Chidambaram confident of restricting fiscal deficit to 4.8%

 
Unperturbed by the rise in the fiscal deficit, Finance Minister P Chidambaram on Thursday exuded confidence that it would remain within the target of 4.8 per cent of GDP in the current financial year.

"We will maintain the fiscal deficit at 4.8 per cent.

That is the red line that will not be breached. I am confident that it will not be breached," he said at a press conference.

The minister was responding to a question about the possibility of the fiscal deficit rising after it touched 94 per cent of the budget estimate at the end of November.

Chidambaram said government finances will improve in December and the fiscal deficit will decline.

Advance tax receipts came in December and the General Financial Rules, which restrict expenditure, will come into play, he said, adding that they would have a positive bearing on the fiscal deficit.

The government has proposed narrowing the fiscal deficit to 4.8 per cent in the current financial year and 3 per cent in 2016-17. It was at 4.9 per cent in 2012-13.

The government, however, will have a tough task in restricting the fiscal deficit in view of poor revenue realisation and tardy progress of the disinvestment programme.

There are indications that the government would go in for a massive cut of about Rs 1 lakh crore in plan expenditure to contain the fiscal deficit.

The government has so far received Rs 3,000 crore from disinvestment as against the budget target of Rs 40,000 crore.

India's fiscal deficit touched Rs 5,09,557 crore during April-November, or 93.9 per cent of the annual target, the Controller General of Accounts (CGA) said on December 31. The gap was 80.4 per cent of the budget estimate at the end of November in 2012-13.

The target for the fiscal deficit -- the gap between expenditure and reveune -- was set at Rs 5,42,499 crore for this financial year.

Chidambaram seeks Vodafone's views on tax issue in writing: Official

 
Finance Minister P Chidambaram has asked UK-based Vodafone Group, which is facing a tax liability of over Rs 11,200 crore in India, to give its view on the long-pending matter in writing, a senior official said on Tuesday.

"Finance Minister P Chidambaram has asked Vodafone to give its view on the tax matter in writing," said the Finance Ministry official.

Vodafone Group Plc's Chief Executive Vittorio Colao had met Chidambaram last week.

The British telecom major is facing a tax liability of over Rs 11,200 crore, along with interest, on its 2007 acquisition of Honk Kong-based Hutchison Whampoa's stake in Indian telecom major Hutchison Essar.

The government had proposed a non-binding conciliation to the telecom major to sort out the tax dispute.

Although the company had been expressing its keenness to reach an amicable settlement with regard to the tax issue, there were differences over the rules under which the dispute should be taken up.

While the British telecom major has indicated its preference to conciliation under the United Nations Commission on International Trade Law, India has proposed settlement under the Indian Arbitration and Conciliation Act.

The Supreme Court last year had ruled in Vodafone's favour, saying the British company was not liable to pay any tax over its 2007 acquisition of mobile phone assets in India.

The government, however, changed the rules to enable it to make retroactive tax claims on already-concluded deals, drawing criticism from global business groups.

Following amendment to the I-T Act of 1961 last year, the Income Tax Department had issued a letter in January to Vodafone International Holdings BV stating that the company was required to pay the tax.

Vodafone replied, saying that they DID not owe anything to the Indian Government. Vodafone earlier wanted to take India to international arbitration but later offered conciliation on the issue.

Sign in | Create a Rediffmail account Rediff.com » Business » Rajan meets PM, FM ahead of monetary review Rajan meets PM, FM ahead of monetary review

Days before his first monetary policy review, Reserve Bank of India (RBI) Governor Raghuram Rajan met Prime Minister Manmohan Singh and Finance Minister P Chidambaram on Tuesday. 
The meeting also comes at a time when the US Federal Reserve is expected to take a call on tapering of the bond-buying programme known as quantitative easing.
“RBI has constant consultations with the finance ministry. This meeting was part of that. We discussed a whole gamut of issues,” Rajan told reporters on Tuesday after meeting Chidambaram.
Later, during the day, the government hiked import duty on gold jewellery to 15 per cent from the existing 10 per cent in an effort to curb the spiralling current account deficit (CAD) that touched an all-time high of 4.8 per cent of the GDP in FY13.
A six-month high inflation in August has already made things tough for Rajan at a time when industry is demanding cut in the policy rate to boost growth.
Inflation rose 6.1 per cent in August from 5.8 per cent in July, driven by expensive food items, particularly onions, which saw the rate of price rise skyrocketing to 244.6 per cent from an already high 119.4 per cent.
According to a report by Dun and Bradstreet, RBI is expected to maintain a status quo on the policy rate. Ironically, onion prices can’t be brought down by interest rate policy.
However, that may desist Rajan from easing the central bank’s monetary stance in the mid-quarter review on the 20th of this month, economists said.
India’s economic growth crashed to a four-year low of 4.4 per cent in the first quarter of 2013-14.
On the other hand, inflation in manufactured products further fell to 1.9 per cent from 2.81 per cent, despite depreciation of the rupee, increasing imported inflation. This showed that demand in the Indian and global economy remained subdued.
Usually, it is manufactured product inflation on which RBI focuses its attention; it is core inflation within manufactured item inflation that RBI is usually concerned.
The core inflation relates to manufactured items sans food articles. It fell further to 1.9 per cent in August from 2.3 per cent.
The low rate of price rise in manufactured items and core inflation should have been ideal conditions for RBI to cut rates, but the party is being spoilt by food articles.