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India’s $300 Billion Budget Gets Mixed Response

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India's $300 Billion Budget Gets Mixed Response

India’s $300 Billion Budget Gets Mixed Response

By Arvind Padmanabhan

New Delhi: Indian Finance Minister P. Chidambaram Thursday presented a please-all budget with a 30 percent hike in plan expenditure, lower deficit and a one-time tax on the rich, while focusing on three main constituencies that can vote his government back to power in the next general elections — women, youth and poor.

You’ll have to shell out more for your smokes, the fuel-guzzling sports utility vehicles will cost more and the smart-phone will attract higher excise, but what will please the masses — read “voters” given the impending elections — is that outlays for virtually every welfare scheme, covering urban areas to the hinterland, have been vastly hiked.

What also makes all this seem like a dream is that the finance minister also promises to refrain from profligacy with a fiscal deficit target set at 4.8 percent of India’s gross domestic product, against 5.2 percent in the current fiscal, without an across-the-board hike in direct and indirect tax rates or slabs.

“All flagship programmes have been fully and adequately funded,” the finance minister said in his 105-minute speech, setting aside Rs.16.65 lakh crore (Rs.16.65 trillion or $300 billion) for the next fiscal towards plan and non-plan expenditure.

The proposals were welcomed by Prime Minister Manmohan Singh. “Given the formidable challenges facing our economy, the finance minister has done a commendable job,” the prime minister said of his cabinet colleague, once hailed for what has come to be known as a “dream budget” he presented in 1997.

“The finance minister has taken important steps to reverse pessimistic mood with regard to investment climate, with regard to the growth potential and the possibilities of our economy,” the prime minister said, even as the opposition said it was a wasted opportunity.

The small tax payer, earning between Rs.200,000 to Rs.500,000 per annum, gets a Rs.2,000 rebate, while the affluent will be imposed a super rich tax that amounts to a surcharge of 10 percent on an annual income of over Rs.10 crore.

For average taxpayers, there are other take-aways: Additional rebate on home loans for first-time buyers, two-year extension of the Rajiv Gandhi Equity Scheme for first-time investors with higher limit of Rs.1.2 million, and launch of inflation-indexed bonds.

In the case of home loan deduction scheme, the benefit could be as much as Rs.30,000 for tax payers in the upper bracket. This apart, those returning from abroad can bring goods worth Rs.50,000 duty-free in the case of men and Rs.100,000 in the case of women.

“In a constrained economy, there is little room to raise tax rates or large amounts of additional tax revenues. Equally, there is little room to give away tax revenues or the tax base. It is time for prudence, restraint and patience,” the finance minister said.

Chidambaram, who now has eight budgets to his credit, equalling the track record of his predecessor Pranab Mukherjee, now the president, also made some specific remarks in his 105-minute speech, aimed at various constituencies, both within and outside India.

For women, he promised an exclusive public sector bank to cater to them, with an initial corpus of Rs.1,000 crore ($180 million), as also a Nirbhaya Fund, named after the recent Delhi gang-rape victim, for those abused in one form or the other.

A reward of Rs.10,000 under the skill development programme for the youth whom he called “impatient and ambitious”, representing the aspirations of the people, and a promise of a pan-India roll-out of the direct cash transfer scheme by next year for the poor.

To investors, domestic and overseas, Chidambaram promised to remove any distrust on any undue regulatory or tax burden, along with an environment of quick decisions, since he held investments as the key to reviving the growth of an economy.

“Investment is an act of faith,” he said, adding: “Doing business in India must be seen as easy, friendly and mutually-beneficial.” He also said overseas borrowings and equity investments were the only options to finance the high current account deficit.

“That is why I have been at pains to state over and over again that India at the present juncture does not have the choice between welcoming and spurning foreign investment. If I may be frank, foreign investment is an imperative,” he said.

At the same time, the finance minister promised action on infrastructure development and said steps will be taken to invest the promised $1 trillion during the current Five Year Plan on roads, ports, highways, waterways, energy and industrial corridors.

These proposals were praised by industry. “The budget will revive manufacturing sector which had come under stress. The biggest take-away is the investment allowance,” said the Associated Chamber of Commerce and Industry (Assocham).

Overall, the direct and indirect tax proposals are expected to yield Rs.18,000 crore

But the markets were none-too-pleased and the sensitive index (Sensex) of the Bombay Stock Exchange (BSE) fell 1.5 percent with hikes in suscharge on corporate tax and dividend distribution tax seen as major dampeners.

The finance minister also made several promises: A pilot programme to promote micro-nutrients, a National Livestock Mission, inflation-indexed bonds, a new corporate tax avoidance tax from 2016, a direct tax code and a new bill for a pan-India goods and services tax this session.

The finance minister felt India, now faced with some serious chaqllenges, was already the world’s 10th largest economy, and had the potential to scale higher to the eighth or the seventh position by 2017. Any economist could tell that, he said.

“By 2025, we could become a $5 trillion economy, and among the top five in the world. What we will become depends on us and on the choices that we make.”

SOUTH ASIA

Pakistani Anti-graft body wants travel ban on Nawaz Sharif, kin

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Nawaz sharif

Pakistan’s anti-corruption watchdog has asked authorities to place ousted premier Nawaz Sharif, his daughter and son-in-law on the Exit Control List to prevent them from leaving the country.

The National Accountability Bureau (NAB) sent a formal request to the ministry of interior. The interior ministry officials confirmed that the NAB wrote that names of Sharif, his daughter Maryam Nawaz and son-in-law Capt (retd) Muhammad Safdar should be put on the Exit Control List (ECL), which listed individuals not allowed to leave Pakistan.

The NAB argued that as the trial of the three nears its conclusion, it is feared that they would leave the country.

Earlier, a similar request to place name of finance minister Ishaq Dar on ECL was not accepted, allowing him to go to London and never return.

Sharif, 68, and his family this week filed an application with the accountability court seeking a fortnight’s exemption from personal appearance from February 19 onwards to let them go to London to see Sharif’s ailing wife. Three cases were filed against Sharif and his family last year, including Avenfield properties, Azizia & Hill Metal Establishment, and Flagship Investments.

Maryam and Safdar are accused only in Avenfield properties case. The NAB had filed two supplementary references against Sharif, his sons Hasan and Hussain regarding Al-Azizia Steel Mills & Hill Metal Establishment and Flagship Investment cases.

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Pakistan “breaches obligations’ on nuclear arms reduction, UN court told

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The Hague: Pakistan is violating its “obligations” to the international community by failing to reduce its nuclear arsenal, the Marshall Islands told the UN’s highest court on Tuesday.

The small Pacific Island nation is this week launching three unusual cases against India, Pakistan and Britain before the International Court of Justice.

Majuro wants to put a new spotlight on the global nuclear threat, its lawyers said yesterday, by using its own experience with massive US-led nuclear tests in the 1940s and 1950s.

“Pakistan is in breach of its obligations owed to the international community as a whole,” when it comes to reducing its nuclear stockpile, said Nicholas Grief, one of the island nation’s lawyers.

Islamabad and its nuclear-armed neighbour India “continue to engage in a quantitative build-up and a qualitative improvement” of their atomic stockpiles, added Tony deBrum, a Marshallese government minister.

DeBrum warned that even a “limited nuclear war” involving the two countries would “threaten the existence” of his island nation people.

Pakistan and India have fought three wars since independence from Britain in 1947, two of them over the disputed Himalayan territory of Kashmir.

In 1998, the rival neighbours both demonstrated nuclear weapons capability.

The ICJ’s judges are holding hearings for the next week and a half to decide whether it is competent to hear the lawsuits brought against India and Pakistan — neither of which have signed the 1968 nuclear Non-Proliferation Treaty (NPT).

A third hearing against Britain — which has signed the NPT — scheduled to start on Wednesday will be devoted to “preliminary objections” raised by London.

The Marshalls initially sought to bring a case against nine countries it said possessed nuclear arms: Britain, China, France, India, Israel, North Korea, Pakistan, Russia and the United States.
Israel has never admitted to having nuclear weapons.

But the Hague-based ICJ, set up in 1945 to rule in disputes between states, has only admitted three cases against Britain, India and Pakistan, because they have accepted the ICJ’s compulsory jurisdiction.

Pakistan’s lawyers did not attend Tuesday’s hearings.

It did however file a counter-claim against Majuro’s allegations saying “the court has no jurisdiction to deal with the application” and insisting that the case is “not admissible”, said ICJ President Ronny Abraham.

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SOUTH ASIA

Bangladesh to drop Islam as official religion following attacks on Hindus

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Bangladesh to drop Islam as official religion following attacks on Hindus

New Delhi: Bangladesh is likely to drop Islam as its official religion following a series of attacks on people from other faiths in the country. The country’s Supreme Court is hearing a plea challenging the status of the official religion of the country to Islam.

Bangladesh, which was declared a secular country after its formation in 1971, was declared an Islamic country following a constitutional amendment in 1988.

According to a report in the Daily Mail, the plea has challenged the declaration of Islam as the national religion of the country.

The move is being supported by leaders from the minority communities like Hindus, Christians and Muslim minority Shiites.

Bangladesh has 90 per cent of Muslims, 8 per cent Hindus and remaining constitutes Christians and Muslim minority Shiites.

In last month, a Hindu priest was hacked to death following an attack on a temple in Panchgarh district. Two others were seriously injured in the attack. There have been several lethal attacks on writers and bloggers.

According to a report in the Independent, Islamist groups Jumatul Mujahedeen Bangladesh and Ansarullah Bangla Team are believed to have carried out at least seven attacks on foreign and minority people in Bangladesh in the past year.

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