Dou­ble-digit growth dif­fi­cult to achieve, says Arun Jait­ley

The Pak Banker - - MARKETS/SPORTS -

The present global eco­nomic en­vi­ron­ment is not con­ducive for the coun­try to achieve a dou­ble-digit growth, In­dia's Fi­nance Min­is­ter Arun Jait­ley said.

"In the cur­rent global en­vi­ron­ment, re­al­is­ti­cally speak­ing, it is ex­tremely dif­fi­cult to achieve dou­ble-digit growth," Mr. Jait­ley said at the In­dia To­day Con­clave, here on Fri­day. If "nec­es­sary" re­forms are ex­e­cuted it would push In­dia's growth rate much higher than the cur­rent 7.3 per cent, he said.

The govern­ment has been try­ing to pass the GST Con­sti­tu­tional Bill in Ra­jya Sabha for more than a year now. How­ever, it is pend­ing for want of two-thirds ma­jor­ity in the Up­per House. He also re­jected a de­mand by the Congress for a cap on GST rate, to be in­tro­duced in the Con­sti­tu­tion Amend­ment Bill, say­ing it would be dif­fi­cult to ac­cede to it.

Agri­cul­ture had the max­i­mum po­ten­tial for growth in In­dia, he said. Mr. Jait­ley also made it clear that "ev­ery penny" liquor baron Vi­jay Mallya owed to the banks would be re­cov­ered. "The facts are very clear. Ev­ery govern­ment agency will take strong ac­tion against him. Banks will go all out to re­cover ev­ery sin­gle penny," he said.

Mean­while, Govt. clar­i­fies rules on tax treat­ment of off­shore funds. The govern­ment said a for­eign hedge fund with an In­dian fund man­ager work­ing in In­dia will nei­ther be clas­si­fied as hav­ing a busi­ness con­nec­tion in In­dia nor as be­ing lo­cated in In­dia.

"Un­der this regime, the fund man­age­ment ac­tiv­ity car­ried out through an el­i­gi­ble fund man­ager in In­dia by an el­i­gi­ble in­vest­ment fund does not con­sti­tute busi­ness con­nec­tion in In­dia of the fund and also does not lead to the res­i­dence of the fund in In­dia," ac­cord­ing to a govern­ment no­ti­fi­ca­tion on Wed­nes­day.

"This was a big is­sue for pri­vate equity where the In­dian coun­ter­parts were con­sid­ered a part of the global com­pany," Girish Van­vari, Co-Head of Tax at KPMG told The Hindu. "This will en­cour­age fund man­agers to be res­i­dent in In­dia."

Among the var­i­ous other changes made, one of the most sig­nif­i­cant is that "where the in­vest­ment in the fund has been made di­rectly by an in­sti­tu­tional en­tity, the num­ber of mem­bers and the par­tic­i­pa­tion in­ter­est in the fund shall be de­ter­mined by look­ing through the said en­tity". "This is partly okay. The re­quire­ment of hav­ing 25 in­vestors has been lib­er­alised. The safe har­bour pe­riod has been pro­vided for ful­fill­ing var­i­ous lim­its for get­ting the ex­emp­tion," Mr. Van­vari said.

How­ever, the steps taken by the govern­ment are still in­com­plete, ac­cord­ing to him.

"The two big is­sues which are not ad­dressed is that no sin­gle in­vestor can in­vest more than 10 per cent in the fund and that the ag­gre­gate par­tic­i­pa­tion of 10 or less mem­bers has to be less than 50 per cent," Mr. Van­vari ex­plained. In other words, 10 peo­ple can­not own more than 50 per cent of the com­pany.

"It has been clar­i­fied that the fund will not be able to own more than 26 per cent in an In­dian en­tity to avail of the ex­emp­tion," ac­cord­ing to a KPMG state­ment. "How­ever, it does not ad­dress two im­por­tant is­sues, i.e. a sin­gle in­vestor can­not own more than 10 per cent in the fund and 10 or less in­vestors should own 50 per cent or less."

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