ECONOMY AFFAIRS SEPTEMBER 2012

ECONOMY AFFAIRS SEPTEMBER 2012

• The Reserve Bank of India on 17 september, cut the Cash Reserve Ratio, the portion of deposits that banks keep with it, by 0.25 percentage point to 4.50 per cent, pumping in Rs.17,000 crore into the banking system. It will be effective from September 22.The RBI, however, kept other policy indicative rates at the same levels. The move is likely to reduce the liquidity pressure on banks, avoiding a rate hike, which means that as funds are released, banks may even compete to reduce rates on retail loans in the festive season.
  
• Microsoft co-founder Bill Gates has retained his position as the richest person in America for the 19th year in a row this year, according to Forbes ’ annual ranking of the nation’s 400 super rich people who have a combined net worth of $1.7 trillion.With a net worth of $66 billion, Gates not only remained the richest person in America but is also “the planet’s most generous person”.Five Indian-Americans, including Silicon Valley venture capitalist Vinod Khosla and founder of IT major Syntel, Bharat Desai, have been named among the richest people in the U.S. by Forbes. Mr. Desai, with a net worth of $2 billion as of September 2012, has been ranked 239 in Forbes ’ annual list.Founder and Chairman of the Symphony Technology Group Romesh Wadhwani is ranked 250 with a net worth $1.9 billion.Google board member and shareholder Kavitark Ram Shriram occupies the 298th rank with a net worth of $1.6 billion.Manoj Bhargava, founder and CEO of the popular energy drink ‘5-hour energy’, is ranked 311, and has a $1.5 billion net worth.
  
• Russian government on 18 September 2012 declassified its diamond reserves formed after a 7 kilometer wide asteroid stroked the graphite rich area of Russia, about 35 million years ago. The most valuable secret of Russian Cold War was kept hidden from the rest of the world for more than five decades. The reserve was discovered by the Russians during the mid 1960s.The huge deposits of hard diamond, which can fulfill the demands of the world for next 3000 years was discovered in the Popigoi crater in East Siberia in an asteroid with diameter of 120 kilometers. Russian scientists from the Novosibirsk Institute of Geology and Mineralogy claimed that the total quantity of the available diamond in the crater is more than 10 times of the total reserve of diamond that the world have.These diamonds are an ideal material for industrial use and are twice harder than that of the technical diamonds generally used for industrial purposes. Declassification of the hidden reserves can’t be used as jewellery item, so will not have any impact in the jewel making industry of the world.
  
• Duty on non-subsidised LPG cylinders abolished:
  In marginal relief to consumers, the government on 21 September, abolished import and excise duties on LPG cylinders they buy beyond the 6 per annum quota of subsidised cooking gas, and asked state governments to subsidise the requirements of households at their level. The government had last week restricted supply of subsidised cooking gas to 6 per household in a year. Any requirement beyond this was to be purchased at market price, which currently works out to Rs. 895 per 14.2 kg cylinder. After the abolition of 5 per cent customs duty and 8 per cent excise duty, the consumer price in Delhi would come to Rs. 798. Subsidised cooking gas (LPG) in Delhi is currently sold at Rs. 399 a cylinder. “Since some LPG cylinders will not be subsidised, we have amended the notification for the non-subsidised household LPG cylinders... customs and excise (on them) will be zero”, Mr. Chidambaram told reporters. Non-subsidised commercial LPG cylinders, however, would continue to attract customs duty of 5 per cent and excise duty at 8 per cent. Taking a cue from the Congress ruled states which have increased the number of subsidised cylinders to nine per year, the Minister asked other states to follow suit.
  
• Reliance Communications raises call rates by 25%, others may follow suit:
  Reliance Communications, India's third-biggest mobile phone carrier, raised call prices by a quarter in four service zones and said it will extend the hike to all zones in the next 30 days, sending its shares to a two-month high. Reliance Communications increased the base call price to 1.5 paisa a second from 1.2 paisa, the company said in a statement on 21 September, citing rising costs and lower competition. A court order to revoke permits of several smaller rivals will significantly reduce competition in the cut-throat Indian market, giving operators such as Bharti Airtel and Vodafone's local unit room to raise call prices."We have seen on ground competition tapering off. Hence we need to restore back the price," Gurdeep Singh, chief executive of Reliance Communications' mobile business, told Reuters.
  
• Foreign Investment cap hiked to 74 percent for Broadcasting Services:
  The Government of India on 20 September 2012 hiked the foreign investment cap for the broadcasting service providers to 74 percent. The registered hike in foreign investment cap is for service providers of Direct to Home (DTH), modernized cable network and mobile television. This move of the government will allow the global players in acquiring major stakes in the broadcasting companies. Before his decision was passed, the eligibility of DTH and multi-system cable operators to make foreign investment was limited to 49 percent only. In its decision last week, the Cabinet Committee on Economic Affairs cleared its stand on the companies of broadcast content that the TV news Channels and FM radio channels can have a foreign investment cap of 26 percent. This decision was made to make sure that majority of control remains back in the hands of Indian Partner.
  
• Cuts tax on External Commercial Borrowings :
  In yet another move to draw in international capital, the government on 21 September, reduced tax on External Commercial Borrowings (ECB) by domestic companies to five percent from 20%, making it easier for local companies to raise funds abroad. Finance Minister said the reduced tax rate will be applicable to the funds borrowed between July 2012 and June 2015. Liability of the company to withhold tax on such income would also be at the reduced rate of 5%. "This lower rate of taxation will apply to interest paid to a non-resident by an Indian company for money borrowed in foreign currency from a source outside India, either under a loan agreement or by way of long-term infra bonds,"FM said. To lower the compliance burden and reduce the time lag which would arise on account of case-by-case approval, the government has decided to grant approval to all borrowings by way of loan agreement and long-term infras bonds that satisfy certain conditions.
  
• A consortium comprising Oil and Natural Gas Corporation, Indian Oil Corporation, and Oil India has jointly placed a $5-billion bid for buying stake in ConocoPhillips’ six Canadian oil-sands assets in Alberta. Early in 2012, Houston-based ConocoPhillips had announced that it was planning to sell as much as 50 per cent of its oil-sands reserves in Alberta.Early this month, ONGC Videsh (OVL) had bought U.S. energy firm Hess Corp's stake in Azeri, Chirag and Guneshli (AGC) group of oil fields in Azerbaijan for $1 billion. ConocoPhillips has hired Scotia Waterous for selling stake in six Alberta properties that produce about 25,000 barrels of oil a day from an estimated 30 billion barrels of bitumen in place.
  
• Citing “volatile” global economic situation, the Standard and Poor’s (S&P) has lowered the growth forecast for India to 5.5 per cent for this fiscal, from 6.5 per cent projected earlier. According to S&P, Asia-Pacific is feeling the pressure of ongoing global economic uncertainty, and it has lowered India growth forecast by one percentage point to 5.5 per cent for this fiscal from 6.5 per cent earlier. The report says, lack of monsoon rains has affected India, for which agriculture still forms a substantial part of the economy and global investors have become more critical of India’s policy and infrastructure shortcomings which was recently highlighted by the power outage in early August that affected 20 of India’s 28 States. S&P said Asia Pacific economies were witnessing cautious growth conditions and any worsening of the economic conditions in the euro zone would increase contagion risk for the region as these economies were “sensitive” to capital flows and trade. S&P has lowered the base case forecasts of 2012 real GDP growth by about half a percentage point for some countries, with China’s revised to 7.5 per cent (from 8 per cent); Japan to 2 per cent (from 2.5 per cent); Korea to 2.5 per cent (from 3 per cent); Singapore to 2.1 per cent (from 2.5 per cent); and Taiwan to 1.9 per cent (from 2.5 per cent).Earlier this month, Morgan Stanley had also lowered India’s growth forecast to 5.1 per cent for the current fiscal from its earlier estimate of 5.8 per cent; HSBC to 5.7 per cent from 6.2 per cent and Standard Chartered to 5.4 per cent from 6.2 per cent projected earlier.
  
• A global study, puts India ranks very low at 111th position in terms of economic freedom,behind countries like China, Nepal and Bangladesh, in a worldwide index of 144 nations. The annual ranking, titled 'Economic Freedom of the World: 2012', is topped by Hong Kong, followed by Singapore, New Zealand, Switzerland (8.24) and Australia in the top-five. The index has been prepared by Canada-based public policy think-tank, Fraser Institute, in cooperation with independent institutes in 90 nations and territories, and claims to measure the degree to which the policies and institutions of countries support economic freedom.
  
• The Securities and Exchange Board of India, on 28 September, issued draft norms for mandatory safety net mechanism in IPOs , to protect the interests of retail investors. The SEBI has sought comments from the public on the draft norms till October 31.According to SEBI, the safety net mechanism would be available for all securities allotted to original resident retail individual allottees, who had made an application for up to Rs.50,000.SEBI also said the total obligation on safety net provider will be capped at 5 per cent of the issue size. The proposal for such a mechanism, discussed at SEBI’s board meeting held on August 16, is aimed at protecting the interest of retail investors.
  
• Ratings firm Fitch in its Global Economic Outlook report on 28 September, lowered India’s growth projection for the current fiscal to 6 per cent for 2012-13 from 6.5 per cent estimated earlier citing challenging economic outlook. India’s economic growth has slowed to a three-year low of 5.3 per cent in the April-June quarter of the current fiscal. The growth had fallen to 6.5 per cent in the 2011-12 fiscal. Fitch said the high fiscal deficit left little scope for government for fiscal easing and increasing spending. It said weak investments were affecting supply capacity and thereby pointing towards weaker growth outlook.
  
• The study on the “Impact of Internet on the Indian Economy” by McKinsey, which is still to be released, says that its contribution to India’s GDP will explode to $100 billion (Rs. 5 lakh crore) by 2015 from $30 billion (Rs.1.5 lakh crore) at present. Revealing the highlights of the study, on 29 September in the presence of Union Telecom Minister Kapil Sibal at a curtain-raiser held to announce a two-day multi stakeholder conference on Internet governance to be held at FICCI in New Delhi on October 4-5, McKinsey said the contribution of the Internet to global GDP is roughly three per cent or $1.7 trillion and its performance in India will eventually mirror this trend. Mr. Sibal said the government is also alive to the growing power of the Internet, including as a communications multiplier. The world currently has 2 billion Internet users, of whom 50 per cent live outside the developed world. The global Internet population is projected to climb to 2.6-2.9 billion by 2015. By 2015, based on existing projections, India, which with 120 million users has the third largest Internet user base in the world, is projected to hit 350 million, catapulting it to a global ranking of 2, with the fastest rate of growth.
  
• Jyotiraditya M. Scindia, Union Minister of State for Commerce and Industry, said in Coonoor,that the Union Government has set up a directorate, as part of the Tea Board, exclusively to address the issues of small tea growers.Speaking to presspersons after inaugurating the 119th conference of the United Planters’ Association of Southern India (UPASI), he said this was an important measure for the welfare of small growers. The initiative was now only for the tea sector. This could be extended to other plantation sectors, if needed. The plantation sector was expected to see higher outlay in the XII Plan with focus on various areas such as research and development and small growers. Mr. Scindhia said ,the domestic market for tea was seeing healthy growth. However, India should also increase its tea exports, and, hence, the government had come out with the Triple Five (555) scheme.Under this, the focus would be on five markets with five major measures for five years. For the first phase, the government had sanctioned Rs.6.5 crore for this scheme. Tea production was 976 million kg last year and domestic consumption 840 million kg. Exports were 191 million kg. G. J. Ancheril was elected as President of the United Planters’ Association of Southern India (UPASI) for 2012-13.
  
• Indian IT firms among 10 worst paymasters in world:
  Indian companies are among the world's 10 lowest paying employers in the IT space, with their mid-to-senior level staff getting an average salary of USD 38,767 (about Rs 21.5 lakh) per annum — less than one-fourth of the IT pay package at globally top-paying Swiss firms. Salaries in the IT sector of Switzerland are the highest in the world at an average of USD 168,211 (about Rs 93 lakh) per annum as per a study titled 'World wide IT Salary 2012'. The study, conducted by global recruitment service provider MyHiringClub.com, has ranked India at eighth spot among 10 worst IT paymasters globally. On the other hand, Switzerland stands at the top spot among the top-paying nations in the IT sector. The study, which was conducted in August this year, took into account the average salaries for people with four and more years of experience for the Indian and other companies. The report compared the total annual cash compensation and total remuneration information for IT staff in more than 6,000 companies across 40 different countries and found that employers in western Europe are the best paymasters. It also found that compensation in developed countries focus more on variable factors, such as bonus schemes, to attract staff. At the same time, the emphasis remains on cash compensation in the lower-paying countries. "Experienced IT managers are highly sought-after in India and there is strong competition to attract and retain skilled employees. MNCs rely heavily on Indian IT managers, so they need to ensure their pay is competitive.''"Although pay in Asia and Eastern Europe tends to be much lower, it would be difficult for firms to outsource the IT manager role to these regions. Instead, we may see a migration of IT skills from lower paying nations to places in Western Europe and North America," MyHiringClub.com CEO Rajesh Kumar said. Interestingly, IT managers in India fare better than their counterparts in neighbouring China, where the average annual compensation package were lower at USD 38,624. In addition, IT employees in India, scored better than their peers in Bulgaria, Vietnam, Indonesia, the Philippines, Thailand and Malaysia, where the average annual salaries were even lower at USD 23,745, USD 29,831, USD 33,768, USD 33,965, USD 34,107 and USD 36,790 respectively. Among the best IT salaries paying countries Belgium bagged the second position with an average salary of USD 144,980, followed by Denmark (USD 136,542), the US (USD 128,632) and the UK (USD 127,890).
  
• Sales percentage of car declined in India:
  The sales of cars in India declined in the month of August 2012 by an overall 19 percent. It is counted among the biggest drop in one year timeline, resulting to which Society of Indian automobile Manufacturer (SIAM) asked the government to cut the excise duty. The next disappointing part is that the export of cars is also declined to a figure of 26.83 percent in the August month which has affected overall production of companies in India. It is the highest decline in 11 years of time. The automobile industry has entered into a desperate situation. The excise duty on automobiles, which was increased in this year’s Budget, needs to be reduced, particularly for the commercial vehicles segment to regain the sale in momentum. In contrary to that, Chinese market saw a robust sale of car in the month of august.
  
• Indian external debts are within manageable limits
  The Department of Economic Affairs (DEA) published its annual publication- India’s external debt: a status report 2011-12. As per the published report, India’s external debt in the end of March 2012 was $345.8 billion, which is 13% high than the previous year’s debt or $ 39.9 billion from where India stood at the end of March 2011. The publication points out about the upward movement of the stress that is put on the current account deficit (CAD) of the nation because of the risks thrown on it, from the external sectors that comprises Fall in the reserve cover for imports and external debt, depreciation in the exchange rate of rupee, rise in the level of external debts and the increased share of the short term commercial borrowing in the complete external debt quantum. The finance ministry cleared on 10 September 2012 that there can be a rise in the global economic risks that may rise with a weakened recovery and a slow growth scopes that may lead into high debts and seek growth finances even in the advanced economies. This clearance was based on Indian Vulnerability Index indicators, which has been experiencing the euro zone debt crisis and the global slowdown. A detailed analysis of India’s position in external debt at the end of March, 2012 has been presented in the status report. It is also based on the data released by the Reserve Bank of India on 29 June 2012. The report not only presents the analysis of external debts trend and composition on the country but it also presents a comparative picture of this debt in reference to other developing nations of the world with respect to the fluid global economic situations. The best part of the report produced is that instead of all the facts presented and developments India’s debt is within manageable limits and can be indicated by the debt service ratio to 6 percent and external debt-to-GDP ratio of 20 percent in 2011-2012. Thus India continues to be within the less vulnerable countries when it comes to external debt indicators compared to that of the indebted countries. The Global Development Finance, 2012 from World Bank, India stood at the fifth position for absolute debt stocks when compared with the 20 other developing debtor countries. But when taken care of the ration of external debt to that of the gross national income, India was at the fifth position from the lowest side.
  
• Guidelines on overseas loans for companies eased:
  The Reserve Bank of India (RBI) on 11 September, relaxed guidelines for Indian companies to raise money overseas through external commercial borrowings (ECB). The RBI allowed companies to raise more funds through ECBs to repay rupee loans or for new capital expenditure in rupees. It raised the maximum limit of ECB to 75 per cent of the average foreign exchange earnings in the past three fiscal years, or 50 per cent of the highest export earnings in any of the three years, or whichever is higher. Earlier, a company could raise a maximum of 50 per cent of its average export earnings in the past three fiscal years. The RBI will also allow refinancing of bridge finance, or short-term credit taken by companies in the infrastructure sector for importing capital goods, with an ECB under the automatic route. Earlier, companies had to seek approval from the RBI for replacing the bridge finance with a long-term ECB. The central bank said companies in the infrastructure sector can seek trade credit for up to a maximum period of five years for importing capital goods, up from one-to-three years previously. Trade credit is a short-term loan.
  
• Chidambaram pitched for Prime Minister led National Investment Board:
  Finance Minister P. Chidambaram on 15 September 2012 pitched for institutionalization of a National Investment Board under the leadership of Prime Minister. The formation of the board will help in speeding the approval of the proposals, for the mega projects and their implementation. Formation of the board will help the country in achieving the targeted growth for the twelfth five year of 8.2 percent. At the meeting of the full planning commission under the chairmanship of Prime Minister Manmohan Singh, the finance minister expressed his concern on the delayed implementation of the mega projects and stressed on the fact that the decision made by the National Investment board (NIB) to be taken as the final decision. Chidambaram also insisted interference by any other authority on the approvals and decisions made by the NIB will be entertained. He also added to his statement that NIB’s role will be limited to the projects with investments of Rs 1000 crore or more.
  
• The Supreme Court, on 6 September, held that Indian courts have no jurisdiction to pass interim orders in foreign arbitration awards between an Indian company and a foreign company under the provisions of the Indian Arbitration and Conciliation Act, 1996. Disposing of a batch of appeals, a five-judge Constitution Bench, comprising Chief Justice S. H. Kapadia and Justices D. K. Jain, S. S. Nijjar, Ms. Ranjana Desai and J. S. Khehar, said, “if the arbitration agreement is found or held to provide for a seat/place of arbitration outside India, then the provision that the Arbitration Act, 1996, would govern the arbitration proceedings would not make Part I (relating to domestic arbitration) of the Arbitration Act, 1996, applicable or enable Indian courts to exercise supervisory jurisdiction over the arbitration or the award.”
  
• The government of India approved a 14000 crore rupees fund to spur the production of hybrid and electrical vehicles in the country. According to a new policy approved, Automobile companies and the government plan to put six million electric vehicles on road by 2020. The government under the new policy will fund research and development, infrastructure and subsidies. With an aim at reducing the burden on fossil fuels, the Union government in national budget 2011 had proposed a plan to develop electric and hybrid vehicles. Later, the government set up a National Council for Electric Mobility led by heavy industries minister Praful Patel, and a National Board for Electric Mobility to ensure uniform rules in all the states. According to an estimate about 130000 electric vehicles were sold in India in 2011-12. Electric scooters cost between 26000 rupees and 43000 rupees in Indian market, while country’s only indigenously built electric car Reva starts at 3.5 lakh rupees. Japan-based Nissan Motor Co. Ltd’s electric car, Leaf, is the largest-selling car in the world that runs on battery. It costs 33000 dollar (around 18 lakh rupees) in the US and its battery cost is at least half the car’s price.
  
• Government on 6 September, approved a Rs 768 crore proposal to hive off engineering and ground handling services of Air India into two wholly-owned subsidiaries as part of its turnaround plan. A meeting of the Union Cabinet, chaired by Prime Minister Manmohan Singh, cleared the proposal to create the two subsidiaries -- Air India Engineering Services Limited (AIESL) and Air India Transport Services Limited (AITSL). With this decision, Air India would begin the process of transferring the assets and manpower to AIESL and AITSL, which would be treated as separate profit centres. AIESL would carry out Maintenance, Repair and Overhaul (MRO) business, for not only Air India but other airlines too and tap the potential of nearly $1.5 billion MRO business in the Asia-Pacific Region.
  
• India claims the second biggest haul after China in Asia's Fab 50 with 11 Indian companies, up from seven last year, figuring in Forbes 2012 list of 50 best publicly traded companies in Asia-Pacific. The US magazine's 2012 list sees the return of the big Indian IT software services and consulting firms, HCL and Tata Consultancy, while an Indian drug company, Sun Pharmaceutical, breaks into the elite ranks for the first time. Once again, China dominates the list with 23 mainland entries, the same as a year ago. Malaysia, Japan, Philippines and Singapore each had one representative on this year's list. South Korea could only muster four companies this year, down from eight last year.
  
• The Reserve Bank of India directed all banks to issue cheques with uniform featuresconforming to the Cheque Truncation System (CTS) 2010 standard by the end of this month. The homogeneity in security features act as deterrent against frauds, and the fixed field placement specifications facilitate straight-through-processing at drawee banks’ end through the use of optical or image character recognition technology, the RBI said in a notification. ``Adherence to CTS-2010 standards has inherent advantages as the security features in cheque forms help the presenting banks to identify the genuineness of the drawee banks’ instruments while handling them in the image based scenario,’’ it said. sAll banks are advised to arrange only “multi-city or payable at par CTS-2010 standard cheques, not later than September 30.
  
• State Bank of India, India’s largest bank, on 5th September, announced a reduction in interest rates on fixed deposits by 0.5 per cent for most of the maturity periods, a move likely to be followed by other lenders. However, for deposits between 241 days and one year, the downward revision is 1 per cent. The new rate would be 6.5 per cent as against 7.5 per cent. Of the total nine maturity periods for fixed deposits, the 0.5 per cent downward rate revision is for six categories. The new rates would be effective from September 7, the bank said in a statement. With the revision, the interest rate on 7-90 days fixed deposit would come down to 6.50 per cent from 7 per cent. Similarly, term deposits of 91-179 days would be down by 0.5 per cent, at 6.50 per cent, and 180-day fixed deposits would also attract 6.50 per cent interest rate. Fixed deposits with maturity of 181-240 days would now provide interest rates of 6.50 per cent, down from 7.25 per cent. For maturity years of one year to less than two years, the new rate will be to 8.5 per cent as against 9 per cent, down by 0.5 per cent. At the same time, interest rates for fixed deposits with maturity period between 2-3 years and 3-5 years have been slashed by 0.5 per cent to 8.5 per cent. However, the bank has left interest rate unchanged at 8.5 per cent for term deposit of 5-10 years.
  
• Five Indian companies including Larsen & Toubro, Hindustan Unilever and Infosys are ranked on Forbes magazine's list of "The World's Most Innovative Companies" topped by four US companies. Larsen & Toubro with an annual sales growth of 19 percent is ranked ninth in the world followed by Hindustan Unilever (12) with 11.4 percent. Infosys (19) comes third with 12.7 percent growth thanks to what the US business magazine called a lower "innovation premium." This measures the difference between the value of the company's existing businesses and its expected future innovations. Companies must also have $10 billion in market capitalization and spend at least one percent of their asset base on research and development. Tata Consultancy Services (29) with 19.5 percent was fourth among Indian companies with Sun Pharmaceutical Industries (38) with a 14.6 growth bringing up the rear. Four US companies- Cloud computing king Salesforce.com, drug major Alexion Pharmaceuticals, internet retail giant Amazon.com and open source software leader Red Hat took the top four places. Forbes said its analyses show at least three key things that the innovative companies do to create and sustain an innovation premium. These were: How well companies leverage people, process, and philosophies, differentiates the best in class from the next in class when it comes to keeping innovation alive and delivering an innovation premium year after year.
  
• The Reserve Bank of India (RBI) will allow domestic entities to invest in Pakistan if they apply for approval, the central bank said in a statement on 7 September. Indian entities were earlier not allowed to invest in Pakistan. On 1 August, the Indian government formally allowed foreign direct investment from Pakistan in an attempt to build trust between the two nuclear-armed neighbours. Pakistani citizens and companies are now allowed to invest in all sectors apart from defence, space and atomic energy, a government statement said. The move to allow FDI from Pakistan had been announced by India's trade minister earlier this year. India and Pakistan have fought three wars since they broke from British colonial rule in 1947. Both sides have implemented measures to improve trade and business ties, as they slowly rebuild relations that were shattered by the 2008 Mumbai attacks.
  
• India received over USD 66.13 billion in remittances in the year 2011-12 as compared to USD 55.62 billion in the previous, a hike of 19 per cent. "We have received USD 66.13 billion in remittances in 2011-12," Minister for Overseas Indian Affairs Vayalar Ravi said on Friday in a written reply to a question in Lok Sabha. The remittances to the country through private transfer of funds have been on the rise in the last few years.
  
• In wide-ranging recommendations aimed at soothing the hackles of investors and revive the inflow of foreign capital, the expert committee on General Anti Avoidance Rules (GAAR), headed by Parthasarathi Shome, on 2 September, has advocated postponement of the controversial tax provision by three years till 2016-17 along with abolition of capital gains tax on transfer of securities. In a further reassurance to foreign institutional investors (FIIs) operating through the Mauritius route, the expert panel, in its draft report submitted to the government on August 31 , has suggested that the GAAR provisions should not be invoked to examine the genuineness of the foreign investor entities’ residency in the island nation. Highlighting that the objective of GAAR should be deterrence rather than revenue, the panel has recommended that the Approving Panel (AP) for purposes of invoking GAAR provisions should consist of five members, including Chairman, who should be a retired judge of the High Court. Besides, two members should be from outside government and persons of eminence drawn from the fields of accountancy, economics or business, with knowledge of matters of income- tax, and two members should be chief commissioners of income-tax or one Chief Commissioner and one Commissioner. It also suggested that GAAR can be invoked only with the approval of the Commissioner.