สรุปข่าวเศรษฐกิจอินเดียประจำวันที่ 6 มกราคม 2557

Why we need to curb the menace of black economy

If one had to choose a problem that needed fixing in 2014 one of it would be the cash economy in black that lies outside the banking system. It distorts everything, from wages and prices to taxes and profits. It hurts and destroys the moral fiber of the economy. It creates and preserves vested interests while widening the gap between the rich and the poor. However, the culture of tax evasion is deep-seated. Several high-income earners are audacious tax evaders, who have not been brought to book. Bringing down the tax rates further and ensuring compliance are the first steps to reining in the black economy and preventing it from expanding. This will remain the toughest step till the elections are fought with cash and unaccounted for money. The challenges for the investor are many. The cash economy distorts asset prices severely. The steady rise in prices of land, property and real estate comes from the uninterrupted inflow of cash. A market that sees liquidity and demand is unlikely to witness a correction in prices. This lulls the retail investor into believing that real estate as an asset class has low risk, high return, and low probability of fall in value. It also sets the price of this commonly sought asset beyond the reach. Gold attracts a high level of cash, raising its price. The common investor joins the bandwagon as the prices move up steadily and steeply. As the cash economy expands to buy more and more gold, it hurts the nation and currency by importing gold to meet its needs. India has a current account deficit primarily because it imports oil. We meet this deficit partly from technology and services exports, and partly from capital inflow through FII and FDI investments. The black economy worsens these problems. It imports gold which, in turn, increases the deficit. Gold purchased for hoarding is actually a capital investment, an outflow of capital that we cannot afford when we have a large import bill to pay. The cash economy splurges on expensive fuel guzzling cars and personal vehicles, another pet spend of the rich. The black economy hurts the common man even more by denying money for important needs. Since a good part of the hidden wealth has moved into gold, real estate and consumption, the money for nation-building is less. The money for augmenting supply in agriculture and industry is not available. The government runs a deficit since its income runs so short of its needs.

(Source: Economic Times)

Ministry seeks tax benefits for CSR expenditure

The corporate affairs ministry has sought tax benefits for social welfare spending which is compulsory for certain class of profitable entities under the new companies law. Industry has been seeking tax benefits on spending towards corporate social responsibility (CSR) activities. Sources said the corporate affairs ministry has written to the finance ministry seeking tax benefits for CSR spending by companies. The ministry, which is also in the process of finalizing CSR rules, is awaiting response on the tax benefits issue from the Central Board of Direct Taxes (CBDT), they added. Considered the first of its kind, the new Companies Act requires certain class of entities to shell out at least 2% of their three-year average annual net profit towards CSR work.

(Source: Financial Express)

New MSMEs may enjoy 50% VAT reimbursement

New industrial units in the micro, small & medium enterprises (MSME) sector may avail VAT (value added tax) reimbursement of up to 50 per cent after the finalisation of the new Industrial Policy Resolution (IPR), 2013 of the state government. The VAT reimbursement will be valid for a period of five years from the date of starting commercial production and would be limited to 100 per cent of fixed capital investment. The new MSMEs as well as thrust and priory sector units will also be exempted from payment of entry tax on acquisition of plant and machinery for setting up of industrial units, according to the draft IPR-2013 prepared by OMEGA TAST (Technical Assistance & Support Team) appointed by UK-based Department for International Development (DFID). Thrust sector includes ancillary and downstream units and industries in sectors like agro-processing, automobiles, auto components, textiles and apparel. Similarity, units in information technology, tourism, bio-technology, chemicals, handicrafts, sea food processing and pharmaceuticals fall under the priority sector. The new industrial units in the priority sector will be eligible for reimbursement for 75 per cent VAT for a period of five years from the date of starting of commercial production. The reimbursement will be limited to 100 per cent of fixed capital investment.

(Source: Business Standard)

Economic Section

Royal Thai Embassy