildings.Medical volunteers rushed in fading evening light to get people to hospitals, which were straining to cope with the influx of injured.The Aceh provincial government said in a statement 93 people had died and more than 500 were injured, many seriously.Sutopo Nugroho of Indonesia’s national disaster management agency, said a state of emergency had been declared in Aceh, which sits on the northern tip of Sumatra island. “We are now focusing on searching for victims and possible survivors,” said Nugroho. His agency put the death toll at 94.Aceh was devastated by a massive earthquake and tsunami centred on its western coast near the provincial capital, Banda Aceh, on Dec. 26, 2004. That tsunami killed 226,000 people along Indian Ocean shorelines.Officials urged people to sleep outdoors as twilight fell, in case aftershocks caused more damage to already precarious buildings.

President Joko Widodo was expected to visit the area on Thursday, his deputy told media.Wednesday’s quake hit the east coast of the province, about 170 km (105 miles) from Banda Aceh. Nugroho said Aceh’s Pidie Jaya regency, with a population of about 140,000, was worst hit. Many victims had suffered broken bones and gashes and had to be treated in hospital corridors and hastily erected disaster tents, a Reuters witness said. Television showed footage of flattened mosques, fallen electricity poles and crushed cars.

A Red Crescent volunteer said health workers were struggling. “There aren’t enough medical staff,” the Red Crescent’s Muklis, who like many Indonesians uses one name, told TVOne. Nugroho said more than 1,000 personnel, including military officers and volunteers, had been deployed to help in disaster relief.

The U.S. Geological Survey said the quake struck just after 5 a.m. (2200 GMT Tuesday) at a depth of 17 km (11 miles). No tsunami warning was issued.At least five aftershocks were felt after the initial quake, the disaster management agency said.The region suffered massive destruction in 2004 when a 9.2 magnitude quake triggered a tsunami that wiped out entire communities in Indonesia and other countries around the Indian Ocean. Indonesia was the hardest hit, with more than 120,000 people killed in Aceh. (Additional reporting by Fergus Jensen in JAKARTA and Reuters stringer in PIDIE JAYA; Writing by Kanupriya Kapoor; Editing by Paul Tait, Robert Birsel)

This story has not been edited by Firstpost staff and is generated by auto-feed.

First Published On : Dec 7, 2016 21:23 IST

Lok Sabha to break for a four-day holiday this weekend

New Delhi: Lok Sabha will have a four-day holiday starting this weekend, with the Business Advisory Committee (BAC) on Wednesday deciding to have a holiday on 12 December, besides Tuesday which has already been declared a holiday on account of Eid-e-Milad-un Nabi.

Representational image. PTI

Representational image. PTI

Leaders of all major parties, who attended the BAC meeting held in Speaker Sumitra Mahajan’s chamber, raised the issue of declaring a holiday on Monday as in some southern states the Prophet’s birthday was being observed on Monday.

After the leaders of Congress, BJP, NCP, TMC and others raised the demand, it was unanimously decided to have a holiday on 12 December as well.

The BAC also decided to allocate four hours for the discussion and voting on Second Supplementary Demands for Grants (General) for 2016-17 and Demands for Excess Grants (General) for 2013-14, which are likely to be taken up on Thursday.

The Committee also decided to allocate three hours for consideration and passage of the Right of Persons with Disabilities Bill, 2014, once it is passed by the Rajya Sabha.

Earlier in the Lok Sabha also, Opposition members had sought a holiday on 12 December.

Sudip Bandopadhyay (TMC) had raised the issue after the House met at noon as he pointed out that 13 December has been officially declared a holiday for Milad-un Nabi, the Prophet’s birthday.

Leader of Congress in Lok Sabha Mallikarjun Kharge also supported this.

Parliamentary Affairs Minister Ananth Kumar said the matter can be discussed at the BAC meeting.

He also used the occasion to urge the opposition members, who were protesting in the Well demanding a debate on demonetisation under a rule entailing voting, to start a debate on Wednesday, pointing out that the Session will end on 16 December.

First Published On : Dec 7, 2016 14:51 IST

RBI policy offers Urjit Patel a chance to clear air on demonetisation; will he live up to it?

That the Reserve Bank of India will most likely cut interest rate today is now almost a foregone conclusion. Economists are mostly betting on whether it will be 25 basis points or 50 bps.

The key reason being cited is that the central bank will have to cut rate to boost growth as the government’s demonetisation move is slowing down consumption and economy.

Two-thirds of the 60 economists polled by Reuters said they expected a cut, with 31 of 56 respondents expecting it to be 25 bps, while six predicted a deeper 50 bps reduction. One said the RBI would slash rates by 75 bps.

Urjit Patel, Reserve Bank of Governor. ReutersUrjit Patel, Reserve Bank of Governor. Reuters

Urjit Patel, Reserve Bank of Governor. Reuters

“Given the concerns about demonetisation and the slowdown it is likely to generate in sectors that have traditionally been cash dependant, such as consumption goods, the RBI will try to cushion the blow with a rate cut,” said Shilan Shah of Capital Economics in Singapore has been quoted as saying in the Reuters report.

A rate cut seems to be the only pill that the central bank can administer at present to boost the economic growth and the consumer confidence.

The government on 8 November announced its decision to demonetise Rs 500 and Rs 1,000 notes and replace them with new ones, in a bid to curb black money generation, fake currency usage and terror funding. The unexpected move resulted in a cash crunch as the RBI was not prepared to meet the demand for new notes. The demonetised notes formed 86 percent of the currency in circulation by value.

In this context, here are the key aspects you should watch out for in the policy statement today.

About demonetisation

Ever since the demonetisation, the central bank and governor Urjit Patel have both come under criticism for keeping mum about the steps taken. The two times Patel spoke – interviews to PTI and Quint – he just made a customary assurance that the central bank is doing everything to reduce genuine customers’ pain. That was hugely insufficient to calm given the difficulties faced by not just the general public but also the bank staff. Bank unions have written to the finance ministry explaining the various hardhsips faced by their members. According to the union, the central bank has been saying there is enough cash and it is being dispatched to the banks while banks are getting only limited cash. Due to repeated assurances given by the RBI, customers feel that the banks are rationing the cash to them for no reason and this is resulting in tension. Again, they also have raised a suspicion that the RBI is preferring private sector banks to public sector ones while disbursing cash. The policy review today is a chance for Patel to clear all these charges. Will he speak up? Will he reveal the status of currency printing in its presses? How much rupee notes have been printed? How much more have to be printed to completely replace the demonetised currency? When does he think the situation will normalise?

About deposit amount banks got

This number is important. In the absence of regular details from the central bank, there are many numbers doing the rounds. The RBI just twice put out releases on this data and the last one was on 8 November. According to the latest numbers available through sources, as much as Rs 12 lakh crore worth old currency has returned to the banking system as deposits. This is against the government’s estimate that it would get back Rs 10 lakh crore and the rest will be extinguished. There was expectation that this will result in a windfall for the central bank which could have been transferred to the government by way of special dividend. This is as of now a speculation. The government and the RBI have neither denied it nor have they clarified. So also the case of fake currency. A report in The Times of India has said 20 days after demonetisation only 3.4% of all notes returned were counterfeit. Both these, according to many, mean that the scheme has failed in its objective. Worse still is the speculation that the rich and wealthy have already laundered their money. A report in The Indian Express noted that from tiffin service to dental implants, everybody has tried to beat the system and swap old notes. What is the RBI’s thinking? Is the suspicion that the rich and wealthy are gaming the system that forced the authorities to change the rules every other day?


As of now, India is the fastest growing economy. It grew 7.3 percent in July-September, better than the previous quarter’s 7.1 percent. However, with demonetisation curbing the spending power

of the RBI, various agencies and brokerage houses have slashed their growth estimates. Former prime minister Manmohan Singh has said he expected the GDP to fall by 200 basis points. What is the RBI’s take? Its estimate for the current year is 7.6 percent. Most probably the central bank will give out a revised estimate for the current year. Watch out for that.

Inflation or deflation?

Inflation is already trending downwards due to the favourbale monsoon that has improved the productivity of food items. In October, the retail inflation was 4.21 percent, lower than 4.39 percent in September. The food inflation, meanwhile, stood at 3.32 percent compared with 3.96 percent in the previous month. The corresponding figure for July 2016 was a higher 8.35 percent. The slower demand induced by demonetisation is seen further pressuring the prices down. There is even a view that the entire process is deflationary. If it is indeed so, this would do more harm to the economy. The RBI is bound to give some clarity on this, including a revised estimate for inflation. Look out for the number.

One could easily argue that the central bank need not clarify all of these. But given the grand scale at which the demonetisation is being rolled out and the way it is impacting the general public, there is a need for more transparency on the workings of the central bank. But, ironically, the RBI has gone into the opaque mode.

This has seriously dented the image of the central bank. Bank officers’ confederation has even sought the resignation of Patel taking moral responsibility for the havoc in the financial system.

Today’s policy review is a chance for the central bank and its governor to clarify and bring back the integrity of a democratic institution, which has always refused to genuflect before the political bosses in Delhi. The question is will Patel live up?

First Published On : Dec 7, 2016 08:25 IST

Tata-Cyrus spat: Trusts’ work exemplary but may need to redefine relation with group cos

New Delhi – The role of Tata Trusts, which together control about 66 percent in Tata Sons, the holding company of the $100 billion Tata group, has come into sharp focus in recent weeks. That the Tata Trusts are charitable in nature but continue to be majority shareholders in Tata Sons and through this association, in commercial group companies, is a proposition which is now being called into question by ousted Tata Sons’ chairman Cyrus Mistry.

Mistry has made numerous allegations of impropriety in the functioning of Tata Trusts and their interference in the workings of Tata Sons and therefore also of group companies. These charges have been stoutly denied by Tata Sons. But one must remember that the entire tussle over control of one of India’s largest business houses erupted precisely because for the first time in the group’s decades-old existence, two different people were heading Tata Sons and the two Trusts.

Cyrus Mistry was the chairman of Tata Sons while Ratan Tata headed Trusts. Mistry was ousted in October by a board resolution where Trusts’ nominees were also votaries and sooner rather than later, a successor to Ratan Tata will also have to be found to carry on the philanthropic activities of the Trusts.



That the Tata Trusts do commendable work in upholding public good has never been in doubt.

This piece points out that for nearly 125 years, these trusts have often been an “oasis for the poorest and most deprived of Indians. The oldest of the trusts, the JN Tata Endowment dates back to 1892 and the youngest, The Tata Education & Development Trust, was set up in 2008. Their vintage and the funds they have made available point to their commitment.”

It goes on to say that increasingly, from being a back-end provider of funds to non-government organisations (NGOs) and self-help groups, Tata trusts are now at the forefront of implementing new models of social work.

So there is no quarrel with the exemplary work the Trusts have been doing. The trouble lies almost entirely in the way their relationship with Tata Sons and commercial group companies is structured. Proxy advisory firm IiAS, which on the one hand has advised TCS shareholders to remove Mistry as chairman in the upcoming EGM, had, on the other hand, raised questions over the Tata Groups’ operating structure in a report last month.

It had noted that the Tata Trusts exert control over Tata Sons, which exerts control over operating companies, several of which are listed and subject to scrutiny by external stakeholders including shareholders. While shareholders expect these companies to operate along commercial lines, they are overlaid with additional expectations regarding behaviour and the brand.

“A philanthropy running a commercial business creates its own paradoxes. The Trusts elegantly solved this problem by putting Tata Sons between themselves and the operating companies….The Tata group needs to address possible areas of conflict and clearly set the terms of engagement between the three tiers of the group. They need to put in place an operating structure that outlives individuals,” IiAS said in a note to clients last month.

According to this piece, the choice of a successor to Ratan Tata as the head of the two Trusts is a crucial upcoming event. It says Tata Trusts have a unique position in India because they are allowed to hold shares in a commercial entity despite being completely income tax exempt given their charity work. The story quotes Noshir Dadrawala, CEO at Centre for Advancement of Philanthropy, a company specialising in the areas of charity law, as saying “Trust is not a corporate body. It is not a legal entity, it is a legal obligation. The Charity Commissioner can’t interfere with appointments and salaries. Good governance and best practices would demand that they make the succession plan clear to all stakeholders, including the public.”

The power to select Ratan Tata’s successor, therefore, lies in the hands of 20 trustees that run India’s most powerful charity organisation. There are no laws governing the selection of chairman of a charity organisation, according to Maharashtra Public Trust Act.

Meanwhile IiAS CEO Amit Tandon raised some pertinent points with regards to needless complexities in the Tata group structure, thanks to the role of Trusts in Tata Sons, and ways to deal with the mess.

First, he questioned even those members of the Trusts who do not sit on the Tata Sons’ board get information about group companies. “Ratan Tata, Soonawala are not on Tata Sons’ board. It is not obvious why they should get granular information about decisions at Tata operating company level.”

Second, he pointed out how the operation and functions of Trusts in general are opaque in India. “Trusts operate like blackboxes in this counrty. Unlike companies, where the Companies Act and other rules governing their functions are known to market participants, little is known about how trusts operate and the rules that govern there functioning.”

Third, he suggested that the Trusts need to look beyond dividend income from group companies for funding their charitable activities. “The whole issue of Trusts is very important because it is at the heart of the Tata-Mistry disagreement. Ratan Tata alleged that Trusts were not getting enough money by way of dividends for charitable activities. The trusts then need to look beyond dividend income and supplement equity holdings with a corpus that gives fixed returns.”

IiAS has suggested that to align the interests of the Tata Trusts and Tata Sons, the chairperson of the Tata Trusts and Tata Sons must be the same individual, noting that when this was the norm in the past, things “worked smoothly”. The firm has also advised that in future, independent CEOs should manage Tata Trusts and Tata Sons, with the chairperson being the custodian of the Tata brand.

This piece suggests that the composition of Tata Trusts has changed recently. “The composition of Tata Trusts has undergone a change in line with their allegiance to the prevailing chairman in the war against Cyrus Mistry. Less than three weeks after the controversial Tata Sons board meeting to sack Mistry, Venu Srinivasan was quietly made a trustee of Sir Dorabji Tata Trust. Of the seven trusts that cumulatively own 65.29% in Tata Sons, it is the single largest shareholder at just under 28%.”

Mistry has now sought government probe into the workings of Tata Trusts even as an income tax probe is already on. In 2013, the Comptroller & Auditor General (CAG) had alleged tax evasion by Tata Trusts. The CAG report had said: “In Maharashtra, DIT‐E, Mumbai, Jamshetji Tata Trust and NavajbaiRatan Tata Trust earned Rs 1,905 crore and Rs 1,234 crore on account of capital gain during AY 09 and AY 10 respectively and invested the same in prohibited mode of investments which is in contraventionto the provisions of section 13(1)(d) of Act. It resulted in short levy of tax of Rs. 1066.95 crore.”

First Published On : Dec 6, 2016 14:49 IST

Black money hunt: Rs 2 lakh cr disclosure under IDS throws up many questions

The demonetisation juggernaut rolls along. The millions of spectators who have been watching this amazing spectacle are filled with admiration, awe, revulsion and perplexity. A section of the people admire the government for the political muscle it showed in ‘demonetising’ high value currency notes worth Rs 500 and Rs 1,000. But many are still perplexed.

The new income declaration scheme has begun to bring in applications which have mind-boggling figures. But, for perhaps the first time, the government is actually pushing the income tax department to scrutinise the applications and reject some of them. Two such applications that have got rejected are those of an Ahmedabad-based businessman who declared an income of Rs 13,860 crore and a Mumbai-based family who had reportedly declared an income of Rs 2 lakh crore.

Representational imageRepresentational image

Representational image

In the first case, the police were instructed to look out for him, as he had not paid his first instalment of taxes due on the amounts declared. He finally surrendered but not before he had made startling disclosures to a media house before cameras that he was being used as a front by various powerful politicians whose wealth he was asked to launder. He was sent to police captivity (reminding one of a similar incident popularly known as the Nagarwala scandal).

In the second instance, the family based in Bandra west, Mumbai, has reportedly made the Rs 2 lakh crore disclosure, which has been termed ‘suspicious’ by the authorities as they have ‘very small means’. As per media reports, the declarants are Abdul Razzaque Mohammed Sayed, Mohammed Aarif Abdul Razzaque Sayed, Rukhsana Abdul Razzaque Sayed and Noorjahan Mohammed Sayed. Of them, three have PAN cards from Ajmer and then migrated to Mumbai, says this report in The Times of India. According to the report, the details given like even the mobile number could not be verified, raising the suspicion it could be an attempt to launder black money.

In fact, the first question that arises when one sees such reports is whether the income tax department will now begin rejecting some of the 8 lakh applications it received in 2011 and 2012 where the sums declared were in excess of Rs 870 lakh crore.

True, this was not under a black money income declaration scheme (IDS). It was declared as agricultural income. But unlike the current IDS, where the state gets to keep around 50 percent or more of the income declared, all the income under agricultural income goes entirely tax-free.

What is even more surprising is that the income tax department has not announced any details of the number of application forms rejected, and the amount of money so involved in respect of the declarations made in 2011 and 2012.

This is critically important because the figure of Rs 870 lakh crore over two years (2011 and 2012) is more than 8 times India’s GDP at that point of time. Since the money has not been acknowledged by the RBI, nor by the Economic Survey, are we to assume that the declarations are valid, but not yet accounted for?

This is extremely important, because in India there have been instances where declarations take the form of anticipatory bail. If an income declaration scheme is very attractive, businessmen are known to have borrowed money from other sources, and are said to have declared much more of black income than they were actually responsible for at that point of time. The idea is to get future black money generation also covered under this attractive income declaration scheme.

Bearer Bonds and India Development Bonds

This is what happened when the special bearer bond scheme of 1981 was announced. Many businessmen actually declared more black money than they had with them, thus ensuring that illegitimate money generated in the future would get protected under this disclosure. Businessmen refer to this as ‘anticipatory bail’. Since there was a complete amnesty granted to them, and since no queries could be raised about the source of these funds, they provided a very lucrative opportunity.

The same thing happened when the India Development Bonds (IDBs) were announced in 1991. This was meant for those declaring black money stashed overseas. The idea was to bolster India’s terribly low foreign exchange reserves.


Once again, there was the guarantee of total immunity, and with no-questions-to-be-asked. Overnight, the unofficial premium on the US dollar went up, as businessmen in India were reported to be converting their black money in India into foreign exchange, and sending it overseas via hawala and then declaring the amount as black money under the IDB scheme. Astute businessmen even borrowed money and declared more black money that they had generated. They, too, were taking the benefit of this anticipatory bail.

This is what appears to have happened in 2011 and 2012, when some businessmen must have thought that agricultural income would be given a tacit approval by someone in the finance ministry with no questions asked (P Chidambaram was the finance minister then). Whether such a tacit approval was given or not, the fact remains that the number of applicants declaring agricultural income swelled, and so did the average amount declared by these people.

The total amount declared during these two years was over 8 times the country’s GDP, and over 125 times the total tax collection.

What about this time? Were the two declarations (by the Ahmedabad and Mumbai-based businessmen) that have got cancelled also instances of anticipatory bail?

This time it is unlikely to be ‘anticipatory bail’ because the state confiscates around 50 percent of the money declared.

So was it to conceal the names of the politicians that the Ahmedabad-based businessman promised to disclose? Or is there something more at work?

Your guess is as good as mine.

First Published On : Dec 5, 2016 11:09 IST

Demonetisation: Govt warns Jan Dhan account holders against misuse

New Delhi: After a sudden surge in deposits in Pradhan Mantri Jan Dhan Yojana accounts showed up various inconsistencies, the government on Sunday again cautioned such account holders not to allow their deposits to be misused in the wake of the 8 November demonetisation move.

Representational image. PTI

Representational image. PTI

“Investigation being conducted by the Income Tax Department across India into the sudden surge in cash deposits in Jan Dhan accounts have revealed various inconsistencies,” a Union Finance Ministry release here said.

“Undisclosed moneys of approximately Rs 1.64 crore deposited by persons who have never filed returns of income being below the taxable limits, into their Jan Dhan accounts have already been detected at Kolkata, Midnapore, Ara (Bihar), Kochi and Varanasi.

“Rs 40 lakh has been seized from one such account in Bihar,” it said

“Undisclosed income so detected will be brought to tax as per the provisions of the Income Tax Act, 1961, apart from other actions depending upon the outcome of investigations,” it added.

Meanwhile, Prime Minister Narendra Modi has urged Jan Dhan account holders to hold on to the black money deposited by elements seeking to launder ill-gotten wealth.

“I want to tell holders of Jan Dhan accounts that they should not withdraw this money. Write to me if someone intimidates you. I am trying to figure out how it (the money) can come to you,” Modi said on Saturday at a public meeting in Moradabad, in Uttar Pradesh.

Over 25 crore Jan Dhan accounts for financial inclusion have been opened in the country as on November 25 last.

First Published On : Dec 4, 2016 16:37 IST

If GST not rolled out by Sept, there won’t be taxation in country, warns Jaitley

New Delhi – Citing constitutional compulsion, Finance Minister Arun Jaitley today sought to drive home the point that the Goods and Services Tax has to roll out before September 16 next year as the existing indirect taxes will come to an end by then and it would not be possible to run the country without revenue collection.

He made a pitch for widening the tax base, saying efforts are on to make taxation process far simpler and make rates more reasonable.

Finance Minister Arun Jaitley. Reuters file photoFinance Minister Arun Jaitley. Reuters file photo

Finance Minister Arun Jaitley. Reuters file photo

For instance, he said, the GST Council is deliberating on ways to reduce the taxation process, including assessment by tax officials.

“Today, each person gets assessed thrice, in each of the three taxations (including VAT and central excise). Now, you will only be assessed once and what one authority assesses, others will have to accept that assessment,” he said.

Terming GST as a game changer, Jaitley said: “The Constitution does not permit delay in GST implementation. The government notified GST on 16 September and the constitutional amendment itself says the current indirect tax system can continue for one year, after which the GST has to come.”

So, if as on 16 September 2017, there is no GST, then there is no taxation in the country, he reasoned.

“So, you have a constitutional compulsion to have a Goods and Services Tax in place before September 16 (2017), otherwise the country doesn’t run, and the tax is absolutely essential. Therefore, our intention is it gets implemented from April 1, 2017, that was the original intention,” he said.

Jaitley made the point that states should not oppose every reform for the sake of opposition because that makes investors wary.

“The states must welcome the decision and I can only tell you, if some states are seen as opposing every reform, then investors in the country and the ones coming from outside, must decide which are the states they want to invest in,” he cautioned.

“So, if your state is seen on the wrong side of the reform, then investors are going to be very wary of those states.

First Published On : Dec 3, 2016 10:26 IST

Demonetisation effect: Firstpost visits Dhasai, Maharashtra’s first cashless village

Akodara, a tiny village in Gujarat, became India’s first digital village in 2015 and is now reaping benefits of a cashless economy. While the whole country is stressed due to the demonetisation of Rs 500 and Rs 1,000 notes, the villagers of Akodara, who transact on mobile banking almost on daily basis, have nothing to complain.

Now a tiny village Dhasai, some 70 km from Thane, and around 140 km from Mumbai, has become Maharashtra’s first cashless village. But, unlike Akodara, where mobile banking is the main mode of payments, here it’s card payments via EDC machine.

Post demonetisation, the situation in the village got worse, no one had cash in hand and all business were conducted only on credit. However, there’s a limit to which a business can function on credit. Barbers had to cut their customers hair on credit; groceries were sold on credit; chicken, meat and medicines were bought on credit; seeds and fertilisers were bought and sold on credit.

A customer uses debit card for buying groceries in Dhasai.

A customer uses a debit card for buying groceries in Dhasai.

Naresh Raiker, a barber in the village, says: “Post demonitisation, I gave people haircuts on udhar (credit). The first day after the demonetisation, I did a business of Rs 450, but carried no money home, as everything was done on credit.”

Same views were echoed by Sayed, the chicken shop owner, “I had to sell chicken and mutton on credit, and it’s been 18 days now. Some have not even paid back the money they owed me and I haven’t said anything in good faith.”

The impact of demonetisation was extreme. Firstpost spoke to farmers, villagers, shopkeepers, and all voiced the struggle. With a population of less than 10,000, most have Jan Dhan accounts and RuPay debit cards. However, most never used the card before demonetisation. Primarily, a village of farmers and adhivasis (tribals), it has around 150 shops and is the biggest village amongst the 25 villages in the surrounding area.

There are two banks in the village – Thane District Central Co-operative Bank and Vijaya Bank. Neither had any cash to dispense in the initial days post the note ban. Even those who managed to get cash later had Rs 2,000 notes and no one could tender change for such a high denomination.

When the situation got out of hand, the villagers, traders and local NGO Swatantryaveer Savarkar Rashtriya Smarak in collaboration of Bank of Baroda decided to change things and ditch the dependency on cash.

Navtej Singh, the general manager of Bank of Baroda, Mumbai Zone, says, “Nearly 40 percent of shops have already been given POS/EDC machines. In a few days, the whole village will become cashless.”

Dr Atul Chaudhary also saw a dip in the number of patients post the currency ban. The OPD number fell by 50 percent. However, the doctor was quick to apply for the ECD machine and had already gotten a few patients using their debit cards to pay him consultation fees. “The literacy in this area is low, just 60-70 percent of the population is educated, that too till 10th or 12th grade,” he says.

“Going cashless have many alternate routes, like card payments, net banking and mobile payments but low literacy is primarily the reason why we chose debit cards as the mode of payment instead of mobile banking,” says, Navtej Singh.

Which means as long as the trader knows how to use the EDC machine and swipe the card, using a debit card to make payments becomes a pretty painless act for most villagers, especially the illiterate ones.

The bank has installed the machines for free and the trader has to pay a fee for every swipe. The fee, also known as interchange money in banking parlance, is fairly less just 0.75 percent for transaction up to Rs 2,000. That’s just 0.75 paise for every Rs 100 swiped.

Raiker, the barber we spoke to, says: “I don’t mind spending a small fee of 0.75 percent. The money will move directly from the customer’s bank account to my account. If I have cash in hand I tend to spend it, now it will reach my account directly and I will automatically be able to save more.”

Many villagers said that carrying cash wasn’t particularly the best option but now carrying a debit card will make their live much easy.

Maruti Behre, a farmer who made his first debit card transaction to buy a kilogram of mutton says, “Now that I have an ATM card, I won’t be using cash.”

Unlike the digitally-equipped Akodara, where literacy level is also high, Dhasai still has to learn the basics. Although this looks like the first step towards a cashless economy in the tiny village of Maharashtra, it may just be the beginning.

First Published On : Dec 3, 2016 08:22 IST