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Govt blundered on Jan IIP,cuts it from 6.8% to 1.1% 

TIMES NEWS NETWORK 

New Delhi:The government faced a major embarrassment on Thursday when it sharply revised the industrial production data for January,with the growth rate lowered to 1.1% from the previously reported 6.8%.Finance minister Pranab Mukherjee termed the sharp revision as disappointing.
For a change,the Central Statistics Office admitted that the error was due to incorrect reporting of the sugar production data.Chief statistician T C A Anant said the error was detected at the time of compilation of IIP for February.He said sugar production had been wrongly taken as 134.08 lakh tonne instead of the actual figure of 58.09 lakh tonne.


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Experts say GDP growth may be lower than 6.9% 

New Delhi: Chief statistician T V A Anant blamed the incorrect IIP figure for January on wrong reporting by the ministry of consumer affairs,food and public distribution.As a result,the growth in the consumer nondurables segment was lowered to 11% instead of 42% reported earlier.Overall,consumer goods growth slowed to 2.9% from 20.2% estimated last month.
While economists and even the RBI have been questioning the quality of data,when asked,Anant told TOI: This is aone-off event.It is because of an unusual occurrence. 
The capital goods sector too has remained volatile for the past few months,and there have been sharp revisions,drawing criticism from economists.The error in the January IIP data comes close on the heels of the sharp correction in the export numbers that was attributed to a software glitch.Economists said the revision would mean that GDP growth would be lower than the previously estimated 6.9% in 2011-12.
Februarys IIP data reinforces the reality of a slowdown in industrial activity.However,even more telling of the trend decline in growth was the very significant downward revision in Januarys data print,removing the outlier characteristic of the initial number, said Saugata Bhattacharya,senior vice-president at Axis Bank.
When the January data was released last month,TOI had flagged the reasons for the unexpected rebound in industrial activity and pointed to the 93% rise in food and beverages output and a surge in tobacco production.


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Govt okays 30,000cr AI bailout 

TIMES NEWS NETWORK 

New Delhi: The government on Thursday approved a Rs 30,000 crore bailout for Air India despite several Cabinet ministers being sceptical of the move.The funds are proposed to be pumped in over the next nine years,but there will be an immediate infusion of Rs 6,750 crore to meet AIs working capital requirement.This is in addition to the equity infusion of Rs 3,200 crore that has already been done.
The clearance came after a long Cabinet meeting during which ministers pitched for the equity infusion on the grounds that it was needed to bail out the national carrier.Planning Commission deputy chairman Montek Ahluwalia and home minister P Chidambaram are learned to have flagged off the need to monitor AIs performance,while agreeing to fund the infusion.



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GETTING FISCAL TAILWIND 


Govt nod for 2 new AI subsidiaries 

New Delhi: While clearing the Rs 30,000-crore bailout package for Air India (AI),members of the Union Cabinet felt the performance of the carrier must be checked constantly to see if it is achieving the milestones promised.
Sources said some ministers were unsure about how AI would be able to meet performance parameters such as aircraft occupancy,on-time services,fleet utilization and rationalization of employees pay structure.In fact,some of them went on to question the rationale for a national carrier when countries such as Italy,Switzerland and Germany have given up on the practice.
However,NCP leaders Sharad Pawar and Praful Patel,the former aviation minister during whose term AI and Indian Airlines were merged,pushed for extending a fresh lifeline to the beleaguered public sector carrier.With doubts over Air Indias ability to turn the corner,the issue quickly turned to allowing foreign airlines buy into Indian carriers.
Civil aviation minister Ajit Singh then batted for fresh capital infusion to restructure the airline struggling with loans and dues of more than Rs 67,500 crore.Along with financial support,AI was allowed to induct the 27 Boeing 787 Dreamliners and three Boeing 777s through the sale-and-leaseback model to avoid fresh debt on its books.
These planes were ordered as part of the 111-aircraft deal for AI and erstwhile Indian Airlines in 2005 for Rs 50,000 crore.Incidentally,the Comptroller and Auditor Generals report on AI had termed the massive aircraft acquisition purely through debt a recipe for disaster.
The cabinet committee on economic affairs,which cleared AIs financial turnaround plan (TAP),also gave the go-ahead to carve two new subsidiaries a maintenance,repair and overhaul unit,and another for ground handling out of the airline that will accommodate around 19,000 of the airlines total workforce of 28,000 employees.
AI will give monetary support of Rs 768 crore to these two units.
Singh later said AI would get an additional equity of Rs 30,231 crore between 2012 and 2021 if it fulfils the tasks set out in the TAP and meets all milestones on a regular basis.He added that AI would now issue governmentbacked non-convertible debentures (NCDs) worth Rs 7,400 crore to its lenders to repay part of its Rs 21,200 crore working capital loans.The airline will get equity support for cash deficit of Rs 4,552 crore and money for the already guaranteed aircraft loan of Rs 18,929 crore till 2020-21.Singh added that banks had approved conversion of short-term working capital loan of Rs 11,000 crore into long-term loan.


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  • 14 Apr 2012
  • Hindustan Times (Delhi)
  • Julia Preston letters@hindustantimes.com
  • >> CONTINUED ON PAGE 27

Whistle-blower who claimed visa fraud keeps his job, but not work

It has been 17 months since Jack B Palmer first made a quiet complaint through internal channels at Infosys, he works for, saying he suspected some managers were committing visa fraud. Since then, Palmer says, he has been harassed by superiors and co-workers, sidelined with no work assignment, shut out of the company’s computers, denied bonuses and hounded by death threats.

But what has driven him nearly crazy, with bouts of depression alternating with rage, Palmer said, is the silence. Since last April, Palmer has been stewing day after day in his home near Montgomery, contemplating a blank Infosys screen on his computer and agonizing over whether his whistle-blowing was worth it.

getimage.aspx?regionguid=2b24d2c1-6c2a-44e3-8b4f-b4be8ddce0f9&scale=272&file=10872012041400000000001001&regionKey=%2bg%2bAD%2f1V0EjBZ%2bu0IzHRnw%3d%3d

"They did the worst thing they could do to someone who is used to working 80 hours a week," Palmer said. "They sit me at home and cut me off from everything. My life is floating in Infosys purgatory." A lawsuit Palmer filed in February 2011 prompted federal prosecutors to open a criminal investigation that is still expanding.

  • 14 Apr 2012
  • Hindustan Times (Delhi)
  • THE NEW YORK TIMES

Infy whistle blower

Federal investigators are looking into whether the company used workers from India for certain kinds of jobs here that were not allowed under their temporary visas, known as B-1. They are also examining numerous irregularities in the company's hiring practices and documents, federal officials said.

“Any allegation or assertion that there is or was a corporate policy of evading the law in conjunction with the B-1 visa programme is simply not accurate,” Ted Bockius, an Infosys spokesman, said Thursday. Infosys has been in discussions with the federal authorities, he said, and has complied with a subpoena they issued. He added that fewer than 2% of the company’s workers in the United States at any time are on B-1 visitor visas.

Palmer, 44, a software project manager for Infosys since August 2008, said he decided to sue the company, claiming he was punished for reporting corporate misdeeds, after executives pressured him to drop his complaints. But even as the months have crawled by, Palmer has not quit his Infosys job, fearing he will not get another one now that he is known as the guy who went up against the Indian company.



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Govt lifts ban,allows Pakistanis to invest in Indian companies 

FIPB Route Likely,Norms To Be Notified Soon 

TIMES NEWS NETWORK 

New Delhi: Suddenly,the horizon in the neighbourhood appears to be brightening.For the first time ever,India on Friday decided to allow foreign direct investment (FDI) from Pakistan a step that signals growing warmth in the relations between the two nuclear-armed neighbours.
Until now,Pakistan was the only country from where FDI was not allowed.The decision to allow FDI may not lead to an immediate rush of investments from Pakistan,but it does show that the two sides are now eager to do business and significantly raise the level of trade and economic engagement between them.India has taken an in-principle decision as part of trade normalization process to allow foreign direct investment from Pakistan, commerce,industry and textiles minister Anand Sharma told a news conference here after a meeting with his Pakistani counterpart Makhdoom Amin Fahim.Procedural requirements are underway and it will be notified soon, Sharma said.No further details were available but officials had earlier told TOI that after the rules are amended,investments can come through the foreign investment promotion board (FIPB) route into sectors where foreign investment is allowed.
FIPB has representatives from all ministries,including home,and scrutinizes proposals which are referred to it.As confidence levels rise,you will see more companies willing to set up ventures in both countries.Initially companies will prefer trading, said a senior government official,who did not wish to be identified.
Right now,the focus is on trade and sectors like tourism,education,health and hospitality.

50 Weeks To Bonhomie 




Done Deals 


Pakistan moves towards grant of full most-favoured nation tag to India Wagah-Attari land trade route upgraded,second gate opened Anand Sharma becomes first Indian trade minister to cross border for bilateral talks;his counterpart Makhdoom Amin Fahim undertakes first bilateral journey by Pak minister in 30 yrs India helps Pakistan get benefits for textiles exports to Europe 3 pacts signed to remove trade barriers Trade shows held in Lahore,Delhi 

In The Pipeline 


Business visa norms to be eased in a few weeks Talks underway on trade in electricity,diesel Preferential trading arrangements planned Steps initiated for banks from both countries to open branches Third route for trade via Munabao-Khokharapar may be opened 

Pak honcho lauds Aman ki Asha project 



With governments of India and Pakistan pushing for liberalizing trade norms,Bashir Ali Ahmed,president of International Textile Manufacturers Federation,is positive that regional trade between the two countries will grow manifold.In an interview to TOI,Ahmed said,With the world economy going through a bad phase,we (India and Pakistan) have a big responsibility to the world and to the region.Aman ki Asha played a huge role in initiating the process



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Infy forecast a letdown;stock skids 

Revenue Guidance Of 10% Lower Than Nasscom Target 

Rules Out Hike 




TIMES NEWS NETWORK 

Bangalore: Infosys Technologies suffered an unexpected decline in revenue and net profit in the fourth quarter ended March,compared to the preceding quarter,which also pushed the IT bellwether to give a very conservative revenue forecast for the new fiscal.
The combined effect of that on the companys share price was disastrous.The share fell 12.61% on Bombay Stock Exchange,the highest in three years.It also pulled most other IT stocks down and the BSE IT index closed the day down 8.76%.
Infosyss revenue in the latest quarter fell 4.8% sequentially to Rs 8,852 crore,and net profit fell 2.4% to Rs 2,316 crore.Compared with the same quarter that year,profit rose 27.4% and revenue rose 22%.The revenue growth forecast for 2012-13 was in the range of 8% to 10%,lower than the 10-15 % expected by many analysts and also lower than the 11-14 % forecast that IT industry body Nasscom recently provided for the software export industry as a whole.
Infosys CEO S D Shibulal said there was a sudden deterioration in the business environment in March.
Nandita Gurjar,HR head,said the company has also decided to not give a salary increase to employees in April,as is the normal practice.The last time it postponed the salary increase was in 2008,in the middle of the global recession.However,Gurjar said that if the business environment improves,a midyear salary increase would be considered.She also said promotions are being given to 16,000 employees,and this would come with salary increments.
Shibulal said the year ahead looks challenging for the IT services industry,with slow recovery in the global markets.Our visibility for the entire year now is only 65%.Given the lack of client confidence in global growth and low visibility on client spending,giving a guidance itself was a bold statement, he said.
Dipen Shah,head of fundamental research at brokerage firm Kotak Securities,said a part of the projected underperformance of Infosys versus the industry is due to the strategy of not chasing low-margin businesses.The recent restructuring within the company is impacting near term growth but should help Infosys return to better growth rates in the medium to long term, he said.
Based on the modest growth projections,Infosys plans to hire 35,000 people in this fiscal,including 13,000 for its BPO operations,compared to the 45,000 it did last year.The net addition (excluding those who quit the company) will be only 6,000 people,compared to 19,000 last fiscal.As on March 31,the company had nearly 1.5 lakh employees.
Given the lower than expected performance in the latest quarter,the company's employee utilization has come down to an all-time low of 71%,and far lower than the 78% to 82% that it considers as a comfortable level.


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TRADE DEFICIT AT $185BN 
FY12 exports cross $300bn target despite slowdown 

TIMES NEWS NETWORK 

New Delhi: Indias exports have managed to cross the $300 billion target set for 2011-12,despite the global economic slowdown and largely due to inroads into new markets.Experts have cautioned that exports will face a headwind in the current fiscal as the key markets for shipments such as the US and Europe still remain sluggish.
I am happy to announce that Indias exports have crossed $300 billion in the last financial year, commerce,industry & textiles minister Anand Sharma told reporters.
The sectors that posted robust growth including engineering,gems and jewellery,textiles,chemicals and pharmaceuticals,Sharma said.Imports during 2011-12 stood at $485 billion,largely due to high global oil prices,he said.Oil imports totalled $150 billion,while gold and silver imports stood at $60 billion in 2011-12.
Commerce secretary Rahul Khullar said the numbers were provisional and the final data would be released later in the month.We were on course,despite very difficult global scenario,contraction of demand in some of traditional destinations... diversification into new markets has positively worked towards meeting our target, Sharma said.
The trade deficit widened to $185 billion from the previously estimated $160- $170 billion,and Sharma said keeping it under manageable limits is a big challenge for in the current fiscal.Every effort will be made to keep the trade deficit under manageable levels, the minister said.
Exports posted robust numbers until July but the data had to be re-worked due to a software glitch and in recent months shipments have remained patchy,while imports have increased mainly that of crude oil and gold.The government has taken steps to moderate gold imports by raising duties.
Global trade expanded in 2011 by 5%,a sharp deceleration from the rebound of 13.8% in 2010,and growth will slow further still to 3.7% in 2012,WTO economists have cautioned.They attributed the slowdown to the global economy losing momentum due to a number of shocks,including the European sovereign debt crisis.


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Bank credit growth up 19% in FY12 

TIMES NEWS NETWORK 

Mumbai: A surge in bank lending in the last fortnight of March has resulted in bank credit growth for 2011-12 touching 19.3% surpassing the 16% target set by the RBI.
Outstanding bank loans touched Rs 47.04 lakh crore as on March 30,2012,an increase of 19.3% at the beginning of the year,as per RBI data.Of the of Rs 7.6 lakh crore net rise in loans,38% came in the last one month which saw bank loan book grow Rs 2.97 lakh crore.
For the same period deposits grew 17.4%,higher-than-expected due to a last minute surge.Outstanding deposits rose to Rs 61.12 lakh crore as on March 30 as compared to Rs 52.06 crore at the beginning of the year.Of the increase of Rs 9.04 crore during the year,Rs 2.9 lakh crore came in March.The increase in deposits was evenly spread between demand and time deposits.
According to M Narendra,chairman,Indian Overseas Bank,there is a spike in bank lending in March because many corporates square off their dues to vendors before the year-end.Also businesses have year-end pay outs towards tax,bonuses and other annual expenditure for which some public sector banks avail short-term loans against deposits.What needs to be seen is whether the number goes down in the next two weeks.If it does,it is clear that the borrowing is short-term, he said.
Such spikes in year-end business figures are also seen as window dressing by analysts because they inflate bank books without adding to their earnings.This year the surge in loans is also partly on account of large borrowing by government oil companies which have been borrowing to meet the shortfall in revenue following their inability to pass on the hike in crude prices to customers.
The surge in deposit is because of some government allocations coming into the banking system.These are a blip and should not be mistaken for a trend, said the chairman of a public sector bank.
An increase in lending at a time when business is witnessing a slowdown could also be a sign of distressed borrowing.In troubled times businesses borrow more either to pay back foreign debt that has fallen due or to fund their inventory.There is also a possibility that corporates have raised fresh loans to repay earlier obligations a process described as evergreening of loans,discouraged by the RBI.
The credit and deposit numbers were released by RBI ahead of its monetary policy on Tuesday.It is widely expected that the central bank will bring down the repo rate.Some bankers expect RBI to infuse liquidity through a reduction in the cash reserve ratio as well.Two factors strongly support liquidity infusion.The first is the shortage of rupees caused by RBIs consistent dollar sales to support the rupee.Liquidity is also under pressure because of an oversized government borrowing programme.

YEAR-END SURGE INFLATES LOAN BOOK 


Of the of Rs 7.6 lakh crore net increase in loans,38% came in the last one month Analysts call such spikes window dressing as lenders they inflate books without adding to their earnings The surge in loans is also partly on account of large borrowing by oil companies


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Infra cos fail to tie up funds for projects 

Aggressive Bidding Haunts New Players | Banks Find Bids Very High,See Poor Returns 

Piyush Pandey TNN 

Mumbai: Infrastructure firms suddenly find themselves in a bind as the projects they bagged after aggressive bidding last year are now getting a thumbs-down from banks as the lenders find the equity returns depressed and project bids very high.So,aggressive bidding by infrastructure players,be it on roads or power projects,has actually come back to haunt them as a winners curse.
In some cases,seasoned infrastructure companies,unable to match the aggression of some of the newer players,had to sit out of bidding for these projects.The result : projects are not achieving financial closure.
For most promoters,it is a case of having bitten off much larger than they could chew.So expectedly,in most cases they are finding it difficult to fund their equity requirements or even meeting the debt obligations in the hardening interest rate environment,said Rajesh Shrivastava,managing director at Meinhardt India,a leading infrastructure engineering consultancy.
With such aggressive bidding how are they going to source funds since the viability of the project itself is under question asks Nomura analyst Saion Mukherjee.
Srei Infrastructure,which gets almost half of its revenues from financing road,power and telecom sectors,has decided to go slow on funding such projects.M D Mallya,chairman and managing director,Bank of Baroda,agrees: I feel that we have got a reasonable exposure in the infrastructure sector and do not want to enhance it further. 
GMR is,however,unfazed.The company is obtaining various clearances and expects to achieve financial closure by May 2012,said a GMR spokesman,adding that mobilization is in progress.
And its not only the road projects that are feeling the heat.In 2008,Indiabulls surprised everyone by outbidding Tata Power,Torrent Power,Adani Power,Reliance Power and GMR to bag the 1500 MW Bhaiyathan Thermal Power in Chhattisgarh.Indiabulls bid of 81 paisa per unit was less than half the others.Its financial services CEO Ganan Banga admits that the project is on hold,but for different reasons.The state itself is not in possession of the land and financial closure cant happen unless you have land.Only 65% of the power was to be sold at 81 paisa per unit and we can still make money by selling the remaining 35% on merchant basis, Banga reasoned.
Similarly,Lanco outbid GMR,GVK,Jindal Power,L&T,Reliance Coal and Sterlite to bag the mine developer and operator (MDO) contract for the coal block of the Maha Tamil Collieries in Chhattisgarh by submitting a negative bid of Rs 112 per tonne of coal mined.This means Lanco will pay Rs 112 for every tonne of coal excavated,while its nearest competitor Sterlite Energy had sought Rs 175 a tonne for coal to be excavated.
A senior Reliance Infra official agrees that there is intense competition from new infra firms.We now find ourselves at the bottom in most infrastructure bids.There is no point in bidding so aggressively and then making losses, he said.
Interestingly,it was Reliance Infra which had surprised everyone five years ago when it bid a tenth of what Reliance Industries had quoted to build the $2 billion Mumbai Trans-Harbour Sea Link (MTHL) project.Finally,the unrealistic bids had to scrapped and the government called for fresh bids,in which both the Ambani brothers did not participate.

RUNNING OUT OF STEAM 


tGMR bid for the Krishngarh-Udaipur-Ahmedabad project the first mega highway at Rs 636 crore per year for the 555 km stretch against the expected revenue of Rs 550 crore.The aggressive bid was more than double of its peers like L&T,HCC and Reliance Infrastructure tHyderabad-based BSCPL Infrastructure bagged the Rs 120 crore four-laning of Orissa-Aurang road project at a premium of Rs 29 crore tA consortium of PNC Infratech and BF Utilities bagged the Rs 90-crore Hospe Bellary four-laning project at a premium of Rs 18 crore;NHAI was expecting to award these two projects as a grant

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Window Dressing: Banks Raise 2 L cr in 6 Days 

OUR BUREAU MUMBAI 

Commercial banks in the country raised a record.2 lakh crore as deposits in the last six days of March,managing to achieve an annual growth of 17.4% and reaching the Reserve Banks comfort zone.This is reckoned to be the largest window-dressing effort to shore up the deposit figures.Banks raised a total of.61.12 lakh crore as on March 30,up.2 lakh crore since March 23.Banks succeeded in raising huge amounts in a short span as many large banks,including the countrys largest,State Bank of India,raised deposit rates,particularly for shorter tenor products in the last few days,despite the Reserve Bank signalling rates may ease.Besides,banks were also selling certificates of deposits,or CDs,at high rates.Rates on three-month CDs were around 10% in the last week of March.Even though the rates were marginally lower than in the previous weeks,they were still reckoned to be high.Besides,banks have been raising rates and have also created special tenors like 91-day deposits and 100-day deposits,which offered 9% to 10%.It is common for banks to go for an overdrive to raise deposits to shore up their balance sheets towards the last few days of a fiscal,but this time round the amount raised is higher than usual.This is because deposits had slowed down in the second half of the fiscal.In fact,as on March 23,with just six days remaining for the fiscal to end,deposits growth stood at only 13.4%,compared to the central banks comfort level of 17% for the year.Bank loans rose by.93,160 crore in the last six days of the previous fiscal to touch.47 lakh crore as on March 30.The extent of windowdressing has,however,been lower as banks were seeing credit pickup throughout the last quarter of FY 12.


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CLB Allows Unitech to Resolve Telenor Row Via Intl Arbitration

Telenor plans to challenge judgement in a higher court 

OUR BUREAU NEW DELHI 

The Company Law Board (CLB) has endorsed realty firm Unitechsstancethat its ownership dispute with Norways Telenor,in their joint venture mobile phone company,should be resolved through arbitration in Singapore.The ruling by the quasi-judicial body is seen as a significant victory for Unitech even as Telenor said it would challenge the judgement in a higher court.Norways Telenor owns a controlling stake in Unitech Wireless,which offers services under the Uninor brand,with about 40 million customers,and both JV partners had been involved in an ownership dispute before the CLB.ET had reported last month that Unitech had sought about $150 million from Telenor to sell its 32.7% stake in their telecom joint venture and end the bitter dispute between two partners,but the Norwegian firm had rejected this offer.This resulted in Unitech petitioning the CLB to settle this issue through arbitration,a move that was opposed by the Norwegian telecom major.The spat between both partners intensified after the Supreme Court in a February 2 order cancelled 122 licences issued by former telecom minister A Raja in January 2008.The Norwegian firm's Indian operation was one of the worst affected by the court's decision.Following the apex court orders,Telenor served a divorce notice and sought compensation from Unitech for damages caused to their mobile venture.Telenor also announced that it was forming a new company in India and would shift its existing business,including 4 crore customers and 17,500 employees,tothisentity.CLBchairman DR Deshmukh ruled that Telenor had gone berserk in filing its petition seeking ouster of its partner Unitech following the Supreme Court order and added that an arbitrator alone could decidewhether or not'S hare Subscription Agreement' and 'S hare Holders Agreement' had been vitiated due to fraud.Unitech said it was pleased that the CLB has accepted its plea and respected the shareholders agreement that had clearly defined the dispute resolution mechanism for settlementof the issues relating to the shareholders agreement.The realty firms shares reacted positively to the CLB verdict and closed up 4.4% at.29.55.Telenor expressed surprise at the CLB order and said,We will certainly challenge this order in a higher court as we have successfully done on matters earlier.Our intention remains to establish a newcompany as a platformfor the future and transfer all Uninor assets,employees and customers to it. The CLB had earlier asked the warring partners to mediate to resolve their differences but both the companies did not opt for it.The war of words between the JV partners continued to be played out through the course of the day with Unitech responding totheTelenor statement.We are not surprised with Telenors reaction on the CLB order which is nothing but continuation of its past conduct of complete disregard to the rights of minority shareholders and terms of the agreements signed between the shareholders, the realty firm added.The IT department had recently attached the shares of three companies through which realty firm Unitech holds a 33% stake in mobile phone company Unitech Wirelss for alleged outstanding income tax dues.The relationship between both partners in the JV went downhill after Unitech refused to participate in Uninors.8,200 crore rights issue in 2011.By the middle of 2011,the two were embroiled in court battles,culminating in an arbitration in Singapore.

Call Connect 


The ruling by the quasi-judicial body is seen as a significant victory for Unitech Unitech had sought about $150 m from Telenor to sell its 32.7% stake in their telecom joint venture



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HC Ruling on Dividend Income a Relief for Brokers 

Dont disallow expense on dividend income thats incidental to brokers biz: Karnataka HC 

RAM SAHGAL & VIJAY GURAV MUMBAI 


If a share broker takes a loan to buy shares and pays interest on it,he can adjust this expenditure against the total trading profit,including tax-free dividend income,if the dividend income is incidental to his business of buying and selling shares.In such cases,the Income-Tax Department cannot,by applying Section 14 of the Income Tax Act,bifurcate the traders expense (interest on loan) proportionately between trading profit and dividend income and disallow the same on dividend income on the ground that while trading income is taxable,dividend income is exempt under Section 10 of the IT Act.Section 14 A states that any expense incurred on earning exempt income is to be disallowed.This was the sum and substance of a recent High Court of Karnataka ruling in the case of CCI,a distributor of state lotteries and a dealer in shares and securities,versus joint commissioner,income tax.The ruling went in favour of CCI and could provide relief to scores of stock traders who are not allowed to adjust expense against their trading profits on similar grounds.CCI,the assessee in this case,bought shares of certain companies and converted partly paid shares to fully paid ones by availing of an interest-free loan for which it paid a broker some commission,which it showed as expenditure.Subsequently,CCI sold a major chunk of shares and got a trading profit,which was offered as business income and taxed.The remaining unsold shares earned tax-free dividend income.However,the assessing officer disallowed the expenditure totally on the ground that it was incurred to earn dividend income,which is exempt.The assessee appealed before the Income Tax Appellate Tribunal which said that the assessing officer had incorrectly attributed the entire broking expense (on the loan) incurred by CCI as related to earning dividend income even though the loan was used to purchase and sell shares later,which was shown as business income and taxed.The tribunal directed the AO to bifurcate the total trading income proportionately into trading profit and dividend income and disallow expense on dividend income.The assessee then moved the HC which ruled in its favour by ruling that the entire expense should be allowed since dividend income earned on the unsold shares was not the main business but merely incidental to the assessees business of selling shares.Praising the HC judgement,chartered accountant Bhupendra Shah,said,Where the total income of any share trader includes tax-free dividend from unsold stock of shares,provisions of Sec 14 A of the Income Tax Act cannot be invoked for purchasing shares in two parts -- tax-free dividend and taxable share trading profit -- so as to disallow expenditure relatable to dividend income,which is incidental to the business of an assessee who trades in shares,which itself is taxable. Rajesh Baheti,managing director,Crosseas Capital Services,said,There are numerous litigations on in many courts in respect of this section... This is a relief as the court has clearly held that it is incumbent on the assessing officer to prove nexus of expenditure with dividend income.He cannot merely disallow expenditure without establishing the nexus. 

What The Ruling Means 


IF DIVIDEND INCOME IS INCIDENTAL TO a share traders business,revenue cannot apportion expense proportionately between trading profit,which is taxable,and tax free dividend income and disallow expense proportionate to dividend income


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LIC PSU Investments may Give Rivals Edge 

Poor returns on stakes in sluggish state cos to be a drag on insurer 

SHILPY SINHA MUMBAI 

Life Insurance Corp invested more than half its equity portfolio last fiscal in state-run companies,raising fears that returns may lag rivals as price controls eat into the profitability of some public sector undertakings (PSUs).The state-run insurer invested around.22,000 crore,or 55% of the total permitted equity investment of.40,000 crore,in companies such as Oil and Natural Gas Corp and Punjab National Bank,said two people familiar with the investments.These are provisional numbers which may be revised,they said.A final number and the investment target for this fiscal will be finalised in a few days.Some of these investments,which exceed the limit stipulated by the insurance regulator to avoid concentration risk,could drag overall returns for LICs 29-crore policyholders,say investment experts.Time and again LIC has been violating prudent investment norms, said Arun Kejriwal,an investment advisor whose public interest litigation against LICs investment practices was rejected by a court recently.LIC has a different mandate and follows a different diktat.Since there is no shareholder involved,there is no shareholder activism. LICs investments,including a.12,000-crore bet on state-run ONGC when few investors turned up for the Centres share sale,have raised questions about governance as the insurance giant is being used by the government to fill its depleting coffers.


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Questions on Governance 

LIC bought shares worth.8,000 crore in various state-run banks.Investors are questioning governance in state-run companies,including in Coal India and oil marketing companies such as IOC,which face price controls.But LIC says these investment practices are in line with its objectives.These investments are in line with the objectives set up by the corporation and are done with a long-term view, said an LIC spokesperson.We have tried to maintain a healthy balance considering the weightage of public sector in the index. An ET study of the Sensex shows PSUs have a weightage of 14.28% with the rest accounted for by the private sector.The BSEs PSU index had underperformed the broader market falling 18.4% in fiscal 2012 when the benchmark Sensex declined 10%.On a single company basis there could be some problem,but on portfolio basis they would make 12-15 % return on a long-term basis, said Abhijit Gulanikar,chief investment officer,SBI Life.The public sector insurer,which is mandated to invest 50% of its funds in government bonds,bought gilts worth.95,000 crore last fiscal when it had an investment corpus of.2 lakh crore.Other corporate bonds bought totalled.45,000 crore,said the people quoted above,who did not want to be identified.Other assets,including loans,accounted for.20,000 crore.As long as LIC is investing within the norms laid down by the regulator there is nothing to worry about, said Shashwat Sharma,partner,KPMG.But the insurer has breached the investment norms laid down by the regulator in some companies.Its demand to raise the 10% ceiling on holding in a particular company was rejected recently by the regulator.



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Mumbai Foods Co Buys UKs Adelie for 1,800 crore 

After the acquisition,India Hospitality to become countrys top food services company 

CHAITALI CHAKRAVARTY & SAGAR MALVIYA NEW DELHI | MUMBAI 


India Hospitality Corp,which owns Mumbai eateries Jazz by the Bay and All Stir Fry,has bought UKs Adelie Food Group,which supplies quiches,salads,sandwiches and assorted ready-toeat food to retail chains like Starbucks coffee and Sainsburys supermarkets,for $350 million from PE firm Duke Street Capital.The transaction,the largest overseas acquisition by an India-focussed company in the food and beverages segment since Tata Tea bought vitamin water maker Glaceau in 2006,will enable India Hospitality Corp (IHC) 
to spread its wings internationally.IHC had made a failed attempt to acquire Londons famous noodle chain company Wagamama two years ago.The deal will also make IHC Indias largest food services company and help strengthen its presence in the rapidly growing out-of-home food market in the country.The company is a supplier to Cafe Coffee Day and Costa Coffee,and plans to expand this business aggressively.We have signed the deal.The acquisition makes us Indias largest food services company.We will make packaged food readily available for Indian consumers to buy from supermarkets and even from some mom-and-pop stores, said IHC Chairman Ravi Deol.Deol,who was Barista coffee chains first chief executive officer,said a decade ago only the affluent went to coffee shops in India,but now the middle class is willing to pay a premium for ready-to-eat food if it is fresh and packaged neatly.According to Euromonitor,Indians spend $64 billion annually on eating out,which includes $13 billion on eating in quick-service restaurants (QSRs) such as McDonalds and Costa Coffee,propelling the industry to grow at 25-30 % annually.QSRs are reaching a critical mass, said Debashish Mukherjee,partner and head of foods at consulting firm AT Kearney.


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CLASS CAPACITY HAS RISEN BY 54% 
IIM Fee Trebles in 5 Years 

SREERADHA D BASU KOLKATA 

The cost of the priceless MBA degree from Indian Institutes of Management has more than trebled in the past five years,after yet another round of fee hikes this year.From.5 lakh or less for the class of 2009,fees at the IIMs in Ahmedabad,Calcutta and Bangalore have risen to.13.5-15.5 lakh for the class of 2014,according to data collected from top B-schools.Students signing up this year face a 7% increase in fees at IIM-Ahmedabad and a 15% increase at IIM-Bangalore.Other institutes such as IIFT and XIM-Bhubaneswar have also raised fees by 15-16 %.IIMs have increased class capacity by 54% after the HRD ministry directed them in 2008 to implement 27% reservation for other backward castes (OBCs).The cost of infrastructure has been one of the major reasons for the fee hike since the OBC quota implementation meant that student numbers were increasing dramatically, said Pankaj Chandra,director,IIM-Bangalore.


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New Facilities to be Set Up 

We need to set up new facilities and provide better resources to enhance the quality of education, said Pankaj Chandra,director,IIM-Bangalore.Different IIMs rolled out the 54% increase in seats over three years in different ways.For instance,IIM-Ahmedabad increased the number of seats from 250 to 385 over the three-year period.Though the increase was spread out,B-schools have had to expand existing infrastructure,including classrooms,hostels and other facilities.If we dont increase fees we might be able to meet our operational expenses,but it wont be enough for capex, said Ashok Banerjee,dean (new initiatives & external relations ),IIM-Calcutta.Added Chandra: For institutes not funded by the government,it is natural to increase fees.But we are very conscious that we dont want to increase until its necessary. IIMs in Lucknow,Rohtak,Ranchi and Kozhikode and ISB Hyderabad have not increased fees this year.Some B-schools have waiver schemes for financially weak students.At IIM-A,for instance,around 25% of the students in the first year (class of 2013) have received some form of fee waiver this year.At IIM-Calcutta,22% of the students have received waiver.Conversely,this increases the bill for those who are able to pay.



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Direct Tax Mop-up Misses 5L-cr Target 

Total collection as on April 11 was below.4.95 lakh cr 

M PADMAKSHAN MUMBAI 

The government has fallen short of its direct tax collection target of.5 lakh crore for FY12 even after revising the projections thrice as the economic slowdown impacted companies which reported a marginal increase in profits in the fourth quarter of the last fiscal.All India tax collection,as on April 11,was below.4.95 lakh crore,according to figures available with the income tax department,senior officials said.The revenue department had revised the target twice last fiscal,revising it upwards from the original target of.5.32 lakh crore to.5.80 lakh crore during the course of the year,only to rework it to.5 lakh crore towards close of FY12.The original target of.5.32 lakh crore was nearly 19% higher than the collection of.4.48 lakh crore in FY11.Initially,the government had pegged the target high hoping to keep the fiscal deficit at below 5% of the gross domestic product (GDP) in 2011-12.The government has projected a fiscal deficit of 5.1% in 2011-12.The chairman of Central Board of Direct Tax (CBDT) was not available for comment as he was travelling abroad.The chief commissioner of income tax department,Mumbai,MP Singh declined to comment on the shortfall.I cannot give a reason for the shortfall, he said.However,senior officers of the income tax department are of the view that the government should be reasonable in fixing the target,since tax collection is linked to the state of the economy and the growth in national income.Knowing that the odds were against it,the CBDT had issued a veiled warning to its chief commissioners saying that their transfers and promotions would be linked to tax collections in their respective jurisdictions.But that has not worked.Taking into account the tax collected by April 11 and measuring it against the revised target of.5.80 lakh crore midway through 2011,the shortfall in collections is a whopping.85,000 cr.Last time,there was a substantial shortfall in 2008-09 when the economy was impacted because of the global financial crisis.In 2008,the shortfall was.60,000 crore when the target was nearly.4 lakh crore.m.padmakshan@timesgroup.com


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Insurers 14_04_2012_007_003



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SBI 13_04_2012_004_022



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20 Big Private Cos Lose $36b in Tough FY12 

AV BIRLA,BAJAJ & HERO GROUP GAIN THE MOST 

RANJIT SHINDE & RAJESH NAIDU ET INTELLIGENCE GROUP 

Investors in companies run by Kumar Mangalam Birla,Rajiv Bajaj and the Munjals ended up richer last fiscal year as these shares outperformed the Sensex while those with shares in firms run by Gautam Adani and the Ambani brothers lagged behind.The Adani Group,which runs utilities and ports,and the Ambani brothers top the list of 20 private sector business groups that lost $36 billion,or.1,81,132 crore,in market cap last fiscal as faltering economic growth and high input and interest costs ate into profits.An ETIG analysis shows three out of five promoters among the top 20 company owners by market capitalisation reported an erosion in market value at the end of March 2012,as the markets slumped over 10%.Besides,56 of the top 100 companies based on market capitalisation failed to earn any return during the year.The fall was the first in three years.The samples market cap had fallen by $135 billion (.6,90,623 crore) in FY09.Among the top 20 promoters who figured in the analysis,the performance of the Adani Group was the worst,with a 41.5% fall.


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LIC,PSU Retirement Funds may have to Bail Out Air India 

May be forced to subscribe to Air Indias.7,400-cr NCDs,which are likely to carry a low interest rate 

SUGATA GHOSH & MANISHA SINGHAL MUMBAI 


Life Insurance Corporation (LIC) and retirement funds of state-run banks and public sector organisations will have to step in with cheque books for Air India if the government dictates the price at which the flag carrier sells bonds.In the next few months,Air India will float.7,400-crore non-convertible debentures (NCD) backed by sovereign guarantee.Top sources told ET that the government,which may have to eventually shoulder the interest burden,has indicated that the bond interest should be fixed as low as possible.For all guaranteed offerings,issuers have to take the governments approval on pricing.Saddled with debts,the government often insists on interest rates that are well below what private sector investors demand.And,when the finance ministry digs its heels in on bond pricing,governmentrun institutions are left to bail out an issue.This happened recently when Damodar Valley Corporation (DVC) a company with better fundamentals and credit rating than Air India made a.4,400-crore guaranteed bond issue that offered investors a return of 60 basis points over the yield on government securities of similar maturity.LIC invested.3,000 crore,a provident fund of a large state-run bank had put in.1,000 crore and the balance.400 crore came from private sector investors who found the return unattractive but later bought the bonds after LIC entered.Chances are there may be a repeat when Air India steps out to borrow as the government wants the airline to fix a spread thats similar to or even lower than what DVC offered.According to a senior Air India official,The spread that we are targetting is 25-50 basis points (bps) above the government bond yield. Bankers and bond market intermediaries said such a rate could be too low to attract investors.They think a realistic spread for Air India bonds will be 80 bps.At 50 bps or even 60,not many banks and institutions will bid.Several banks,with credit outstanding to Air India,will hit exposure limits.Besides,such investments are exposed to mark-to-market risks, said a bond trader.He said there was a distinct feeling in the market that the government,which capped the spread at 60 bps for DVC,had nudged LIC to buy the DVC issue.While LIC has enough cash and may be genuinely interested in government-guaranteed bonds,I dont think it was happy with the 60-bps spread offered by DVC, said the person.But,interestingly,these are issues where LIC ends up being the market maker : Other investors buy the paper once LIC purchases most of it.But,in a way,this is rigging the market.You are not allowing market forces to determine the price.If the pricing is artificial,then LIC and state institutions have to do for Air India what they did for ONGC, said a bank treasurer.Air India is understood to be in talks with the government for a slightly higher spread.It is not decided as yet what the final spread will be.We are also watching whether the Reserve Bank of India cuts rates and improves liquidity by cutting interest rates and banks cash reserve ratio.But,yes,we are also asking the government for a spread that is similar to the DVC issue, said the airline official.He is hopeful that there will not be a DVC-like situation because Air Indias NCDs will be highly saleable with the principal and interest both guaranteed by the government.But,while the expected monetary policy actions from RBI may soften interest rates in the system,they are unlikely to squeeze the spreads.Last August,Air India had sold bonds at a spread of 30 basis points over triple-A PSU papers,which works out to 100 bps over the government bond yield.The market perceives certain instruments like state government papers and oil bonds,which are technically not guaranteed by the Centre,as more powerful instruments than guaranteed papers like DVC or Air India.There is a demand for oil bonds from provident funds as these bonds are categorised as government securities while state loans qualify for statutory liquidity ratio (SLR) banks.Also,banks do not book mark-to-market losses on state-loan papers as these securities are held in the held to maturity basket of their bond portfolios.As a result,these papers command lower spreads than Air India or DVC bonds.

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State Drops Criminal Prosecution Provision against Realtors in New Bill 

Consumer organisations say all 56 clauses in new bill favour developers and are in contradiction to Centres bill 

KAILASH BABAR & MAULIK VYAS MUMBAI 


Maharashtra governments proposed housing regulatory bill has dropped the provision of criminal prosecution against developers who violate provisions of the law,inviting the wrath of consumer bodies.This,ironically comes at a time when a central housing regulatory law,which is in the works,is proposing imprisonment of errant builders.The states efforts to set up a regulator through the proposed Maharashtra Housing (Regulation and Development) Act,2011,is also being opposed by builders,who feel that unnecessary and excessive interference may lead to more corruption.The proposed bill has also introduced the concept of independent area,which may allow developers to sell even the open area or parking lots.There are 56 clauses in this proposed bill.All of these favour developers and are in contradiction of the central governments draft bill, said Ramesh Prabhu,chairman of Maharashtra Societies Welfare Association.Under the proposed act,if the developer fails to deliver on his promise as per the agreement,he can be fined up to.50 lakh,while the maximum fine can run up to.1 crore for non-compliance.The central governments draft bill has a provision for jail term for the developer in case of non-compliance while the Maharashtra Bill has not included this provision and instead has limited the penalty to a fine ranging from.1,000 to.1 crore,said Prabhu,adding the penalty is negligible in the backdrop of revenue potential of realty projects.The proposed Maharashtra Housing Regulation Act is in line with Real Estate Regulatory Agency (RERA) of Dubai, says Hitesh Jain,senior partner,ALMT Legal.However,developers should get single window clearance like RERA and consumers should be also protected accordingly.The proposed act should also have clarity on clearances.Otherwise,this will only be old wine in a new bottle, he added.Maharashtra may become one the first state in the country to establish a housing regulatory act after it tabled the proposed bill in the state assembly earlier this week.The bill proposes to revoke the existing Maharashtra Ownership Flats Act,1963 (MOFA),and set up an authority and an appellate tribunal for efficient implementation of the proposed act.This comes three months after the Union Ministry of Housing and Urban Poverty Alleviation released its Model Real Estate (Regulation & Development) Bill,2011.This has been drafted to serve as a prototype for enforcing such a law aimed at protecting consumers interests and its not mandatory for state governments to follow all the clauses in this.However,consumer bodies are voicing their concerns over dropping major clauses that could protect consumers interest efficiently.The central government,in its draft bill,had proposed that 70% of the amount collected from flat owners be kept in a separate escrow account.This provision has been completely ignored by the state government,said Prabhu.Instead of making laws more ambiguous,there should be a system where the developer should deposit certain amount in an escrow account with the state government for a particular project, says Huzefa Nasikwala,founder partner of Nasikwala Law Office.If a project gets delayed beyond the pre-decided schedule,consumers can take their money back by filling a single form,from that account.This move will empower consumers and developers will be compelled to finish their projects on time, he added.Consumer bodies are also raising the issue of introduction of the concept of independent area,restricted common area and utility area in the state governments proposed housing bill.According to them,developers will start designating the open areas or free of floor space index areas as independent area,car parking area and utility area and start selling these too.This is contradictory and against the consumers interest as existing MOFA prescribes the sale of only carpet area and no common areas.Its not just the consumers,but developers are also opposing the provisions in the proposed bill.The bill,once it becomes an act,has the potential of bringing in corrupt practices and unnecessary interference in real estate business,said Lalit Kumar Jain,National President of Confederation of Real Estate DevelopersAssociations of India (CREDAI ).


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BANKS DEFAULTED ON TWO OCCASIONS 
Pensioner wins fight for delayed dues 

Indifference Of Bankers Highlighted 

Karthika Gopalakrishnan TNN 

Chennai: Highlighting the plight of pensioners denied dues because of the indifference of bank officials,S S Radhakrishnan,64,has won a favourable order from the District Consumer Disputes Redressal Forum.
A bench of V Gopal,president,and L Deenadayalan,member,has ordered Indian Overseas Bank (IOB) to pay interest at the rate applicable to credit card loans (of 24%) on the enhanced pension amount which was belatedly paid and a compensation of 10,000.
In his complaint,Radhakrishnan of Besant Nagar said his pension was credited to the account he held with an IOB branch in his locality.His pension was revised from 6,021 to 13,609 with effect from January 1,2006 as per a resolution of the Union government.
A subsequent memorandum from the department said 40% of the arrears would have to be paid by September 30,2008 while the remaining would be done in 2009-10.However,Radhakrishnan said the arrears of 30,761 were credited after a delay of 14 days on October 14,2008 instead.Though the Union government had issued a similar memorandum that the second installment of arrears be credited before November 30,2008,this was done only in May 2009 after a delay of 152 days.The amount due in this case was 1,05,342.Finding strength in Radhakrishnans contentions,the bench ruled that the delay in crediting the revised pension arrears amounted to deficiency in service.
Allowing the complaint,the bench directed bank authorities to pay interest at the rate applicable to credit card loans for 30,761 from October 1 to October 14,2008 and also for 1,05,342 from December 1,2008 to May 2,2009.The bench also directed that Radhakrishnan be paid 10,000 as compensation for mental agony and 3,000 as cost of the complaint.
I have got my money.There are officials from several banks who are not doing their job even now.Retired people may not know they are not getting their rightful dues because to the indifference of bank staff.Lakhs of pensioners might benefit from this judgment, Radhakrishnan said.karthika.gopalakrishnan@timesgroup.com



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  • 16 Apr 2012
  • Hindustan Times (Delhi)
  • Sachin Kumar sachin.kumar1@hindustantimes.com

Small is now big as bank branches go the Nano way...

MUMBAI: After auto and IT, the banking industry is now going small.

Private sector major Bank of Baroda recently rolled out nano branches — a rent-free model where just two people will provide basic banking facilities in remote areas.

The bank has already launched around 1,700 such branches in Gujarat, Rajasthan and UP and plans to set up another 1,000 in the current fiscal year.

“These ultra-small branches are play crucial role in instilling trust in the people in the unbanked areas because they will see a permanent physical structure having the bank’s name,” said Kishor Kharat, general manager, Bank of Baroda.

Bank will not have to spend on the rental of the branch areas as the space (of around 100-200 square feet) will be provided free of cost by the Gram Panchayat or the local community centre.

According to the estimates, while the per transaction cost for banks normally comes around R40- 60, it is very low in the case of nano branches.

These small branches are linked to the nearest big branch and function once in a week. A business correspondent and an employee (the manager or senior manager) of from the nearest branch will visit the branch.

“The officer will clear the loan approval and will also provide advisory services to customers,” said Kharat. “Basic banking facilities such as withdrawal and deposit, balance enquiry, statement of account will be provided from these branches.”

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The branches will have a point-of-sale machine, passbook printer and laptop to carry out necessary banking services.



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  • 16 Apr 2012
  • Hindustan Times (Delhi)
  • Rachit Vats rachit.vats@hindustantimes.com

No plain milk: Amul to take legal action over Cadbury’s ad

MUMBAI: Is plain milk not enough? The question has become a bone of contention between dairy major Amul and confectionery giant Cadbury, owned by Kraft Foods. Amul will be taking the legal route against Cadbury for promoting its flagship health drink Bournvita in a misguided way. Amul claims Cadbury’s campaign saying milk alone is not nutritious puts the entire dairy industry in a poor light and misguides consumers.

getimage.aspx?regionguid=5e6fafd3-9ce0-41e3-94e1-679a5188ae7a&scale=340&file=10872012041600000000001001&regionKey=RWDS2V8Lo5%2bk%2fYGumr342Q%3d%3dThe Cadbury campaign advises consumers to mix supplements such as Bournvita to raise Vitamin D levels.

“Milk is the best source of vitamins and has enough nutrition,” said RS Sodhi, managing director, GCMMF (Gujarat Cooperative Milk Marketing Federation Ltd). “Cadbury has tried to degrade milk’s virtues and is misguiding consumers to promote its own supplement.”

“For centuries people have consumed milk and derived its nutrition without any external supplement and to say that the quality of milk is degrading is misguiding consumers. Not just Amul but the entire dairy industry is against this kind of promotion. We’ll take suitable legal action against the company,” said Sodhi.

A while ago Cadbury started a promotional campaign for Bournvita citing that milk alone is not nutritious. To derive calcium from milk, one needs to use a supplement such as Bournvita. The campaign suggests that in recent years the quality of milk has gone down and advises consumers to mix supplements such as Bournvita to raise levels of Vitamin D, which further helps absorb calcium from milk!

“We have not received any legal notice and therefore we cannot respond to specific claims,” said a Cadbury spokesperson. “Vitamin D deficiency is a growing concern among a large proportion of children today because of changing lifestyles and inadequate exposure to sunlight. Vitamin D aids calcium absorption from milk. Bournvita contains Vitamin D which enhances the calcium absorption of milk and thus multiplies its benefits.”



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Default Rate Goes up to 3.4% 

They did not respond to ETs email queries.Over 90% of these borrowers have ratings in BB (double B ) or below categories;most of them have borrowed money from banks, said Pawan Agrawal,director,Crisil Ratings.According to Crisil findings,default rate the ratio between the number of companies that defaulted to the total number of companies under the agencys surveillance has gone up to 3.4% in 2011-12 to 2.9% in 2010-11.Low profitability,declining demand and weak liquidity conditions are triggering defaults,said Agrawal.Access to funding and higher borrowing costs are turning out to be a challenge for companies.In terms of credit quality outlook,we expect downgrades to continue to outnumber upgrades for some more quarters, he said.Companies with large debt are finding it difficult to honour their financial commitments,merchant bankers said.Those with substantial debt are hurt by increased interest costs and marked-to-market losses reported on foreign currency debt and derivatives due to rupee depreciation.This has resulted in a significant drop in net margins of most companies since September 2011.According to equity analysts,sectors like textiles,real estate,steel,automobile,construction & engineering and infrastructure will continue to face margin pressure in the upcoming quarters.



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Piramals Acquire Bayers Molecular Imaging Business 

Company says market potential for such services is $1.5 billion 

OUR BUREAU MUMBAI 

Piramal Imaging,a 100% subsidiary of Mumbai-based Piramal Healthcare,has acquired the research and development portfolio of molecular imaging from Germanys Bayer Pharma,asserting its seriousness in the intellectual property side of pharma.Piramal did not reveal the size of the deal,but said the market potential for such services is close to $1.5 billion.We had said earlier we will change the idea of our pharma business.We will be moving away from branded generics to intellectual property, said Ajay Piramal,chairman,Piramal Enterprises.The deal will enable the company to acquire Florbetaben,one of the molecules used to detect Alzheimers disease.Piramal will now have the patent,marketing and distribution rights for Florbetaben,which is in the last phase of its clinical trial.The company is likely to file for approval from the US Food and Drug Administration by October-December to sell the molecule in the US market.In 2010,when Piramal Healthcare had sold its branded generics business to Abbott for.17,000 crore,the market was taken aback.Analysts questioned the future of the company and its commitment in the pharma business.But,with this investment and the European approval of its knee pain drug Cargel last week,Piramal seems to be sending the message across to the market that it has not exited the pharma business and that it has reiterated that its future lies in intellectual property.Globally,new product approvals are coming down.The Big Pharma are focusing on personalised products, said Ajay Piramal.The concept of molecular imaging comes under the personalised medicine segment,which is a method that targets specific diseases among patients.According to the company,this acquired business has a strong pipeline,which is in the early stage of development in cardiovascular and oncology areas.However,the company did not disclose how it plans to commercialise the molecule.Apart from the US,it will apply for marketing approvals in Japan and Europe.On Monday,Piramal Healthcare shares closed at.443 on BSE,down 1% from previous close.


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IFFCO Says it may Have to Shut Down UP Operations 

Co faces jump in outgo after RIL decided to pass on hike in VAT 

SHUCHI SRIVASTAVA MUMBAI 


Indian Farmer Fertiliser Cooperative (IFFCO),a major fertiliser supplier,fears it will be forced to shut operations in Uttar Pradesh as Reliance Industries (RIL) agreed to pay under protest a disputed tax levied by the state on natural gas,and pass on the burden to customers.From.2 crore a month,our overall payments have now increased to.21 crore,as instead of the regular 10% VAT rate,we are paying the penal rate of 26%.At this rate,we will have to close down since we cannot afford this, a senior IFFCO official told ET.The UP government had levied VAT on Reliances gas from April 2009.RIL secured a stay order against the state levy from the High Court.But subsequently,when the state approached the Supreme Court,the company told the apex court in January this year that it will start paying VAT from February 1,2012,and pass on the burden to consumers.The company still opposes the tax and will seek a full refund if it wins the case,sources close to RIL said.RIL has argued that it was already paying central state tax on the gas produced in the D6 block off the Andhra Pradesh coast RIL supplies gas to four fertiliser companies in the state IFFCOs Aonla and Phulpur units,Kribhcos Shahjahanpur plant,Indo Gulf Fertilisers Jagdishpur unit and Tata Chemicals unit at Babrala.The IFFCO official said that RILs move was surprising as the company itself had challenged the tax.We cannot understand RILs about-turn on the issue and it is volunteering to pay VAT,especially when earlier it had filed a writ petition in the Allahabad High Court resisting imposition of tax,we were also party to the same petition and RIL took this step without informing or consulting us, added the official.RIL declined comment,but a source close to the company said it had not changed its position on the tax.The company cannot go on bearing the contingent liabilities on our books as the overall outstanding amount will go on increasing,and we are only the collectors as the end-sellers have to make the final VAT payments.The company has written to the state that it is paying this amount under protest and will claim a full refund incase the high court rules in its favor, the source said.RIL could have decided on this course of action to avoid showing any contingent liability on its books, added the IFFCO official.This entire issue is extremely unfair as in no other state,customers are forced to pay both central sales tax and VAT on the supply of gas,it is completely unconstitutional since it amounts to double taxation,it is difficult to comprehend RILs stance, another senior IFFCO executive told ET.RIL did not respond to an email sent by ET.The SC has asked the Allahabad HC to decide on the plea against the VAT demand made by the state government within three months.We are hoping that the high court will rule in our favour or else we will find it very difficult to sustain ourselves, the official added.RIL,on the other hand,had submitted in the SC that the UP governments levy amounted to double taxation as it was already paying central sales tax.Indo Gulf Fertlisers refused to comment while Tata Chemical and Kribhco were unavailable for comment.

Tax Burden 


The UP government had levied VAT on Reliances gas from April 2009 RIL secured a stay order against the state levy,but later agreed to pay VAT SC has asked Allahabad HC to decide on the plea against the VAT demand by the UP government



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Current A/c Deficit Threat to Indias Stability 

Gold demand,crude oil prices and decelerating growth in emerging economies likely to hit Indias trade balance 

OUR BUREAU MUMBAI 

The Reserve Bank of India has warned that Indias financial stability could be impaired if the current account deficit widens to uncontrollable levels.The overall balance of payments,which measures the net import of goods and services along with net foreign capital inflows,may continue to be under pressure even if capital flows trend higher in the near term.Going forward,the CAD (current account deficit) may still remain under pressure if import of oil and gold does not significantly moderate.Robust gold demand and continuing high crude oil prices,along with decelerating growth in emerging and developing economies,or EDEs,may adversely affect Indias trade balance, the Reserve Banks latest report quarterly report on the state of the economy said.A cautious approach with regard to trade and capital accounts is,therefore,required. The CAD is at 4.3% of GDP in Q3 of 2011-12,reckoned to be the highest since the balance of payments crisis of 1991.The RBI has said even though debt inflows provide a means for financing the CAD,they have implications for Indias external debt position and,consequently,for financial stability.Major external sector vulnerability indicators worsened in Q3 of 2011-12.The reserve cover of imports,the ratio of short-term debt to total external debt,the ratio of foreign exchange reserves to total debt,and the debt service ratio deteriorated during the quarter,the report said.RBI governor D Subbarao,speaking at a panel discussion in Delhi recently,said the situation was not as alarming as in 1991.That is quite disturbing picture.Nevertheless,I would still argue that in 1991,an implosion was imminent.In 2012,an implosion is not imminent, he said.With significant risks ahead,the RBI has called for caution in external sector policies and aggregate demand management so that CAD does not widen further and the external account parameters remain at prudent levels.Steps need to be taken to facilitate a complete passthrough of international commodity prices,especially by raising domestic prices of petroleum products,curb the demand for precious metals and accelerate reforms to attract FDI,the report has said.


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FIRST STEP TO INTERNATIONAL ARBITRATION 
Vodafone Hands Notice to Govt on Tax Proposal 

British telecom giant cites investment treaty between India and the Netherlands 

OUR BUREAU NEW DELHI 

TheVodafoneG roup hasserved a dispute notice on the Centre,the first step before it begins international arbitration proceedings under the India-Netherlands bilateral investment treaty against the governments controversial move to tax the companys acquisition of Hutchison Essar in 2007.This is the first formal action initiated by the worlds largest mobile operator since the government included a proposal in last months budget to tax overseas transactions involving sale of Indian assets on a retrospectivebasis.The proposalhas sparked off an international uproar with the UKs Chancellor of Exchequer George Osborne raising the issue with Finance Minister Pranab Mukherjee,andleading tradebodies representing more than 250,000 companies across the US,Europe and Asia warning that foreign investment flows into the country could be impacted.The UK-headquartered Vodafone on Tuesday said it had served the notice of dispute on Prime Minister Manmohan Singh,who had in a letter to Gordon Brown in February 2010 assured the then UK prime minister that the company wouldhavefull protection ofthe law in India and there would be no retrospective application of taxation.ET had in its edition dated March 30 reported that Vodafone planned to invoke the bilateral investment pact between India and the Netherlands,as its investments in the country have been done through its Dutch subsidiary.Vodafone,which faces the daunting prospect of paying around.20,000 crore in tax and penalties,said the proposal to retrospectively bring deals such as its 2007 purchase of Hutchisons assets in India into the tax net violated internationallegal protections granted to it and other international investors.

Notice Factsheet 




What is the notice 


It is the first step towards starting international investment treaty arbitration under the Bilateral Investment Treaty between India and the Netherlands 

Who has the notice been served on 


The notice has been delivered to the prime minister and ministers of finance,law & justice and telecommunications 

What happens now 


The notice requests the government to abandon the retrospective aspects of the proposed legislation.It says Vodafone would be happy to meet with the government to explain its position and prefer to reach an amicable solution 

What if govt refuses to meet with Vodafone or amend legislation 


The British telecom giant will commence investment treaty arbitration against the government



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No Big Hikes,Bonus for MF Staff this Year 

Some fund houses pushing for paycuts,downsizing 

SHAILESH MENON MUMBAI 

Four CEO exits in a month,abysmal pay hikes,ban on bonuses and whispers of downsizing the Indian mutual fund industry is going through one of its roughest patches in a decade.Fund house managements are taking a hard look at slow AUM (asset under management ) growth,scheme underperformance,low profits and rising costs.Boards of trustees of several MFs are pushing for paycuts,skipping bonuses,increasing variable component in salaries and forewarning employees of a possible right-sizing.According to industry sources,which include views from over half-a-dozen domestic fund houses,and a few leading HR consultants,the best and the biggest domestic fund houses are offering just about 9-12 % increments to top performers.Bonus payouts,which are performance-linked,are being kept aslow as 12-20 %of salaries.Theres little to reward employees this year, said the CEO of a banksponsored fund house.March and April are important months for fund companies that follow a two-year lap calendar .Fund houses strive hard to maintain high assetbases and NAVlevels in March as itbecomes a reference pointfor the following year.However,average AUM of the Indian fund industry fell over 2% to.6.64 lakh crore in the March quarter.Asset bases of fund houses like IDBI Mutual,JM Mutual,Kotak Mutual Fund,L&T Mutual and Religare Mutual,among others,dipped 10-35 % during the threemonth period starting January.The sales and marketing departments have not been able to bring in investors;fund managers have also not showcased any extraordinary performance, the person said.

Boards Try to Cut Operational Costs 

A few corporate marketers have managed to bring in money;theyll be given a 25% bonus and small increment, added the person.In the bullish years of 2006 and 2007,even mid-sized fund houses paid bonuses in the range of 40-50 %;increments were in the range of 20-30 % in those years,as per data sourced from various HR consultants.Increments and bonuses in asset management companies have fallen significantly this year.Fund houses have failed to grow their assets or put up good fund performance;its not going to be a very rewarding time for fund professionals, said E Balaji,MD & CEO,Randstad India.Boards of most fund houses are now trying to reduce their operational costs.Many of them are planning to cut flab in their marketing,sales and other support departments.According to Balaji,most fund houses are only resorting to selective replacement hiring to fill up senior-level vacancies.Mutual fund and investment banking have been the worst-hit trades in the financial services industry.We may see a downsizing this year.Cuts may come initially in out-of-flavour verticals like aviation,mining and renewable energy, said R Suresh of Stanton Chase.In the last one year,brokerages made news for sacking employees and folding up bases in smaller towns as trading volumes shrank.The crisis in mutual funds came to the fore with the exit of four CEOs in quick succession.Piyush Surana of Daiwa Asset Management,Arindam Ghosh who headed Mirae Mutual Fund,and Rajan Krishnan of Baroda Pioneer Mutual Fund have resigned in the past three weeks.Sameer Kamdar,who was supposed to head ASK Asset Management,resigned last week after a two-year wait for Sebi approvals.Were not sure whats making them leave... the real reasons could be pressure on performance,cost-cutting or differences in strategies, Balaji of Randstad India said.According to the CEO of a large corporate fund house,FY12 was probably the worst year in the history of funds in India.The industry was hit badly by frequent regulatory changes,volatile equity markets,disinterested distributors and outflow of bank money from debt schemes.We missed all our targets last year, he said.



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Market Report 
ITC is Now Top-weighted Sensex Stock 

ITC is now the most influential stock ahead of RIL,Infy slips to third spot;Sensex Scores 207 points 

OUR BUREAU MUMBAI 

Tobacco-to-hotels major ITC emerged as the most influential stock on the benchmark Sensex on Tuesday,for the first time ever,after it overtook Reliance Industries in terms of weightage.Reliance slipped to second position,while Infosys Technologies dropped to the third spot after the sharp fall in its shares following the companys poor results.On Tuesday,ITCs weightage on the Sensex rose to 9.25% compared to Reliances weightage of 9.23% and Infosys weightage of 7.98%.Sensex weightage,which is measured by the market value of a company's free-float or non-promoter shares that can be freely traded in the market ITC will be able to retain its top position as both Reliance and Infosys are not as fast-moving, said Bharat Shah,head of institutional sales at Ventura Securities.ITC is a widely held stock and is present in the portfolios of most institutional investors.These two stocks are also commanding lower price-earnings multiples these days.Being an FMCG,ITC will be in good demand;this will keep the prices up, he said.ITC shares rose 2.1% to.246.15 on Tuesday,while Reliance Industries ended 0.3% lower at.746.40 amid worries the companys fourth quarter earnings could disappoint.Infosys shares have dived 15% since Friday when the company announced its fourth quarter results.Benchmark indices ended firm in a choppy session on Tuesday after the Reserve Bank of Indias surprised the market with a higherthan-expected cut in repo rate by 50 basis points.The Sensex ended 206.99 or 1.21% higher at 17150.95 while Nifty gained 63.50 or 1.22% to 5289.70.Foreign institutions net bought shares worth.441 crore on Tuesday,while domestic institutions net sold shares worth.213 crore,according to provisional BSE data.Further upside will depend on the Q4 results outcome and the global markets.Spain will be issuing 10 year bond next week,the outcome could influence the short term trend of the market said Mehul Dedhia,associate vice-president Equity at Sharekhan.


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CAPPING EXPOSURE AT 10% 
In Line with IRDA Cap,LIC may Pare Stake in 51 Unlisted Cos 

Regulator not to force LIC to cut stake immediately nor will it set timeframe for exercise 

DHEERAJ TIWARI NEW DELHI 


Life Insurance Corporation of India,the countrys largest insurer,is likely to pare down its holding in unlisted firms to bring it in line with the 10% investment ceiling,a government official said.The official said data available with the government shows that the insurer has exceeded the investment limit in about 78 companies,of which only 27 are listed.It was pointed out to us that LIC has exceeded the investment norm only in state-run banks and public sector companies under government pressure, the official said.But this is not the case.So,if investments have to be pared down,it would have to begin with unlisted companies. Some of the companies where LIC has exposure in excess of 10% include L&T,ITC,JSW Steel,MTNL and Wockhardt.The Insurance Regulatory and Development Authority had in 2008 amended investment norm that prohibit an insurer from having more than 10% stake in a company.But a senior executive at LIC said investments in some of these 78 companies were done before IRDA amended the investment regulation.He said it would be difficult to bring down the investments immediately.We will have to arrive at valuations before reducing our exposure to some of the unlisted companies,which takes time, he said,adding,LIC has already made efforts to cut exposure. In the past four months,the insurer has brought down its holdings in Central Provinces Railways and Empire Industries.IRDA has said it would not force LIC to reduce its stake immediately nor would it set a time frame for the exercise.Rejection of the insurers demand to be allowed to retain stake in excess of 10% does not mean that it has to reduce exposure immediately, the official said,adding,It is for LIC to decide on which companies it wants to bring down its holding. LIC plans to invest about.2.25 lakh crore this fiscal,of which.60,000 crore will be in equities.The finance ministry says it would be incorrect to term all investments made by LIC in staterun firms as loss making.These companies or banks are marquees in their respective areas and their valuations are bound to improve, a finance ministry official said.

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IMF Cuts Indias Growth Forecast for 2012 to 6.9% 

OUR BUREAU NEW DELHI 

The International Monetary Fund (IMF) on Tuesday lowered Indias growth forecast for 2012 to 6.9%,from 7% earlier,citing policy inertia and slower growth in the rest of the world.In some economies,such as India,domestic factors also contributed to the slowdown,as a deterioration in business sentiment weakened investment and policy tightening raised borrowing costs, the IMF said in its latest World Economic Outlook.India is now expected to grow at a slower pace this calendar year than the 7.2% it clocked in 2011.The IMF,however,kept Indias growth forecast for 2013 unchanged at 7.3%.The report said India needs to tighten more on the fiscal policy front as it has little room for maneuverability.A number of economies in emerging Asia have room to make policy more supportive of economic activity (a notable exception is India),given favourable debt dynamics, the IMF said,adding that more tightening than currently projected appears necessary in India.The government recently projected a fiscal deficit of 5.1% of GDP for 2012-13.The report noted that there was need to tackle policy uncertainty and supply bottlenecks in the near term to ensure that potential growth does not decline.Potential growth is the maximal rate of growth a country can achieve without fanning inflationary pressures.The IMF said that further support from monetary authorities is limited as there is little room for further easing due to underlying inflationary pressures.The report outlined that there is an upside risk for global inflation,which in turn would mean lower global growth.It put special emphasis on the ongoing uncertainty with respect to oil exports from Iran that accounts for about a third of global crude oil exports.The oil price shock could also trigger a reassessment of the sustainability of credit booms and potential growth in emerging Asia,leading to hard landings in these economies, the report said.The IMF called for better fiscal management in advanced countries,which would help sustain demand and also lead them on to a path of sustained fiscal consolidation.Noting that problems within the Euro zone have partly affected Asias growth prospects,the report said that credit from the Euro zone has been curtailed while exports have also diminished.Consequently,Indias external balance is expected to deteriorate in the current year.The current account deficit is expected to increase to 3.2% in 2012,from 2.8% in 2011.The IMF said that addressing infrastructure bottlenecks and enhancing governance and public service delivery could help India kick-start private investments,which is necessary for strengthening domestic demand.It said managing volatile capital flows and spillover effects from the global economy are the main challenges for the emerging economies.Global growth estimates have been revised upwards from 3.3% to 3.5% for 2012 as growth is expected to rebound in the second half of 2012 with the Euro Zone emerging from a recession.The IMF also revised Chinas growth forecast for 2012 up by 0.1% to 8.2%.


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Argentina Seizes 51% of Oil Producer YPF 

Country moves to secure vital resource;Spain threatens economic retaliation 

AGENCIES RIO DE JANEIRO 


Argentine President Cristina Fernandez unveiled plans on Monday to seize control of leading energy company YPF,drawing swift warnings from key trade partners and risking the countrys further economic isolation.YPF,controlled by Spains Repsol,has been under intense pressure from Fernandezs center-left government to boost production,and its share price has plunged due to months of speculation about a state takeover.Until recently,YPF had a harmonious relationship with Fernandez,whose increasingly interventionist and off-beat policies infuriate critics.She praised YPF when it found massive resources of shale oil and natural gas in late 2010.However,a surging fuel import bill has pushed a widening energy shortfall to the top of her agenda at a time of worsening state finances in Latin Americas No.3 economy.Fernandez named planning minister Julio De Vido to head the oil company with immediate effect and said the government would ask Congress,which she controls,to approve a bill to expropriate a controlling 51% stake in the company by seizing shares held exclusively by Repsol,saying energy was a vital resource. 

REPSOL TO SEEK ARBITRATION 


Spanish oil giant Repsol vowed on Tuesday to fight for at least $10 billion in compensation for Argentinas decision to expropriate its subsidiary YPF.Repsol executive chairman Antonio Brufau said the company would base compensation claims against Argentina for its takeover of its YPF unit on a minimum value of the YPF of $18 billion.Argentinian presidents decision to nationalise the firm infuriated Repsol and the Spanish government,and provoked deep concern in the European Union.These acts will not remain unpunished, said Brufau,whose companys shares plummeted more than 7% on the Madrid stock market on Tuesday.He said the group would seek international arbitration over Argentinas decision to take over 51% of YPF,in which Repsol has a 57.4% stake.Repsol will launch all legal actions that are within its reach, Brufau promised,saying he had a wide range of options including constitutional,commercial and civil actions.

SPAIN WARNS ARGENTINA 


An incensed Spain threatened swift economic retaliation against Argentina on Tuesday.Madrid called in the Argentine ambassador in a rapidly escalating row over the nationalisation order by Argentinas populist and increasingly assertive president.Promising action in the coming days,Spanish industry minister Jose Manuel Soria said: With this attitude,this hostility from the Argentine authorities,there will be consequences that well see over the next few days.They will be in the diplomatic field,the industrial field,and on energy. Repsol described Argentinas move as clearly unlawful and seriously discriminatory.This battle is not over, Repsols Brufau said on Tuesday.The expropriation is nothing more than a way of covering over the social and economic crisis facing Argentina right now. But Fernandez dismissed the risk of reprisals.This president isnt going to respond to any threats ... because I represent the Argentine people.Im the head of state,not a thug, she said.European Commission president Jose Manuel Barroso said he expected Argentina to uphold international agreements on business protection with Spain.I am seriously disappointed about Mondays announcement, he said in Brussels.Spain will decide specific measures against Argentinas decision at Fridays Cabinet meeting,its foreign minister said on Tuesday.Spains Prime Minister Mariano Rajoy is currently in Mexico for the World Economic Forum.Spain promised clear and strong action against Argentina for its nationalisation of YPF,but other companies and countries have found it difficult to exert concrete pressure on Argentina on similar matters.The most effective sanction in this world ... is the loss of global investor confidence, foreign minister Jose Manual Garcia-Margallo said at an event on Tuesday.Argentina has shot itself in the foot, he said.


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With this attitude,this hostility from the Argentine authorities,there will be consequences that well see over the next few days.They will be in the diplomatic field,the industrial field,and on energy 

JOSE MANUEL SORIA Spanish industry minister 



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India Pips Japan in Purchasing Power Parity 

New Delhis share in world GDP at 5.65% in 2011 

DEVIKA BANERJI & RISHI SHAH NEW DELHI 


Its economy may be in the grips of a slowdown,its polity paralysed and markets morose,but all this hasnt prevented India from overtaking Japan to become the worlds third-largest economy in purchasing power terms.Data just released by the International Monetary Fund (IMF) shows that Indias gross domestic product in purchasing power parity (PPP) terms stood at $4.46 trillion in 2011,marginally higher than Japans $4.44 trillion,making it the third-biggest economy after the United States and China.Indias share in world GDP in terms of PPP,a measure of relative consumer prices across countries,stood at 5.65% in 2011 against Japans 5.63%,with the gap expected to widen significantly by 2017.In five years,the IMF estimates the share of Indias GDP in PPP terms would grow to 8.09% compared with 4.8% for Japan.Economists said Indias move up the league table was a reminder of the boundless potential the country offered,despite the prevailing mood of pessimism.


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Indias Tremendous Potential 

This basically turns the spotlight back on the tremendous opportunity Indias growth story has even under the given conditionsIf India plays its cards correctly through policy measures we can actually achieve much more in the next 5-10 years, said Saugata Bhattacharya,chief economist with Axis Bank.Added Samiran Chakraborty,chief economist with Standard Chartered India: This shows that India is no longer an emerging economy.It has already emerged.But beyond that there are not many conclusions one can take from the data. The PPP system allows GDP comparisons to be made by asking how much money would be needed to purchase the same goods and services in two countries and using that to calculate an implicit foreign exchange rate.Under this method,a dollar should be able to buy the same amount of goods anywhere in the world and exchange rates should adjust accordingly.It also strips away distortions that come with market exchange rates,which are often volatile,affected by political and financial factors that do not lead to immediate changes in income and tend to understate the standard of living in poor countries.The Economist magazines proprietary Big Mac Index,which takes the price of a McDonald burger across 120 countries to calculate the real price of their currencies,is another crude way to measure PPP.India was included in the index recently.It showed that the Indian rupee was undervalued by 62% against the US dollar in January.PPP methods help adjust income to prices for a meaningful comparison on quality of life in countries with widely different prices and incomes.The PPP comparison is more useful while comparing the standards of living between countries, said Ulrich Bartsch,a senior macroeconomist in the World Banks India office,adding that while the per capita GDP in PPP terms shows that India still has some distance to go to reach Japanese levels,the difference is less than the comparison of per capita GDP in nominal dollar terms would indicate.India,according to the IMFs calculations,was able to overtake Japan in 2011 because its economy grew 7.24% whereas in the case of Japan,it shrank 0.75%,hit by a tsunami that ravaged the country and exacerbated the adverse impact of global economic slowdown.While India may have beaten Japan under this particular system of calculation,under more conventional methods of measurement,it has to travel a long distance to catch up.Under the regular method of GDP calculation,Indias economy is well behind Japan.Even assuming an average economic growth rate of 7.5% over the next five years,the Indian economy will be only $2.9 trillion compared with Japans $6.69 trillion.For the fiscal year to end-March 2013,official forecasts are for GDP growth of around 7%,slightly higher than the 6.9% expected in the previous year and much lower than 8.4% the year before.Economists reckon that India will continue to lag behind when it comes to matching living standards of its population with more developed western and Asian economies.Yet,with its demographic advantage and prospects of sustainable high growth over the next five years,the country is expected to consistently improve its global economic standing.



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Now,Software MNCs Protest Tax Law Tweak 

Hire top US law firm to lobby with PM,warn of a cut in India investments 

LISON JOSEPH BANGALORE 

The worlds top software companies have enlisted Americas biggest law firm to lobby with Prime Minister Manmohan Singh against software tax changes proposed in the Union Budget.Baker & McKenzie,writing on behalf of the Software Coalition group,which includes Microsoft,Oracle and Adobe,warned that if the tax changes are implemented,software companies could reconsider the amount they are willing to invest in India.To impose new rules with retroactive effect to 1976 under the guise that they are clarifications violates fundamental notions of fairness, the law firms partner,Gary D Sprague,wrote in an April 10 letter also marked to Finance Minister Pranab Mukherjee,Law Minister Salman Khurshid and Commerce Minister Anand Sharma.The global software industry is the latest to join in the chorus of protests against the numerous retroactive amendments proposed in Budget 2012.On Tuesday,the UKs Vodafone Group told the government it intends to start arbitration proceedings against a proposal to use retrospective amendments to tax its acquisition of Hutchison Essar in 2007.In recent weeks,several global trade bodies have also cautioned the government against retroactive amendments to tax laws saying such astep could affect investments in India.The hiring of a legal firm by the Software Coalition to write to the PM does not necessarily mean a threat of litigation,said Somasekar Sundaresan,a partner at corporate law firm J Sagar Associates.In the US,it is not unusual for affiliates of legal firms to undertake lobbying efforts on behalf of clients. In fiscal 2012 alone,.18,000 crore worth of software products were sold in India,according to data from Indias software services industry body Nasscom.Experts say it is hard to even estimate additional liability on account of the new retrospective changes.


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