The Finance Minister said the changes in tax slabs would benefit 60 per cent of taxpayers.
Changes in personal income tax slabs would help taxpayers save 4-6 per cent of their tax outgo, experts said.
Mukherjee's proposals sent cheers among taxpayers as they were not expecting any major changes before the implementation of the Direct Taxes Code, which is likely to come in to force from April 1, 2011.
However, the changes in slabs as proposed in draft DTC would be much steeper as it suggested 10 per cent tax on income between Rs 1.6 lakh and Rs 10 lakh, 20 per cent on up to Rs 25 lakh and 30 per cent on income beyond that.
On the other hand, corporates were not upbeat on the proposal as they said what the government gave them by reducing surcharge has been taken back from increase in MAT.
The Finance Minister said the changes in tax slabs would benefit 60 per cent of taxpayers.
Changes in personal income tax slabs would help taxpayers save 4-6 per cent of their tax outgo, experts said.
Mukherjee's proposals sent cheers among taxpayers as they were not expecting any major changes before the implementation of the Direct Taxes Code, which is likely to come in to force from April 1, 2011.
However, the changes in slabs as proposed in draft DTC would be much steeper as it suggested 10 per cent tax on income between Rs 1.6 lakh and Rs 10 lakh, 20 per cent on up to Rs 25 lakh and 30 per cent on income beyond that.
On the other hand, corporates were not upbeat on the proposal as they said what the government gave them by reducing surcharge has been taken back from increase in MAT.
Saturday, February 27, 2010
Air travel to become costlier in 2010-2011
Air travel on all classes in both domestic and international sectors is likely to become costlier with the government expanding the scope of air transport services to attract service tax.
"The scope of air passenger transport service is being expanded to include domestic journeys and international journeys in any class," said the memorandum explaining the provisions of the 2010-11 Finance Bill, presented by Finance Minister Pranab Mukherjee in Parliament on Friday.
So far, service tax was imposed only on international travel on First and Business classes.
The government, however, has proposed to exclude from the taxable value the statutory taxes charged by foreign governments, it said, indicating airport taxes charged at foreign destinations.
The definition of 'airport services' was also being amended to include all services provided within the airport premises. An authorisation from the airport authority "would not be a pre-condition for taxing these services", it said.
The Finance Minister also announced that rate of tax on services will be retained at 10 per cent and added that certain services hitherto untaxed would be brought within the purview of service tax levy. These services will be notified separately, he added.
On the brighter side, the budget made a provision of Rs 1,200 crore equity infusion for Air India in the next fiscal as part of its financial restructuring process.
The ailing carrier will soon receive Rs 800 crore as the first tranche of equity infusion, which was cleared by the Cabinet recently.
The entire outlay of the Civil Aviation Ministry totals Rs 9,588.30 crore, of which budgetary support is Rs 2,000 crore.
The state-run Airports Authority of India has been provided with a budgetary support of Rs 600.50 crore out of which Rs 120.50 crore has been earmarked for development of airports in North-Eastern States.
The remaining Rs 480 crore is meant for development of airports in other crucial areas like Leh, Ajmer, Agatti, Port Blair, Tirupati and Puducherry, besides the satellite-based navigation project called GAGAN or GPS Aided Geo Augmented Navigation system.
A provision of Rs 40 crore has been made for development of a helipad at Rohini in Delhi to come up before the Commonwealth Games and for a helicopter training institute and heliport in Pune by the Pawan Hans Helicopters Limited.
"The scope of air passenger transport service is being expanded to include domestic journeys and international journeys in any class," said the memorandum explaining the provisions of the 2010-11 Finance Bill, presented by Finance Minister Pranab Mukherjee in Parliament on Friday.
So far, service tax was imposed only on international travel on First and Business classes.
The government, however, has proposed to exclude from the taxable value the statutory taxes charged by foreign governments, it said, indicating airport taxes charged at foreign destinations.
The definition of 'airport services' was also being amended to include all services provided within the airport premises. An authorisation from the airport authority "would not be a pre-condition for taxing these services", it said.
The Finance Minister also announced that rate of tax on services will be retained at 10 per cent and added that certain services hitherto untaxed would be brought within the purview of service tax levy. These services will be notified separately, he added.
On the brighter side, the budget made a provision of Rs 1,200 crore equity infusion for Air India in the next fiscal as part of its financial restructuring process.
The ailing carrier will soon receive Rs 800 crore as the first tranche of equity infusion, which was cleared by the Cabinet recently.
The entire outlay of the Civil Aviation Ministry totals Rs 9,588.30 crore, of which budgetary support is Rs 2,000 crore.
The state-run Airports Authority of India has been provided with a budgetary support of Rs 600.50 crore out of which Rs 120.50 crore has been earmarked for development of airports in North-Eastern States.
The remaining Rs 480 crore is meant for development of airports in other crucial areas like Leh, Ajmer, Agatti, Port Blair, Tirupati and Puducherry, besides the satellite-based navigation project called GAGAN or GPS Aided Geo Augmented Navigation system.
A provision of Rs 40 crore has been made for development of a helipad at Rohini in Delhi to come up before the Commonwealth Games and for a helicopter training institute and heliport in Pune by the Pawan Hans Helicopters Limited.
Rupee to get unique symbol in 2010-2011
The Indian Rupee will this fiscal join the elite league of global currencies like US dollar, British Pound and Euro that have their unique symbols, Finance Minister Pranab Mukherjee said on Friday.
"In the ensuing year, we intend to formalise a symbol for the Indian Rupee, which reflects and captures the Indian ethos and culture," he announced in his Budget speech in Parliament.
"With this, Indian Rupee will join the select club of currencies such as the US Dollar, British Pound Sterling, Euro and Japanese Yen that have a clear distinguishing identity," he said.
While these foreign currencies have their own unique symbols, other than their abbreviations like USD and GBP, Rupee is only referred to by the abbreviation 'Rs'. Moreover, the same abbreviated forms are also in neighbouring countries like Pakistan, Nepal and Sri Lanka rupee.
The decision to have a symbol for Rupee was taken by the government last year. It was also decided to invite designs from the public for the new symbol. The shortlisted designers would present their designs to a seven-member jury, comprising of officials from the government and RBI as also people from institutes like J J Institute of Applied Art, National Institute of Design, Lalit Kala Akademi and Indira Gandhi National Centre.
"In the ensuing year, we intend to formalise a symbol for the Indian Rupee, which reflects and captures the Indian ethos and culture," he announced in his Budget speech in Parliament.
"With this, Indian Rupee will join the select club of currencies such as the US Dollar, British Pound Sterling, Euro and Japanese Yen that have a clear distinguishing identity," he said.
While these foreign currencies have their own unique symbols, other than their abbreviations like USD and GBP, Rupee is only referred to by the abbreviation 'Rs'. Moreover, the same abbreviated forms are also in neighbouring countries like Pakistan, Nepal and Sri Lanka rupee.
The decision to have a symbol for Rupee was taken by the government last year. It was also decided to invite designs from the public for the new symbol. The shortlisted designers would present their designs to a seven-member jury, comprising of officials from the government and RBI as also people from institutes like J J Institute of Applied Art, National Institute of Design, Lalit Kala Akademi and Indira Gandhi National Centre.
Govt to infuse Rs 16,500 cr in PSU banks
The government said it would provide Rs 16,500 crore financial assistance, over and above Rs 1,200 crore being infused now, to the public sector banks for augmenting their capital.
"An additional sum of Rs 1,200 crore is being infused now. For the year 2010-11, it is proposed to provide a sum of Rs 16,500 crore to ensure that the public sector banks are able to attain a minimum 8 per cent Tier-I capital by March 31, 2011," Finance Minister Pranab Mukherjee said while presenting Budget.
The government infused Rs 1,900 crore in 2008-09 as Tier-I capital in four public sector banks to maintain a comfortable level of capital to Risk Weighted Asset Ratio, he said.
Besides, the Finance Minister proposed to provide capital support to Regional Rural Banks (RRBs) to enhance their capacity to lend.
"RRBs which were last capitlised in 2006-07 are proposed to be further strengthened by providing additional capital so that they have adequate capital base to support increased lending to the rural economy," he said.
"An additional sum of Rs 1,200 crore is being infused now. For the year 2010-11, it is proposed to provide a sum of Rs 16,500 crore to ensure that the public sector banks are able to attain a minimum 8 per cent Tier-I capital by March 31, 2011," Finance Minister Pranab Mukherjee said while presenting Budget.
The government infused Rs 1,900 crore in 2008-09 as Tier-I capital in four public sector banks to maintain a comfortable level of capital to Risk Weighted Asset Ratio, he said.
Besides, the Finance Minister proposed to provide capital support to Regional Rural Banks (RRBs) to enhance their capacity to lend.
"RRBs which were last capitlised in 2006-07 are proposed to be further strengthened by providing additional capital so that they have adequate capital base to support increased lending to the rural economy," he said.
Union Budget 2010: Winners and losers
India needs to review public spending and improve its fiscal position, Finance Minister Pranab Mukherjee said on Friday, kicking-off the presentation of his budget for the fiscal year that starts on April 1.
Following are the major sectors that are likely to gain or lose from the proposals of the budget:
WINNERS:
* Construction and engineering companies such as Larsen & Toubro, GMR Infrastructure, Jaiprakash Associates and Gammon Infra on proposal to invest 1.73 trillion rupees ($7.4 billion) on infrastructure in 2010/11.
The capital good index was up 1.8 per cent by 0804 GMT, in line with the rise in the broader market.
* Real estate firms such as DLF, Unitech and Sobha Developers after the budget proposed to give developers tax deductions on existing projects and relaxed norms for built-up area. The sector index was up 4.8 per cent.
* Drugmakers such as Dr Reddy's Laboratories, Cipla and Biocon after weighted deduction on in-house research and development expenses was proposed to be raised to 200 per cent from 150 per cent now.
* Hospitality services providers such as Indian Hotels, EIH and Taj GVK Hotels on proposal to allow firms setting up new two-star and above hotels to claim investment-linked tax deduction.
* State-run bank shares such as State Bank of India, Andhra Bank, Canara Bank and Bank of India on proposal to provide 165 billion rupees ($3.6 billion) for recapitalisation. The sector index was up 3.3 per cent.
* Education service providers such as Educomp Solutions, NITT and Aptech after the budget increased allocation to the education sector to 1.38 trillion rupees in the union budget.
LOSERS:
* Outsourcers such as Infosys Technologies, Tata Consultancy Services and Wipro on no mention of extension of a tax holiday scheme for software firms in the budget speech. The tax break ends in March 2011. The sector index was flat in a firm market.
* Cigarette makers such as ITC after the budget proposed to raise excise duty on tobacco products. Shares in ITC was down 3.6 per cent, after having fallen as much as 4 per cent earlier.
Following are the major sectors that are likely to gain or lose from the proposals of the budget:
WINNERS:
* Construction and engineering companies such as Larsen & Toubro, GMR Infrastructure, Jaiprakash Associates and Gammon Infra on proposal to invest 1.73 trillion rupees ($7.4 billion) on infrastructure in 2010/11.
The capital good index was up 1.8 per cent by 0804 GMT, in line with the rise in the broader market.
* Real estate firms such as DLF, Unitech and Sobha Developers after the budget proposed to give developers tax deductions on existing projects and relaxed norms for built-up area. The sector index was up 4.8 per cent.
* Drugmakers such as Dr Reddy's Laboratories, Cipla and Biocon after weighted deduction on in-house research and development expenses was proposed to be raised to 200 per cent from 150 per cent now.
* Hospitality services providers such as Indian Hotels, EIH and Taj GVK Hotels on proposal to allow firms setting up new two-star and above hotels to claim investment-linked tax deduction.
* State-run bank shares such as State Bank of India, Andhra Bank, Canara Bank and Bank of India on proposal to provide 165 billion rupees ($3.6 billion) for recapitalisation. The sector index was up 3.3 per cent.
* Education service providers such as Educomp Solutions, NITT and Aptech after the budget increased allocation to the education sector to 1.38 trillion rupees in the union budget.
LOSERS:
* Outsourcers such as Infosys Technologies, Tata Consultancy Services and Wipro on no mention of extension of a tax holiday scheme for software firms in the budget speech. The tax break ends in March 2011. The sector index was flat in a firm market.
* Cigarette makers such as ITC after the budget proposed to raise excise duty on tobacco products. Shares in ITC was down 3.6 per cent, after having fallen as much as 4 per cent earlier.
BOLD Moves in Budget 2010 by Pranab Mukherjee
Shedding his trademark conservatism, Union Finance Minister Pranab Mukherjee made bold moves that, he hopes, will catapult India into a high-growth — and sustainable — orbit. His Budget for 2010-11 smartly blends fiscal correction with tax relief in a year when domestic recovery seems to be firmly setting in although doubts still persist globally.
Projecting a promising macro-economic picture of 8 per cent growth, 4.5 per cent inflation and 5.5 per cent of GDP fiscal deficit for the coming year, Mukherjee did not lose sight of the various small things that buttress the modest Budget estimates.
He gave a firm timeline for implementing the biggest of all tax reforms — the Goods and Services Tax regime from April 1, 2011 and the Direct Tax Code from the assessment year 2011-12. The market loves certainty — the Sensex jumped 415 points before closing 175 points up — after four disappointing years.
He put more money in the hands of 25 million taxpayers; those earning over Rs 8 lakh a year will save a neat Rs 4,300 a month. He took a host of other small measures that got lost in the din the Opposition raised after he hiked the excise duty on diesel and petrol by Re 1 a litre, making them dearer by Rs 2.67 a litre and Rs 2.58, respectively in Delhi.
Interestingly, the Finance Minister seems to have taken note of his Chief Economic Advisor Kaushik Basu’s observation of how the long-term plot is oft lost in pursuit of the short-term.
For instance, he promised to award banking again to private companies and NBFCs — Aditya Birla Group and Anil Ambani’s Reliance Capital were the first ones to evince interest. Banking licence was last given to Yes Bank in 2005.
Similarly, he set up a Financial Sector Legislative Reforms Commission to not just weed out irritants in existing laws but also to bring them in sync with today’s dynamic market environment. He gave form to Raghuram Rajan’s idea of a Financial Stability and Development Council to resolve issues falling under the purview of more than one regulator. Finally, an Independent Evaluation Office to objectively assess public programmes will ultimately serve to put an end to schemes that achieve little.
A practical Mukherjee did not rush to exit from the stimulus but shrewdly protected the government’s revenues by raising about half the extra Rs 46,500 crore indirect tax revenues largely from two measures — a 5 per cent customs duty on crude imports and a Re 1 excise hike on petrol and diesel.
The impact of a 2 percentage point increase in Cenvat that in effect leads to a convergence of the tax rate on goods and services at 10 per cent lends credence to his intent of GST introduction next year. He had to do this to subsume the Rs 26,000-crore giveaway to the aam aadmi by raising tax slabs. Nevertheless, his new tax measures earned him an extra Rs 26,500 crore.
What can queer the pitch though is the inflation that the Budget appears to stoke and uncertain global market conditions that can undermine his ambitious plan to raise Rs 40,000 crore through sell-off.
A rise in petroleum products prices, Mukherjee said, will directly add 0.41 per cent to the wholesale price index based inflation. There is a risk it will seep into the manufacturing and services sectors with global commodity prices already on an upswing.
The fear of food price-induced inflation, currently pegged at 8.63 per cent, transforming itself into a high generalized inflation looks real. The Budget, however, assumes inflation to average at 4.5 per cent for 2010-11.
Even if it does call for major policy adjustments, Mukherjee’s Budget Estimates for 2010-11 are modest.
He has kept non-Plan expenditure more or less at this year’s level and, in fact, slashed petroleum and fertiliser subsidies. The total expenditure has risen just 8.5 per cent. Revenue receipts, on the back of robust corporate tax collections and a one-time gain of Rs 35,000 crore from 3G auction, are projected to jump 18 per cent (again modest given his estimate of a 12.5 per cent nominal growth in GDP), letting him keep his promise of cutting deficit to 5.5 per cent of the GDP for 2010-11.
Projecting a promising macro-economic picture of 8 per cent growth, 4.5 per cent inflation and 5.5 per cent of GDP fiscal deficit for the coming year, Mukherjee did not lose sight of the various small things that buttress the modest Budget estimates.
He gave a firm timeline for implementing the biggest of all tax reforms — the Goods and Services Tax regime from April 1, 2011 and the Direct Tax Code from the assessment year 2011-12. The market loves certainty — the Sensex jumped 415 points before closing 175 points up — after four disappointing years.
He put more money in the hands of 25 million taxpayers; those earning over Rs 8 lakh a year will save a neat Rs 4,300 a month. He took a host of other small measures that got lost in the din the Opposition raised after he hiked the excise duty on diesel and petrol by Re 1 a litre, making them dearer by Rs 2.67 a litre and Rs 2.58, respectively in Delhi.
Interestingly, the Finance Minister seems to have taken note of his Chief Economic Advisor Kaushik Basu’s observation of how the long-term plot is oft lost in pursuit of the short-term.
For instance, he promised to award banking again to private companies and NBFCs — Aditya Birla Group and Anil Ambani’s Reliance Capital were the first ones to evince interest. Banking licence was last given to Yes Bank in 2005.
Similarly, he set up a Financial Sector Legislative Reforms Commission to not just weed out irritants in existing laws but also to bring them in sync with today’s dynamic market environment. He gave form to Raghuram Rajan’s idea of a Financial Stability and Development Council to resolve issues falling under the purview of more than one regulator. Finally, an Independent Evaluation Office to objectively assess public programmes will ultimately serve to put an end to schemes that achieve little.
A practical Mukherjee did not rush to exit from the stimulus but shrewdly protected the government’s revenues by raising about half the extra Rs 46,500 crore indirect tax revenues largely from two measures — a 5 per cent customs duty on crude imports and a Re 1 excise hike on petrol and diesel.
The impact of a 2 percentage point increase in Cenvat that in effect leads to a convergence of the tax rate on goods and services at 10 per cent lends credence to his intent of GST introduction next year. He had to do this to subsume the Rs 26,000-crore giveaway to the aam aadmi by raising tax slabs. Nevertheless, his new tax measures earned him an extra Rs 26,500 crore.
What can queer the pitch though is the inflation that the Budget appears to stoke and uncertain global market conditions that can undermine his ambitious plan to raise Rs 40,000 crore through sell-off.
A rise in petroleum products prices, Mukherjee said, will directly add 0.41 per cent to the wholesale price index based inflation. There is a risk it will seep into the manufacturing and services sectors with global commodity prices already on an upswing.
The fear of food price-induced inflation, currently pegged at 8.63 per cent, transforming itself into a high generalized inflation looks real. The Budget, however, assumes inflation to average at 4.5 per cent for 2010-11.
Even if it does call for major policy adjustments, Mukherjee’s Budget Estimates for 2010-11 are modest.
He has kept non-Plan expenditure more or less at this year’s level and, in fact, slashed petroleum and fertiliser subsidies. The total expenditure has risen just 8.5 per cent. Revenue receipts, on the back of robust corporate tax collections and a one-time gain of Rs 35,000 crore from 3G auction, are projected to jump 18 per cent (again modest given his estimate of a 12.5 per cent nominal growth in GDP), letting him keep his promise of cutting deficit to 5.5 per cent of the GDP for 2010-11.
Aam admi cries - Budget 2010 India
By the time you read this, petrol prices would in all likelihood have gone up by over Rs 2.70 a litre and diesel by Rs 2.55 as the FM played ducks and drakes with customs and excise duties on motor fuels. This practically bushwhacked a chance of giving state-run oil marketers at least some freedom to decide pump prices in line with international markets.
An increase in prices was expected after the Budget as part of what was anticipated to be at least a partial deregulation.
The revised prices would have shored up the sagging bottomlines of state-run oil marketers, some of whom are facing bankruptcy due to mounting losses from selling fuels at government-capped prices. The government too would have benefited through the incremental increase in the variable tax components in fuel prices.
The Budget may have created the ground for a political roadblock in the way of deregulation by raising customs on petrol and diesel from 2.5% to 7.5%, restoring 5% import duty on crude and increasing excise by Re 1 a litre. The net impact of the move will actually push up motor fuel prices by almost Rs 3 a litre due to the impact of the budget rejig and the incremental increase in local taxes.
After such a steep increase, it appears politically impossible for the oil ministry to push for pricing reforms in line with the Kirit Parikh panel's recommendations since that would entail another increase in excess of Rs 4 a litre for petrol and more than Rs 2 for diesel in a free-market regime.
Essentially then, it is back to haggling for dole for oil minister Murli Deora unless he musters the courage to raise prices by at least another rupee or so in tandem with the duty rejig — and give it a guise of limited pricing freedom.
Dole, too, should not be a problem for the FM since he can hand back some of the Rs 26,000 crore he will mop up from the petro duty rejig to keep state oil marketers afloat.
This, some expect, is the only option left for Deora's ministry. No wonder, despite being unhappy with the duty hikes, they still see a ray of hope for reforms. Essar Oil CEO Naresh Nayyar told the Times of India, "The changes in the duty will have some negative impact on the profitability of the domestic refineries. However, there are clear-cut signs of a move towards deregulation in the automobile fuel sector which is expected to have a positive impact on private sector marketing companies."
The restoration of customs on crude will also adversely impact private refiners such as Reliance Industries and Essar Oil as their input costs will go up. Beyond the duty rejig, the increase in MAT to 18% will also hurt exploration firms and other companies that are implementing big projects during their tax holiday period.
An increase in prices was expected after the Budget as part of what was anticipated to be at least a partial deregulation.
The revised prices would have shored up the sagging bottomlines of state-run oil marketers, some of whom are facing bankruptcy due to mounting losses from selling fuels at government-capped prices. The government too would have benefited through the incremental increase in the variable tax components in fuel prices.
The Budget may have created the ground for a political roadblock in the way of deregulation by raising customs on petrol and diesel from 2.5% to 7.5%, restoring 5% import duty on crude and increasing excise by Re 1 a litre. The net impact of the move will actually push up motor fuel prices by almost Rs 3 a litre due to the impact of the budget rejig and the incremental increase in local taxes.
After such a steep increase, it appears politically impossible for the oil ministry to push for pricing reforms in line with the Kirit Parikh panel's recommendations since that would entail another increase in excess of Rs 4 a litre for petrol and more than Rs 2 for diesel in a free-market regime.
Essentially then, it is back to haggling for dole for oil minister Murli Deora unless he musters the courage to raise prices by at least another rupee or so in tandem with the duty rejig — and give it a guise of limited pricing freedom.
Dole, too, should not be a problem for the FM since he can hand back some of the Rs 26,000 crore he will mop up from the petro duty rejig to keep state oil marketers afloat.
This, some expect, is the only option left for Deora's ministry. No wonder, despite being unhappy with the duty hikes, they still see a ray of hope for reforms. Essar Oil CEO Naresh Nayyar told the Times of India, "The changes in the duty will have some negative impact on the profitability of the domestic refineries. However, there are clear-cut signs of a move towards deregulation in the automobile fuel sector which is expected to have a positive impact on private sector marketing companies."
The restoration of customs on crude will also adversely impact private refiners such as Reliance Industries and Essar Oil as their input costs will go up. Beyond the duty rejig, the increase in MAT to 18% will also hurt exploration firms and other companies that are implementing big projects during their tax holiday period.
Pranab juggles duties on petroleum products
With Finance Minister Pranab Mukherjee tinkering with the customs duty and excise structure, the oil marketing companies (OMCs) have increased petrol and diesel prices by Rs. 2.71 and Rs. 2.55 a litre respectively with effect from midnight on Friday night.
The OMCs “are not in a position to absorb the incidence of increased taxation and are passing it on to consumers, resulting in an increase in petrol and diesel price,” Petroleum Secretary S. Sundareshan told journalists here after consultations with Petroleum and Natural Gas Minister Murli Deora.
The hike also indicates that the Kirit Parikh Committee report has been put on the hold. It recommended that petrol and diesel prices be decontrolled.
On the Committee report, which also recommended a steep hike of Rs. 100 a cylinder of domestic LPG and a Rs. 6 a litre increase in kerosene rates, Mr. Mukherjee said a decision on these suggestions would be taken by “my colleague, the Petroleum and Natural Gas Minister, in due course.”
Mr. Deora said the Ministry would take a view on the Committee report in a week or 10 days.
If the customs and excise duty hikes were not passed on to consumers, the revenue loss to the state-owned firms would rise by Rs. 17,240 crore over and above the Rs. 45,571-crore loss estimated for the full year on selling petrol, diesel, domestic LPG and kerosene below cost, Mr. Mukherjee said.
He also indicated that the era of issuing oil bonds was over and instead cash subsidy would be given directly from the budget. The budget proposal to raise customs duty on other specified petroleum products from five to 10 per cent would result in aviation turbine fuel (ATF) prices going up by Rs. 1,000 to Rs. 1,500 a kilolitre.
LPG and kerosene
The LPG and kerosene subsidy at Rs. 3,108 crore for 2010-11 was almost unchanged from the allocation for the previous fiscal.
During the current year, the Indian Oil Corporation, the Hindustan Petroleum Corporation and the Bharat Petroleum Corporation lost Rs. 31,574 crore in revenue on selling LPG and kerosene below cost. In spite of the Finance Minister providing oil bonds for an additional Rs. 11,845 crore, the deficit is still huge at Rs. 19,729 crore.
“In the wake of spiralling petroleum prices, the government provided full exemption from basic custom duty to crude petroleum and proportionately reduced the basic duty on refined petroleum products in June 2008. Compared to the international price of the Indian crude basket of $112 per barrel at the time, the prices are much softer at present,” Mr. Mukherjee said.
Budget 2010: Baby steps towards oil sector reforms
The petroleum sector, for long, a ward of the government, may be seeing light at the end of the tunnel on reforms with the increase in customs and excise duty on crude and petroleum products. But it may well turn out to be a mirage, given the opposition from rival parties and some within the ruling coalition.
“There are clear-cut signs of deregulation in the auto fuel sector, which will have a positive impact on private sector marketing companies,” said Naresh Nayyar, MD and CEO of Essar Oil, a victim of the government’s subsidised fuel policy.
Pranab Mukherjee said he was restoring the basic duty of 5% on crude petroleum, 7.5% on diesel and petrol and 10% on other refined products. He also enhanced the central excise duty on petrol and diesel by Re 1 per litre. Petrol prices will rise by Rs 2.71 a litre and diesel by Rs 2.55. Opposition parties walked out of Parliament in protest.
Another indication that the government is moving towards reforming the sector is that it cut subsidy on petroleum products to Rs 3,108 crore next fiscal, from Rs 14,954 crore this year. Probably, Mr Mukherjee is \factoring in the subsidy for the poor man’s fuel — kerosene — and not for petrol and diesel mostly used by the affluent.
While a section of the industry is taking the levy of taxes as a reform measure, some say it may be just a way to enhance revenues. Also, the payment of subsidies in cash instead of oil bonds has led to the belief that the government may have no option but to let oil companies raise prices in line with international crude oil prices, if they have to survive. Crude prices have more than doubled in the past year, but are off their all-time highs.
While the imposition of duties will fetch the government revenue of Rs 18,680 crore, it would hardly address the chronic problem of oil marketing companies (OMCs) such as IndianOil and Hindustan Petroleum, which bleed due to subsidies. These companies, which in the past had contributed as much as 25% of tax receipts, may report a loss of Rs 45,000 crore this fiscal.
“Prices of fuel will go up, but this will not help the oil companies or reduce their losses as the price rise is due to higher levy,” a marketing official at IOC said.
The government will be left with no option, but to free pump prices of petrol and diesel, said a senior oil ministry official who did not want to be identified.
The finance ministry budgeted Rs 12,000 crore as cash compensation for the three state-owned OMCs for 2009-10 against their demand of Rs 31,000 crore, just for selling cooking fuel below cost.
The taxes may have been raised, but the reform could be a long way off. “I am not the only one who has to decide (on reform)... we have to consult a lot of others,” petroleum minister Murli Deora told reporters.
“There are clear-cut signs of deregulation in the auto fuel sector, which will have a positive impact on private sector marketing companies,” said Naresh Nayyar, MD and CEO of Essar Oil, a victim of the government’s subsidised fuel policy.
Pranab Mukherjee said he was restoring the basic duty of 5% on crude petroleum, 7.5% on diesel and petrol and 10% on other refined products. He also enhanced the central excise duty on petrol and diesel by Re 1 per litre. Petrol prices will rise by Rs 2.71 a litre and diesel by Rs 2.55. Opposition parties walked out of Parliament in protest.
Another indication that the government is moving towards reforming the sector is that it cut subsidy on petroleum products to Rs 3,108 crore next fiscal, from Rs 14,954 crore this year. Probably, Mr Mukherjee is \factoring in the subsidy for the poor man’s fuel — kerosene — and not for petrol and diesel mostly used by the affluent.
While a section of the industry is taking the levy of taxes as a reform measure, some say it may be just a way to enhance revenues. Also, the payment of subsidies in cash instead of oil bonds has led to the belief that the government may have no option but to let oil companies raise prices in line with international crude oil prices, if they have to survive. Crude prices have more than doubled in the past year, but are off their all-time highs.
While the imposition of duties will fetch the government revenue of Rs 18,680 crore, it would hardly address the chronic problem of oil marketing companies (OMCs) such as IndianOil and Hindustan Petroleum, which bleed due to subsidies. These companies, which in the past had contributed as much as 25% of tax receipts, may report a loss of Rs 45,000 crore this fiscal.
“Prices of fuel will go up, but this will not help the oil companies or reduce their losses as the price rise is due to higher levy,” a marketing official at IOC said.
The government will be left with no option, but to free pump prices of petrol and diesel, said a senior oil ministry official who did not want to be identified.
The finance ministry budgeted Rs 12,000 crore as cash compensation for the three state-owned OMCs for 2009-10 against their demand of Rs 31,000 crore, just for selling cooking fuel below cost.
The taxes may have been raised, but the reform could be a long way off. “I am not the only one who has to decide (on reform)... we have to consult a lot of others,” petroleum minister Murli Deora told reporters.
Thursday, February 25, 2010
A beginner's guide to the Union Budget
As finance minister Pranab Mukherjee gets ready to present the much anticipated budget for financial year (FY) 2010-11 on February 26, here is what you ought to know about the Union budget. It will help you understand and analyse the budget.
What does the Union Budget contain?
The Union Budget is our country's annual financial statement of receipts and expenditures for the coming financial year -- similar to an individual's personal cash flow statement but prepared on an annual basis. It contains the expected revenues (to be received) and expected expenditures (to be met) in the coming FY by the Government of India. It is supposed to be an indicator of the economic growth and the financial well being of our country.
When is the Union Budget presented?
The presentation of the Union Budget is usually done on the last working day of February. This year, however, it will be presented on February 26 as the last working day falls on a Sunday. The current budget being presented is for the coming financial year: FY 2010-11.
Who prepares Government's annual budget?
There's a separate division in the Ministry of Finance called as the 'Budget Division' to look after the preparation of the Budget.
Budget process
Here are the various stages through which the Union Budget goes through before it is passed in the lower house of Parliament (Lok Sabha) after which the President of India signs it and it becomes an Act:
- Every year, the 'Budget Division' under the Ministry of Finance is responsible for the preparation of the budget. All government ministries & departments send in their funds' proposals and requirements
- Based on the inputs, a Draft Budget is prepared
- The draft budget is then approved by the Finance Minister in consultation with the Prime Minister
- A final budget is then presented in the Parliament
- A discussion on the budget is held in the Parliament (regarding each ministry's grant proposals) and Finance Minister responds to questions. Revision of tax (direct & indirect) proposals are also discussed & voted upon here
- Once the grants are approved, 2 bills are introduced in the Lok Sabha -- Appropriation Bill (final approval of funds to be given to each ministry) and Finance Bill (tax proposals). Union Budget is then
Budget terms you should know
1. Budget estimate
The Budget estimate is an assessment of the Government's revenues and expenses for the coming FY. The government makes an assessment of the expenditure to be incurred and revenue (or income) to be received.
2. Central plan/Annual plan
The government's Five-Year plans are split into Central Plans or Annual Plans and necessary funds are allocated every year through the Union Budget to achieve the laid-out goals (social & welfare commitments).
3. Consolidated Fund of India
This is the government's savings account. All money received by government (in any form) is placed here. All expenses are met from this account. Withdrawal is subject to Parliament's authorisation.
4. Public account
It is an account where money received through transactions not relating to consolidated fund is kept.
5. Contingency Fund of India
As the name suggests, money from this account is only for contingencies (such as floods, drought, other national calamities, disasters etc). Withdrawal is subject to Parliament's authorisation.
6. Revenue account
This is the income & expenditure statement of the government containing details of revenue spent in comparison with revenue received.
Revenue receipts: The government earns revenue in the form of taxes (direct and indirect taxes), duties (excise, custom), interest, and other fees collected.
Revenue expenditure: Any expenditure (other than for creation of capital asset) for the normal operation of the government is called revenue expenditure. Example, interest payments on government borrowing programme, salaries to government staff, subsidies etc.
The above expenditure must be financed from revenue receipts, ie revenue that the government earns.
7. Capital account
Alike Revenue Account, Capital Account is the statement containing details of capital expenditure incurred vis-a-vis capital receipts.
Capital receipts: Thye refer to the money that the government make via loans -- given to RBI, market advances, to foreign governments and other international organisations. Also, disinvestment proceeds fall into this category.
Capital expenditure: Refers to the money used up on creating capital assets (railways, express highways, airways, canals and dams, purchase of land, machinery and equipment), loans to state governments & government subsidiaries, and other investments made/incurred by the government.
8. Non-Plan expenditure
This consists of government's fixed expenditure like expenditure on defense, interest payments, subsidies and grants to states. This can be both revenue & capital in nature.
9. Plan expenditure
This consists of expenditure incurred on five-year plans and social and welfare commitments of the government (example, expenditure incurred on National Rural Employment Guarantee Scheme). Funds are allocated for this periodically.
10. Fiscal deficit
When the revenue receipts of the government falls short of its total expenditure, a fiscal deficit is created. In such a case, the Government resorts to borrowing to make good this shortfall.
11. Finance Bill
This consists of the proposed amendments to taxes (example, change in income tax slabs etc) and their impact on the Government's revenue resources.
12. Direct and indirect taxes
Direct Taxes: Taxes cut directly from salary, business income or income from other sources are called direct taxes.
Indirect Taxes: Taxes added (indirectly) to the price of goods and services are called indirect taxes. Example: sales tax, excise duty and service tax.
13. Subsidies
Monetary concession given to producers or consumers of specific goods in order to control prices and manage resources for better utilisation.
This is what the Economic Survey 2009-10 says!
A day before the Budget, the Economic Survey on Thursday predicted up to 8.75 per cent growth in 2010-11 while recommending a gradual roll back of stimulus -- a move that could entail hike in excise duty and service tax.
Warning that high double digit food prices could lead to "higher-than-anticipated" general level of inflation, the Survey called for effective steps to be taken to remove supply-side bottlenecks together with other policies.
The Survey said the government policy, other calibrated measures and tax reliefs as contained in the stimulus have helped the economy shrug off effects of slowdown triggered by global financial meltdown in 2008.
The buoyancy in the economy in tandem with reforms would make India possibly the fastest growing economy in the next four years, it said while recommending that there was a need for improving government financial by way of raising tax and non-tax revenues and containing deficit.
Last week, the Prime Minister's Economic Advisory Council too had suggested partial roll back of stimulus measures, including raising excise duty and service tax rates.
The Survey also echoed this view: "The broad-based nature of the recovery creates scope for a gradual rollback, in due course, of some of the measures undertaken over the last 15-18 months. . . so as to put the economy back on to the growth path of nine per cent annually."
The economy is projected to grow by 7.2 per cent this fiscal with industrial and services sectors growing at 8.2 and 8.7 per cent, respectively. Full recovery is likely over the next two fiscals with up to 8.75 per cent growth in 2010-11 and nine per cent the subsequent year.
Critical about the government's policy, particularly over the very high consumer price inflation, the Survey said that the "hype" over kharif crop failure without taking into account the comfortable food stocks and rabi prospects "may have exacerbated inflationary expectations encouraging hoarding and resulting in a higher inflation in food items.
". . . in the case of sugar, delay in the market release of imported raw sugar may have contributed to the overall uncertainty, thereby allowing prices to rise to unacceptably high levels in recent months," it added.
Elaborating on the prospects in the short and medium terms, the Survey observed that gross domestic savings stood at 32.5 per cent of GDP in 2008-09, while the gross domestic capital formation (investment) was 34.9 per cent.
"The rates of savings and investment have reached levels that even ten years ago would have been dismissed as a pipedream for India. On this important dimension, India is now completely a part of the world's fastest growing economies."
Indian economy has been one of the least affected by the global crisis. "In fact, India is one of the growth engines, along with China, in facilitating faster turnaround of the global economy. Risks, however, remain," it added.
On the foreign trade front, which had taken a beating in 2009, the economic document said it is looking up with the prospects of recovery in the world output and trade volumes. The downside risks for world and Indian trade lie in the fact that though the fall has been arrested, both output and trade recoveries are still fragile given the fact that the recovery has been pumped up by the stimulus given by different countries, including India, the effects of which may dry up if natural recovery does not follow.
High food prices may trigger higher inflation
The Economic Survey warned that overall prices would go up further in the next few months and partially blamed poor food management policies for double-digit food inflation.
"Since December 2009 there have been signs of these high food prices, together with the gradual hardening of non-administered fuel products prices, getting transmitted to other non-food items, thus creating some concerns about higher-than-anticipated generalised inflation over the next few months," Economic Survey, tabled in Parliament, said.
On a year-on-year basis, Wholesale Prices-based inflation in December 2009 was 7.3 per cent, while food inflation was 19.77 per cent.
Higher food prices were mainly because of supply-side constraints, compounded by poor monsoons in 2009.
The government has taken a number of short-term and medium term measures to improve domestic availability of essential commodities and moderate inflation, it said.
Survey asks for gradual roll back of stimulus
Buoyed by the prospects of economy bouncing back to 9 per cent economic growth, the Economic Survey today suggested gradual roll back of stimulus steps unveiled in the wake of the global financial meltdown.
This, it said, would help cut down the fiscal deficit that is estimated at 6.8 per cent of GDP in 2009-10 that was fed by a fall in indirect tax collections and delay in 3G auction.
"The fast-paced recovery of the economy underscores the effectiveness of the policy response of the government in the wake of the financial crisis. Moreover, the broad-based nature of the recovery creates scope for a gradual rollback, in due course, of some of the measures undertaken over the last 15 to 18 months," said the Survey, tabled in Parliament.
This was part of the policy response to the global slowdown, "so as to put the economy back on the growth path of nine per cent per annum," it added.
With the stimulus measures primarily comprising cut in indirect taxes, the Survey said there is likely to be a shortfall in tax collections under these heads.
40 million households get jobs
With a budgetary outlay of over Rs 70,000 crore on various poverty alleviation and employment generation schemes, nearly four and half crore households have availed job opportunities, the Economic Survey said.
"During the year 2009-10, 4.34 crore households have been provided employment under the National Rural Employment Guarantee Scheme (NREGS)," the Survey for 2009-10 said.
In the previous financial year, over 4.51 crore households were provided employment under the scheme.
As against the budgetary outlay of Rs 39,100 crore for 2009-10 for NREGS, an amount of Rs 24,758.50 crore has been released to the states and union territories till December 2009, the Survey, tabled in Parliament, said.
Survey for freeing food, fertiliser, diesel prices
The Economic Survey asked the government to decontrol prices of food, fertiliser, diesel and kerosene, saying subsidies given to these sectors have a "questionable" impact.
Freeing prices from government control could help deploy large resources for financing other vital activities in the economy that could promote productivity and eradicate poverty.
"The impact of these (food, fertilisers, kerosene and diesel) subsidies, using the yardstick of poverty mitigation is, however, questionable", the Survey said.
The high level of subsidies "now constitutes a major fiscal burden and tends to crowd out the government's ability to finance other vital activities in the economy that could promote productivity and eradicate poverty," it added.
Already, the government's resources are strained due to various fiscal stimulus and the Survey has separately noted that high growth environment creates scope for partial rollback of these stimuli.
Warning that high double digit food prices could lead to "higher-than-anticipated" general level of inflation, the Survey called for effective steps to be taken to remove supply-side bottlenecks together with other policies.
The Survey said the government policy, other calibrated measures and tax reliefs as contained in the stimulus have helped the economy shrug off effects of slowdown triggered by global financial meltdown in 2008.
The buoyancy in the economy in tandem with reforms would make India possibly the fastest growing economy in the next four years, it said while recommending that there was a need for improving government financial by way of raising tax and non-tax revenues and containing deficit.
Last week, the Prime Minister's Economic Advisory Council too had suggested partial roll back of stimulus measures, including raising excise duty and service tax rates.
The Survey also echoed this view: "The broad-based nature of the recovery creates scope for a gradual rollback, in due course, of some of the measures undertaken over the last 15-18 months. . . so as to put the economy back on to the growth path of nine per cent annually."
The economy is projected to grow by 7.2 per cent this fiscal with industrial and services sectors growing at 8.2 and 8.7 per cent, respectively. Full recovery is likely over the next two fiscals with up to 8.75 per cent growth in 2010-11 and nine per cent the subsequent year.
Critical about the government's policy, particularly over the very high consumer price inflation, the Survey said that the "hype" over kharif crop failure without taking into account the comfortable food stocks and rabi prospects "may have exacerbated inflationary expectations encouraging hoarding and resulting in a higher inflation in food items.
". . . in the case of sugar, delay in the market release of imported raw sugar may have contributed to the overall uncertainty, thereby allowing prices to rise to unacceptably high levels in recent months," it added.
Elaborating on the prospects in the short and medium terms, the Survey observed that gross domestic savings stood at 32.5 per cent of GDP in 2008-09, while the gross domestic capital formation (investment) was 34.9 per cent.
"The rates of savings and investment have reached levels that even ten years ago would have been dismissed as a pipedream for India. On this important dimension, India is now completely a part of the world's fastest growing economies."
Indian economy has been one of the least affected by the global crisis. "In fact, India is one of the growth engines, along with China, in facilitating faster turnaround of the global economy. Risks, however, remain," it added.
On the foreign trade front, which had taken a beating in 2009, the economic document said it is looking up with the prospects of recovery in the world output and trade volumes. The downside risks for world and Indian trade lie in the fact that though the fall has been arrested, both output and trade recoveries are still fragile given the fact that the recovery has been pumped up by the stimulus given by different countries, including India, the effects of which may dry up if natural recovery does not follow.
High food prices may trigger higher inflation
The Economic Survey warned that overall prices would go up further in the next few months and partially blamed poor food management policies for double-digit food inflation.
"Since December 2009 there have been signs of these high food prices, together with the gradual hardening of non-administered fuel products prices, getting transmitted to other non-food items, thus creating some concerns about higher-than-anticipated generalised inflation over the next few months," Economic Survey, tabled in Parliament, said.
On a year-on-year basis, Wholesale Prices-based inflation in December 2009 was 7.3 per cent, while food inflation was 19.77 per cent.
Higher food prices were mainly because of supply-side constraints, compounded by poor monsoons in 2009.
The government has taken a number of short-term and medium term measures to improve domestic availability of essential commodities and moderate inflation, it said.
Survey asks for gradual roll back of stimulus
Buoyed by the prospects of economy bouncing back to 9 per cent economic growth, the Economic Survey today suggested gradual roll back of stimulus steps unveiled in the wake of the global financial meltdown.
This, it said, would help cut down the fiscal deficit that is estimated at 6.8 per cent of GDP in 2009-10 that was fed by a fall in indirect tax collections and delay in 3G auction.
"The fast-paced recovery of the economy underscores the effectiveness of the policy response of the government in the wake of the financial crisis. Moreover, the broad-based nature of the recovery creates scope for a gradual rollback, in due course, of some of the measures undertaken over the last 15 to 18 months," said the Survey, tabled in Parliament.
This was part of the policy response to the global slowdown, "so as to put the economy back on the growth path of nine per cent per annum," it added.
With the stimulus measures primarily comprising cut in indirect taxes, the Survey said there is likely to be a shortfall in tax collections under these heads.
40 million households get jobs
With a budgetary outlay of over Rs 70,000 crore on various poverty alleviation and employment generation schemes, nearly four and half crore households have availed job opportunities, the Economic Survey said.
"During the year 2009-10, 4.34 crore households have been provided employment under the National Rural Employment Guarantee Scheme (NREGS)," the Survey for 2009-10 said.
In the previous financial year, over 4.51 crore households were provided employment under the scheme.
As against the budgetary outlay of Rs 39,100 crore for 2009-10 for NREGS, an amount of Rs 24,758.50 crore has been released to the states and union territories till December 2009, the Survey, tabled in Parliament, said.
Survey for freeing food, fertiliser, diesel prices
The Economic Survey asked the government to decontrol prices of food, fertiliser, diesel and kerosene, saying subsidies given to these sectors have a "questionable" impact.
Freeing prices from government control could help deploy large resources for financing other vital activities in the economy that could promote productivity and eradicate poverty.
"The impact of these (food, fertilisers, kerosene and diesel) subsidies, using the yardstick of poverty mitigation is, however, questionable", the Survey said.
The high level of subsidies "now constitutes a major fiscal burden and tends to crowd out the government's ability to finance other vital activities in the economy that could promote productivity and eradicate poverty," it added.
Already, the government's resources are strained due to various fiscal stimulus and the Survey has separately noted that high growth environment creates scope for partial rollback of these stimuli.
Sunday, February 21, 2010
India, China should team up for 21st century
India and China are ancient civilisations, neighbours, the two most populous countries of the world, its two fastest-growing economies, friends in global power talks such as over climate change or world trade, rivals when it comes to winning friends and influencing people around the world, conquering export markets and cornering mineral resources. They tried to be bhai-bhai for some time, then fought a war.
There is no burning desire in either capital today for a mutual relationship as between blood brothers, nor is there any hunger to run a blood feud. The sensible course for both countries is to rid their rivalry of overt friction, extend the many areas of cooperation and share the special place in the sun reserved in the 21st century for those who work economic miracles.
The biggest irritant in India-China relations is a border dispute. The dispute is a colonial legacy. The British negotiated an agreement with Tibet in 1914 in an accord at Simla on the border with India and that border, named after the then British foreign secretary McMahon, is what the government of Independent India chose to uphold.
The Chinese never accepted this boundary, saying that Tibet never had the sovereign authority to negotiate a border. The Chinese claim some 150,000 sq km south of the McMahon line as theirs, while India deems this territory as its own.
It is debatable whether it made sense for New Delhi to view a boundary drawn by the former colonial power as the final word on defining the geographical limits of two territories that were new to nationhood but had coexisted for millennia as great civilisations that respected each other.
The Chinese are not prone to respecting other civilisations. For centuries, they considered their Middle Kingdom as the centre of the universe, as the epitome of human achievement. In early 15th century, legendary admiral Zheng led a naval expedition and explored south-east and south Asia and Africa (some claim he discovered Australia and even the Americas).
He reported back to the peacock throne that the rest of the world did not contain anything worth Chinese attention. But the Chinese had respect for India, as the land of the Buddha and as the land from which they procured valuable knowledge, including that of martial arts.
That culture of respect did not survive the colonial experience. The British left, leaving opium-smoking Chinamen and tea-swilling Indians calling each other names from either side of a border dispute, oblivious of the expiry date on the commercial interests that had made the British get the Chinese and Indians hooked to stimulants from across their disputed boundary.
Emancipation from this colonial hangover took time. The Chinese went through their wrenching experience of the Cultural Revolution followed by the restoration of order and a new game of cat and mouse in which the colour of the cat did not matter so long as it caught billions of mice.
India sent AB Vajpayee to Beijing as the foreign minister of the post-Emergency Janata government, and followed it up with a visit by Rajiv Gandhi as prime minister. Since then, the two countries have quarantined their border dispute to a committee of babus from both sides and proceeded to interact like two normal nations in other matters.
Overtly. Covertly, the Chinese tried their best to keep India tied down in a perpetual deadlock with Pakistan, proliferating nuclear technology and missiles to that country, using client state North Korea for the purpose. But India has outgrown that hyphenated relationship, and after the Bush administration went out of its way to get India quasi-membership of the nuclear club and, with it, release from the high-technology denial regime that had crimped the growth of its strategic capacity, is slated to fulfil the aspiration of all countries in south-east Asia and much of the world, of emerging as a strategic balancer of emerging Chinese power.
The world increasingly recognises China as the number two power in the world, after the US. The world, in the process, underestimates Europe, whose woolly incoherence prevents its economic might from translating into proportionate political clout. The world also underestimates Russia and India.
Indians mostly underestimate India vis-a-vis China. India is actually a more efficient economy than China, contrary to all impressions. Indians invest around 36% of their output and generate close to 9% growth (let’s set aside the post-Lehman phase of global crisis). The Chinese cannot invest all of the 55% of their output they save, and get about 10% growth from the 48% they invest. Per unit of capital, India squeezes out more growth than the Chinese do.
In India, capital is not subsidised. So, Indian entrepreneurs, without access to subsidised capital, optimise the use of capital. China is yet to experience this discipline arising out of allocation of capital by the market. Indian democracy sorts out problems as they crop up — if Singur is not sorted out to the satisfaction of the land-losers, nothing can come up on that land, so it will be sorted out, sooner or later.
The Maoist challenge to Indian sovereignty is another occasion to sort out a larger, systemic problem. And it will eventually get sorted out, the political system will adjust to give agency to the rural poor and the system will gather strength, politically and economically.
Absence of democracy makes the Chinese pile up their problems. They could blow up in another Tiananmen. Another factor in India’s favour is that India will reap its demographic dividend at a time when broadband access will be universal, creating the potential for a multiplier effect on the growth process.
But of course, all this depends on India delivering on its tryst with destiny, to end poverty and ignorance and disease and inequality of opportunity, for the people at large. The Indian elephant is hobbled only by its own, self-wrought entanglement in vines. Once it frees itself, it can saunter past the dragon and the fire it breathes. The Chinese have themselves denied their dragon wings, let’s not forget.
There is no burning desire in either capital today for a mutual relationship as between blood brothers, nor is there any hunger to run a blood feud. The sensible course for both countries is to rid their rivalry of overt friction, extend the many areas of cooperation and share the special place in the sun reserved in the 21st century for those who work economic miracles.
The biggest irritant in India-China relations is a border dispute. The dispute is a colonial legacy. The British negotiated an agreement with Tibet in 1914 in an accord at Simla on the border with India and that border, named after the then British foreign secretary McMahon, is what the government of Independent India chose to uphold.
The Chinese never accepted this boundary, saying that Tibet never had the sovereign authority to negotiate a border. The Chinese claim some 150,000 sq km south of the McMahon line as theirs, while India deems this territory as its own.
It is debatable whether it made sense for New Delhi to view a boundary drawn by the former colonial power as the final word on defining the geographical limits of two territories that were new to nationhood but had coexisted for millennia as great civilisations that respected each other.
The Chinese are not prone to respecting other civilisations. For centuries, they considered their Middle Kingdom as the centre of the universe, as the epitome of human achievement. In early 15th century, legendary admiral Zheng led a naval expedition and explored south-east and south Asia and Africa (some claim he discovered Australia and even the Americas).
He reported back to the peacock throne that the rest of the world did not contain anything worth Chinese attention. But the Chinese had respect for India, as the land of the Buddha and as the land from which they procured valuable knowledge, including that of martial arts.
That culture of respect did not survive the colonial experience. The British left, leaving opium-smoking Chinamen and tea-swilling Indians calling each other names from either side of a border dispute, oblivious of the expiry date on the commercial interests that had made the British get the Chinese and Indians hooked to stimulants from across their disputed boundary.
Emancipation from this colonial hangover took time. The Chinese went through their wrenching experience of the Cultural Revolution followed by the restoration of order and a new game of cat and mouse in which the colour of the cat did not matter so long as it caught billions of mice.
India sent AB Vajpayee to Beijing as the foreign minister of the post-Emergency Janata government, and followed it up with a visit by Rajiv Gandhi as prime minister. Since then, the two countries have quarantined their border dispute to a committee of babus from both sides and proceeded to interact like two normal nations in other matters.
Overtly. Covertly, the Chinese tried their best to keep India tied down in a perpetual deadlock with Pakistan, proliferating nuclear technology and missiles to that country, using client state North Korea for the purpose. But India has outgrown that hyphenated relationship, and after the Bush administration went out of its way to get India quasi-membership of the nuclear club and, with it, release from the high-technology denial regime that had crimped the growth of its strategic capacity, is slated to fulfil the aspiration of all countries in south-east Asia and much of the world, of emerging as a strategic balancer of emerging Chinese power.
The world increasingly recognises China as the number two power in the world, after the US. The world, in the process, underestimates Europe, whose woolly incoherence prevents its economic might from translating into proportionate political clout. The world also underestimates Russia and India.
Indians mostly underestimate India vis-a-vis China. India is actually a more efficient economy than China, contrary to all impressions. Indians invest around 36% of their output and generate close to 9% growth (let’s set aside the post-Lehman phase of global crisis). The Chinese cannot invest all of the 55% of their output they save, and get about 10% growth from the 48% they invest. Per unit of capital, India squeezes out more growth than the Chinese do.
In India, capital is not subsidised. So, Indian entrepreneurs, without access to subsidised capital, optimise the use of capital. China is yet to experience this discipline arising out of allocation of capital by the market. Indian democracy sorts out problems as they crop up — if Singur is not sorted out to the satisfaction of the land-losers, nothing can come up on that land, so it will be sorted out, sooner or later.
The Maoist challenge to Indian sovereignty is another occasion to sort out a larger, systemic problem. And it will eventually get sorted out, the political system will adjust to give agency to the rural poor and the system will gather strength, politically and economically.
Absence of democracy makes the Chinese pile up their problems. They could blow up in another Tiananmen. Another factor in India’s favour is that India will reap its demographic dividend at a time when broadband access will be universal, creating the potential for a multiplier effect on the growth process.
But of course, all this depends on India delivering on its tryst with destiny, to end poverty and ignorance and disease and inequality of opportunity, for the people at large. The Indian elephant is hobbled only by its own, self-wrought entanglement in vines. Once it frees itself, it can saunter past the dragon and the fire it breathes. The Chinese have themselves denied their dragon wings, let’s not forget.
Google's threat to China is an opportunity for India
Google's threat to withdraw from China over ethical concerns on doing business there comes on the heels of the Delhi High Court's decision that no one in India, not even its peers on the Supreme Court are exempt from the needs for transparency. The two might not seem automatically connected, yet if the Indian government was smart it would make the link. Because the two stories most sharply highlight the essential differences between China and India.
Google's decision will almost definitely be downplayed or abused by the Chinese government, who will allege everything from this being the latest manifestation of Western imperialism - private sector this time - to the sour grapes of a company that could not compete with home grown competitors like Baidu.com. Google has certainly been having difficulties in China, but for a company this large, that is hardly the reason for it to quit. It is, for example, also trailing Naver.com in South Korea, but no one is talking about Google quitting that country.
As almost anyone other than the usual Chinese lackeys will admit, Google's threat is primarily driven by its frustration with doing business with a country whose very ethos so fundamentally conflicts with Google's own. The company's 'Don't Be Evil' slogan has been much mocked as being untenably naïve for any large company, and perhaps it is, but that doesn't mean the company does not try, in however makeshift a way, to live up to it.
Google's top executives have agonised about the increasing extent they have had to given in to the Chinese government's demands for control of information, and evidently some breaking point has now been reached. The company strongly suspects that the cyber attacks it has faced in China have been inspired by the government, for whom even the unprecedented concessions Google has made for China are not enough. This then is the breaking point: no matter the huge potential of China, Google feels that it can only compromise so far.
It is an Emperor's New Clothes moment, made all the stronger by the fact that the company doing the calling out is no small one, but one of the largest and most influential in the world. The immediate impact within China will probably be negligible, exactly because of the censorship that the Chinese government maintains, but the cumulative impact will not be small. At the very least it throws an uncomfortable spotlight on all the other companies, particularly those involved in the information and knowledge industries, who are acquiescing with Chinese control; Mr.Rupert Murdoch, for one, can expect some tough questioning.
China is now also under attack from quarters that have often left it alone. The Green movement is now a potent force, and has squarely blamed China for undermining Copenhagen. China's exploitation of African resources, and its conniving with dictators for this, are also drawing uncomfortable attention. And even Asian countries which have long been very circumspect where China is concerned, are raising questions about how its economic performance is undermining their own, and about China's investment in infrastructure projects which are looking increasingly like means to acquire resources and create employment for its own labour, who are nearly always used rather than creating local employment.
For the Indian government, which was happy to play China's sidekick in Copenhagen, there are urgent lessons to draw from this. We must certainly not antagonise such a large and powerful neighbour - yet we must equally surely make subtle attempts to emphasise our difference from it. The Delhi High Court's verdict is a fine example, showing our genuinely independent judiciary emphasising the need for transparency for all. It is a verdict that needs to be upheld by the Supreme Court as admirable in principle - and the fact that nothing like it would ever come out from China is a minor plus, but one well worth highlighting.
The Indian government must also keep its impulses towards authoritarianism under control. We can (reluctantly) accept that in a country as diverse and contentious as ours, there may be occasional needs to control information. But it must be very much a last choice, not the default option. Not just from any abstract commitment to free speech, but for the very practical reason that this is what makes companies like Google eager to business with us. We have the large consumer base, the young population, the technical skills and cheap manufacturing ability of China - and we are not (hopefully) breathing down your neck on everything you do.
In the past the Chinese-Indian comparison game has been played mostly to our demerit by China. It has told multinationals that India might have democracy, but that also means unions, infrastructure delays, political problems, public scrutiny... We have helped China by being unforgivably inefficient too often, and proving their case. We now have the opportunity to show that we can be efficient - maybe not as much as a ruthless authoritarian government can be - but efficient enough, and yet open and humane about how we do it.
The best example of this is also one of our most visible new landmarks - Mumbai's new Sea Link. Its initial design was changed, at huge expense, because of a political decision driven by the interests of local fishermen. The cable-stayed portion, which is its most distinctive feature, is simply to allow their boats to pass below. In China one can only imagine what would have been the fate of those protesting fishermen, but here their interests were accommodated - in an unforgivably delayed and clumsy way, its true, yet it was done.
Google may not realise it, but its threat to China is a tacitly an endorsement of processes like these. We must work at reducing delays, companies must accommodate the occasional compromises this requires, but in the end we can arrive at solutions that are acceptable both to Indian and international standards, if never Chinese ones - and are all the better for that.
Google's decision will almost definitely be downplayed or abused by the Chinese government, who will allege everything from this being the latest manifestation of Western imperialism - private sector this time - to the sour grapes of a company that could not compete with home grown competitors like Baidu.com. Google has certainly been having difficulties in China, but for a company this large, that is hardly the reason for it to quit. It is, for example, also trailing Naver.com in South Korea, but no one is talking about Google quitting that country.
As almost anyone other than the usual Chinese lackeys will admit, Google's threat is primarily driven by its frustration with doing business with a country whose very ethos so fundamentally conflicts with Google's own. The company's 'Don't Be Evil' slogan has been much mocked as being untenably naïve for any large company, and perhaps it is, but that doesn't mean the company does not try, in however makeshift a way, to live up to it.
Google's top executives have agonised about the increasing extent they have had to given in to the Chinese government's demands for control of information, and evidently some breaking point has now been reached. The company strongly suspects that the cyber attacks it has faced in China have been inspired by the government, for whom even the unprecedented concessions Google has made for China are not enough. This then is the breaking point: no matter the huge potential of China, Google feels that it can only compromise so far.
It is an Emperor's New Clothes moment, made all the stronger by the fact that the company doing the calling out is no small one, but one of the largest and most influential in the world. The immediate impact within China will probably be negligible, exactly because of the censorship that the Chinese government maintains, but the cumulative impact will not be small. At the very least it throws an uncomfortable spotlight on all the other companies, particularly those involved in the information and knowledge industries, who are acquiescing with Chinese control; Mr.Rupert Murdoch, for one, can expect some tough questioning.
China is now also under attack from quarters that have often left it alone. The Green movement is now a potent force, and has squarely blamed China for undermining Copenhagen. China's exploitation of African resources, and its conniving with dictators for this, are also drawing uncomfortable attention. And even Asian countries which have long been very circumspect where China is concerned, are raising questions about how its economic performance is undermining their own, and about China's investment in infrastructure projects which are looking increasingly like means to acquire resources and create employment for its own labour, who are nearly always used rather than creating local employment.
For the Indian government, which was happy to play China's sidekick in Copenhagen, there are urgent lessons to draw from this. We must certainly not antagonise such a large and powerful neighbour - yet we must equally surely make subtle attempts to emphasise our difference from it. The Delhi High Court's verdict is a fine example, showing our genuinely independent judiciary emphasising the need for transparency for all. It is a verdict that needs to be upheld by the Supreme Court as admirable in principle - and the fact that nothing like it would ever come out from China is a minor plus, but one well worth highlighting.
The Indian government must also keep its impulses towards authoritarianism under control. We can (reluctantly) accept that in a country as diverse and contentious as ours, there may be occasional needs to control information. But it must be very much a last choice, not the default option. Not just from any abstract commitment to free speech, but for the very practical reason that this is what makes companies like Google eager to business with us. We have the large consumer base, the young population, the technical skills and cheap manufacturing ability of China - and we are not (hopefully) breathing down your neck on everything you do.
In the past the Chinese-Indian comparison game has been played mostly to our demerit by China. It has told multinationals that India might have democracy, but that also means unions, infrastructure delays, political problems, public scrutiny... We have helped China by being unforgivably inefficient too often, and proving their case. We now have the opportunity to show that we can be efficient - maybe not as much as a ruthless authoritarian government can be - but efficient enough, and yet open and humane about how we do it.
The best example of this is also one of our most visible new landmarks - Mumbai's new Sea Link. Its initial design was changed, at huge expense, because of a political decision driven by the interests of local fishermen. The cable-stayed portion, which is its most distinctive feature, is simply to allow their boats to pass below. In China one can only imagine what would have been the fate of those protesting fishermen, but here their interests were accommodated - in an unforgivably delayed and clumsy way, its true, yet it was done.
Google may not realise it, but its threat to China is a tacitly an endorsement of processes like these. We must work at reducing delays, companies must accommodate the occasional compromises this requires, but in the end we can arrive at solutions that are acceptable both to Indian and international standards, if never Chinese ones - and are all the better for that.
James Wilson and 150 years of Indian Budgets
Pranab Mukherjee isn’t known for wearing hats. But come this Budget season the Finance Minister might consider doffing one, even metaphorically, to the shade of James Wilson. Because this February will mark 150 years since Wilson gave what was India’s first Budget Speech, in his capacity as Finance Member of the India Council that advised the Viceroy of India.
And the hat would be an appropriate gesture since hats are what started Wilson on a journey that would take him from being a Free Trade activist, to founder of The Economist, founding director of Standard Chartered Bank, MP, Finance Secretary to the UK Treasury, Vice-President of the Board of Trade and finally, in effect, India’s first Finance Minister – the original idea was to call him the Indian Chancellor of the Exchequer – a post he held from 29 November 1859, when he arrived in Calcutta, to 11 August, 1860, when he died there from dysentery.
It was a tenure of barely nine months yet in that time Wilson did an incredible amount. Paying tribute to him, his understudy and later successor, Sir Richard Temple wrote: ‘he introduced for the first time in India a financial budget framed upon the English model – inspired the public mind with fresh confidence – brought together the threads of finance which had been broken and scattered by a military and political convulsion – stimulated the operations of the Military Finance Commission to review the numerous branches of civil expenditure – reviewed the existing system of audit and account – besides discharging the multifarious duties devolving on a finance minister and a member of the general government.” Less expectedly, but of great long term significance, Wilson also provoked a debate that ultimately fuelled the nationalist movement.
But it started with hats, and he was never allowed to forget it. Wilson was an example of something new in the 19th century – a largely self made and self taught man, whose achievements were based almost entirely on his intellectual ability and enterprise. His father was a well off woollen manufacturer in Scotland, and Wilson went to a good school. He hoped to study law, but his father insisted he learn a trade and apprenticed him to a hat maker. Wilson did well, moving to London and building his hat manufacturing company into a good business. But his modest fortune was wiped out in 1837 by bad investments in indigo – an early Indian involvement – and he had to work hard to build it up again. This gave Wilson practical experience in the ups and downs of trade and industry, and he valued this.
But in a Britain still dominated by landed aristocracy it was also a handicap. Sabyashachi Bhattacharya in Financial Foundations of the British Raj, a fascinating work on which much of this article is based, noted how after becoming Finance Member, cartoons in the Indian (English) press lampooned him as a hat maker, and Lord Elgin wrote to Sir Charles Wood, the powerful Secretary of State for India, disparaging Wilson and his successor, Samuel Laing, as belonging to “the middle-class speculative business hierarchy.”
Even when the Prime Minister, Lord John Russell, wrote to Queen Victoria in 1848, recommending him for a promotion, he mentioned apologetically that “a few years ago he carried on the trade of a hatter, & failed. But his integrity has not been questioned and his talents are considerable...” The Queen declined to promote him then, and would decline again years later, when the government sought to reward his considerable services by making him Governor of the Australian colony of Victoria. The Indian Finance Member position that he was then offered was less a reward, than a further appeal for his services, at a time when India desperately needed someone with his combination of practical and theoretical knowledge.
Because this is the point about Wilson – for all that the British establishment might sneer, they also needed him. Their 19th century Empire, it was clear, rather than just being based on conquest as in the past, would have to be built on the power of trade and industry and men like Wilson were at the fore. All through his work as a hatter, he had maintained a strong interest in the emerging field of economics, and far from being a problem here, this practical experience, balanced with theoretical insights from his readings and the debates he participated in, gave him added authority.
Wilson’s tipping point to political involvement was the Corn Law movement to remove the taxes on imported grain that benefitted the aristocracy with their large farmholdings, but almost no one else. Opposition to the Corn Laws brought together an unlikely coalition from Free Trade supporters like Wilson to worker’s rights activists (one who noticed him was Karl Marx, who described Wilson as an “economical mandarin of high standing”). Wilson founded The Economist to advocate his position for Free Trade combined with liberal social views, and as Ruth Dudley Edward noted in The Pursuit of Reason, her weighty history of that magazine, it is remarkable how consistently it has stuck to Wilson’s essential views over the years.
By 1844 Wilson was ready to give up hats to focus on The Economist. It was influential by then, and Wilson, who had written most of the early issues, was able to start taking on others to help, including Walter Bagehot, who was to become the magazine’s most famous editor and, as it happened, also Wilson’s son in law. Wilson became a MP in 1847 and was quickly co-opted by the government in 1848 to serve on the India Board of Control, which oversaw the activities of the quasi-government East India Company. Edwards writes that at this first involvement with Indian policy he “developed a state guarantee to encourage English involvement in India and had been the driving force behind the development of the Indian railway system: Emilie (his daughter) remembered him planning the railway lines on the dining table at home.”
Involvement in public issues changed Wilson. He had been a hard-core exponent of laissez-faire principles, even defending their most tragic application – the Irish famine, where failure of the potato crop was initially met by refusal of the British government to supply relief, or even stop grain exports from Ireland, resulting in the deaths of thousands. This was, as we will see, to have a possibly profound effect on British policy in India, but Wilson had then supported the ‘leave it to the markets’ line. Now he cautiously recognised that in some core areas like the new high-tech fields of the railways and telegraph, unbridled competition could result in wasteful duplication and there was some case for public investment.
This involvement in Indian policy was also partly why, in 1859, he was offered the Indian job. The job was needed for a brutally simple reason: the Indian Uprising, or Mutiny of 1857, which finally forced the British to accept that they could not govern India indirectly through the fiction of the East India Company. For the Indian Empire to be sustained, direct rule was needed and accordingly the Government of India Act was passed in 1858, making the Governor-General into the Viceroy with vast powers of direct rule. To help him, he was to have a Council, like the modern Cabinet, with specialised Members. The Financial Member, or essentially Minister, was one, and this was what Wilson agreed to be.
On his voyage to India Wilson studied the daunting task of reforming the Indian financial system. “The English Treasury is nothing to it for complexity, diversity and arid remoteness of the points of action,” he moaned in a letter to Bagehot. The system was a patchwork put together to control Company activities that stretched from the Afghan border to Burma and Ceylon, at a time when communications were slow and unsure. Instead of a single Annual Budget, Bhattacharya notes, there was first an Anticipation Estimate “submitted by Local Accountants to the Supreme Government two and a half months prior to the commencement of the finance year they also contained in parallel columns receipts and disbursements of the two previous years for comparison.”
Next came Sketch Estimates, that gave corrected estimates four months into the financial year, and finally there were Regular Estimates that were sent three months later. These allowed actual figures for half the year to be reported, along with projections for the remaining half- year. In addition, writes Bhattacharya: “monthly returns of cash balance were also received from the Local Accountants... The receipts and disbursements, estimated or actual, were compared by the Finance Secretary of the Government of India to find out the extent of requirements for the allotment of funds.” Finally, actual disbursements were checked by the Audit Department.
Attempts to streamline this system had always been stymied by fiercely independent Presidency bureaucrats. But the Mutiny provided the ideal chance to overrule them since it had made clear the need for centralised control. It had also hugely increased military expenditure: from Rs11.49 crores in 1856-57 to Rs29.9 crores in 1859-60. The government was in debt, not least because its sources of revenue were still so limited – mostly land revenue and duties on the opium trade, which the government controlled for historical reasons (and still does – one of the odder parts of the Budget, never mentioned in the FM’s speech, but available from the document, are the reports from the opium factories run by the Finance Ministry).
Two other factors also pushed the case for more control. The looming American troubles, soon to break out as the Civil War in 1861had made British textile mills realise the need to develop India as an alternative source of supply. This meant an immediate need for roads and railways to transport export commodities and a Budget would help with such capital investment. Last, better communications had weakened the case for independent local systems. One example was over the Indian financial year. This was from May 1st, partly because the Indian shipping season ended soon after with the start of the South-West monsoon. But officials argued that this served to distance Parliament from Indian issues, since this was when its session ended, and better communications meant less reason for delay. Accordingly from 1865 the financial year was pushed back to April 1st.
Wilson landed in Calcutta with these arguments in hand, and quickly set to work. His disciple Temple would recall that he did not have only an abstract approach to his task: “He delighted in India and regarded her resources with hopeful interest, her people with sympathy, her scenery with admiration, her antiquities with curiosity. Nothing, he said, could be imagined more intensely interesting than India; with the ancient cities, the relics of decayed dynasties, the thronging population, the bustle of trade at every corner...He would often stop at the wayside booths or shops, discuss the manufacture, prices and styles of the wares. He would note the carts, drawn by bullocks and laden with produce on their way to the capital, also the men and women carrying head-loads of articles to the market. Then he would ever and anon exclaim that the country seemed bursting, as it were, with vitality and industry.”
Wilson’s regard for Indian enterprise was doubtless genuine, but with Finance Ministers one must always watch out! While he might have denied any direct link between the market scenes he admired and what he was planning to do in his first Budget, the fact is that this peaceful commerce was to be used to buttress the one really controversial innovation – the introduction of an income tax. And the reason Wilson needed this support was because, unlike some of our more recent FMs, taxing incomes was not something that came easily to him.
As Bhattacharya notes, Wilson’s approach to Budgets stuck to a relatively conservative public finance approach: to aim for a balanced budget and apply taxation for revenue only: “This meant that revenue should be raised in such a way as to cause minimum interference; taxation must not deflect economic behaviour from what it would have been in the absence of taxation.” Wilson may have drifted from the hard laissez-faire days of his youth, but he had not become an easy taxing left-winger.
Bhattacharya points to two corollaries that would have chimed with Wilson’s beliefs: taxation should not protect indigenous industry and it should not be progressive. Allowing protectionist tariffs would have been anathema to someone with anti-Corn Law roots like Wilson, while progressive taxation was seen as wrong because it punished economic enterprise. “To a group of petitioners who wanted income tax on a ‘graduated scale’ Wilson replied that it was not the object of taxation ‘to equalise the conditions of men.’” Wilson today would be a strict libertarian, arguing that equity is best served by removing restrictions to allow all people to compete equally.
But he still needed the revenue. The greatly expanded military expenditure due to the Mutiny had left the government with big debts. The relatively static land revenue would not meet the shortfall, and a sudden upsurge duties from opium sales (the other main source of revenue) was both unlikely and probably undesirable. So what could Wilson do? The market scenes provided an answer. Commerce like that flourished best in stable social and political conditions, and for that the government was responsible. So if such stability was being provided – and the suppression of the Mutiny could be seen as an example of that – then wasn’t the government entitled to charge a fee for its services in the form of a tax on incomes generated by such commerce?
Some holes could be picked in this argument, not least the fact that Indians were being asked to pay for a ‘stability’ caused by suppressing them. But men like Wilson genuinely saw the Mutineers are lawless bandits, and felt that the sort of trade going on in Calcutta was what most Indians wanted. In any case, he needed the money. In his speech of February 18, 1869, presenting the budget statement, which must count as the first Indian Budget Speech, Wilson went ahead and imposed Income Tax. (Earlier he had already proposed another direct tax in his License Tax Bill of 4th March, 1860, which levied a small license fee on traders, but this attracted less attention).
The reaction was immediate and strong – and not just for monetary reasons. Bhattacharya writes, for example of how “Marwari traders of Calcutta went a deputation to the Secretariat of the Bengal Government to submit that if enquiry by income tax assessors disclosed ‘how much of the money employed by them in trade was their own, and how much belonged to others, the result would be commercial discredit for many Marwari cooties.”
Zamindars were particularly upset because they felt such a tax went against the spirit of the Permanent Settlement instituted by Lord Cornwallis in 1793. This had attempted to create through the zamindars a local landed aristocracy, who could be counted on to serve as a buffer between the British and Indian farmers, and who would collect the land revenue in return for various privileges. The zamindars argued that this included exemption from income tax, but this cut no ice with Wilson who inveighed against the “pretensions of the zamindars”. Yet the zamindar’s lobby was strong enough, in the short term, to get the income tax dropped soon after Wilson’s death.
But the real salvo against Wilson’s Budget came from Madras. Sir Charles Trevelyan, the Governor, was one of the most influential people in the Empire and Wilson had been expecting problems from him. He had worked with him at the UK Treasury, which Trevelyan has essentially run for many years, and had got full experience of Trevelyan’s difficult personality. Trevelyan was extremely intelligent and capable – and he knew it. The one feature throughout his career was his willingness to say what he believed, regardless of its effect on others, and to stick by it, whatever the facts and consequences.
Very early in his life, as a young officer in India, he had caused a scandal when he denounced his superior for taking bribes. But he stood his ground and the superior was dismissed, leading Lord William Bentinck, the then Governor-General to remark that it was just as well that Trevelyan was mostly on the right side of most questions “for he gives a most confounded deal of trouble when he happens to take the wrong one.” So was Trevelyan in the right or wrong in his opposition to Wilson’s Budget?
In some superficial areas he was certainly wrong. Trevelyan was objecting to the principle of centralisation partly on grounds of prestige (Madras had long chafed at taking directions from Calcutta despite being the older settlement), but this misguided since it was bound to happen. In a few years Trevelyan would return as Financial Member himself (much to the unhappiness of Wilson’s family), and he did little to reduce his powers then. Madras could also argue that since the Mutiny had hardly affected the South it was unfair it had to help pick up the tab, but this could not be avoided in the new unified British Raj.
But Trevelyan did raise one important – and dangerous – point of principle: how, he asked, could people be taxed if they did not have political representation. It’s true there were a few Indians on the Legislative Council in Calcutta, but these were only a few super-zamindars and rajahs, who were hardly representative of native interests. This was dynamite because as everyone would have remembered ‘no taxation without representation’ had been the battle cry of the American Revolution. Trevelyan was formulating an argument for Indian nationalism – and all the worse because, in true Trevelyan style, he did not do it quietly behind the scenes, but in public official correspondence.
And Indians responded. For example, in Prarambh, a fictionalised recounting of the career of the merchant Jagannath Shankarshet and the early 19th century in Mumbai, written by the economist Gangadhar Gadgil, he describes a public meeting called by Shankarshet and other Mumbai merchants to felicitate Trevelyan. For their part the British were livid and immediate representations went out to London to recall Trevelyan. For all his ability in India and influence in the UK, he couldn’t prevent it and soon left Madras (though this would only temporary and he would come back to Calcutta).
Why did Trevelyan raise this point? It was not opposition to income tax in principle since Bhattacharya points out that he had already formulated a scheme for direct taxation, and as Financial Member he would follow policies similar to Wilson’s. Trevelyan did have a deep connection to Indians, who he did not confuse with privileged zamindars, and perhaps he worried about the long term consequences of burdening Indians with taxes with no chance of political representation.
One intriguing link is Ireland – unlike Wilson who was just a commentator, Trevelyan’s position at the Treasury during the Famine made him directly responsible for aid, or the lack of it, and some Irish writers have held him responsible for genocide. This is extreme, since he did ultimately, if grudgingly, organise aid, but it is possible that his direct experience of such a disaster did make him realise the long term consequences of bad governance of a subject population.
Last, but not least given such strong personalities, there was Trevelyan’s simple dislike for Wilson the ex-hatter, who he saw as representing self serving merchant interests, rather the supposedly unbiased ones of administrators like himself. He also felt that Wilson just saw the Indian post as a stepping stone to that of Chancellor of Exchequer back home.
In that he was probably unjust since Wilson’s dedication to his Indian job, where he achieved so much in so short a time, could not be doubted. Overwork almost certainly played a role in his death from dysentery on 11th August, 1860. In her history of The Economist Ruth Dudley Edwards writes that two days before, knowing he was probably dying, he still insisted on receiving the Viceroy, Lord Canning, with who he discussed his financial bills: “And taking devotion to duty almost to a level of self-parody, on the day of his death almost his last words were ‘Take care of my Income Tax.’”
And the hat would be an appropriate gesture since hats are what started Wilson on a journey that would take him from being a Free Trade activist, to founder of The Economist, founding director of Standard Chartered Bank, MP, Finance Secretary to the UK Treasury, Vice-President of the Board of Trade and finally, in effect, India’s first Finance Minister – the original idea was to call him the Indian Chancellor of the Exchequer – a post he held from 29 November 1859, when he arrived in Calcutta, to 11 August, 1860, when he died there from dysentery.
It was a tenure of barely nine months yet in that time Wilson did an incredible amount. Paying tribute to him, his understudy and later successor, Sir Richard Temple wrote: ‘he introduced for the first time in India a financial budget framed upon the English model – inspired the public mind with fresh confidence – brought together the threads of finance which had been broken and scattered by a military and political convulsion – stimulated the operations of the Military Finance Commission to review the numerous branches of civil expenditure – reviewed the existing system of audit and account – besides discharging the multifarious duties devolving on a finance minister and a member of the general government.” Less expectedly, but of great long term significance, Wilson also provoked a debate that ultimately fuelled the nationalist movement.
But it started with hats, and he was never allowed to forget it. Wilson was an example of something new in the 19th century – a largely self made and self taught man, whose achievements were based almost entirely on his intellectual ability and enterprise. His father was a well off woollen manufacturer in Scotland, and Wilson went to a good school. He hoped to study law, but his father insisted he learn a trade and apprenticed him to a hat maker. Wilson did well, moving to London and building his hat manufacturing company into a good business. But his modest fortune was wiped out in 1837 by bad investments in indigo – an early Indian involvement – and he had to work hard to build it up again. This gave Wilson practical experience in the ups and downs of trade and industry, and he valued this.
But in a Britain still dominated by landed aristocracy it was also a handicap. Sabyashachi Bhattacharya in Financial Foundations of the British Raj, a fascinating work on which much of this article is based, noted how after becoming Finance Member, cartoons in the Indian (English) press lampooned him as a hat maker, and Lord Elgin wrote to Sir Charles Wood, the powerful Secretary of State for India, disparaging Wilson and his successor, Samuel Laing, as belonging to “the middle-class speculative business hierarchy.”
Even when the Prime Minister, Lord John Russell, wrote to Queen Victoria in 1848, recommending him for a promotion, he mentioned apologetically that “a few years ago he carried on the trade of a hatter, & failed. But his integrity has not been questioned and his talents are considerable...” The Queen declined to promote him then, and would decline again years later, when the government sought to reward his considerable services by making him Governor of the Australian colony of Victoria. The Indian Finance Member position that he was then offered was less a reward, than a further appeal for his services, at a time when India desperately needed someone with his combination of practical and theoretical knowledge.
Because this is the point about Wilson – for all that the British establishment might sneer, they also needed him. Their 19th century Empire, it was clear, rather than just being based on conquest as in the past, would have to be built on the power of trade and industry and men like Wilson were at the fore. All through his work as a hatter, he had maintained a strong interest in the emerging field of economics, and far from being a problem here, this practical experience, balanced with theoretical insights from his readings and the debates he participated in, gave him added authority.
Wilson’s tipping point to political involvement was the Corn Law movement to remove the taxes on imported grain that benefitted the aristocracy with their large farmholdings, but almost no one else. Opposition to the Corn Laws brought together an unlikely coalition from Free Trade supporters like Wilson to worker’s rights activists (one who noticed him was Karl Marx, who described Wilson as an “economical mandarin of high standing”). Wilson founded The Economist to advocate his position for Free Trade combined with liberal social views, and as Ruth Dudley Edward noted in The Pursuit of Reason, her weighty history of that magazine, it is remarkable how consistently it has stuck to Wilson’s essential views over the years.
By 1844 Wilson was ready to give up hats to focus on The Economist. It was influential by then, and Wilson, who had written most of the early issues, was able to start taking on others to help, including Walter Bagehot, who was to become the magazine’s most famous editor and, as it happened, also Wilson’s son in law. Wilson became a MP in 1847 and was quickly co-opted by the government in 1848 to serve on the India Board of Control, which oversaw the activities of the quasi-government East India Company. Edwards writes that at this first involvement with Indian policy he “developed a state guarantee to encourage English involvement in India and had been the driving force behind the development of the Indian railway system: Emilie (his daughter) remembered him planning the railway lines on the dining table at home.”
Involvement in public issues changed Wilson. He had been a hard-core exponent of laissez-faire principles, even defending their most tragic application – the Irish famine, where failure of the potato crop was initially met by refusal of the British government to supply relief, or even stop grain exports from Ireland, resulting in the deaths of thousands. This was, as we will see, to have a possibly profound effect on British policy in India, but Wilson had then supported the ‘leave it to the markets’ line. Now he cautiously recognised that in some core areas like the new high-tech fields of the railways and telegraph, unbridled competition could result in wasteful duplication and there was some case for public investment.
This involvement in Indian policy was also partly why, in 1859, he was offered the Indian job. The job was needed for a brutally simple reason: the Indian Uprising, or Mutiny of 1857, which finally forced the British to accept that they could not govern India indirectly through the fiction of the East India Company. For the Indian Empire to be sustained, direct rule was needed and accordingly the Government of India Act was passed in 1858, making the Governor-General into the Viceroy with vast powers of direct rule. To help him, he was to have a Council, like the modern Cabinet, with specialised Members. The Financial Member, or essentially Minister, was one, and this was what Wilson agreed to be.
On his voyage to India Wilson studied the daunting task of reforming the Indian financial system. “The English Treasury is nothing to it for complexity, diversity and arid remoteness of the points of action,” he moaned in a letter to Bagehot. The system was a patchwork put together to control Company activities that stretched from the Afghan border to Burma and Ceylon, at a time when communications were slow and unsure. Instead of a single Annual Budget, Bhattacharya notes, there was first an Anticipation Estimate “submitted by Local Accountants to the Supreme Government two and a half months prior to the commencement of the finance year they also contained in parallel columns receipts and disbursements of the two previous years for comparison.”
Next came Sketch Estimates, that gave corrected estimates four months into the financial year, and finally there were Regular Estimates that were sent three months later. These allowed actual figures for half the year to be reported, along with projections for the remaining half- year. In addition, writes Bhattacharya: “monthly returns of cash balance were also received from the Local Accountants... The receipts and disbursements, estimated or actual, were compared by the Finance Secretary of the Government of India to find out the extent of requirements for the allotment of funds.” Finally, actual disbursements were checked by the Audit Department.
Attempts to streamline this system had always been stymied by fiercely independent Presidency bureaucrats. But the Mutiny provided the ideal chance to overrule them since it had made clear the need for centralised control. It had also hugely increased military expenditure: from Rs11.49 crores in 1856-57 to Rs29.9 crores in 1859-60. The government was in debt, not least because its sources of revenue were still so limited – mostly land revenue and duties on the opium trade, which the government controlled for historical reasons (and still does – one of the odder parts of the Budget, never mentioned in the FM’s speech, but available from the document, are the reports from the opium factories run by the Finance Ministry).
Two other factors also pushed the case for more control. The looming American troubles, soon to break out as the Civil War in 1861had made British textile mills realise the need to develop India as an alternative source of supply. This meant an immediate need for roads and railways to transport export commodities and a Budget would help with such capital investment. Last, better communications had weakened the case for independent local systems. One example was over the Indian financial year. This was from May 1st, partly because the Indian shipping season ended soon after with the start of the South-West monsoon. But officials argued that this served to distance Parliament from Indian issues, since this was when its session ended, and better communications meant less reason for delay. Accordingly from 1865 the financial year was pushed back to April 1st.
Wilson landed in Calcutta with these arguments in hand, and quickly set to work. His disciple Temple would recall that he did not have only an abstract approach to his task: “He delighted in India and regarded her resources with hopeful interest, her people with sympathy, her scenery with admiration, her antiquities with curiosity. Nothing, he said, could be imagined more intensely interesting than India; with the ancient cities, the relics of decayed dynasties, the thronging population, the bustle of trade at every corner...He would often stop at the wayside booths or shops, discuss the manufacture, prices and styles of the wares. He would note the carts, drawn by bullocks and laden with produce on their way to the capital, also the men and women carrying head-loads of articles to the market. Then he would ever and anon exclaim that the country seemed bursting, as it were, with vitality and industry.”
Wilson’s regard for Indian enterprise was doubtless genuine, but with Finance Ministers one must always watch out! While he might have denied any direct link between the market scenes he admired and what he was planning to do in his first Budget, the fact is that this peaceful commerce was to be used to buttress the one really controversial innovation – the introduction of an income tax. And the reason Wilson needed this support was because, unlike some of our more recent FMs, taxing incomes was not something that came easily to him.
As Bhattacharya notes, Wilson’s approach to Budgets stuck to a relatively conservative public finance approach: to aim for a balanced budget and apply taxation for revenue only: “This meant that revenue should be raised in such a way as to cause minimum interference; taxation must not deflect economic behaviour from what it would have been in the absence of taxation.” Wilson may have drifted from the hard laissez-faire days of his youth, but he had not become an easy taxing left-winger.
Bhattacharya points to two corollaries that would have chimed with Wilson’s beliefs: taxation should not protect indigenous industry and it should not be progressive. Allowing protectionist tariffs would have been anathema to someone with anti-Corn Law roots like Wilson, while progressive taxation was seen as wrong because it punished economic enterprise. “To a group of petitioners who wanted income tax on a ‘graduated scale’ Wilson replied that it was not the object of taxation ‘to equalise the conditions of men.’” Wilson today would be a strict libertarian, arguing that equity is best served by removing restrictions to allow all people to compete equally.
But he still needed the revenue. The greatly expanded military expenditure due to the Mutiny had left the government with big debts. The relatively static land revenue would not meet the shortfall, and a sudden upsurge duties from opium sales (the other main source of revenue) was both unlikely and probably undesirable. So what could Wilson do? The market scenes provided an answer. Commerce like that flourished best in stable social and political conditions, and for that the government was responsible. So if such stability was being provided – and the suppression of the Mutiny could be seen as an example of that – then wasn’t the government entitled to charge a fee for its services in the form of a tax on incomes generated by such commerce?
Some holes could be picked in this argument, not least the fact that Indians were being asked to pay for a ‘stability’ caused by suppressing them. But men like Wilson genuinely saw the Mutineers are lawless bandits, and felt that the sort of trade going on in Calcutta was what most Indians wanted. In any case, he needed the money. In his speech of February 18, 1869, presenting the budget statement, which must count as the first Indian Budget Speech, Wilson went ahead and imposed Income Tax. (Earlier he had already proposed another direct tax in his License Tax Bill of 4th March, 1860, which levied a small license fee on traders, but this attracted less attention).
The reaction was immediate and strong – and not just for monetary reasons. Bhattacharya writes, for example of how “Marwari traders of Calcutta went a deputation to the Secretariat of the Bengal Government to submit that if enquiry by income tax assessors disclosed ‘how much of the money employed by them in trade was their own, and how much belonged to others, the result would be commercial discredit for many Marwari cooties.”
Zamindars were particularly upset because they felt such a tax went against the spirit of the Permanent Settlement instituted by Lord Cornwallis in 1793. This had attempted to create through the zamindars a local landed aristocracy, who could be counted on to serve as a buffer between the British and Indian farmers, and who would collect the land revenue in return for various privileges. The zamindars argued that this included exemption from income tax, but this cut no ice with Wilson who inveighed against the “pretensions of the zamindars”. Yet the zamindar’s lobby was strong enough, in the short term, to get the income tax dropped soon after Wilson’s death.
But the real salvo against Wilson’s Budget came from Madras. Sir Charles Trevelyan, the Governor, was one of the most influential people in the Empire and Wilson had been expecting problems from him. He had worked with him at the UK Treasury, which Trevelyan has essentially run for many years, and had got full experience of Trevelyan’s difficult personality. Trevelyan was extremely intelligent and capable – and he knew it. The one feature throughout his career was his willingness to say what he believed, regardless of its effect on others, and to stick by it, whatever the facts and consequences.
Very early in his life, as a young officer in India, he had caused a scandal when he denounced his superior for taking bribes. But he stood his ground and the superior was dismissed, leading Lord William Bentinck, the then Governor-General to remark that it was just as well that Trevelyan was mostly on the right side of most questions “for he gives a most confounded deal of trouble when he happens to take the wrong one.” So was Trevelyan in the right or wrong in his opposition to Wilson’s Budget?
In some superficial areas he was certainly wrong. Trevelyan was objecting to the principle of centralisation partly on grounds of prestige (Madras had long chafed at taking directions from Calcutta despite being the older settlement), but this misguided since it was bound to happen. In a few years Trevelyan would return as Financial Member himself (much to the unhappiness of Wilson’s family), and he did little to reduce his powers then. Madras could also argue that since the Mutiny had hardly affected the South it was unfair it had to help pick up the tab, but this could not be avoided in the new unified British Raj.
But Trevelyan did raise one important – and dangerous – point of principle: how, he asked, could people be taxed if they did not have political representation. It’s true there were a few Indians on the Legislative Council in Calcutta, but these were only a few super-zamindars and rajahs, who were hardly representative of native interests. This was dynamite because as everyone would have remembered ‘no taxation without representation’ had been the battle cry of the American Revolution. Trevelyan was formulating an argument for Indian nationalism – and all the worse because, in true Trevelyan style, he did not do it quietly behind the scenes, but in public official correspondence.
And Indians responded. For example, in Prarambh, a fictionalised recounting of the career of the merchant Jagannath Shankarshet and the early 19th century in Mumbai, written by the economist Gangadhar Gadgil, he describes a public meeting called by Shankarshet and other Mumbai merchants to felicitate Trevelyan. For their part the British were livid and immediate representations went out to London to recall Trevelyan. For all his ability in India and influence in the UK, he couldn’t prevent it and soon left Madras (though this would only temporary and he would come back to Calcutta).
Why did Trevelyan raise this point? It was not opposition to income tax in principle since Bhattacharya points out that he had already formulated a scheme for direct taxation, and as Financial Member he would follow policies similar to Wilson’s. Trevelyan did have a deep connection to Indians, who he did not confuse with privileged zamindars, and perhaps he worried about the long term consequences of burdening Indians with taxes with no chance of political representation.
One intriguing link is Ireland – unlike Wilson who was just a commentator, Trevelyan’s position at the Treasury during the Famine made him directly responsible for aid, or the lack of it, and some Irish writers have held him responsible for genocide. This is extreme, since he did ultimately, if grudgingly, organise aid, but it is possible that his direct experience of such a disaster did make him realise the long term consequences of bad governance of a subject population.
Last, but not least given such strong personalities, there was Trevelyan’s simple dislike for Wilson the ex-hatter, who he saw as representing self serving merchant interests, rather the supposedly unbiased ones of administrators like himself. He also felt that Wilson just saw the Indian post as a stepping stone to that of Chancellor of Exchequer back home.
In that he was probably unjust since Wilson’s dedication to his Indian job, where he achieved so much in so short a time, could not be doubted. Overwork almost certainly played a role in his death from dysentery on 11th August, 1860. In her history of The Economist Ruth Dudley Edwards writes that two days before, knowing he was probably dying, he still insisted on receiving the Viceroy, Lord Canning, with who he discussed his financial bills: “And taking devotion to duty almost to a level of self-parody, on the day of his death almost his last words were ‘Take care of my Income Tax.’”
IT, ITES industry for continuing tax benefits this budget 2010
The IT and ITES (IT enabled services) industry has requested the finance minister, who is set to present union Budget on February 26, to either continue the tax benefits existing under 10A/10B for an additional ten years or come out with an alternative scheme.
It has also appealed the government to invest in the security infrastructure in the country to ensure incident free, peaceful and secure societies.
According to Information Technology & Services Industry Association of Andhra Pradesh -- formerly Hyderabad Software Exporters Association, the incentives under the Software Technology Parks of India scheme should be in line with what IT companies get in a special economic zone.
The SMEs are the hardest hit with the impending sun-setting on 10A/10B benefits in 2011 and we need government to address this, Narasimha Rao, president ITsAP told PTI. He also said the movement of business from STPI to SEZs or between SEZs is extremely restrictive.
It makes companies uncompetitive and the government should allow for greater flexibility for the IT industry in moving business and resources between the SEZs and from other entities.
Shakti Sagar, Managing Director, ADP Pvt Ltd said the STPI scheme should be extended to 3 to 5 years instead of year to year.
He also said the STPI should also be made the single nodal agency for all approvals and clearances of IT firms including central excise & customs.
The peak tax rate of 30 per cent for salaried employees should be reduced to 25 per cent. This will increase the purchasing power of the individual which in turn stimulate demand for core sectors, Shakti Sagar said. Echoing similar views, Ramesh Loganathan, VP, products and managing director Progress Software-India said there has to be some clarity on the fringe benefit tax and hoped for a more favorable tax regime for such business expenses.
Besides extension of STPI benefits for a few more years, Suman Reddy Eadunuri, managing director, PegaSystems Worldwide India, said the existing norms should also changed for granting government IT contracts to provide fair chances to newer players who have innovative and advanced solutions.
It has also appealed the government to invest in the security infrastructure in the country to ensure incident free, peaceful and secure societies.
According to Information Technology & Services Industry Association of Andhra Pradesh -- formerly Hyderabad Software Exporters Association, the incentives under the Software Technology Parks of India scheme should be in line with what IT companies get in a special economic zone.
The SMEs are the hardest hit with the impending sun-setting on 10A/10B benefits in 2011 and we need government to address this, Narasimha Rao, president ITsAP told PTI. He also said the movement of business from STPI to SEZs or between SEZs is extremely restrictive.
It makes companies uncompetitive and the government should allow for greater flexibility for the IT industry in moving business and resources between the SEZs and from other entities.
Shakti Sagar, Managing Director, ADP Pvt Ltd said the STPI scheme should be extended to 3 to 5 years instead of year to year.
He also said the STPI should also be made the single nodal agency for all approvals and clearances of IT firms including central excise & customs.
The peak tax rate of 30 per cent for salaried employees should be reduced to 25 per cent. This will increase the purchasing power of the individual which in turn stimulate demand for core sectors, Shakti Sagar said. Echoing similar views, Ramesh Loganathan, VP, products and managing director Progress Software-India said there has to be some clarity on the fringe benefit tax and hoped for a more favorable tax regime for such business expenses.
Besides extension of STPI benefits for a few more years, Suman Reddy Eadunuri, managing director, PegaSystems Worldwide India, said the existing norms should also changed for granting government IT contracts to provide fair chances to newer players who have innovative and advanced solutions.
top-10 companies lose Rs 36k crore in a week; Airtel major loser
In a volatile session past week, six out of the top-10 firms lost nearly Rs 36,000 crore from their market capitalisation, telecom major Bharti Airtel losing the major pie from its valuation.
Besides, four companies who buck the falling trend are - ONGC, TCS, Infosys and BHEL, which added Rs 6,295.94 crore to their market capitalisation for the week ended February 20.
Bharti Airtel, which slipped to the 10th spot from the previous week's ninth position saw its valuation plunging by Rs 13,717.66 crore, taking its total market cap to Rs 1,05,658.76 crore. The company is in race to acquire South Africa-based Zain Telecom for USD 9 billion.
Shares of Bharti Airtel lost 11.49 per cent to close at Rs 278.25 on the Bombay Stock Exchange at the end of Friday's trade.
During the week the 30-share index Sensex gained 39 points or 0.24 per cent to close at 16,191.63 points on BSE.
Mukesh Ambani-led Reliance Industries maintained its numero-uno position in the list even after losing Rs 9,712.52 crore from its valuation, taking its total m-cap to Rs 3,21,870.42 crore
Next to RIL is state-run oil firm ONGC which added Rs 1,165.68 crore to its valuation, while mining major NMDC stood at the third spot with its m-cap plunging by Rs 10,764.16 crore.
ONGC's valuation rose to Rs 2,36,484.16 crore while NMDC m-cap declined to Rs 1,81,702 crore.
Two state-run firms - NMDC and MMTC together lost Rs 10,968.41 crore from their valuation.
Besides, four companies who buck the falling trend are - ONGC, TCS, Infosys and BHEL, which added Rs 6,295.94 crore to their market capitalisation for the week ended February 20.
Bharti Airtel, which slipped to the 10th spot from the previous week's ninth position saw its valuation plunging by Rs 13,717.66 crore, taking its total market cap to Rs 1,05,658.76 crore. The company is in race to acquire South Africa-based Zain Telecom for USD 9 billion.
Shares of Bharti Airtel lost 11.49 per cent to close at Rs 278.25 on the Bombay Stock Exchange at the end of Friday's trade.
During the week the 30-share index Sensex gained 39 points or 0.24 per cent to close at 16,191.63 points on BSE.
Mukesh Ambani-led Reliance Industries maintained its numero-uno position in the list even after losing Rs 9,712.52 crore from its valuation, taking its total m-cap to Rs 3,21,870.42 crore
Next to RIL is state-run oil firm ONGC which added Rs 1,165.68 crore to its valuation, while mining major NMDC stood at the third spot with its m-cap plunging by Rs 10,764.16 crore.
ONGC's valuation rose to Rs 2,36,484.16 crore while NMDC m-cap declined to Rs 1,81,702 crore.
Two state-run firms - NMDC and MMTC together lost Rs 10,968.41 crore from their valuation.
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