NEW DELHI, WEDNESDAY, SEPTEMBER 1, 2010

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P6 P6 First eight months of 2010 see P13 NEW NORMS WILL HELP
C O R P O R A T E S & M A R K E T S C O R P O R A T E S & M A R K E T S M O N E Y & B A N K I N G

KINGFISHER AIRLINES TO
RAISE RS 5K CR THROUGH REDUCE MISSELLING OF
EQUITY AND DEBT record $13-bn FII buys ULIPS: HARI NARAYAN
P U B L I S H E D F R O M : A H M E D A B A D B A N G A L O R E C H A N D I G A R H C H E N N A I H Y D E R A B A D K O C H I K O L K A T A L U C K N O W M U M B A I P U N E

Manufacturing boosts Q1 GDP It’s not end of the

growth to 8.8%, fastest in 3 yrs
fe Bureau
New Delhi, Aug 31: India’s
grossdomesticproduct(GDP)
expandedat8.8%intheApril-
June quarter of this fiscal—
thefastestpaceinnearlythree
years—onthebackof arobust
12.4% growth in manufactur-
ingandacomparableshowby
certain services industries
like communications and ho-
tels, despite a slowing of the
growth in financial services
andrealestate.
Commentingonthedatare-
leasedTuesday,financeminis-
terPranabMukherjeesaidthe
economywasontracktogrow
at 8.5% in the current fiscal,
while Planning Commission
deputy chairman Montek
Singh Ahluwalia expressed
In the news the hope that the growth
“couldbestillbetter.”
The growth in the previ-
ous quarter was 8.6%.
The first-quarter GDP da-
tawasinlinewithwhatmost
economists predicted, but
ECONOMY TO GROW 8.75% IN FY11: FM
INDICES Closing Up/down ■ Finance Minister Pranab Mukherjee on
Tuesday said he expects the nation’s economy
BSE
Sensex 17,971.12 ▼ 60.99 to grow as much as 8.75% in the financial year
S&P ending March 31, 2011.
CNX Nifty 5,402.40 ▼ 13.05
Free distribution of
GROWTH PATH
In %
Industry
Agriculture, forestry & fishing
Mining & quarrying
Manufacturing
Electricity, gas & water supply
Construction
Trade, hotels, transport, communication
Financing, real estate, business services
Community, social & personal services
GDP at factor cost
many of them warn that
manufacturing growth
could now moderate, and
this could reflect in the July-
September quarter data.
“While the manufacturing
growthisexpectedtomoder-
ate in the second quarter,
servicessectorwouldbroad-
ly maintain the momentum.
There will be a further pick-
up in agricultural activity
on account of good mon-
■ Page 12
story for Vedanta
in Orissa: Saxena
ing of the base effect (last
year’s high base) and a com- Nistula Hebbar mit to the government.
parative dip in growth capi- “Most remain on paper,
Q1 09-10 Q1 10-11 tal goods output, which grew New Delhi, Aug 31: Vedan- with no checks,” he said.
atascorchingpaceinthepre- ta could have another shot Saxena said that more
1.9 2.8
vious few months. Manufac- at the bauxite mining pro- than anything else, he fears
8.2 8.9 turinghasnearly80%weigh- jectinOrissa’sNiyamgiriif that certain ambiguities in
3.8 12.4 tage in the index of it promises to be within the the Forest Rights Act, 2006
6.6 6.6 industrial production. Al- confines of the legal frame- (FRA) would create some
ready, farm output in Q1 this work, NC Saxena, member, problems in land acquisi-
4.6 7.5
year (2.8%) was better than National Advisory Coun- tion issues in the future.
5.5 12.2 that in the corresponding pe- cil, who prepared the “What FRA gives tribal and
11.8 8.0 riod a year ago (1.9%). damning report on the pro-
7.6 6.7 Joshi added that the effect ject, told FE.
6.0 8.8 of the rollback of extra gov- The Orissa government
ernment spending could be could appeal the matter in
visibleinthemonthstocome court, and if Vedanta
soon,”said DK Joshi, princi- twobasispointsto7.95%after oncertainserviceindustries restarted the process of
pal economist at Crisil. thereleaseof data.According but private sector services taking permissions and
Tuesday’s data, when pit- to agency reports, some bond would keep the growth pace. stayed within the law, the
ted against the persistent dealers anticipate a 25-basis Thegovernmenthasalready project has a chance of re-
double digit inflation— pointsrateriseatthenextpol- started cutting down on sub- vival, he said in an inter-
9.97% last month—could icy review. The central bank sidies and certain adminis- view with FE.
prompt RBI to stick tena-
ciously to its policy of cali-
has raised interest rates four
timessincemid-March.
trative expenses, in its bid to
reduce the fiscal deficit as a
According to sources,
while the Orissa govern- The trend in
bratedmonetarytightening. Industrial output in June percentage of GDP. mentiscontemplatinglegal Europe, US and
The policy will come up for grew at a modest 7.1% on an ■ Continued on Page 2 recourse after one of the
review on September 16. year-on-year basis, as com- ■ See Edit: Rear-window biggest private investment other parts of the
Yieldonthebenchmark10- pared to 11.35% in the previ- economics, Page 8 proposals for the state was world has been to
yeargovernmentpaperfellby ous month, owing to the fad- ■ India Inc upbeat, Page 12 shown the red flag, it is not
spend time and
sure whether Vedanta has
LOW INDUSTRIAL OUTPUT TO HIT GDP GROWTH TO EXCEED 8.5%: MONTEK taken any legal advice. money on
■ PMEAC chairman C Rangarajan has said ■ Planning Commission deputy chairman Saxena also denied that developing superior
lower industrial output in the second quarter Montek Singh Ahluwalia said the 8.8% growth he or anyone in the forest
may pull down overall gross domestic product in Q1 is on expected lines and the economy will advisory committee of the technology, which
growth in July-September. ■ Page 12 grow by more than 8.5% in FY11. ■ Page 12 environment ministry was leads to less
inherently anti-industry or
intrusive effects on
anti-development. “India is
the environment

Sinha panel suggests common rules for

not the only country which
grain an order, not isindustrialisingorisgrap- NC Saxena,
a suggestion: SC pling with issues of envi- member, NAC
ronmental degradation re-
latedtotheseprocesses,”he

all foreign investments other than FDI

Taking exception to
agriculture minister
Sharad Pawar’s
statement, the Supreme
Court on Tuesday
asserted that it had
ordered free distribution
of grain to the poor
instead of allowing it to
rot in godowns and that
this was not a suggestion.
“It was not a suggestion.
It is there in our order,”
the court told the
govt counsel. Page 17
Stick to science, UN
climate panel urged
In what calls for a reform
of the the UN climate
panel, scientists have said
that the body should
make predictions only
when it has evidence and
that it should avoid
policy advocacy. Page 12
EDIT PAGE P8
When green
is more red
than amber
BIBEK DEBROY
Exclusive!
Chance for Alfa
Alfa Romeo cars haven’t
always lived up its brand.
That is changing ■ P18
fe Bureau
New Delhi, Aug 31: The fi-
nance ministry on Tuesday
proposed to do away with the
different rules for portfolio,
NRI and foreign venture cap-
ital investments in India and
institute a single window
regulatory system for all.
The idea behind the sweep-
ing changes is to make life
easier for foreign investors
in India and to reduce the
cost of equity capital for lo-
cal companies.
As per the proposals made
by a working group headed
by UTI AMC head UK Sinha
and released by the ministry
forpubliccomments,thegov-
ernmentshouldendtheprac-
tice of treating foreign insti-
tutional investors (FIIs),
foreign venture capital in-
vestors(FVCIs)andNon-Res-
ident Indians (NRIs) as dis-
tinct investor classes. They
wouldbetreatedatparfroma
regulatory point of view. The
India gets to access more Swiss bank data with new pact
fe Bureau
NewDelhi,Aug31:Indiawill
now have the right to track
banking information from
Switzerland.CasesliketheIPL
scam or the Madhu Koda min-
ingscamwheretheIndianrev-
enuedepartmentcouldnotget
information about the num-
bered bank accounts of those
prosecuted may now be inves-
tigatedwithease,eventhough
finance minister Pranab
MukherjeetoldParliamenton
Tuesday that the “provision
will be applicable only for
prospective information and
notforpastinformation”.
India and Switzerland on
Mondaysignedareviseddou-
ble taxation avoidance agree-
said. “But the trend in Eu- forest-dwelling communi-
rope, US and other parts of ties is community rights
the world has been to spend but not ownership; so while
timeandmoneyondevelop- theirclaimstouseofforests
ing superior technology, is recognised, it is not the
the hard caps with percent- which leads to less intru- right to sell or own, or even
ROAD AHEAD age limits to remove quanti- sive effects on the environ- devolve as inheritance.
■ Tax global income of residents in a residence-based system tativerestrictions.Itsuggest- ment,” he added. Their consent is required if
ed to study the revenue “Here,theeffortistosub- forest land has to be ac-
■ Create FSAT or empower SAT to hear appeals on foreign inflow
implications of shifting from vert systems as it costs less quired, but the government
■ No distinction between investor classes on foreign investments
a source-based taxation sys- than any genuine develop- remains the owner of the
■ Qualified global depository participants to enforce OECD KYC norms tem to a residence-based sys- ment of technology which land. This ambiguity will
■ Depository participants must pass Sebi’s fitness test tem of taxation. would help you stay within create problems in the fu-
■ Abolish FIIs, FVCIs and non resident Indians as investor classes Thegroupalsowantstoem- the law and also lead to in- ture,” he said.
power Sebi to ask and receive dustrialisation without He added that the Na-
■ Grandfather existing foreign venture capital investments
UK Sinha, all information related to the concomittant environmen- tional Advisory Council of
■ Replace Sebi FVCI and FII norms with QFI regulation
UTI AMC chairman ultimate investors in Indian tal degradation,” he said. which he is a member will
companiesthroughparticipa- The example he cited was of be looking into these as-
tory notes, an instrument is- the reforestation plans that pects when assessing the
proposals do not apply to for- sures. As per the working that as foreign direct invest- suedtooffshoreinvestors. companieswhichwouldcut implementation record
eign direct investment. group, regulators (Read RBI) ment, which has to comply In essence, the working treesforprojectswouldsub- of the Act.
As FE hadreportedearlier, willhavetoassignspecificrea- with all sectoral caps and group has attempted to sug-
the working group also wants sonsforsuchmeasureswhen- other regulations. Now, FIIs gest a framework where
HDFC raises PLR Corp governance
tosetupaFinancialSectorAp- ever they are taken and in- can invest in a company up costs,complexityandregula-
pellate Tribunal (FSAT) or al- vestors should have recourse to 24%. If the directors tory uncertainty would be to 14.25% focus in Cos Bill
ternatively, enlarge the scope for appeal to the SAT or the agree, it can be raised up to much less to the entities re- Unwilling to absorb rising Listed firms will have to
of Securities Appellate Tri- proposed FSAT. Currently, the sectoral cap. ceiving foreign capital as borrowing costs, HDFC follow strict norms on
bunaltohearappealsonallas- regulators other than RBI The working group also well as to those making those upped its RPLR by 50 bps corporate governance
pects of regulation related to anyway have to spell out the proposed grandfathering the investments. to 14.25%. Since HDFC’s and any deviations must
foreign capital inflows. Cur- reasonsfortheiractions. existing foreign venture cap- Now, different classes of adjustable home loan be reported to the gover-
rently,theRBIhasunqualified Another significant pro- ital investments after a cut- foreigninvestorsareboundby rates are benchmarked to nment, said the House
discretionary powers under posal is to classify all for- off date. The new norms also different rules, which force RPLR, the rise will hit all standing committee
the Foreign Exchange Man- eign investment less than propose to either rescind the themtoexploittheregulatory customers in the next on Companies
agement Act when it comes to 10% in a company to be FII limit on foreign institutional arbitrage and camouflage to three months. Page 13 Bill 2009. Page 2
taking capital control mea- and any fund inflow beyond investment in debt or replace enterintoreceivingentities.
ment which substantially ex- vision for providing banking treatyshopping—alegalroute ment Directorate, under an use of information by such Swiss border. While there are
pands the scope of informa- andownershipinformation.” often used by companies to escape clause in the new other purposes which are al- no clear estimates of the
tion to be shared. Finance ministry officials claimtaxreliefinIndia,evenif agreement, the officials ex- lowed under the laws of both amount involved in the Mad-
Thenewagreementmeans said while the new agreement they enjoyed a tax-exempt sta- plained. On record, Mukher- States and the competent au- huKodascamforinstance,the
inallthosecaseswheresome- covers only prospective cases, tusinSwitzerland. jee said the information ex- thority of the supplying State five Swiss bank account num-
one has run afoul of the Indi- there is no bar on the govern- The data can now also be changed “is to be used for tax authorises such use”. bers unearthed by the income
an tax authorities and has a mentopeningfreshcasestoob- shared with other investiga- purpose only. However, the In the wake of the finan- tax department is expected to
Swissaccount,NewDelhican tain the data. It will also block tiveagenciesliketheEnforce- new article also provides for cial meltdown of 2008, coun- runcloseto$1billion.
obtain information on them tries like the US and the UK The agreement will come
from Berne. The Swiss gov- had accused tax havens in- into force after “the comple-
ernment will not insist on In- FORWARD TOGETHER cluding Switzerland of mon- tion of internal process by
dia proving that a Swiss law ■ Agreement will be applicable ey-laundering through num- the Switzerland side” said
has also been violated by the only for prospective information bered bank accounts. While the minister. He said at pre-
offenderbeforeofferinginfor- ■ Swiss banks don’t give info on the US has reworked infor- sent, income from interna-
mation. As the minister ex- banking transactions, says FM mation sharing mechanisms tionalshippingisnotcovered
plained in his statement in ■ Under current DTAA, India cannot with Switzerland, India has under the DTAA. This is now
both houses, “There is a spe- get banking info from Swiss been stymied so far. sought to be included in the
cific provision to ensure that ■ Data can be shared with agencies The signing of the double DTAA by providing for resi-
information will be ex- like ED under an escape clause tax avoidance agreement is a dence-based taxation for
changed even if there is no ■ Information can be exchanged even major step for India to deal shipping income from inter-
(Swiss) domestic interest. if there is no domestic interest with cases where the trail of national traffic.
There is (also) a specific pro- taxevasionhasruncoldatthe ■ Continued on Page 2