Chandan Sapkota’s Blog

The latest Economic Survey 2011/12 released by India’s Ministry of Finance areas that GDP growth rate for 2011/12 is estimated at 6.9% (factor costs at 2004-05 prices). The overall Indian economy is likely to grow at 7.6% in 2012-13 and 8.6% in 2013-14. The main reason for a gradual recovery within the next two years is due to the expected decline in overall investment rate. These projections are based on assumptions regarding factors like normal monsoons, stable international prices reasonably, oil prices particularly, and global development somewhere between where it now stands and 0.5% higher. Gross capital development during the third one-fourth of 2011-12 as a percentage of GDP was at 30%, down from 32% a year ago.

Agriculture and allied industries are estimated to attain a rise rate of 2.5% in 2011-12 with food grains production likely to mix 250.42 million tonnes owing to increase in the creation of rice in some carrying on says. The industrial sector poorly has performed, retreating to a 27% share of the GDP.

Industrial development pegged at 4-5 percent, likely to improve as financial recovery resumes. Inflation on WPI was high but demonstrated clear slow down by the year-end. WPI food inflation dropped from 20.2% in February 2010 to at least one 1.6% in January 2012. Calibrated steps initiated to rein-in inflation at the top priority. India remains among the fastest growing economies of the global world.

Fiscal consolidation on the right track – cost savings & capital formation expected to rise. Through the first half of 2011-12, India’s export development was at 40.5%, but it’s been decelerating since. Imports rapidly have growth, by 30.4% during 2011-12 (April-December). 292.8 billion at end-January, 2012. It covered almost the whole external debt stock. Sustainable development and climate change concerns on high priority.

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There continues to be a probability of some comfort to the FPIs, later this month when the parliament provides last approval to the tax proposals. WHO WILL BE AFFECTED? 50 billion in Indian collateral, debt, and hybrid instrument markets. Tax experts say 30-40% of these, signed up as trusts, could be suffering from the new guidelines.

WHY FPIS REGISTER AS TRUSTS? FPIs register as private trusts to get around troublesome disclosure rules and other compliance questions mainly. WHAT’S THE LIKELY INCREASE IN TAX BURDEN? The FPIs authorized as trusts will be taxed as AoPs at the new rates. For corporate funds, there is no noticeable change in the tax burden on long term or short term capital gains. Amit Maheshwari, partner at Ashok Maheshwari & Associates, said many countries don’t tax foreign investors on capital gains from listed securities and there is no discrimination against trusts. WILL FPIs WITHDRAW FUNDS OR CHANGE STRUCTURE?

Tax consultants with abroad investors said the majority of investors are unlikely to withdraw their current investments particularly in your debt market though they might continue to lobby for withdrawal of tax rules. Future investments in India could rely not only on taxes rates but on corporate earnings and the fundamentals of the overall Indian economy compared with other countries. Large numbers of FPIs might continue steadily to use trusts and pay higher taxes, taxes experts said, as their promoters find the framework convenient and have the option to shift to other marketplaces always. COULD IT IMPACT SOVEREIGN BONDS FOREIGN INVESTMENT FLOWS?

15 billion through overseas sovereign bonds and its own attempts to catch the attention of more international investment in equities and personal debt as many traders may feel reluctant to get due to doubt over taxes rates in India. If the federal government doesn’t announce tax exemptions to proposed overseas sovereign bonds then you will see a poor impact, said Rishabh Shroff, Partner & Co-Head, Private Client Practice, Cyril Amarchand Mangaldas. Government officials have suggested that they could taxes interest payments on sovereign bonds under current guidelines. However, the facts aren’t public still.

Not surprisingly, simply because they are attacking a bedrock state of investment theory (that no mechanized formula can beat the marketplace), the suppliers of fundamental indexes ‘ve got a skeptical reception in academia. Harvard Business School’s Andre Perold joked that Arnott’s strategy is ”fundamentally flawed.” Burton Malkiel, a Princeton professor known for his support of the effective markets theory, suggested Arnott was another stock picker in pull just. Malkiel and Bogle attacked Siegel’s approach on the Wall Street Journal’s editorial page in 2006. They argued that Siegel’s state of superior performance for a small-cap value stock index over five years would be disproved on the long run.