Impact 
In an attempt to raise revenues and step-up fiscal prudence to avoid further damage to the long term ratings of India, the Government has proposed penal provisions for inaccurate, thereby ensuring that corrective returns are filed from July 1, 2012. This exercise will thus help the Government to raise revenues, as TDS accounts for close to 40% of the total direct taxes.
Income Tax Joint Commissioner - Mr. A.K. Dey said, "From July 1, Government may impose penalty of Rs 10,000 and Rs 1,00,000 for inaccurate TDS returns and also for corrective filings after proposed amendments in the Finance Bill is cleared."
It is noteworthy that, at present there are no penal provisions for mistakes in both first and corrective TDS filings if wrong details had been provided. However, penal provisions are already introduced for late filing of returns. The tax department believes quantum of wrong inputs is large and most of them are not cases of unwilling mistakes.
In our view, the Government is right in roping up assessees who deliberately or willingly give incorrect details while filling their TDS. However, there should be provisions for handling queries where the mistakes are not deliberate in order to safeguard the interests of genuine TDS filers. The proposal of introducing such a penal provision for TDS filing, as mentioned earlier would also help the Government to raise revenues, and will step-up fiscal prudence.
| Impact 
The Foreign Institutional Investors (FII) turned their back on the Indian equity markets after pumping in Rs 43,951 crore in the first three months of 2012. The FIIs were net sellers to the tune of Rs 1,190 crore in the month of April 2012. There were several issues which led the FIIs flee the Indian markets in April 2012.
(Source: ACE MF, PersonalFN Research)
The above graph reveals that after reaching its peak investment of Rs 25,212 crore, the FII flows reduced to Rs 8,381 crore due to adverse changes in tax laws proposed in the Budget 2012. Soon to be followed was the controversial tax penalty levied on Vodafone for buying Hutchison's stake in the Hutchison - Essar joint venture which negatively affected the investor sentiment in the country.
Further to add to the gloomy investor sentiments, were the provisions under the General Anti Avoidance Rules (GAAR) which sent shivers down the spine of FIIs. Many of them pulled out their short-term money from the Indian markets from the fear of coming under the tax net. Then came the last nail in the coffin when the renowned rating agency Standard & Poor's downgraded India's long-term rating to BBB- with a negative outlook (from BBB- with a positive outlook). The downgrade was on account of poor progress on fiscal situation as well as deteriorating economic indicators; with one-in-a-three chance of a downgrade to India's credit rating if external conditions continue to deteriorate. Finance Minister too, termed it as a ‘timely warning' but added that the he was confident about the economy growing at 7% if not more than 7% and keeping the fiscal deficit in control.
We believe that only policy reforms and fiscal prudence can bring the Indian economy on the growth path. Instead of retrospective charge on foreign investments like the Vodafone's purchase of Hutchinson's Indian assets, the Government should find out ways and means to attract long-term FDI flows which are of utmost importance for putting the economy on above average growth path.
Prudent fiscal policy and predictable tax laws can bring confidence amongst the investors to invest in India for the long-term.
| Impact
In a busy city life, many a times you are running short of time to manage multiple responsibilities, may it be at work or at home. And to add to it, many a times you have to run across various shops & stores to cater to your daily household needs too. But thanks to the recent setups like hypermarkets, supermarkets, malls etc. which act as ‘one stop shop' relieving you of running from one store to the other to buy different household things. These ‘one stop shops' provide grocery to readymade garments all under one roof, helping you to save your precious time and energy.
Similarly, while investing in mutual funds through the online portal, you must have come across this hurdle of investing in your preferred mutual fund scheme. But for some reason or the other you either have to take help of a distributor who maintains an online mutual fund transaction portal or use his or her AMFI Registration Number (ARN) using online portal or manage multiple login id's to keep a track on your mutual fund investments across different fund houses.
To read our views on the same, please click here.
| 
| Impact
Most of you may be aware that the insurance regulator - Insurance Regulatory and Development Authority (IRDA) is busy undertaking policy changes which are meant to be in the interests' of the policyholder. Right from rejigging the ULIPs, to bringing in measures to increase the life cover in life insurance policies, the IRDA has given due attention to its regulatory role.
In its recent policy changes, the IRDA had discouraged the use of single premium, or limited premium, payment term polices, as these could hit the cash flow management of companies. Accordingly, it proposed that all polices should have a regular payment option, equivalent to the term of the policy. Single-premium polices might be issued only under special categories, it said.
To know more about this news please.
This Week's Poll !!!
Do you buy single premium insurance policies?
|
In an interview with the Business Standard, Mr Robert Prior-Wandesforde, Economist at Credit Suisse shared his views on the recent downgrade of India's long-term sovereign rating by S&P and Government's reform process.
Mr Robert is of the view that although the S&P has downgraded the long-term outlook on India's sovereign credit rating to negative, while retaining the rating itself at BBB- (the lowest for investment grade), the other two main agencies, however have a neutral outlook - both suggesting that they have no intention of changing this at present (they too, rate the sovereign at just one notch above junk). He said, “Judging by the markets' reactions, the announcement was an unpleasant surprise but not a particularly big one. In many ways, the move simply acknowledges the widespread frustration that many have been expressing in relation to the lack of Government action on several fronts for some time."
As far as India's reform process is concerned, Mr Robert believes that the Government doesn't need to do much to head-off a move back to sub-investment grade status. “The first key test is if, and by how much, it increases subsidised fuel prices. Although the current political scene makes an agreement on any vaguely contentious issue uncertain, the huge pressure on the finance minister from the Reserve Bank of India (RBI) and others means a rise remains more likely than not. In our view, we will see diesel, kerosene and LPG prices hiked by the same amount and roughly at the same time as last year (June). This would have the benefit of leaving WPI energy price inflation unchanged. A second test, which we are much less convinced the Government will pass, is whether it is able to reach a compromise on the thorny issue of allowing foreign retailers to compete in the multi-brand space. Thirdly, many will be anxious to see the implementation of the GST and Direct Taxes Code plan. Both are thought likely to produce sizeable efficiency gains for the economy. We do expect these to come through but probably not until the start of the 2013-14 fiscal year. All in all, it looks to us as though there is no reason to panic. The announcement / downgrade might even help spur the Government into structural action, although unfortunately we suspect the impact is likely to be limited," he said.
We believe that the S&P's revised negative outlook for India's long-term sovereign ratings, addresses the need for prudent policy actions on the part of the Government. Though at present, India's growth story is still intact, keeping reforms on the back burner will do more harm than good to the global image of our country. Slow and unwarranted delay in reforms may also affect the long-term foreign capital in the form of FDI.
To continue on the above average growth path, India needs prudent and actionable reforms in place and that too without any delay.
|
- In their meeting with the capital market regulator - SEBI, the Independent Financial Advisor (IFA) Association put forth their demands to revive the mutual fund industry whose growth has been stagnated in the last three years. Some of the key demands put forth are:
- Revival of the entry load ban
- To allow fund houses to provide indicative yields in case of FMPs
- Higher pay-out to distributors to widen the reach of mutual funds beyond 'top-20' cities
- A standard 'minimum investment limit' while launching equity NFOs
- A standard (or common) application format across mutual fund industry, which will further simplify the investor admission process
- Instruct fund houses to state the category of fund in the 'scheme title' itself.
In our opinion the decision of the SEBI on the above demands should be closely watched as these demands if met will again change the functioning of the mutual fund industry as a whole.
Watch out for a special coverage of this event in our Financial News. Simplified - Special Edition.
- The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by Markit rose to 54.9% for the month of April 2012 just a tad above 54.7% recorded in the previous month. The minor uptick in the PMI can be attributed to the increasing order books, but the slower output growth and increasing price pressures kept the PMI growth under check. However, it is noteworthy that the index has remained above the 50-mark that divides growth from contraction for more than three years.
- China's official PMI rose to a 13-month high of 53.3 in April 2012 from March 2012 signalling that the economy has found a footing and may be recovering from a first-quarter trough. On the other hand the HSBC Flash PMI for China came in at 49.1 for April 2012 (below 50 for the sixth month in a row).
- According to the Labour Minister - Mallikarjun Kharge, the Employees Provident Fund Organisation (EPFO) may fix the interest rate for the FY 2012-13 above the 8.25% provided during the FY 2011-12. The interest rate on the EPF will be decided based on the income of the organisation, the Labour Minister said.
- The core sector growth for the month March 2012 grew at a meagre 2% from 6.9% in the previous month. For the full year FY 2011-12, the core sector growth stood at 4.3% as against 6.6% in the previous year. This could have a major impact on the full year IIP numbers, since the core sector comprises of 62% of IIP
|
Sovereign Credit Rating: The credit rating of a country or sovereign entity. Sovereign credit ratings give investors insight into the level of risk associated with investing in a particular country and also include political risks. At the request of the country, a credit rating agency will evaluate the country's economic and political environment to determine a representative credit rating. Obtaining a good sovereign credit rating is usually essential for developing countries in order to access funding in international bond markets.
(Source: Investopedia)
| | QUOTE OF THE WEEK
"Success is the progressive realization of worthwhile, predetermined, personal goals."
- Paul J. Meyer
| | | |
|
Disclaimer: This newsletter is for Private Circulation only and not for sale, is only for information purposes and Quantum Information Services Pvt Limited (PersonalFN) is not providing any professional/investment advice through it and, does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. PersonalFN disclaims warranty of any kind, whether express or implied, as to any matter/content contained in this newsletter, including without limitation the implied warranties of merchantability and fitness for a particular purpose. PersonalFN and its subsidiaries / affiliates / sponsors / trustee or their officers, employees, personnel, directors will not be responsible for any direct/indirect loss or liability incurred by the user as a consequence of his or any other person on his behalf taking any investment decisions based on the contents of this newsletter. Use of this newsletter is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. PersonalFN does not warrant completeness or accuracy of any information published in this newsletter. All intellectual property rights emerging from this newsletter are and shall remain with PersonalFN. This newsletter is for your personal use and you shall not resell, copy, or redistribute this newsletter, or use it for any commercial purpose. Please read the terms of use. |