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B U S I N E S S

Infrastructure issues retarding growth: FM
New Delhi, August 18
To sustain economic growth of 9 per cent every year, India would need an investment of $475 billion during the 11th plan period to upgrade infrastructure at current prices against earlier estimate of $320 billion, Finance Minister P. Chidambaram said.

A man carries a bag of coins outside a branch of the Reserve Bank of India in Hyderabad.
A man carries a bag of coins outside a branch of the Reserve Bank of India in Hyderabad. Taking a cue from countries like Australia and New Zealand, the RBI said it was considering use of a mixture of paper, plastic and cotton to make currency notes, replacing paper. The main objective behind this exercise was to deal with the problem of soiled notes particularly in smaller denomination, an official of the apex bank said. — AFP photo

Panel on financial sector set up
New Delhi, August 18
The Planning Commission has set up a high-level committee on financial sector reforms with a view to outline a comprehensive agenda for the evolution of the financial sector indicating especially the priorities and sequencing decisions which the government must keep in mind.

IRDA order to insurers
New Delhi, August 18
The Insurance Regulatory and Development Authority (IRDA) today asked insurers to withdraw their actuarial-funded unit-linked insurance products (ULIPs) "over a period of time" as they are too complicated for customers to understand. The move would affect Bajaj Allianz and Aviva's 8-10 actuarial-based ULIPs, which charge administrative and managerial fees.



EARLIER STORIES

 

Narayana Murthy Go low tech to create jobs, suggests Murthy
Mumbai, August 18
India could use low level of technology in the manufacturing sector
to provide job opportunities to a large number of illiterate and semi-
literate people in the country, Infosys chief mentor Narayana Murthy
said today.

People walk by a stock market board showing Dow Jones points in San Francisco, California on Friday. People walk by a stock market board showing Dow Jones points in San Francisco, California on Friday. US stock market rebounded after a week of volatile activity once the Federal Reserve lowered its key discount rate by a half percentage point. — AFP photo

Aviation Notes
Patel promises to replace
insignia VT

by K.R. Wadhwaney
Since the first aviation code was initiated in 1936, the Indian aircraft have been bearing the weight of VT (Viceroy’s Territory).

Investor Guidance
NRIs need PAN to invest in India
by A.N. Shanbhag
Q: Recently a law has been passed in India that investments in mutual funds will be allowed only for those who have a PAN. So far, since we (my wife and I) never filed return, we do not have PAN. Could you let us know if as NRIs we too would have to apply for PAN, just for the purpose of investing in mutual funds in India? — Mani

 
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Infrastructure issues retarding growth: FM
Tribune News Service

New Delhi, August 18
To sustain economic growth of 9 per cent every year, India would need an investment of $475 billion during the 11th plan period to upgrade infrastructure at current prices against earlier estimate of $320 billion, Finance Minister P. Chidambaram said.

The minister also asserted that if 9 per cent growth was sustained then India would wipe out poverty in 20 years and emerge as the world’s third-largest economy.

"Studies show by growing close to 9 per cent, we will become the third largest economy in 20-25 years," he said. "We must produce wealth and then divide it equitably. How can we have a welfare state without wealth?"

“The challenge of infrastructure is huge. The committee on infrastructure has revised funds required for infrastructure during 11th plan from $320 billion to $384 billion at 2005-06 prices, which means $475 billion at current prices,” Chidambaram said at the valedictory dinner for foreign diplomats from some 25 countries who attended a professional course organised here last evening by the Foreign Service Institute.

Chidambaram pointed out that the bottlenecks in infrastructure were pulling down GDP growth by 1 to 2 per cent every year.

“But I can say with confidence that no country needs, and no country but India can absorb, such large funds for the infrastructure sector,” he said, adding that the increase in domestic savings, investment and inflow of capital from other countries would help India achieve its target.

The rate of domestic savings and investment was likely to go up by at least 1.3 per cent to cross 35 per cent mark. Savings as percentage of total GDP was 32.4 per cent and investment 33.8 per cent in 2005-06, he said.

He expressed concern over the performance of India’s farm sector, which had seen stagnation in both production and the area under foodgrain between 1998 and 2007.

While the area under foodgrain had stagnated at between 120 and 125 million hectares, the productivity stood virtually frozen at 68-73 million tonnes for wheat and 85-91 million tonnes in the case of rice, the minister said.

“It is, therefore, necessary that we urgently address the issues relating to both production and productivity,” he said, adding the Rs 25,000-crore package announced recently should reverse the situation.

The participants included diplomats from Sri Lanka, Bhutan, South Korea, Mozambique, Turkmenistan, Lesotho and Cambodia.

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Panel on financial sector set up
Tribune News Service

New Delhi, August 18
The Planning Commission has set up a high-level committee on financial sector reforms with a view to outline a comprehensive agenda for the evolution of the financial sector indicating especially the priorities and sequencing decisions which the government must keep in mind.

Raghuram G. Rajan will be the chairman of the 12-member committee, an official press note said here.

The committee will identify the emerging challenges in meeting the financing needs of the Indian economy in the coming decade and to identify real sector reforms that would allow those needs to be more easily met by financial sector.

It will also examine the performance of various segments of the financial sector and identify changes that will allow it to meet the needs of the real sector, identify changes in the regulatory and the supervisory infrastructures that can better allow the financial sector to play its role, which ensuring that risks are contained.

The terms of reference will also identify changes in other areas of the economy, including the conduct of monetary and fiscal policy, and the operation of the legal system.

The panel will submit report by March 31, 2008.

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IRDA order to insurers

New Delhi, August 18
The Insurance Regulatory and Development Authority (IRDA) today asked insurers to withdraw their actuarial-funded unit-linked insurance products (ULIPs) "over a period of time" as they are too complicated for customers to understand. The move would affect Bajaj Allianz and Aviva's 8-10 actuarial-based ULIPs, which charge administrative and managerial fees.

"We have decided that actuarial-funded products be phased out so that products across companies could be compared and understood easily by customers," IRDA said.

Without giving the exact time-frame for the phaseout, it said, companies having these products have been asked to withdraw them "over a period of time". However, the regulator said customers need not worry as policyholders' interests will be protected.

The companies can continue to sell the products till they are phased out and customers, both existing and new, can continue to enjoy the benefits of these products and have no reasons to feel concerned, it said.

Aviva India Managing Director Bert Paterson said: "the insurer has always kept the policyholders' interests uppermost in its mind and our products and services are designed to provide maximum benefits and security to the Indian customer." — PTI

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Go low tech to create jobs, suggests Murthy

Mumbai, August 18
India could use low level of technology in the manufacturing sector to provide job opportunities to a large number of illiterate and semi-literate people in the country, Infosys chief mentor Narayana Murthy said today.

Speaking at a meeting organised jointly by the All India Association of Industries and Young Entrepreneurs' Society, Murthy said low-tech manufacturing could create a large number of jobs in India as in the case of China.

"Various products could be made using low-tech. Even cars can be made using low tech. The designing of a car is expensive but the actual manufacturing is not," he said.

"India had never received the kind of attention it is receiving now. But the progress made by the country has not reached the rural poor," he observed.

He said India could become a developed country if it could create a large number of jobs and institutions, besides emphasising on greater transparency and accountability.

Unimpressed by the economic growth of the country, Murthy said high growth rate is nothing uniquely Indian. "All countries are growing at high rates," he added.

"We don't act to redress problem. In 1991, we needed 1.20 lakh MW power. And even today we say we need that kind of power. We have hardly put up new power plants all these years," he said. — PTI

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Aviation Notes
Patel promises to replace insignia VT
by K.R. Wadhwaney

Since the first aviation code was initiated in 1936, the Indian aircraft have been bearing the weight of VT (Viceroy’s Territory).

For 60 years, no airline bigwig nor any aviation official in the ministry or DGCA realised the irrelevance and absurdity of this insignia on aircraft until Rajya Sabha MP Tarlochan Singh raised the issue.

To Tarlochan Singh’s letter dated July 9, Indian CMD Vishwapati Trivedi, on July 24, replied: “I have got the position checked up. Indian Airlines does not have any document to indicate that the registration prefix ‘VT’ on the aircraft stands for ‘Viceroy’s Territory’.

Rule 37 of the Aircraft Rules, 1937, states that the nationality mark of the aircraft shall be in the capital letters VT in Roman and the registration mark shall be a group of three capital letters in Roman assigned by the Director General...”

Armed with more information on VT, Tarlochan Singh took up the vexed issue again in the consultative committee meeting at Mumbai on July 31. Aviation minister Praful Patel reacted immediately and agreed to replace VT with a suitable Indian insignia. While the change will be welcome, it is shocking that aviation officials have shown indifference on such a vital issue!

No one grudges another international airport coming up in Greater Noida. But, as pointed out by Tarlochan Singh and other MPs, the proximity of 70 km will pose problems to passengers in commuting from and to the airport.

Thus, it was suggested that it would be beneficial to all if suitable international airports were constructed in Haryana and Chandigarh (Mohali). To this suggestion, the minister said: “The more, the merrier. I stand for upliftment of the civil aviation sector. It will be great if the concerned governments put up proposals along with feasibility data and we, in ministry, will provide it due weightage.”

The consensus is that the international airports in Haryana and Mohali would reduce congestion at the Indira Gandhi International Airport (IGIA). If New York (Kennedy) and London (Heathrow) can have three-four international airports why not Delhi (IGIA)? If these airports come up, the passengers will have an option to choose their airlines and flights to their convenience and price.

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Investor Guidance
NRIs need PAN to invest in India
by A.N. Shanbhag

Q: Recently a law has been passed in India that investments in mutual funds will be allowed only for those who have a PAN. So far, since we (my wife and I) never filed return, we do not have PAN. Could you let us know if as NRIs we too would have to apply for PAN, just for the purpose of investing in mutual funds in India? — Mani

A: Yes, it is true that without PAN, no mutual fund investments will be accepted and this is true for resident Indians and NRIs alike. So, you should take steps to apply for a PAN in India if you wish to continue investing in India. However, there is a significant difference in the prescribed procedure for NRIs (still having an Indian passport) and PIOs (NRIs who have taken up foreign citizenship).

While NRIs can submit a copy of their passport as an identity proof, PIOs have to get such a copy attested by the Indian embassy. In other words, NRIs do not need attestation whereas PIOs are required to submit the attested copy (from the Indian embassy) of their passport.

This we think is blatantly unfair, especially considering that the Indian embassy may not be easily accessible to all. If an attestation had to be done, one from the bank or from a notary would have sufficed.

There are representations being made in this behalf to the authorities and we expect this requirement to be relaxed. However, as things stand now, for non citizens of India, PAN is obtainable only after attestation. Note, that having an OCI or a PIO card does not make any difference.

NSS-87

Q: If my taxable income drops to near zero, can I start withdrawing from the NSS-87 amounting to Rs 1.85 lakh per year, which is the tax free limit for senior citizens? I have Rs 7 lakh accumulated in NSS-87. Can it be collected by my nominee or legatee after my death? Also, I am depositing Rs 70,000 in PPF per year. — C. Subbarao

A: Yes, it would be an excellent policy to unlock the funds in NSS-87. As a matter of fact, if you are contributing Rs 70,000 to PPF, mainly to earn the 8 per cent tax-free interest rather than earn the deduction under Section 80C, you can withdraw as much as Rs 2,55,000 (Rs 18,5000 + Rs 70,000) without coming in the tax net.

You can withdraw Rs 30,000 more by deposing this amount in other avenues under Section 80C. For instance, NSC pays 8 per cent (tax-free in your case) whereas you are earning only 7.5 per cent in NSS.

Even if EET becomes a law, your NSS would be liquidated before three years and, therefore, your withdrawals from fresh contributions to PPF and NSC will be outside the tax net.

Amount sent abroad

Q: My daughter is studying abroad. She is about to reach the end of her course and may need some funds during the interim period before she finds a job. She may require the rupee equivalent of $10,000. Am I allowed to send so much money to her and what will be the tax implications thereof on both her and me? — Bhaskaran

A: As per Section 56 of the Income Tax Act, you would be considered a ‘relative’ of your daughter and consequently there would no tax implication whatsoever on any amount that you gift to her. Also, under FEMA, the RBI allows you to send as much as $1,00,000 per year to your relatives for family maintenance. You may approach your bank for this purpose and they would help you with the procedure for remittance of the money to your daughter’s account abroad.

PPF account

Q: I opened a PPF account in post office in March 1991, which matured on March 30, 2006. Then I got it extended for another five years. In April 2006, I withdrew some amount from this account. Now, I want to withdraw the remaining amount.

1. Can I withdraw the total remaining balance along with up to date interest?

2. Can this account be closed premature before the expiry of extended
five years?

3. If I cannot withdraw the whole amount then what percentage of balance amount can be withdrawn? — Ram Murti

A: At its maturity, the account can be continued for a block of five years. This facility is available for any number of blocks on expiry of the extended term. The continuation can be with or without contribution. Once an account is continued without contributions for one year, the subscriber cannot change over to with-contributions extension. [Notification F.3(6)-PD/86 dated August 20,1986].

A subscriber, continuing his account with fresh subscriptions, can withdraw up to 60 per cent of the balance to his credit at the commencement of each extended period in one or more instalments, but only one per year. On the other hand, in the case of account extended without contribution, withdrawals can be effected in instalments, not exceeding one in a year. The balance will continue to earn interest till it is completely withdrawn.

Revised return

Q: I am a salaried employee and have filed return for the financial year 2005-06 taking the perk value on employer provided accommodation at the rate of 20 per cent. In the new budget, the same has been reduced to 15 per cent. Now, I want to revise my return. What is the procedure? — Nadir

A: You have time till March 31, 2008 to file the revised return. There is no fee for filing such return. All you have to do is to mention on the return form that it is a revised return.

The authors may be contacted at wonderlandconsultants@yahoo.com.

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