01st December, 2011 to 31st December, 2011
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Chinese companies to bid for India infrastructure projects: Wang
New Delhi, December 09, 2011: As India plans to invest over one trillion dollars on infrastructure projects in the next five years, Chinese companies are gearing up to participate in the process.
Mr Wang Xuefeng, Minister at the Embassy of China in India, said the country has several competitive advantages in manufacturing and infrastructure construction. “The Indian government’s plan to invest one trillion dollars on infrastructure projects offers excellent opportunity for Chinese companies to participate.”
He was addressing delegates at a roundtable conference titled ‘India China Economic Cooperation: Win Win Situation’ organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM). “In the past three years, Chinese enterprises have completed India infrastructural projects with a total value of ten billion dollars. The two-way investment is also showing a booming trend. China’s ever-growing market also means huge space for Indian companies.”
Mr Wang brushed aside fears of hike in tariff and non-tariff barriers on imports of some Chinese goods by India or a complete ban on specific items like power and telecom equipment. China has already raced past the United States, Britain and Japan to become India’s largest trading partner.
Trade between the world’s most populous nations with 2.5 billion people jumped 20-fold from 2.9 billion dollars in 2000 to more than 60 billion dollars in 2010. It is likely to cross 70 billion dollars this year and reach 100 billion dollars in the next four years.
Dr Subramaniam Swamy, president of the Janata Party who did doctoral research on the Chinese economy at Harvard University, said India and China should identify complementarities in manufacturing, services, innovation, research and development, banking and finance, energy, and environment.
For instance, he said, hydrogen fuel cells have a great future and can reduce dependence on hydrocarbons. “We must create an atmosphere of negotiated settlements as stable economic cooperation requires complete and clear political understanding.”
After the United States, China is the world’s second largest economy with a GDP of 5.6 trillion dollars in 2010 and growing at ten per cent in the past five years. India is the fourth largest economy in terms of purchasing power parity and expected to become the third largest by 2040.
Indian exports to China jumped 68.8 per cent to 19.6 billion dollars in 2010-11 from 11.6 billion dollars in the previous year. The imports also increased 41 per cent to 43.5 billion dollars from 30.8 billion dollars in the same period.
Most Indian exports to China comprise of metals, ores, iron and steel besides cotton while imports are of electrical machinery and equipment, nuclear reactors and boilers, organic chemicals, fertilisers, iron and steel. Top
FDI Retail on Hold – ASSOCHAM reaction
New Delhi, December 07, 2011: Industry body ASSOCHAM said holding back the Cabinet decision on FDI in retail due to political opposition is a clear case of missed opportunity which will dent the country’s image as a global investment destination and put further pressure on the falling rupee.
India needs domestic and foreign capital to build infrastructure and re-balance its widening current account deficit, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM). “This decision will send a very negative message to foreign investors,” said secretary general D.S. Rawat.
“It is a clear case of missed opportunity which would have created over 10 million of new jobs in three years, curbed agricultural wastages, benefited farmers with better remuneration for their produce and brought down prices of many commodities for consumers.”
Foreign direct investments in many sectors like information and communication technology have resulted in enormous spin-off benefits including introduction of efficiencies and modern management practices besides creating new jobs, he said. Top
CEOs have muted investment plans for 2012 both in India and abroad: CII Survey
New Delhi, December 05, 2011: CII conducted a snap poll among leading CEOs of the country to assess their outlook on investments in view of the current economic slowdown. “Given the downturn in investor sentiment and the decline in fixed capital formation seen in the second quarter GDP numbers, such a survey is of great relevance,” said Mr. Chandrajit Baneerjee, Director General, CII. CII’s CEO Snap Poll also served to gauge the appetite for outward investment in the back drop of the ongoing European crisis.
The survey revealed that only 33.3% of respondents expect domestic investments to increase by more than 10% in 2012 while 66.7% expect it to increase by less than 10% or to decline. Similarly, 32.1% of respondents expect international investments to increase by more than 10% while 67.9% expect it to increase by less than 10% or to decline. “It is worrying to note that a majority of CEOs have muted investment plans both in India and abroad, reflecting the difficult environment for investments,” said Mr. Banerjee.
When asked to rate specific factors that are holding back domestic investments, the respondents rated land availability, availability and cost of power environmental clearances and high cost of capital as issues of high importance in that order while issues such as transportation infrastructure, labor reforms and taxation regime were perceived as moderately important. Other issues included governance, discretionary powers, slowness of decision making, high transaction costs and corruption. However, a majority of respondents felt that the New Manufacturing Policy announced recently is likely to improve the investment environment.
When asked about the significance of the Eurozone for the Indian economy, more than half the respondents (60.6%) rated it as moderate while 33.3% said it was high and 6.1% felt it was low. However, a vast majority (over 80% in each case) felt that the sluggishness in the western world and growing uncertainty and risk averseness is likely to have a moderating impact on India’s exports, FDI, FII inflows and External Commercial Borrowings. The outlook with regard to PE investments was relatively less pessimistic with 75.8% expecting moderation. When asked whether India should contribute to the Eurozone’s bailout fund, 70.6% of the respondents said no, while 23.5% believed that India should contribute.
When asked whether the trend of Indian companies investing abroad would strengthen despite the global economic turmoil, 44.1% of respondents said yes while 35.3% said no and the rest said it was uncertain. “While the global crisis has made Indian companies more conservative towards investing abroad, many companies will continue to expand abroad,” said Mr. Banerjee.
Respondents revealed some of the countries and sectors where they are looking for international acquisitions or investments. Countries include Malaysia, Singapore, Indonesia, USA, Canada, Brazil, UK, Germany, Sweden, Austria, Nigeria, Sub-Saharan Africa, Russia, Italy, Vietnam, Argentina and Ukraine and sectors varied from Auto components, Automobiles, Bio manufacturing, Financial Services, IT services, Coal, Solar Power, Health and Chemicals.
To understand the motivation for Indian companies to invest abroad, the questionnaire asked which factor is more important: the pull factor i.e. the desire to increase global footprint/get access to natural resources or the push factor i.e. lack of opportunities/infrastructure bottlenecks at home. An overwhelming majority of 78.8% felt that the former was more important. When asked whether the signing of Free Trade Agreements with various countries provided an incentive for domestic companies to shift production base outside India given the better infrastructure and investment climate in these countries, the verdict was divided: 29.4% said yes, 35.3% said no and remaining said it was uncertain. Top
WPI – ASSOCHAM reaction
New Delhi, December 01, 2011: Industry body ASSOCHAM said the wholesale price index shows a fall in intensity of price rise. Over the past four weeks, inflation rate has progressively fallen from 12.08 per cent in the week ending October 22 to 7.74 per cent in the week ending November 19.
If the trend continues, the RBI should take a re-look at its monetary policy stance, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM). “In the context of declining GDP growth rates and sharp dip in the performance level of eight core industries released today, this will be a particularly welcome relief,” said secretary general D.S. Rawat.
Of the eight core industries, output of four shrank. “This is aggravating shortages of items like coal, fertilisers, natural gas and further contributing to pushing up costs of manufacturing sector,” he said. Top
ASSOCHAM calls for fundamental reforms in transfer pricing norms
New Delhi, December 01, 2011: Industry body ASSOCHAM today called for introducing fundamental reforms in transfer pricing regulations with in-built mechanisms for smooth negotiation and conflict resolution to avoid unnecessary litigation and reverse the risk of tax base erosion.
Radical changes are underway with the Direct Taxes Code likely to come into effect from next financial year (2012-13) but there is no formal mechanism for mediation under the law at present, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
Transfer price refers to the amount used in accounting for cross-border transfer of goods or services from one responsibility centre to another or from one company to another which belongs to the same group. It is a mechanism for distributing revenue between different divisions which jointly develop, manufacture and market products and services.
The transfer pricing disputes in India have so far involved officers and taxpayers locking horns on complex economic concepts relating to creation of intangibles, location savings and benefits commensurate with payments. A sizeable number of disputes arise solely on the ground of comparability or benchmarking analyses.
Transfer pricing regulations should introduce the concept of multiple years data not only from the perspective of compliance but more importantly for improving the quality of comparability analyses as repeatedly voiced by the Organisation for Economic Cooperation and Development (OECD) for comparability analyses, said ASSOCHAM secretary general D.S. Rawat.
Authorities should adopt the concept of inter-quartile range and median as better and more robust statistical tools, instead of arithmetic mean which produces biased results, he said in communication to the finance ministry.
Case studies prove that most transfer pricing adjustments on account of comparability analyses actually take place due to peculiarities of Indian transfer pricing regulations rather than business realities, said Mr Rawat.
Fiscal demands aggravated by downturn place significant pressure on governments to raise revenue and prevent tax base erosion. On the other hand, multinational enterprises face constant competitive pressure to structure global operations effectively and efficiently by achieving lower costs.
This results in substantial increase in number and size of audits, adjustments and disputes. Nearly 70 per cent of global transfer pricing litigations emanate from India. Top
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