สรุปข่าวเศรษฐกิจอินเดียประจำวันที่ 10 มีนาคม 2557

How 150-200 tons of gold is smuggled into India annually

Between financial years 2011 and 2014, the worth of gold seized by India's Directorate of Revenue Intelligence has risen more than fourteen times to Rs 250 crore, according to government statistics. But the seized amount--about 1 to 1.5 tons — is a mere pixel in what is a largely blurred picture. The World Gold Council estimates gold smuggled annually into India at a staggering 150-200 tons! Between March 2012 and August 2013, the Indian government raised duties on imported gold on five instances, bringing it up to 10% from 4%. This was done to clamp the country's yawning fiscal deficit fanned by India's rush for gold, according to the RBI's annual report for last fiscal year. The price of gold in India is now Rs 31,010/10 grams, about Rs 4,000 higher than the price in Dubai. This means importing gold and selling it in India generates a profit of Rs 5 lakh per kilo, even after duties. Moreover, about 20% of gold imported into India has to be ploughed back into exports. The move has, as expected, curbed gold imports, but not consumption. Imports in recent months have sagged to 20-30 tonnes a month from a record 162 tonnes in May last year. India's gold import till November 2013 was 655 tonnes, compared to about 800 tons in the 12 months of the previous year. But according to the WGC, the country's demand for gold rose 18% to 975 tonne in 2013, compared to a 32% rise to 1,066 tonnes in China. WGC estimated the difference between imports and actual consumption was brought in through unofficial, mostly illegal, means. India still parks more than 70% of its household savings in gold and real estate, partly due to tradition and also as bank deposits haven't risen at the same rate as inflation. Not only in households, banks and unofficial financial institutions, gold in India is also stacked in temples and mosques. The RBI, in its latest annual report, estimates India's total gold holdings as of December 2013 at 557.75 tonnes.

(Source: Economic Times)

I don't think import duty for gold is high: C Rangarajan

C Rangarajan, chairman, Economic Advisory Council to the Prime Minister, is known for his conservative views on gold, which he calls a 'non-productive asset'. He was amongst the first to flag up the fast-rising import of the yellow metal putting pressure on the current account deficit (CAD). After recommending tightening of gold imports, the government gradually increased the import duty and the Reserve Bank of India tightened import norms. CAD is expected to remain at around two per cent of the GDP in FY14, much lower than last year (FY13). This is partly due to a fall in gold imports. Gold imports prior to 2009-10 used to be $30-40 billion, which went up after that; last year, it was $54 billion. Gold demand was rising as it was imported for being a hedge against inflation, which was high and also as an asset. According to Ranarajan, once investors start getting better returns from financial assets and inflation starts moderating, there would be sustained reduction in import of gold. Imports should stabilise at the pre-2009-10 level and $35-40 billion worth of gold import is still possible to absorb and may not cause any serious problem to CAD. If, eventually, Indians bring in fundamental change in the use of gold and reduce its demand, it will be good for the country but those changes don't happen in the short term. On relaxing Gold import curbs Rangarajan said that he  doesn’t  think the Customs duty on gold is so high. If you look at the import duty on many other luxury goods, others have much higher duties.

(Source: Business Standard)

FM push for tax pacts

In an effort to deliver on his promise of offering tax certainty, Finance Minister P Chidambaram is trying to address the transfer pricing woes of multinational companies by inking a few Advance Pricing Agreements (APAs) before a new government is formed after the Lok Sabha polls in April-May. APAs can help avoid recurrence of transfer pricing disputes between the income tax authorities and MNCs. The tax department is currently embroiled in transfer pricing rows with Vodafone and Shell. The safe-harbour norms (provision in a statute or regulation which specifies in advance something deemed not to violate a given rule) announced in August 2013 got a lukewarm response from industry, with the finance ministry getting barely 36 applications last year. Chidambaram seems keen on closing a few APAs - a deal between taxpayer and department to decide in advance the pricing of a transaction between an MNC and its group companies in India. Industry has hailed APAs as a positive step, while denouncing safe harbour, where they feel the margins set by the Central Board of Direct Taxes are "much higher" than the actual profits companies are making. Owing to a poor response, the department is considering overhaul of the safe harbour rules for next year, and a final decision will be taken by the next government. "Currently, safe harbour caters to a limited sector. It needs to include more. Second, the margins prescribed by CBDT are too high. APA is an expensive and long process but it gives you certainty. The rate agreed upon by two parties is fixed for five years," said Rakesh Nangia, managing partner with chartered accountancy firm Nangia & Co.

(Source: Business Standard)

Improving investment climate is challenge for new govt: Gopinath

The biggest challenge before the next government would be to push economic reforms and reduce uncertainties about taxation and regulatory practices, Harvard University professor Gita Gopinath said. “The job for the next finance minister is tough. It is important to re-create an environment for growth in India, to undertake reforms that stimulate investment and improve the quality of jobs created,” she said in an interview. The general elections for the Lok Sabha had been announced. The polling will be held in nine phases beginning April 7 and the counting of votes will take place on May 16. Gopinath, the first Indian woman to become a professor at the economics department, Harvard University, said, “the first (task before the government would be) to revive investment. This will require reducing uncertainty about tax and regulatory practices. It will require transparent and timely processes to clear projects.” Tax uncertainty remains a fundamental concern for global companies investing in India. The government’s handling of the Vodafone tax case has evoked sharp reaction from global companies. As regards growth, Indian economy has been expanding by over 9% before being hit by the 2008 global financial meltdown. The economic growth rate in 2012-13 has slipped to a decade low of 4.5% and in FY14 it is estimated to rise to 4.9%. Gopinath also underlined the need for fiscal prudence saying it was essential for improving investment climate. “Serious effort has to be made to contain the size of the government and keep fiscal deficits in check,” she said. On the resolve to bring down the fiscal deficit to 4.1%, Gopinath said, “in the last few years there has been a disconnect between targets set by the government either for the fiscal deficit, inflation or growth and what has later played out. So there is little credibility in these targets.”

(Source: Financial Express)

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