Andhranews

New Delhi, Sept. 13: India has on Wednesday said that the “quota” (which primarily signifies voting power) formula of the IMF is flawed and outdated. Stating this, finance minister P. Chidambaram told the Commonwealth finance ministers meeting at Colombo that an ad-hoc quota redistribution based on this flawed formula cannot provide a durable solution. He said what is needed is a consensus on a new formula.

“It is widely believed that the present quota formula of the IMF is hopelessly flawed and outdated,” said Mr Chidambaram, adding, “Obviously, an ad-hoc redistribution based on this flawed formula cannot provide a durable solution. We need a consensus on a new formula. And we need it quickly.”

It is a member countries quota that determines the primary aspects of its financial and organisational relationship with the IMF, including voting powers and access to finance. So in effect, what India is saying is that developing nations like India should have a greater voice in international financial organisations, like the IMF.

Mr Chidambaram has also said that there must be a deep commitment to fundamental reform and there should be no postponement of a comprehensive review. He said, “My government firmly believes that any exercise intended to enhance the credibility and legitimacy of the IMF has to be based on fundamental reforms in the quota structure.” It may be pointed out here that earlier this month, IMF managing director Rodrigo de Rato had said that the board of governors meeting in Singapore from September 19 will take up the issue of ad-hoc increase of quota for China, Korea, Mexico and Turkey.

India will increase its contribution to the Commonwealth fund for Technical Cooperation by £50,000, taking the figure to £8,50,000 in the current fiscal. Announcing this, Mr Chidambaram said that the fund is an important source to develop institutional capacity among the developing member countries. He said this will help them achieve sustainable development. This fund was set up in 1971. It is the principal means by which the Commonwealth gives development assistance to member countries.

New Delhi, Sept. 13: US ambassador to India, David Mulford, on Wednesday warned that pause in the reform process could have serious economic costs for India. But India has maintained that the process of reforms are going on, though there may be some minor hitches.

Reacting to Mr Mulford statement, CPI(M) said that no outside force could dictate either policy directions or its implementation in the country. “It is not necessary for me to respond to what he (Mulford) has commented because in our country, we have a Parliament and a government and no one can dictate from outside on the policy directions and its implementation,” CPI(M) general secretary Prakash Karat said in a press conference at the end of party two-day politburo meeting in Kolkata.

Speaking on the occasion of third Indo-US Economic Summit, US Ambassador David Mulford had said that there are signs of a pause in the reform process in recent months. “Privatisations have stopped and political reality suggests that reform of other key sectors and policies of central interest to investors will take longer than envisioned,” said Mr Mulford.

Mr Mulford further said that it is important to bear in mind there are serious economic costs to any loss of momentum on the reform front. Mr Mulford added that Prime Minister Manmohan Singh has expressed his hopes for even higher than 8 per cent growth per annum for India. “But the Prime Minister has also indicated that higher growth requires continued reforms,” he said.

Speaking at the same platform, defence minister Pranab Mukherjee tried to counter Mr Mulford saying, “There could be minor hitches in the process of reforms, but as you know only too well, democracy is about checks and balances.” Mr Mukerjee said that decisions can be taken only after debate and due consideration. Hasty decision making can have its own negative repercussions, added Mr Mukerjee.

Mumbai, Sept. 13: The Sensex made a sizzling turnaround notching up a gain of 233 points closing at 11,893.79, after seeing a high of 11,938.41. The Nifty too gained 64.65 points to close at 3454.55. It saw intra-day swings between 3389.80 and 3470.65. There was heavy buying in index shares which had taken a beating on Monday when the Sensex lost 105.30 points. The total trading on both the exchanges was Rs 39,248.60 crores, inching towards the pre-May figures. The F&O sector accounted for Rs 27,804 crores.

The ratio of shares ending in the green to those in the red was encouraging with 736 stock ending with gains and 180 in the red. With Wednesday’s gains, the Sensex has erased the losses of Monday where just 96 stock ended with gains.
It was a day of gains throughout Asia. The Nikkei was up 30.17 points, the Hang Seng 134.64 points, the Kospi 5.09 and the Straits Times 20.83.

The cooling of crude oil prices at around $63.90 a barrel, has brought some calm to the market and foreign funds too are said to be coming back to Asia. Baring Private Equity group announced on Wednesday that it had raised $490 million for a new Asian private equity fund for which it received strong investor response. It will be targeting mid-sized companies in China, India, Singapore, Taiwan, Japan and Hong Kong. Globally the metal markets are still down. Metal stocks saw mixed results with Sesa Goa up Rs 4.70, Nalco Rs 1.60, Sterlite marginally up at Rs 0.50, but Hindalco was down Rs 1.10 and Hindustan Zinc Rs 13.80.

No one is willing to bet that in India at least the Sensex can be sustained at these levels and fuelled by sharp rises and falls. Some foreign brokerage houses feel that the Indian stocks are too expensive at this level of the index and are still talking of the 10,000 mark and lower.

Hyderabad, Sept. 13: Even as the inflation, which was at 5.01 per cent in the week to August 26 from 4.91 per cent a week earlier due to rise in prices of primary articles, is expected to cross the six per cent mark by December, economic analysts say India is on course to cross eight per cent GDP in 2006-07.
Citigroup Global Markets revised revised its GDP forecast for India for 2006-07 from 7.6 per cent to 8.3 per cent, on par with the GDP growth of 8.4 per cent estimated by the Central Statistical Organisation for 2005-06. The economy had grown by 7.5 per cent in 2004-05.

“On the back of strong industrial production data, solid sectoral trends and buoyancy in services, we are revising our FY07 GDP estimate from 7.6 per cent to 8.3 per cent. While maintaining the three per cent growth for agriculture, we are raising estimates for industry from 8.4 per cent to 9.2 per cent and services from nine per cent to 9.9 per cent,” Citigroup Global Markets’ analysts Rohini Malkani and Anushka Shah said in a note on Wednesday.

Referring to the sustainability of the GDP, they said, “We expect industry to sustain 9 per cent growth as new capacities are coming on stream in both electricity generation and petroleum refineries, coal shortage is being reversed, construction activity is likely to remain strong, and trends in consumer goods including textiles are positive.”

“The buoyancy in services is supported by a continued uptrend in telecom subscribers, insurance premiums, tourism and freight traffic,” they said.

Inflation worries

The dampner could be the rising inflation. According to a report by Edelweiss Securities, “In the current context of rising demand, we expect inflation to rise over the course of the financial. It is likely to be close to six per centin December and stay at those levels till the end of the year,” Edelweiss analyst Manika Premsingh said in a report.

Edelweiss says globally demand has started softening, affecting prices of crude. “However, it still remains a wild card. We believe that the second round impact of crude prices has kicked in and will continue to drive inflation for some time. Skewed rainfall distribution and domestic demand are likely to sustain pressure on inflation as well,” it said.

Interest rates

The higher inflation and oil prices could result another hike in interest rates. “With bank credit running at over 30 per cent, money supply at over 19 per cent, and inflation likely to cross six per cent later this year, we maintain our view that the RBI will hike policy rates once more this fiscal,” Citigroup Global Markets said.

Key risks

“While the economy has so far been resilient to the impact of higher oil prices and interest rates, we believe rates rising more than 100 basis points would be a risk. In addition, although thegrowth drivers – investment upturn, urban led consumption, and outsourcing –areintact, a surprise midterm poll on the political front would pose a key risk to our outlook,” the two analysts said.

Chennai, Sept. 13: EMC India, a subsidiary of EMC Corporation, on Wednesday announced the launch of its Chennai operations including a customer support and logistics centre. “India is among the top two fastest-growing markets and within the country, one of our key pivotal markets will be Tamil Nadu,” Mr Manoj Chugh, president, India and Saarc, EMC, told a press conference here.

He said the total market size for information management and storage industry in India was about $200 million, of which EMC accounted for a little over 21 per cent. Tamil Nadu has emerged as a huge attraction with the IT and ITeS sectors registering big growth in recent years. Apart from these areas, EMC would be targeting automobile, media and manufacturing sectors, besides the e-governance project of the government, Mr Chugh said.

At the national level, EMC would focus on markets in telecom, manufacturing, IT-ITeS, banking and financial services and the government. Considering the growth potential, the company had set an investment target of $500 million by 2010 and would double its headcount from the present 1,600, Mr Chugh said, adding that there were over 350 clients across India at present. EMC India was launching EMC Insignia, a line of hardware and software products that enable small and medium businesses (SMBs) to store, manage and share vital information, he said, adding that the company had enlisted ten partners in Tamil Nadu, who would sell the Insignia products apart from other EMC products.

Mr Arun Rawtani, vice-president, EMC South India, said the company’s growth in this part of the country was based on the new philosophy of expansion, which took EMC to areas close to the customers. “We want to go close to our clients and in that, our prime expansion destination is Tamil Nadu. We want to have our logistics and spares close to clients, hence the launch of operations in Chennai,” Mr Rawtani said, pointing out that Tamil Nadu was rated third in India for software exports. To a question on the EMC’s China operations, Mr Chugh said he would not be able to provide any information.

Chennai, Sept. 13: Ceat Tyre Ltd is planning to come out with truck radial tyres with an investment of Rs 400 crores in the next three years. “We are in discussion with leading radial technology providers for the best technology for Indian roads,” said Mr Arnab Banerjee, vice president, sales and marketing, Ceat Ltd. He said the project would absorb an investment of Rs 400 crores developing radial tyres for trucks, adding that “the process is in the nascent stage, but we hope to the product by 2009-10.” Currently, around 4-5 per cent of trucks are using radial tyres in the replacement market, while in the developed market 90 per cent of trucks are using radial tyres, he added.

He pointed out that Indian road infrastructure was not fit for radial tyres. Additionally, sufficient supply is not available and manufactures have not started using radial tyres. However, the major ongoing road infrastructure project would make these tyres suitable for Indian roads in three-four years.

Ceat is importing truck radial tyres form Pirelli and selling these tyres as its own brand in India. In the next five years, he said, truck radial tyres would capture a market share of minimum of 25 per cent in the overall domestic truck market. The overall radial tyres operating efficiency would be much longer than the current technology, he pointed out. Mr Banerjee said the company is developing a roadmap to bring out new generation high-speed radial car tyre in the Indian market.

Q: I booked a flat in May 2005, which shall be ready for possession by October this year. The registration shall be completed on my name at that time. For the purchase of the flat, I availed of a loan from a housing finance agency. Will I be eligible for income-tax deduction for repayment of principal and interest from financial year 2005-2006? If I rent out the property after registering, what will be my tax repercussions?

Nilesh Mehta

A: As per Section 24(vi) where the property has been acquired or constructed with the borrowed capital, the interest, if any, payable on such capital for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous year.

Accordingly, the interest up to financial year 2005-06 will be deductible in five equal instalments beginning from financial year 2006-07. In case the property is let out, the rental income after deductions for interest on capital, repair and maintenance as provided in the Act will be taxable in your hands.