Wednesday, March 25, 2009
Cong talks disinvestment
Cong talks disinvestment
The Financial Express, March 25, 2009, P1
Economy Bureau, New Delhi
The Congress party plans to list all public sector companies on the stock markets, replace indirect taxes with an omnibus goods & services tax and pass right-to-food legislation if returned to power after the general elections in April-May.
However, the party manifesto—released by Prime Minister Manmohan Singh and Congress president Sonia Gandhi in New Delhi on Tuesday—does not outline any immediate expansion of public investment to follow the three stimulus packages already announced by the government. Instead, Singh said he expected those packages to deliver higher growth soon.
“I am confident that because of the stimulus our government has announced, in the next six to seven months the revival of the Indian economy should take place in a big way,” he said. The party expects to use the higher growth to spend on its list of priorities, which begins with education, and lists health, agriculture, social security and infrastructure—in that order.
The party’s 2009 manifesto is more emphatic on disinvestment than the Common Minimum Programme cobbled together after the Congress and its allies won the 2004 general elections. One para states, “Indian people have every right to own part of the shares of public sector companies, while the government retains the majority shareholding.”
To steer clear of controversy, it also makes clear that public sector banks and insurance companies would not be privatised. Disinvestment in public sector companies will reduce the runaway fiscal deficit from the current 6%, which has crippled the government’s ability to mount any major investment programme in a decelerating economy.
In a reflection of the changing face of the Indian economy, the Congress manifesto has promised financially viable self-government for urban areas. Because of the pressure from regional state-based parties, this was an absolute no-no so far as they felt it would clip their powers.
Measures to boost demand include the announcement of a National Food Security Act as part of the two major sops for rural India.
Building on the success achieved under the flagship National Rural Employment Guarantee Scheme, the Congress manifesto says it will a clause into the Bill that the government would have to sell at Rs 3 per kg, 25 kg of wheat or rice to every family below the poverty line.
The price is roughly the same at which foodgrain is now sold to the poor under the Antodaya Anna Yojana. As on March 1, India’s wheat stocks are estimated to be around 15.3 million tonne, against last year’s stocks of 6.5 million tonne. Rice stocks are estimated at 21.3 million tonne, against 14.7 million tonne.
Using this buffer is expected to keep the pressure on food price inflation in check, unlike the present situation where it is still 10% despite headline inflation having slipped to near zero. Following up on the loan waiver, the Congress has also promised to reduce interest rates for all farmers who repay bank loans on schedule.
The party also plans to push up the floor on wages of agricultural labourers to Rs 100 across the country. The average minimum wage now varies between Rs 75 a day in Orissa to as high as Rs 135 a day in Haryana. This thrust to rural demand through the NREGS could propel sales of FMCG goods and improve the savings rate in rural India.
The Financial Express, March 25, 2009, P1
Economy Bureau, New Delhi
The Congress party plans to list all public sector companies on the stock markets, replace indirect taxes with an omnibus goods & services tax and pass right-to-food legislation if returned to power after the general elections in April-May.
However, the party manifesto—released by Prime Minister Manmohan Singh and Congress president Sonia Gandhi in New Delhi on Tuesday—does not outline any immediate expansion of public investment to follow the three stimulus packages already announced by the government. Instead, Singh said he expected those packages to deliver higher growth soon.
“I am confident that because of the stimulus our government has announced, in the next six to seven months the revival of the Indian economy should take place in a big way,” he said. The party expects to use the higher growth to spend on its list of priorities, which begins with education, and lists health, agriculture, social security and infrastructure—in that order.
The party’s 2009 manifesto is more emphatic on disinvestment than the Common Minimum Programme cobbled together after the Congress and its allies won the 2004 general elections. One para states, “Indian people have every right to own part of the shares of public sector companies, while the government retains the majority shareholding.”
To steer clear of controversy, it also makes clear that public sector banks and insurance companies would not be privatised. Disinvestment in public sector companies will reduce the runaway fiscal deficit from the current 6%, which has crippled the government’s ability to mount any major investment programme in a decelerating economy.
In a reflection of the changing face of the Indian economy, the Congress manifesto has promised financially viable self-government for urban areas. Because of the pressure from regional state-based parties, this was an absolute no-no so far as they felt it would clip their powers.
Measures to boost demand include the announcement of a National Food Security Act as part of the two major sops for rural India.
Building on the success achieved under the flagship National Rural Employment Guarantee Scheme, the Congress manifesto says it will a clause into the Bill that the government would have to sell at Rs 3 per kg, 25 kg of wheat or rice to every family below the poverty line.
The price is roughly the same at which foodgrain is now sold to the poor under the Antodaya Anna Yojana. As on March 1, India’s wheat stocks are estimated to be around 15.3 million tonne, against last year’s stocks of 6.5 million tonne. Rice stocks are estimated at 21.3 million tonne, against 14.7 million tonne.
Using this buffer is expected to keep the pressure on food price inflation in check, unlike the present situation where it is still 10% despite headline inflation having slipped to near zero. Following up on the loan waiver, the Congress has also promised to reduce interest rates for all farmers who repay bank loans on schedule.
The party also plans to push up the floor on wages of agricultural labourers to Rs 100 across the country. The average minimum wage now varies between Rs 75 a day in Orissa to as high as Rs 135 a day in Haryana. This thrust to rural demand through the NREGS could propel sales of FMCG goods and improve the savings rate in rural India.
HDFC cuts retail PLR
HDFC cuts retail PLR
The Financial Express, March 25, 2009, P1
The Financial Express, March 25, 2009, P1
Banking Bureau, Mumbai
India’s largest home loan financer, Housing Development Finance Corporation (HDFC), on Tuesday slashed by 50 basis points its prime lending rate for retail borrowers. The move will benefit all existing HDFC customers who borrowed at floating rates.
India’s largest home loan financer, Housing Development Finance Corporation (HDFC), on Tuesday slashed by 50 basis points its prime lending rate for retail borrowers. The move will benefit all existing HDFC customers who borrowed at floating rates.
HDFC has a share of about 40% of new home loans approved every year. This is the second time in three months that it has reduced its retail prime lending rate (RPLR). The actual benefit for each customer will, of course, depend on the rate at which the loans were contracted. “Borrowers who will benefit most from this reduction are those who contracted floaters in the range of 11-12 %,’’ said a bank spokesperson.
The reduction will fuel competition in the housing loan market. India’s largest bank, State Bank of India, has announced a scheme under which a customer can borrow at a fixed 8% for the first year and a re-priced 10.25% from the second year. The bank’s loan book has expanded by Rs 800 crore since the middle of December 2008.
“We are now seeing a reduction in the costs on a portfolio level and, as in the past, HDFC has ensured that the reduction in cost is passed on to existing customers by way of a reduction in RPLR,” HDFC joint MD Renu Sud Karnad said. The rate cut will accrue to customers over the next three months based on their reset dates.
The lender has seen its costs fall owing to improved operational efficiencies and a good quality portfolio, Karnad said.
“The measures taken by the government, drop in interest rates, correction in property prices and developers introducing affordable housing by resizing the area has resulted in an increased interest from first-time house buyers,” she added.
Currently, the housing finance company gives Rs 30 lakh at 9.5%, while for loans above that figure it charges 10.5%. HDFC Bank lends for a maximum tenure of 20 years and almost 90-95% of its incremental loans are in the floating rate category.
HDFC reduced its deposit rates across maturities in the first week of March. On an incremental basis, retail deposits for the first nine months—April to Dec—formed 55% of HDFC’s funding requirements.
Among other banks, Canara Bank has also announced home loans up to Rs 30 lakh at 8.25% for the first 12 months, 9.25% for the next 48 months and BPLR minus 2.50% subject to a minimum of 10.00% thereafter.
Global trade in ‘09 to shrink 9%, biggest fall since WW-II: WTO
Global trade in ‘09 to shrink 9%, biggest fall since WW-II: WTO
The Financial Express, March 25, 2009, P2
Arun S, New Delhi
The prevailing financial crisis, widespread demand slowdown and the consequent recession in many economies will result in global trade contracting by 9% in terms of volume in 2009, the sharpest fall in global trade since the Second World War, World Trade Organisation (WTO) economists have said in their report ‘World Trade 2008, Prospects for 2009.’
The WTO report, released on Monday, comes close on the heels of a similar outlook by International Monetary Fund that predicted a fall of around 3% in world trade this year. Significantly, the WTO has now placed the onus on G20 (leaders of 20 of the world’s leading economies) meeting in London next month to come out with positive solutions to revive shipments.
“Trade can be a potent tool in lifting the world from these economic doldrums. In London, G20 leaders will have a unique opportunity to unite in moving from pledges to action and refrain from any further protectionist measure, which will render global recovery efforts less effective,” said WTO director-general Pascal Lamy.
Though, the global demand collapse will equally affect both developed and developing countries, the rich countries are likely to be badly hit with their exports set to fall by 10% this year, according to the WTO economists. Developing countries will see a 2-3% contraction in their shipments as they have become more reliant on trade for growth, the study said.
“Merchandise trade growth in real terms (adjusted to discount changes in prices) slowed significantly in 2008 to 2%, compared to 6% in 2007,” the study said, adding “in dollar terms (which includes price changes and exchange rate fluctuations), world merchandise exports increased by 15% in 2008, to $15.8 trillion, while exports of commercial services rose 11% to $3.7 trillion.” According to Lamy, “The depleted pool of funds available for trade finance has contributed to the significant decline in trade flows, particularly in developing countries.”
WTO has singled out China, the most dynamic among emerging economies while showing its concern about the future of global trade. Highlighting that Chinese exports in February were down 26% compared to the same month in the previous year and 28% compared to January. The report said, “If one were to extrapolate this downturn, Chinese exports would be approaching zero within ten months to a year.”
Indian exports too have been contracting since October 2008 and are estimated to fall by 21% in February 2009, its steepest this fiscal. The total exports for this fiscal will fall short of the $200-billion target by at least $30 billion.
Rueing the loss of several thousands of jobs in the trade sector, Lamy warned the governments against enforcing protectionist measures. He said such steps would only lead to “making this bad situation worse” and cause more job losses.
While countries cannot raise tariffs according to the developments at the earlier WTO talks, they are using innovative protectionist measures in the form of non-tariff barriers. Also, investigations into each other’s policies and trade show the general mistrust that is causing complications in the global trading system.
Though the last G20 meeting in November 2008 saw its members promising not to undertake any new protectionist measures, a recent World Bank study showed that 17 of the 20 members had together taken as many as 47 measures that amounted to trade restrictions in one form or the other.
Noting that the use of protectionist measures is on a rise, Lamy said, “The risk is increasing of such measures choking off trade as an engine of recovery. We must be vigilant because we know that restricting imports only leads your trade partner to follow suit and hit your exports.”
Early signs regarding the G20 meeting are hardly inspiring. The recent sherpas meeting of the G20 (or the preliminary meeting of senior government officials of these countries) failed to reach any conclusion or provide guidance to the G20 meeting.
Government sources in India blame it on the unilateral proposals of the US, seeking to protect its own interests and not taking on board the concerns of developing countries.
But several countries around the world are now obsessed with their own stimulus packages to pump-prime their economy and catering to their constituencies instead of taking collective responsibility to perk up global trade, experts said.
Biswajit Dhar, professor and head, centre for WTO studies, Indian Institute of Foreign Trade, said, “The WTO provides a predictable rule-based system. Now is the time for G20 to repose faith in WTO and empower the multilateral body to monitor and ensure that markets remain open and rules are not misused to raise new trade barriers.”
Official sources said keeping with the general mood, the G20 meeting will see India supporting the move for a successful conclusion of the Doha Round talks by the year-end and agreeing not to take any protectionist measures. Also, New Delhi will assure that it will help least developed countries through its duty-free-quota-free market access programme.
India is not going to make any specific demand at the G20 meet due to the General Elections, they added. “But we will be keen on some forward movement on restructuring of the international financial architecture. The developing countries need to have a greater say in IMF and World Bank,” a senior government official told FE.
WTO noted that the problems in the financial markets could prolong the present crisis, adding that the world’s banking sector has to be repaired for an effective recovery. It said international institutions have noted the shortage of trade finance.
In 2008, Germany topped the merchandise goods exporters category with shipments of $1.46 billion (9.1% share of global exports), closely followed by China with $1.42 billion (8.9% of global exports). The US was placed third with $1.3 billion (8.1% of the total) and India was ranked 26 th with $179 billion (1.1% of the global total).
In the list of top services exporters in 2008, India secured ninth place with $106 billion, thereby contributing to 2.8% share in the global exports. With $522 billion, the US was ranked first. China came seventh with exports worth $137 billion comprising 3.7% of the world total.
The Financial Express, March 25, 2009, P2
Arun S, New Delhi
The prevailing financial crisis, widespread demand slowdown and the consequent recession in many economies will result in global trade contracting by 9% in terms of volume in 2009, the sharpest fall in global trade since the Second World War, World Trade Organisation (WTO) economists have said in their report ‘World Trade 2008, Prospects for 2009.’
The WTO report, released on Monday, comes close on the heels of a similar outlook by International Monetary Fund that predicted a fall of around 3% in world trade this year. Significantly, the WTO has now placed the onus on G20 (leaders of 20 of the world’s leading economies) meeting in London next month to come out with positive solutions to revive shipments.
“Trade can be a potent tool in lifting the world from these economic doldrums. In London, G20 leaders will have a unique opportunity to unite in moving from pledges to action and refrain from any further protectionist measure, which will render global recovery efforts less effective,” said WTO director-general Pascal Lamy.
Though, the global demand collapse will equally affect both developed and developing countries, the rich countries are likely to be badly hit with their exports set to fall by 10% this year, according to the WTO economists. Developing countries will see a 2-3% contraction in their shipments as they have become more reliant on trade for growth, the study said.
“Merchandise trade growth in real terms (adjusted to discount changes in prices) slowed significantly in 2008 to 2%, compared to 6% in 2007,” the study said, adding “in dollar terms (which includes price changes and exchange rate fluctuations), world merchandise exports increased by 15% in 2008, to $15.8 trillion, while exports of commercial services rose 11% to $3.7 trillion.” According to Lamy, “The depleted pool of funds available for trade finance has contributed to the significant decline in trade flows, particularly in developing countries.”
WTO has singled out China, the most dynamic among emerging economies while showing its concern about the future of global trade. Highlighting that Chinese exports in February were down 26% compared to the same month in the previous year and 28% compared to January. The report said, “If one were to extrapolate this downturn, Chinese exports would be approaching zero within ten months to a year.”
Indian exports too have been contracting since October 2008 and are estimated to fall by 21% in February 2009, its steepest this fiscal. The total exports for this fiscal will fall short of the $200-billion target by at least $30 billion.
Rueing the loss of several thousands of jobs in the trade sector, Lamy warned the governments against enforcing protectionist measures. He said such steps would only lead to “making this bad situation worse” and cause more job losses.
While countries cannot raise tariffs according to the developments at the earlier WTO talks, they are using innovative protectionist measures in the form of non-tariff barriers. Also, investigations into each other’s policies and trade show the general mistrust that is causing complications in the global trading system.
Though the last G20 meeting in November 2008 saw its members promising not to undertake any new protectionist measures, a recent World Bank study showed that 17 of the 20 members had together taken as many as 47 measures that amounted to trade restrictions in one form or the other.
Noting that the use of protectionist measures is on a rise, Lamy said, “The risk is increasing of such measures choking off trade as an engine of recovery. We must be vigilant because we know that restricting imports only leads your trade partner to follow suit and hit your exports.”
Early signs regarding the G20 meeting are hardly inspiring. The recent sherpas meeting of the G20 (or the preliminary meeting of senior government officials of these countries) failed to reach any conclusion or provide guidance to the G20 meeting.
Government sources in India blame it on the unilateral proposals of the US, seeking to protect its own interests and not taking on board the concerns of developing countries.
But several countries around the world are now obsessed with their own stimulus packages to pump-prime their economy and catering to their constituencies instead of taking collective responsibility to perk up global trade, experts said.
Biswajit Dhar, professor and head, centre for WTO studies, Indian Institute of Foreign Trade, said, “The WTO provides a predictable rule-based system. Now is the time for G20 to repose faith in WTO and empower the multilateral body to monitor and ensure that markets remain open and rules are not misused to raise new trade barriers.”
Official sources said keeping with the general mood, the G20 meeting will see India supporting the move for a successful conclusion of the Doha Round talks by the year-end and agreeing not to take any protectionist measures. Also, New Delhi will assure that it will help least developed countries through its duty-free-quota-free market access programme.
India is not going to make any specific demand at the G20 meet due to the General Elections, they added. “But we will be keen on some forward movement on restructuring of the international financial architecture. The developing countries need to have a greater say in IMF and World Bank,” a senior government official told FE.
WTO noted that the problems in the financial markets could prolong the present crisis, adding that the world’s banking sector has to be repaired for an effective recovery. It said international institutions have noted the shortage of trade finance.
In 2008, Germany topped the merchandise goods exporters category with shipments of $1.46 billion (9.1% share of global exports), closely followed by China with $1.42 billion (8.9% of global exports). The US was placed third with $1.3 billion (8.1% of the total) and India was ranked 26 th with $179 billion (1.1% of the global total).
In the list of top services exporters in 2008, India secured ninth place with $106 billion, thereby contributing to 2.8% share in the global exports. With $522 billion, the US was ranked first. China came seventh with exports worth $137 billion comprising 3.7% of the world total.
PM to meet industry leaders on Saturday to review economic situation
PM to meet industry leaders on Saturday to review economic situation
The Financial Express, March 25, 2009, P2
fe Bureau, New Delhi
With the economy showing no signs of revival despite the government’s three fiscal stimulus packages, Prime Minister Manmohan Singh is scheduled to meet industry leaders on Saturday to review the situation and seek their suggestions to rev up flagging growth. Heads of the apex business chambers including Ficci, Assocham and CII have been also invited for the meeting.
India Inc has been pressing for increased government spending as well as announcement of new projects, especially in the infrastructure sector. But for the UPA, which is bound by the Election Commission’s model code of conduct because of the upcoming Lok Sabha elections this may not be possible.
On Tuesday, the Prime Minister exuded confidence that the stimulus packages announced by the government would help the economy recover in the next six to seven months.
“I am confident that because of the stimulus that our government has announced the revival of the Indian economy should take place in big way,” he said while releasing the election manifesto of the Indian National Congress.
The Prime Minister had earlier in November last year held similar consultations with India Inc, to gauge the impact of the global financial crisis on the Indian economy and promote growth by ensuring adequate liquidity in the system.
Since then the government and the Reserve Bank of India have also announced a series of stimulus measures, whose impact and implementation is being constantly reviewed by Cabinet Secretary KM Chandrasekhar.
But the stimulus measures announced by the UPA do not seem to have had much impact if key economic indicators like IIP and advance tax figures are taken into consideration.
While IIP contracted by 0.5% in January this year compared to a 6.2% growth in January 2008, corporate advance tax collections rose by a mere 18% in the fourth quarter of this fiscal. The only silver lining has been that inflation fell to 0.44% as per latest figures.
The country’s chief statisitician Pronab Sen also recently said that a 7.1% growth in 2008-09 may be a tad too optimistic. Meanwhile, the International Monetary Fund too said India’s growth could moderate to 6.25% in 2008-09 and 5.25% in 2009-10.
The Financial Express, March 25, 2009, P2
fe Bureau, New Delhi
With the economy showing no signs of revival despite the government’s three fiscal stimulus packages, Prime Minister Manmohan Singh is scheduled to meet industry leaders on Saturday to review the situation and seek their suggestions to rev up flagging growth. Heads of the apex business chambers including Ficci, Assocham and CII have been also invited for the meeting.
India Inc has been pressing for increased government spending as well as announcement of new projects, especially in the infrastructure sector. But for the UPA, which is bound by the Election Commission’s model code of conduct because of the upcoming Lok Sabha elections this may not be possible.
On Tuesday, the Prime Minister exuded confidence that the stimulus packages announced by the government would help the economy recover in the next six to seven months.
“I am confident that because of the stimulus that our government has announced the revival of the Indian economy should take place in big way,” he said while releasing the election manifesto of the Indian National Congress.
The Prime Minister had earlier in November last year held similar consultations with India Inc, to gauge the impact of the global financial crisis on the Indian economy and promote growth by ensuring adequate liquidity in the system.
Since then the government and the Reserve Bank of India have also announced a series of stimulus measures, whose impact and implementation is being constantly reviewed by Cabinet Secretary KM Chandrasekhar.
But the stimulus measures announced by the UPA do not seem to have had much impact if key economic indicators like IIP and advance tax figures are taken into consideration.
While IIP contracted by 0.5% in January this year compared to a 6.2% growth in January 2008, corporate advance tax collections rose by a mere 18% in the fourth quarter of this fiscal. The only silver lining has been that inflation fell to 0.44% as per latest figures.
The country’s chief statisitician Pronab Sen also recently said that a 7.1% growth in 2008-09 may be a tad too optimistic. Meanwhile, the International Monetary Fund too said India’s growth could moderate to 6.25% in 2008-09 and 5.25% in 2009-10.
DLF to open 4 malls this year
DLF to open 4 malls this year
The Economic Times, March 25, 2009, Page 5
NEW DELHI: The country's largest realty firm, DLF, on Tuesday said that it would open four new shopping malls in the Delhi-NCR region before Diwali (mid-October) this year and is expecting a lower rent in its new malls than existing levels. "We are now launching four new malls in Delhi-NCR before Diwali," DLF Retail Developers MD Arvind Nair told reporters on the sidelines of a CII conference here.
The Economic Times, March 25, 2009, Page 5
NEW DELHI: The country's largest realty firm, DLF, on Tuesday said that it would open four new shopping malls in the Delhi-NCR region before Diwali (mid-October) this year and is expecting a lower rent in its new malls than existing levels. "We are now launching four new malls in Delhi-NCR before Diwali," DLF Retail Developers MD Arvind Nair told reporters on the sidelines of a CII conference here.
DLF to book Rs 2,000 cr from group firm by April
DLF to book Rs 2,000 cr from group firm by April
Business Standard, March 25, 2009, Page 5
Raghavendra Kamath / Mumbai
DLF, the country’s largest property developer, plans to book nearly Rs 2,000 crore revenue from sale of 4.5 million square feet of commercial space to the group company, DLF Assets Ltd (DAL), by next month, according to a company executive.
The company would also book Rs 3,500 crore revenue from sale of 3.5 million sq ft space expected to be delivered to DAL, a holding company promoted by DLF’s KP Singh and family, in the next 12-18 months, the executive said.
The company has already booked Rs 5,450 crore revenue from sale of 5 million sq ft it has sold to DAL. It is, however, yet to receive the same. In a bid to pay DLF, the group’s arm, DAL, plans to raise Rs 2,000 crore through lease rental discounting, analysts say.
Simultaneously, DLF was expected to use around Rs 1,300 crore to buy a minority stake in DAL in a bid to help DE Shaw, a hedge fund that had invested $400 million (approximately Rs 2,000 crore) in DAL in 2007, exit the company, analysts said.
DLF today clarified to the exchanges that it had been looking at various options from time to time but no definite option had been presented to the board so far for its consideration.
However, a report from ICICI Securities today said DLF might need Rs 2,700 crore additional capital in the next two years to meet its cashflow requirements as its ability to generate cash from group company DAL remained under pressure.
Business Standard, March 25, 2009, Page 5
Raghavendra Kamath / Mumbai
DLF, the country’s largest property developer, plans to book nearly Rs 2,000 crore revenue from sale of 4.5 million square feet of commercial space to the group company, DLF Assets Ltd (DAL), by next month, according to a company executive.
The company would also book Rs 3,500 crore revenue from sale of 3.5 million sq ft space expected to be delivered to DAL, a holding company promoted by DLF’s KP Singh and family, in the next 12-18 months, the executive said.
The company has already booked Rs 5,450 crore revenue from sale of 5 million sq ft it has sold to DAL. It is, however, yet to receive the same. In a bid to pay DLF, the group’s arm, DAL, plans to raise Rs 2,000 crore through lease rental discounting, analysts say.
Simultaneously, DLF was expected to use around Rs 1,300 crore to buy a minority stake in DAL in a bid to help DE Shaw, a hedge fund that had invested $400 million (approximately Rs 2,000 crore) in DAL in 2007, exit the company, analysts said.
DLF today clarified to the exchanges that it had been looking at various options from time to time but no definite option had been presented to the board so far for its consideration.
However, a report from ICICI Securities today said DLF might need Rs 2,700 crore additional capital in the next two years to meet its cashflow requirements as its ability to generate cash from group company DAL remained under pressure.
Foreign investors in real estate locked for 3 years
Foreign investors in real estate locked for 3 years
The Economic Times, March 25, 2009, Page 11
MNCs NO LONGER EXEMPT FROM BAR ON NON-RESIDENT FUND TRANSFER
Sanjeev Choudhary & Rajat Guha, NEW DELHI
FOREIGN investors in Indian real estate cannot sell their stakes to another foreign investor before three years, the Foreign Investment Promotion Board (FIPB), the body that clears such proposals, has said.
With this, FIPB has overruled a provision in FDI policy that exempts foreign players from the rule in cases where fund transfer is from one non-resident to another. Till now, this three-year lock-in was applicable only on foreign investment in real estate and not on investors.
The FIPB view is contrary to the stand taken by the department of industrial policy and promotion (Dipp), the nodal agency that formulates FDI rules in the country. Dipp’s view is that a foreign investor can repatriate funds if it offloads its stake to another foreign investor as the actual investment in a project would remain intact and only its ownership would change.
“Though Press Note 2 of 2005 has an enabling clause to permit sale of investment between two non-residents before the end of lock in, it has not been allowed so far,” an official in the commerce & industry ministry said.
The issue came up in the last FIPB meeting, when the board took up private equity fund 2I Capital’s request to sell its investment in Delhi-based real estate firm Uppal Housing to Mauritius-based fund ICP Investments.
The company had sought approval for transferring 1.9 crore shares in the Indian real estate company to the Mauritian company. According to the company’s proposal, the fund transfer involved no repatriation of funds but physical transfer of shares from one investor to another.
Though Dipp had recommended giving permission for sale of 2I Capital’s shares to ICP Investments, FIPB rejected it. Dipp argued the sale of shares was permissible between two non-residents within the lock-in period, but FIPB rejected it.
In a missive to FIPB, ICP Investments said it has already invested $45 million in Uppal Housing and has plans to make substantial investments.
However, if 2I Capital is not permitted to transfer its shares to ICP, Uppal Housing’s projects may be jeopardised, the company has stated. The joint venture between Uppal Housing and 2I Capital has been terminated and the company still holds its shares, given the policy logjam.
REAL PICTURE
Till now, 3-year lock-in was applicable only on foreign investment, not on investors
FIPB view contrary to Dipp’s, which said foreign investors can repatriate funds if they sell stake to alien investor
Under PN 2, 100% FDI is allowed in real estate projects with certain curbs
The Economic Times, March 25, 2009, Page 11
MNCs NO LONGER EXEMPT FROM BAR ON NON-RESIDENT FUND TRANSFER
Sanjeev Choudhary & Rajat Guha, NEW DELHI
FOREIGN investors in Indian real estate cannot sell their stakes to another foreign investor before three years, the Foreign Investment Promotion Board (FIPB), the body that clears such proposals, has said.
With this, FIPB has overruled a provision in FDI policy that exempts foreign players from the rule in cases where fund transfer is from one non-resident to another. Till now, this three-year lock-in was applicable only on foreign investment in real estate and not on investors.
The FIPB view is contrary to the stand taken by the department of industrial policy and promotion (Dipp), the nodal agency that formulates FDI rules in the country. Dipp’s view is that a foreign investor can repatriate funds if it offloads its stake to another foreign investor as the actual investment in a project would remain intact and only its ownership would change.
“Though Press Note 2 of 2005 has an enabling clause to permit sale of investment between two non-residents before the end of lock in, it has not been allowed so far,” an official in the commerce & industry ministry said.
The issue came up in the last FIPB meeting, when the board took up private equity fund 2I Capital’s request to sell its investment in Delhi-based real estate firm Uppal Housing to Mauritius-based fund ICP Investments.
The company had sought approval for transferring 1.9 crore shares in the Indian real estate company to the Mauritian company. According to the company’s proposal, the fund transfer involved no repatriation of funds but physical transfer of shares from one investor to another.
Though Dipp had recommended giving permission for sale of 2I Capital’s shares to ICP Investments, FIPB rejected it. Dipp argued the sale of shares was permissible between two non-residents within the lock-in period, but FIPB rejected it.
In a missive to FIPB, ICP Investments said it has already invested $45 million in Uppal Housing and has plans to make substantial investments.
However, if 2I Capital is not permitted to transfer its shares to ICP, Uppal Housing’s projects may be jeopardised, the company has stated. The joint venture between Uppal Housing and 2I Capital has been terminated and the company still holds its shares, given the policy logjam.
REAL PICTURE
Till now, 3-year lock-in was applicable only on foreign investment, not on investors
FIPB view contrary to Dipp’s, which said foreign investors can repatriate funds if they sell stake to alien investor
Under PN 2, 100% FDI is allowed in real estate projects with certain curbs
‘GDP growth rate to be 4.8-5.5% in 2009-10’
‘GDP growth rate to be 4.8-5.5% in 2009-10’
The Hindu Business Line, March 25, 2009, Page 5
Global slowdown has dealt severe blow: ICRIER.
K.R. Srivats, New Delhi, March 24
The country’s GDP growth rate for 2009-10 might be in the range of 4.8 to 5.5 per cent, the Indian Council for Research on International Economic Relations (ICRIER) has said, reflecting the likely intensification of domestic economic slowdown.
In a working paper, Indian Economic Outlook 2008-09 and 2009-10, the economic policy think-tank has attributed the lower forecast for the next fiscal, when a new Government assumes office, to the impact of the worst economic downturn since the Great Depression.
For the current fiscal, the GDP growth has been pegged by ICRIER at 6.3 per cent, lower than the projected 7.9 per cent in a “no-shock” situation.
This GDP forecast comes close on the heels of the International Monetary Fund’s projection that India’s GDP growth will slow down to 6.25 per cent in 2008-09 and 5.25 per cent in 2009-10, in the wake of “deteriorating global outlook”.
Global blow
ICRIER has noted that the global crisis has dealt a severe blow to investment sentiments and consumer confidence in the economy. The crisis would also deepen and prolong Indian economy’s slowdown, according to the think-tank.
The basic question is how long it will take to revive the investment and consumer demands, which are falling precipitously, says the ICRIER paper.
It noted that fiscal and monetary expansionary steps at a time of extreme uncertainty worldwide will have limited impact.
A better way of responding to the crisis is the often repeated and now a cliché of kick-starting the “second round of reforms,” which was long overdue.
India has to substantially relax its “permit and approval” system by carrying out procedural reforms that will improve the investment climate for domestic and foreign investments.
Also, India ranks low among countries on regulatory environment with regard to enforcement of contracts, payment of taxes, business closure, licensing, property registration and setting up of business (World Bank, 2008). Reforms in these areas would be much more effective than just packages of monetary and fiscal stimuli to restore investor and consumer confidence, the ICRIER paper said.
While monetary and fiscal stimuli may provide the short-term palliatives for shoring up GDP growth, the real push will only come from implementing structural reforms, the agenda for which has been put on the shelf for a while.
“We cannot hope to generate the needed economic activity or the employment levels by continuing to tinker around with the economy. Bold and visionary measures, such as those undertaken in the early nineties, are needed again if the economy is not to slip into a prolonged phase of anaemic growth,” says the paper.
The Hindu Business Line, March 25, 2009, Page 5
Global slowdown has dealt severe blow: ICRIER.
K.R. Srivats, New Delhi, March 24
The country’s GDP growth rate for 2009-10 might be in the range of 4.8 to 5.5 per cent, the Indian Council for Research on International Economic Relations (ICRIER) has said, reflecting the likely intensification of domestic economic slowdown.
In a working paper, Indian Economic Outlook 2008-09 and 2009-10, the economic policy think-tank has attributed the lower forecast for the next fiscal, when a new Government assumes office, to the impact of the worst economic downturn since the Great Depression.
For the current fiscal, the GDP growth has been pegged by ICRIER at 6.3 per cent, lower than the projected 7.9 per cent in a “no-shock” situation.
This GDP forecast comes close on the heels of the International Monetary Fund’s projection that India’s GDP growth will slow down to 6.25 per cent in 2008-09 and 5.25 per cent in 2009-10, in the wake of “deteriorating global outlook”.
Global blow
ICRIER has noted that the global crisis has dealt a severe blow to investment sentiments and consumer confidence in the economy. The crisis would also deepen and prolong Indian economy’s slowdown, according to the think-tank.
The basic question is how long it will take to revive the investment and consumer demands, which are falling precipitously, says the ICRIER paper.
It noted that fiscal and monetary expansionary steps at a time of extreme uncertainty worldwide will have limited impact.
A better way of responding to the crisis is the often repeated and now a cliché of kick-starting the “second round of reforms,” which was long overdue.
India has to substantially relax its “permit and approval” system by carrying out procedural reforms that will improve the investment climate for domestic and foreign investments.
Also, India ranks low among countries on regulatory environment with regard to enforcement of contracts, payment of taxes, business closure, licensing, property registration and setting up of business (World Bank, 2008). Reforms in these areas would be much more effective than just packages of monetary and fiscal stimuli to restore investor and consumer confidence, the ICRIER paper said.
While monetary and fiscal stimuli may provide the short-term palliatives for shoring up GDP growth, the real push will only come from implementing structural reforms, the agenda for which has been put on the shelf for a while.
“We cannot hope to generate the needed economic activity or the employment levels by continuing to tinker around with the economy. Bold and visionary measures, such as those undertaken in the early nineties, are needed again if the economy is not to slip into a prolonged phase of anaemic growth,” says the paper.
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