Thank God, Finally Pranab
Mukherjee left the Finance Ministry
When Pranab took the reins of
financial affairs of India, the country was growing at about 8%, FIIs and FDIs
always considered India as a desirable destination and Indian entrepreneurs
were enthusiastic to start new ventures. After all, Chidambaram, who hailed
from a reputed business family in South India, conducted the financial affairs
in business-like fashion. Of course, India’s foreign currency rate hovered
around healthy 1USD= Rs 45/- . Even when international oil prices peaked at US$148/- p/b in July
2008, petrol prices in India was around Rs 50-55/- per litre.
Now, as Pranab leaves the finance
ministry, the country’s growth rate has fallen to 5% levels, FIIs and FDIs have
dropped to a trickle, currency stability has become a joke, petrol prices
increase to the north of Rs.70 p/l (although international crude oil price is around
USD 90 p/b only). All of the above is nothing compared to the main achievement
‘driving the Indian entrepreneurs’ abroad!
Recently, I got a few Clients
from India, who came to the UAE enquiring how to set up factory in this country.
The reason is the changes in Indian income tax. They have informed that the
export income which was hitherto tax free in India is now made taxable through
MAT (Minimum Alternate Tax). So, the entrepreneurs are planning to shift the
production base to business friendly UAE in such a manner that the production
for exports will be done in the UAE. Whilst this is good for UAE Economy as the
economic multiplier and accelerator works in its favour, Indian economy will
suffer in terms of lost jobs, lost government revenue and negative multiplier
effect. Wealth creation in the country will be affected.
This is over and above other
myopic policies pursued by the government in tax front that will scare away BPO
outsourcing, FII and FDI. We have covered this in an earlier blog see http://www.financialviewsonline.com/2012/04/income-tax-department-is-taking-lessons.html
‘Penny wise and Pound foolish’ seem
to the dictum of Indian tax bureaucracy now!
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