Indian Economy News & Discussion - Nov 27 2017

[vinod]

Got over whatsapp

% of Indians pay tax - 4%
% of Indians upset over new tax slabs - 90%

[V_Raman]

I think reactions to the budget probably reflect expectations different people had from it.

If you think (like the policy-making team) that GDP growth at 5% going on to 6-6.5% next year is "good", then it makes sense. The budget does nothing major to alter this trend.

OTOH if you REALLY believe in the potential of the Indian economy which should be growing north of 10%, then you should be disappointed because this budget does nothing to take us from there to there.

IMO India does not have the infra/process setup to grow north of 10% yet.

[Rahulsidhu]

I think reactions to the budget probably reflect expectations different people had from it.

If you think (like the policy-making team) that GDP growth at 5% going on to 6-6.5% next year is "good", then it makes sense. The budget does nothing major to alter this trend.

OTOH if you REALLY believe in the potential of the Indian economy which should be growing north of 10%, then you should be disappointed because this budget does nothing to take us from there to there.

IMO India does not have the infra/process setup to grow north of 10% yet.

On the contrary, the lack of infra means that India can absorb HUGE investments in infra alone to take growth > 10% for several years.
Here is a plan: the NIIF issues rupee bonds, implicitly guaranteed by GoI. The RBI can make them eligible as SLR "to promote infra spending and help inflation lower". NIIF debt can be kept outside the fiscal deficit numbers. "Analysts" will cry foul but let them. Use the proceeds to fund big infra projects. watch growth and jobs happen very very fast.

[Rahulsidhu]

Despite the budget disappointment, things are lining up well for the Indian economy:

* worst of credit crisis seems over
* BS6 disruption over
* nCov has crashed commodity prices. This will lead to lower CAD and more money in consumers' pockets.
* Food inflation spike over, and commodities prices lower => lower headline inflation in the coming months
* lower CPI => more RBI cuts
* FDI could pick up, as manufacturing base gets diversified away from China

All in all, a pretty supportive environment

[Vikas]

If nothing else then stock market is limping back to pre-Budget level. All my equity shopping on Sat and Mon is up by 2%-4%. Looks like it was a knee jerk reaction by stock market to the budget.
If US-Iran do not go into shooting match, We should see lower Oil prices for next 2 quarters giving some more reprieve to the govt.

[Philip]

Confidence at the lowest levelsof the economy are essential as that's wherethe greatest unemoyment exists,now at a record high since 1962. The NREGA funds can last only for 2 more months Thus the rural " dole" is doomed,with much less money to bebin circulation.

The China virus has given us a great opportunity.To sa itise India,ban all containers,ships,aircraft,passengers from China. Automatically imports from China will collapse.Piddly little 10% duty increases are a joke as their cheap goods are at least 30% cheaper than desiones. That is the ONLY way that the MSMEs can increase.Even if you give them loans,if their production costs are greater than a Chinese product they will fail. That's why few are investing in new ventures.There's great insecurity around in biz circles and no one wants to take a hit. This budget hasn't been able to remove the feeling of insecurity. 10% TDS on mutual funds is a dampener, whythe market plunged almost 1000pts. It has only mildly recovered,still 800 points down.

Unless pro-active help is given to agriculture,real estate and the infrastructure, we will be limping along like past eras.
I happened to drive from Chandigarh to Delhi recently.240km took over 7 hrs! A nightmare, with so many underpasses left unfinished, that too for thee ancient route for over 4000 years the principal route into India from Kashmir. We passed famous battle sites like Kurukshetra,Panipat.,Sonepat.Battles still exist,but this timf with lorries,tankers,goods,livestock,etc.was dreadful. Most of the underpasses linking service roads were incomplete in this the premier NH from Kashmir to Delhi!

[Arun.prabhu]

Growth is bad. Social justice and the parasites that live off it is good. Better to roll In mud forever than to try to stand on one’s feet:

https://www.thehindu.com/news/national/ ... 720952.ece

[Suraj]

Growth is bad. Social justice and the parasites that live off it is good. Better to roll In mud forever than to try to stand on one’s feet:

https://www.thehindu.com/news/national/ ... 720952.ece

Please don't bring political diatribes (not yours, the quoted person's) here. It detracts from the purpose of this thread.

[Atmavik]

Folks,

why do you think the gov did not issue a dollar bond? yields around the world are at historic low. 10yr us treasury @ 1.5xx and 30 yr @ 2.0xx %. looks like the best time to borrow and fund our Infra push.

1. will this put pressure on the rupee valuation?
2. is the decision more political?

[Suraj]

What's the bond for ?

[vijayk]

https://www.livemint.com/opinion/column ... 67914.html

Opinion | The budget’s critics should take an in-depth look at its proposals

Much budget commentary ends up reflecting pre-existing biases rather than informed analysis

The budget for 2020-21 was expected to meet two or three important criteria. One was that it should enhance transparency and improve the credibility of its numbers. By expanding the scope of a key data tableand presenting details of fully-serviced government bonds and loans availed from the National Small Savings Fund (NSSF), not just for 2019-20 and 2020-21, but for the past four years, the government has taken giant strides towards reporting its off-budget borrowing. Equally importantly, it has pencilled in a much smaller increase on this score for 2020-21, signalling that it would like to freeze its recourse to off-budget borrowings, which had ballooned in 2018-19 and in 2019-20. It has made it a lot easier for many to report the “true" fiscal deficit.
Second, the government was expected to put money in the hands of the public. The number of tax slabs might have increased now, but the substantially lower tax rates with zero exemptions is a big move forward in putting more money in the hands of people and in making filing tax returns a less stressful exercise. That said, easing business and living conditions remains an urgent priority for state and local governments. Formalization of micro and small businesses remains a herculean task. That is why many give up growth aspirations and operate below the radar. The key to unlocking productivity gains lies in easing local and state-level compliance and regulatory requirements.

Third, the government was expected to raise more money by selling its assets. It has signalled its intent by budgeting a large sum on this score. It also needs luck in the form of better market sentiment next year, not just in India but globally. Other positives include the treatment of employee stock options in startups, liberalized conditions on the exemption of startup profits, the far-sighted decision to provide exemption from tax on dividends in the hands of sovereign wealth funds for investments made in India up to 2024, and the taxpayers’ charter.

[Nikhil T]

The budget in graphs:
https://www.rediff.com/business/report/ ... 200204.htm

Key points
1. Most of food subsidy is being accounted from National Small Savings Fund in last four years.
2. The real fiscal deficit after accounting for such off-budget borrowing is 4.4% of GDP.
3. This is after Govt had cut Rs 90,000 crore in expenditure in last year vs. budgeted amounts.
4. The rise in fiscal deficit even when expenditure was cut can be attributed to low revenue due to lower than expected growth and lesser disinvestment proceeds.

It remains to be seen if we can achieve the 2020 budget estimates of revenue and investment through higher growth (budget math assumes 10% nominal GDP growth - some say its unlikely) and Rs 2.1 lakh crore of disinvestments (vs. ~Rs 20K crores this year).

This graph was very telling about the quality of Govt expenditure - only 13% of Govt expenditure is on capital assets, rest is all revenue expenditure. Even within capital expenditure, AFAIK, 35% is Defence capital expenditure - which is not very productive for economic growth (unless sourced from domestic).

[vijayk]

CNBC-TV18

@CNBCTV18Live


IHS Markit India Manufacturing PMI rises to 55.3 in January from 52.7 in December, its highest level in just under eight years

[vijayk]

https://twitter.com/KiranMudlagiri/stat ... 8360269825

Kiran Mudlagiri
@KiranMudlagiri
Green shoots of economy visible. Industries expanding their production capacities, more hiring in manufacturing and other industries. Positive signs showing up. #EkBharathShresthBharath

[vijayk]

https://www.business-standard.com/artic ... 317_1.html
Solid domestic demand lifts services PMI to 7-year high of 55.5 in Jan
he Nikkei/IHS Markit Services Purchasing Managers' Index rose to 55.5 in January from December's 53.3

Spaminder Bharti Retweeted
Aashish Chandorkar
@c_aashish

Services PMI at 7-year high
Manufacturing PMI at 8-year high
Composite PMI at 7-year high

January GST collection was Rs 1,10,828 crore which is the second highest since launch of GST.

So are we back in the game?

[Suraj]

The economic answer is we don't know yet. The political answer is whatever you want it to be.

[fanne]

PMI are leading indicators - Surveys on hiring, inventory, sentiments, fresh orders and what not. Above 50 means we are expanding. These numbers (if they pan out, remember it is still a hope and a plan) points to economy that is going to expand big time. Let's see

[Suraj]

PMI figures for a single month are too noisy to be useful indicators. Same for IIP, CPI etc. For quite some time, I'd posted 3- and 6-month averaged IIP data on this thread to offer greater insight. However I've not done so for PMI and I don't know of anyone else who has.

[Uttam]

PMI figures for a single month are too noisy to be useful indicators. Same for IIP, CPI etc. For quite some time, I'd posted 3- and 6-month averaged IIP data on this thread to offer greater insight. However I've not done so for PMI and I don't know of anyone else who has.

The 3-month trend definitely supports expansion:





Source: https://tradingeconomics.com/

[Suraj]

Yes that's certainly a good upwards trend on both services and manufacturing PMI. Thanks for looking for it and posting it!

[Kakkaji]

Government to sanction all 1.12 crore houses under PMAY by next month

The government will sanction the entire 1.12 crore houses under the Pradhan Mantri Awas Yojana (PMAY) by next month, Union Housing and Urban Affairs Minister Hardeep Singh Puri said in Rajya Sabha on Wednesday.

“A revised demand assessment was made and now the demand is for 1.12 crore houses. I am sure we can meet that in terms of sanctioning in the next month or so,” he said during the Question Hour in the Upper House.

[Yagnasri]

My personal work suggest that we may be back or at least on the path to increased activity. I would have preferred more green field units coming up that they are now. But at least some are coming up which was not happening for some time.

Of course this is personal experience.

[chetak]

This is not only a pointed diversification of energy sources way beyond the gulf but also a hedge against the amerikis.


what russia has not got from their traditional weapon sales being curtailed, they are being compensated via preferential access to the very lucrative Indian energy market.

we will just have to wait and see just how this new game starts to play out.

the saudis had made a very serious bid for Essar Oil too but the GoI preferred the russkis.


Russia's Rosneft keen to bid for BPCL

Russia's Rosneft keen to bid for BPCL

Russia's largest oil producer Rosneft is keen to bid for acquisition of BPCL, sources said.

Feb 06, 2020

NEW DELHI: Russia's largest oil producer Rosneft is keen to bid for acquisition of Bharat Petroleum Corp Ltd (BPCL), sources said after the Russian firm's CEO Igor Sechin met Oil Minister Dharmendra Pradhan on Wednesday.

Rosneft, which is the majority owner of India's second-biggest private oil refinery, is keen to expand in the world's third-largest and the fastest-growing energy market.

Sechin first met Pradhan over breakfast, and then in delegation-level talks expressed interest in bidding for the acquisition of government stake in Bharat Petroleum Corp Ltd (BPCL), officials privy to the discussions said.

The government is selling all of its 53 per cent stake in BPCL in the country's biggest privatisation plan.

Officials said national oil companies from the Middle East, such as Aramco of Saudi Arabia and ADNOC of UAE, have also been primed for bidding for BPCL.

Sechin, who was here to witness the signing of the first deal with Indian state-owned refinery for supplying crude oil a fixed-term basis, expressed interest in investing more in India, they said.

On November 20, 2019, the Cabinet headed by Prime Minister Narendra Modi had decided to privatise BPCL by selling the government's entire 52.98 per cent stake to a strategic investor along with management control.

Rosneft owns a 49.13 per cent Nayara Energy Limited (formerly Essar Oil Limited). Nayara owns and operates 20 million tonnes per year refinery at Vadinar in Gujarat and also owns 5,628 petrol pumps in the country.

It is keen on expanding the fuel retailing network and BPCL would get it ready access to close to one-fourth of 67,440 petrol pumps in the country.

BPCL operates four refineries in Mumbai, Kochi (Kerala), Bina (Madhya Pradesh) and Numaligarh (Assam) with a combined capacity of 38.3 million tonnes per annum, which is 15 per cent of India's total refining capacity of 249.4 million tonnes.

After removing three million tonnes of the capacity of the Numaligarh refinery, which will be sold to a public sector unit, the new buyer will get 35.3 million tonnes of refining capacity.

BPCL owns 15,177 petrol pumps and 6,011 LPG distributor agencies in the country. Besides, it has 51 liquefied petroleum gas (LPG) bottling plants.

The company distributed 21 per cent of petroleum products consumed in the country by volume as of March last year and has more than a fifth of the 250 aviation fuel stations in the country.

The government is keen to get international energy majors such as Saudi Aramco, Total SA of France and ExxonMobil to operate in the downstream fuel marketing business so as to bring in greater competition.

Currently, 95 per cent of retail petrol and diesel sales and near 100 per cent of cooking gas (LPG) and kerosene sales are controlled by the public sector units.

As on March 31, BPCL reported cash and cash equivalents of around Rs 5,300 crore, against Rs 10,900 crore of debt maturing over the next 15 months.

Officials said Indian Oil Corp (IOC) signed a term contract to import up to 2 million tonnes of Russian grade Urals oil from Rosneft in 2020.

This is the first time a state-owned firm has signed a term import deal with Russia as they look to diversify sourcing of oil beyond their traditional suppliers in the Middle East. State-run firms have started importing significant volumes from the US as part of this strategy.

At current prices, the government stake in BPCL is worth just over Rs 53,000 crore. The acquirer will have to make an open offer for buying an additional 26 per cent stake from other shareholders of BPCL.

The stake sale is critical for the government to meet its disinvestment target of Rs 2.10 lakh crore set for the coming financial year starting April 1.

[Vips]

India has crossed a billion monthly digital payments. Now, to a billion transactions a day.

Google’s letter to the US Federal Reserve two months ago asking them to learn from Indian digital payments must be an unfamiliar feeling for the central bank. Indian regulators, used to lectures and advocacy from global firms and diplomats peddling their models — not intellectually different from Thomas Macaulay’s quip in 1835 that a single shelf of a good European library was worth the whole native literature of India — should be proud of reaching our target of a billion monthly digital payments. We make the case that digital payment transactions on the Universal Payment Interface (UPI) platform rising from 0.1 million in October 2016 to 1.3 billion in January 2020 represents the magic of entrepreneurs, nonprofits and policymakers working together. And gives us a new target — a billion transactions a day.

India was long a financially excluded nation — only 17 per cent of Indians had a bank account in 2011. The World Bank suggests it would have taken 50 more years for 80 per cent of Indians to get a bank account at the pre-2011 speed. Yet, we reached that milestone in 2018. How? A magical combination of political will (Jan Dhana Yojana and Aadhaar embedding), a proactive central bank (creating a non-profit market participant entity and leveling the playing field between non-banks and banks), and a technology stack with three layers (identity, payments, and data).

India’s payment revolution comes from a clear vision (shifting the system from low volume, high value, and high cost to high volume, low value, low cost), a clear strategy (regulated and unregulated private players innovating on top of public infrastructure) and trade-offs balanced by design (regulation vs innovation, privacy vs personalisation, and ease-of-use vs fraud prevention). Consumers wanted a payment experience that was mobile-first, low-cost, 24/7, instant, convenient, interoperable, fintech friendly, inside banking, and safe. This was UPI, a platform operated by the entrepreneurial nonprofit National Payments Corporation of India. UPI created interoperability between all sources and recipients of funds (consumers, businesses, fintechs, wallets, 140 member banks), settled instantly inside the central bank in fiat money (state-issued money declared by the sovereign to be legal tender) and blunted data monopolies (big tech firms have strong autonomy but weak fiduciary responsibilities over customer data). A new paper by the Bank for International Settlements (‘The design of digital financial infrastructure: lessons from India’) suggests that India demonstrates how “a central bank can be proactive and equal partners with private sector counterparts when it comes to fostering technological innovation in finance”.

UPI offers five policy lessons. First, how the India stack — interconnected yet independent platforms or open APIs — are a public good that lowers costs, spurs innovation, and blunts the natural digital winner-takes-all. Replicating this in education, healthcare, and government services are likely to be a harbinger of large scale multi-domain collaborative innovation. Second, collaboration can create ecosystems that overcome the birth defects of its constituents — the execution deficit of government, the trust deficit of private companies, and the scale deficit of nonprofits. Third, complementary policy interventions are important. Demonetisation and GST are changing the stories that firms and individuals tell themselves around cash and informality. Fourth, human capital and diversity matter. This revolution needed career bureaucrats to partner with academics, tech entrepreneurs, venture capitalists, global giants and private firms. The final lesson is that India doesn’t need to be Western or Chinese to be modern. If our policymakers had copied Alipay or US banks, we wouldn’t have leapfrogged their birth defects.

Google’s letter to the Federal Reserve counters powerful lobbying by US banks against the “FedNow” payment system that will undermine their supernormal profits. FedNow will do far less than UPI, but its launch delay supports the thesis of the new book, The Great Reversal, by Thomas Philippon that American capitalism, once a model for the world, is giving up on healthy competition. Many sectors are more concentrated than 20 years ago, dominated by fewer and bigger players who lobby politicians aggressively to protect and expand their profit margins. But capitalism without competition — India has seen that movie before — hurts growth, investments, productivity and wages.

There is more work to be done. The central government must deadline digitising all its payments. The RBI must implement the 100-plus action items arising from its own Vision 2021 document and the Nandan Nilekani Committee for Deepening Digital Payments. It must also make UPI and RuPay fit for use in our $70 billion inward remittances that currently come through exploitative financial institutions which don’t have clients but hostages. More importantly, the RBI must replicate the core design of UPI — fierce but sustainable private and public competition — in bank credit because our 50 per cent credit-to -GDP ratio is one of the reasons India is poor. China’s 300 per cent is the wrong number, but reaching the OECD average of 100 per cent needs the RBI to do many things — raising its human capital and technology game in regulation and supervision, catalysing an ecosystem for lending against the rapidly expanding digital exhaust of small firms and individuals, issuing more private bank licences, facilitating management changes in old private banks with market caps that signal questions about book value, and shepherding a governance and human capital revolution at PSU banks (their risk-weighted assets being lower than two years ago despite a capital injection of Rs 2.5 lakh crore should be unacceptable).

Converting the collective independence our citizens got in 1947 to individual freedom surely involved universal financial inclusion. The gap between this aspiration and reality was not a lie but a disappointment because our capital got handicapped without labour and our labour got handicapped without capital. Change has begun – the RBI, the finance ministry, and many individuals deserve our gratitude and duas for a billion digital payments a month. We now ask you for a billion digital payments a day.

[a_bharat]

Found this in my twitter feed: Taiwan's innovation to prevent tax evasion

GoI should adapt similar ideas or come up with some original, creative mechanisms, instead of meaningless/ineffective tinkering in every budget.

[vijayk]

https://www.orfonline.org/expert-speak/ ... rms-61169/

Does budget 2020 provide material support for the ongoing health reforms?

Perhaps for the first time in the history of India’s health policymaking, multiple agencies are moving in a closely coordinated manner, towards common policy goals. We see unprecedented expansion of government medical colleges across the country, particularly in districts where none existed. A centrally sponsored scheme for establishment of new government medical colleges is upgrading 157 existing district hospitals across India’s most underserved areas.
As a result, there has been a 47% rise in the number of government medical colleges between 2014 and 19, compared to a 33% increase in the total number of medical colleges in the past five years, from 404 to 539. The number of undergraduate medical seats has seen a jump of 48%, from 54,348 in 2014-15 to 80,312 in the academic year 2019-20. Government is aggressively trying to expand medical seats leveraging the private sector as well, with an aim to overcome bottlenecks in terms of personnel as well as healthcare delivery.
The High Level Group on the Health Sector constituted by the government submitted its recommendation to the Fifteenth Finance Commission that in the coming five years, 3000 to 5000 hospitals (200 beds) needs to be created across the country.

[Vips]

India's electricity demand rises 3.5% in January after five months of decline.

[SRajesh]

Deleted.

[SRajesh]

Deleted

[nandakumar]

The latest CPI data is out. Consumer price inflation is still pegged at 7 odd per cent. What is puzzling is that vegetable prices are still higher at 55% which carries a weight of 6.6% in the over all index. In other words the impact of vegetable prices alone contributed 3.63 percent of the total 7.5% in January. It was generally assumed that when December CPI came in at 7.3% it was primarily due to onions which in December had shot up to 130-140 rupees per Kg. We know it had come down to 60 rupees or so in January. But vegetable inflation is still high at 55%. May be it is not onions alone.

[tandav]

Time has come to pull the plug on GST and move to a transaction tax system. That way only when a transaction is made there will be tax collected by govt. It will greatly simplify ease of business.

[Rishirishi]

Time has come to pull the plug on GST and move to a transaction tax system. That way only when a transaction is made there will be tax collected by govt. It will greatly simplify ease of business.

That would be very unfair for small traders and Amazon will take over the entire market. Currently the products may shift hands 4 to 5 times before it is finally sold.

All advanced countries have GST and it is working. It will take some time to settle.

[Suraj]

Time has come to pull the plug on GST and move to a transaction tax system. That way only when a transaction is made there will be tax collected by govt. It will greatly simplify ease of business.

Far too simplistic and meaningless. Don't conflate political reasons with economic ones.

[Yagnasri]

We need to look for new direct taxation areas wherein people with means will pay more and not any indirect tax which is paid at the same rate by everyone. We already have property tax at local admin level which due to political and pressures is very low % of the actual value of the property. If that can be made say 0.25% to 1.0% of the value of the property in all urban areas and reduce the funding of the municipality and Municipal Corporations to the extant of that new amount we may have very good collection of funds. Funds can be used to local education, health and other social infra which is badly needed in most of Bharat.

[tandav]

Time has come to pull the plug on GST and move to a transaction tax system. That way only when a transaction is made there will be tax collected by govt. It will greatly simplify ease of business.

That would be very unfair for small traders and Amazon will take over the entire market. Currently the products may shift hands 4 to 5 times before it is finally sold.

All advanced countries have GST and it is working. It will take some time to settle.

As of date there is a huge number of folks who should have been able to bill very large amounts to their clients but can't since they would need to pay GST and there is no way to ensure they get paid. Tax should not be collected unless vendor is paid.

[tandav]

We need to look for new direct taxation areas wherein people with means will pay more and not any indirect tax which is paid at the same rate by everyone. We already have property tax at local admin level which due to political and pressures is very low % of the actual value of the property. If that can be made say 0.25% to 1.0% of the value of the property in all urban areas and reduce the funding of the municipality and Municipal Corporations to the extant of that new amount we may have very good collection of funds. Funds can be used to local education, health and other social infra which is badly needed in most of Bharat.

I think it is better to tax all at the same rate and use the taxation to benefit the lower rung folks in a more targeted manner. Like giving Rations, free medical care etc based on their income level

[UlanBatori]

A pooch for the experts. I was looking up the definition of Foreign Direct Investment.

The RBI page says it is investment by a person RESIDENT OUTSIDE India. So if Abdul Bin Kabul were to come stay in India for 130 days a year for 3 years, he becomes Resident. Then he can invest all he wants, no restriction at all?
Plus it says nothing about the investment having to come from a halal phoren institution etc.
Could someone shed light on this please?

**Disclosure** My real intent is to see if the following scam works. An OhSeeEye has only 3 years to repatriate phoren $$$ to desh ("rejident but naat aardinarily rejident") b4 the money being repatriated is considered to be "Income", taxed at Indian rates. This can be very steep.

OTOH, suppose same Oh See Eye (Abdul) settles in desh. Then forms a company in Mongolia, Kublai Khan Inc, office address PO Box 6661313, Ulan Bator.
Said company gets money invested by Abdul from funds drawn out of his EyeArrAay (tax due to Mongolia at that point). The money is then funnelled as FDI by this phoren entity to buy shares of say, Raoul and Robert Pvt Ltd. Saves the difference between Mongolian and Indian tax rates, which is significant.
Why doesn't this work? {Hmmm.. I suspect because desh hits Abdul with the diff. between tax paid to Mongolia and tax due to desh, under DTAA. There goes another bright idea. }

So an EnnArrEye can bring their retirement funds into India paying only Mongolian tax rate, but same abdul if resident in India, gets hit with higher desh tax? UNPHAIR!!!!
Trouble is that this dictates to Abdul to do scorched-earth and withdraw $$ at high rate inside the 3 years and pump it into desh before the Resident But Not Ordinarily Resident window closes. That hurts!!

Only saving scenario there, is if exchange rate moves in favor of INR. That of course is a game-changer.

[kvraghav]

But the Abdul bin Kabul will have to have a PAN card, declare all his global assets and income, pay income tax for the entire earnings and can invest his way happily.
For the NRI, there are NRE and NRO accounts. NRO is his local account and he wants to move money out of country, he has to file the taxes and move to NRE account. So this prevents the easy movement without tax.

[nandakumar]

A pooch for the experts. I was looking up the definition of Foreign Direct Investment.

The RBI page says it is investment by a person RESIDENT OUTSIDE India. So if Abdul Bin Kabul were to come stay in India for 130 days a year for 3 years, he becomes Resident. Then he can invest all he wants, no restriction at all?
Plus it says nothing about the investment having to come from a halal phoren institution etc.
Could someone shed light on this please?

**Disclosure** My real intent is to see if the following scam works. An OhSeeEye has only 3 years to repatriate phoren $$$ to desh ("rejident but naat aardinarily rejident") b4 the money being repatriated is considered to be "Income", taxed at Indian rates. This can be very steep.

OTOH, suppose same Oh See Eye (Abdul) settles in desh. Then forms a company in Mongolia, Kublai Khan Inc, office address PO Box 6661313, Ulan Bator.
Said company gets money invested by Abdul from funds drawn out of his EyeArrAay (tax due to Mongolia at that point). The money is then funnelled as FDI by this phoren entity to buy shares of say, Raoul and Robert Pvt Ltd. Saves the difference between Mongolian and Indian tax rates, which is significant.
Why doesn't this work? {Hmmm.. I suspect because desh hits Abdul with the diff. between tax paid to Mongolia and tax due to desh, under DTAA. There goes another bright idea. }

So an EnnArrEye can bring their retirement funds into India paying only Mongolian tax rate, but same abdul if resident in India, gets hit with higher desh tax? UNPHAIR!!!!
Trouble is that this dictates to Abdul to do scorched-earth and withdraw $$ at high rate inside the 3 years and pump it into desh before the Resident But Not Ordinarily Resident window closes. That hurts!!

Only saving scenario there, is if exchange rate moves in favor of INR. That of course is a game-changer.

Raoul and Robert pvt limited is a resident Indian company. If that company manufactures Maruti cars designed and patented by Uncle Sanjay Gandhi and make profits then those profits will be taxed at Indian rates because the business has an 'Indian connection'. There is relief for Mongolian shareholders of Raoul and Robert through DTAA on the dividend distributed by the company. But since Abdul has by now become a resident he will have to pay tax at Indian rates on all incomes wherever received/earned.

[UlanBatori]

May yuwar goats eat only alcohol receipts that don't win lottery prizes.

Based on deep analy-e-sys of Poojya NSji's extortion algorithm, UBCN's famed (in the right circles) Tax Advice Division (Evasion thereof) UBCN-TADet has decided to close down.

It turns out that a Mongolian resident has to pay typically 6% State Extortion in addition to the Federal Extortion. Even WITHOUT this (!!!) Indian tax rates per NSji are now lower than Mongolian until some very princely income level Once you add the 6% it is a Raoul-brainer. We see this up to some $50K per PERSON level which is waay above the "BPL" limit in desh, even if one files Hashish (Joint) in Khanistan. Maybe I was only checking for the Aged: SS payments are only taxable in Mongolia: so one pays that to Mongolia.

Unless of course our madarssa math is at its usual quality.

This does not actually reduce one's taxes because Khan still extorts on global income of any Khan slaves, but it removes injenteve to park money outside desh, at least in Mongolia. DTAA (or even without it) allows one to get a direct tax credit for any credits paid to desh, but that no longer gets "capped" at the tax that would have been owed in Khanistan on same income.

Of course the problem is different if one is as rich as Raoul/Robert, but then why would THEY pay taxes?
This leaves the transfer of $$$ from hard-earned IRAs etc to desh as the main issue - for those who believe that USD is more overvalued than INR.

That FDI scam was our last hope of staying relevant, but that's a no-win as well. If one parks one's ass in desh, one is rejident, so not FDI. If one parks ass in Mongolia, one pays that State tax (and corporations pay local tax).
Next to see impact of the "lower rate or deductions?" cruel choice.

Psst: In Khanistan, there used to be a scam where one could donate abbreshiated stocks directly to a Charitable Institution and one got a 100% tax deduction on the whole donation. Very iffy with new Khan rules - choice there too is Standard Deduction - which means no charitable or any other deduction - or Itemized Deductions, with state and property tax capped at $10K. Unless one is deep in debt one does not get up above $24K however one groans and digs at tax time.

How about in desh? 80G is gone for those who choose the lower rate, I presume?
But could one escape by directly transferring appreciated stock to a charitable institution? Or.... by designating that dividend goes direct to charitable institution, now that dividend is taxed by desh? (No rest for Mongolians there: all these saal, we had to pay Mongolian tax on Indian dividend!!!