80 per cent FDI cleared between ’91-’98 remains on paper
New Delhi: According data compiled by the Confederation of Indian Industry (CII),80 per cent of the foreign direct investment (FDI) approved between 1991 and 1998 has not yet been actually fructified. Only 21.7 per cent of the aggregate FDI cleared during the period have actually been invested in the country. The rest has only remained on paper.

While total FDI approvals during the period stood at $55.1 billion only $11.9 billion actually flowed in. The CII study shows that while the actual inflow was 47.7 per cent of the approvals during 1991, the first year of economic reforms, the percentage of inflow dropped to 13.1 per cent in the next year and has since climbed steadily to reach 32 per cent during 1998, the last year for which data is available.

Though the study does elaborate on the experience of other emerging economies with respect to FDI flows, it says that countries that had got lesser FDI than India a few years ago are now ahead of India. Thailand, for instance, got actual FDI of $2.06 billion in 1995 as compared to India’s $2.11 billion; but in 1998, its FDI inflow of $6.96 billion was almost thrice that of India’s $2.25 billion. During the same period, the actual FDI in South Korea improved from $1.77 billion to $5.14 billion.
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Shome panel seeks doing away with surcharge on corporate taxes
New Delhi: The advisory group, headed Dr Parthasarthi Shome on tax policy and tax administration has called for abolishing the surcharge on corporate and income taxes and do away with the dividend distribution tax. The committee has also recommended a steep reduction in the tax rates for both the domestic and foreign companies so as to bring them at par.

Currently, the effective corporate tax is around 38.5 per cent for Indian companies and 48 per cent for foreign companies. The committee had suggested that the rates, for both the categories, be lowered to 30 per cent. The industry has been pleading for reducing the tax on dividends to 10 per cent in the forthcoming Budget. The Shome committee is believed to be of the view that dividend tax be abolished altogether, if not in one shot at least in a phased manner.

The advisory group has submitted the interim report to the Planning Commission. The group set up by the Planning Commission is preparing a strategy paper on tax policy and administration for the Tenth Plan. The final report will be submitted to the commission at a later date.
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