PM to keep finance portfolio for now

Prime Minister Dr. Manmohan Singh has kept the Finance portfoliowith him for the time being, according to reports. This will be the second timein the past eight years of the UPA regime that Dr. Singh will keep the Financeportfolio. In 2008, when the then Finance Minister, P. Chidambaram, shifted tothe Home Ministry, the Prime Minister refrained from appointing anybody to thecritical position on the same day. There are reports that the Prime Minister may bring Dr. C.Rangarajan into the Prime Minister's Office (PMO). This would allow Dr.Rangarajan to be inducted into the Cabinet Committee on Economic Affairs(CCEA), the reports added. The Deputy Chairman of the Planning Commission, Dr.Montek Singh Ahluwalia is also likely to aid the Prime Minister in running theFinance Ministry. One more Minister of State could also be appointed to theFinance Ministry, reports said. The MoS would manage the day-to-day affairs andshare the responsibility of answering Parliament questions with the other twoMoSes in the Ministry.

The option of appointing a new Finance Minister is alsoavailable with the Prime Minister. Jairam Ramesh or Anand Sharma are said to bethe front-runners for the post. Chidambaram is also understood to be keen ongetting back his old portfolio, reports said. Separately, reports said that former IMF economist, Dr. RaghuramG. Rajan is likely to be named the new Chief Economic Advisor once Dr. KaushikBasu’s term ends on July 31. Dr. Singh on Wednesday took stock of the economic situation byhaving discussions with deputy chairman of planning commission, Dr. MontekSingh Ahluwalia and PMEAC chairman, Dr. C Rangarajan. Dr. Ahluwalia and Dr. Rangarajan both met the Prime Minister separately,according to reports. The Prime Minister was reportedly likely to meet senior Finance Ministryofficials in the evening, including Finance Secretary R.S. Gujral, EconomicAffairs Secretary R. Gopalan, Financial Secretary D.K. Mittal and ChiefEconomic Advisor Kaushik Basu...Read More

We need to address domestic problems quickly: PM to FinMin

We have to take necessary steps to boost growth: PM

Govt unveils draft guidelines on GAAR

The Government has published draft guidelines on Thursday to implement the controversial General Anti-avoidance Rules (GAAR), introduced in the Union Budget in March this year. The guidelines issued by the Finance Ministry have sought to address some of the concerns over the dubious act by suggesting that GAAR be invoked only in cases where foreign investors have opted to take the benefit of tax treaties entered into with India. "Where an FII (foreign institutional investor) chooses to take a treaty benefit, GAAR provisions may be invoked in the case of the FII, but would not in any case be invoked in the case of the non-resident investors of the FII," say the draft guidelines. The GAAR provisions would not apply retrospectively, as many investors had feared, and would apply only to income accruing from April 1, 2013. An income threshold also has been suggested for invoking the GAAR. The guidelines say that the onus of proving tax liability lies with the Indian authorities and have proposed time limits for completion of various actions under the GAAR. It may be recalled that the proposed GAAR has spooked foreign investors ever since its announcement in the Union Budget in March after the Government said it will target tax evasion through tax havens such as Mauritius. Overseas investors and experts have been rattled by uncertainty over GAAR's implementation and its vague provisions. Stung by the GAAR, panicky FIIs have sent Indian shares and the rupee tumbling in the past three months. This forced the Government to defer implementation of GAAR until 2013.

Draft guidelines regarding implementation of GAAR

RBI announces fresh measures to boost dollar inflows

The Reserve Bank of India (RBI), in consultation with the Government of India has decided to introduce the following measures with immediate effect: 

It has been decided to allow Indian companies in manufacturing and infrastructure sector and having foreign exchange earnings to avail of external commercial borrowing (ECB) for repayment of outstanding Rupee loans towards capital expenditure and/or fresh Rupee capital expenditure under the approval route. The overall ceiling for such ECBs would be US$10bn. The existing limit for investment by Securities and Exchange Board of India (SEBI) registered foreign institutional investors (FIIs) in Government securities (G-Secs) has been enhanced by a further amount of US$5bn. This would take the overall limit for FII investment in G-Secs from US$15bn to US$20bn. In order to broad base the non-resident investor base for G-Secs, it has also been decided to allow long term investors like Sovereign Wealth Funds (SWFs), multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks to be registered with SEBI, to also invest in G-Secs for the entire limit of US$20bn. The sub-limit of US$10bn (existing US$5bn with residual maturity of 5 years and additional limit of US$5bn) would have the residual maturity of three years. The terms and conditions for the scheme for FII investment in infrastructure debt and the scheme for non-resident investment in Infrastructure Development Funds (IDFs) have been further rationalised in terms of lock-in period and residual maturity. Further, Qualified Foreign Investors (QFIs) can now invest in those mutual fund (MF) schemes that hold at least 25 per cent of their assets (either in debt or in equity or both) in infrastructure sector under the current US$3bn sub-limit for investment in mutual funds related to infrastructure. The operational/ regulatory guidelines for the above measures under Foreign Exchange Management Act (FEMA), 1999 are being issued separately.

ASSOCHAM welcomes RBI move to boost rupee, economy

India's rating outlook stable despite GDP growth slowdown: Moody's

Moody's Investors Service says that it is maintaining its stable outlook on India's rating as various credit challenges-- such as weak fiscal performance, tendency towards inflation and an uncertain investment policy environment -- have characterized the Indian economy for decades, and are already incorporated into the current Baa3 rating. On the other hand, certain recent negative trends -- such as lower growth, slowing investment and poor business sentiment -- are unlikely to become permanent or even medium-term features of the Indian economy, although Moody's expects that global and domestic factors, including potential shocks in agriculture, could keep India's growth below trend for the next few quarters. Moody's notes that its ratings express a view on medium-term sovereign creditworthiness and do not generally change with fluctuations in growth related to the direction of the business cycle at a particular point, if Moody's believes growth will recover and sustain over time.

Furthermore, the impact of lower growth and still-high inflation will deteriorate credit metrics in the near term, but not to the extent that they will become incompatible with India's current rating, Moody's says in its newly released "Frequently Asked Questions about India's Sovereign Rating." This publication offers responses to six questions: [1] Why is Moody's outlook on India's sovereign rating stable when GDP growth has decelerated?; [2] Are deteriorating budget deficits incorporated into the rating outlook?; [3] Is rupee depreciation negative for the sovereign credit profile?; [4] How does Moody's incorporate the policy environment into the sovereign credit analysis? [5] What could change the rating down?, and [6] What could change the rating up? In assessing India's budget deficits, Moody's points out that India's government debt and fiscal deficit ratios have always been worse than those of similarly rated peers, adding that its own assessment of low government financial strength is based not merely on a comparison of ratios, but also on the underlying reasons for weak government finances...Read More

Reliance Industries' long-term fundamentals remain intact: Moody's

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