US Senate passes Nuke Bill with a 85-12 margin
Washington: The United States Senate voted by an overwhelming 85-12 margin approving the US-India nuclear deal. Both Republican and Democratic senators decisively voted against an amendment brought by New Mexico Democrat Jeff Bingaman which would have required the President to determine that India committed to a cap on its fissile material production before Washington could proceed with nuclear exports to India.

The administration had said such an amendment would finish the deal because India would not agree to the condition considering the geopolitical realities and the neighbourhood it lived in. A majority of Senators agreed with this assessment.

Most Republicans were joined by Democrats in voting against the Bingaman deal-killer amendment. The non-proliferation constituency that supported the amendment that could have killed the deal included Massachusetts Democrat Edward Kennedy, California's two Democrat Senators Barbara Boxer and Dianne Feinstein and Illinois Democrat Barack Obama.
Back to News Review index page  

Cabinet approves investment pact with China
A week before Chinese president, Hu Jintao's maiden visit to India, the Union Cabinet has approved the signing of a Bilateral Investment Promotion and Protection Agreement (BIPPA) with China for 10 years.

BIPPA's clearance by the Cabinet would send positive signals, particularly, at a time when there were some concerns about New Delhi's alleged bid to block Chinese investments in what it called security-risk areas.

Commerce Ministry officials said bilateral trade with China was in India's favour since 2003 with New Delhi enjoying a trade surplus with China of $907.81 million in 2003, $1,746.94 million in 2004 and $ 843.17 million in 2005. But, in the first eight months of 2006, India saw a trade deficit of $1,793.48 million. Bilateral trade volume has gone up from $2,914 million in 2000 to $18,717 million in 2005, while such trade turnover during January-August 2006 touched $15,959.62 million.

The composition of India's exports to China showed a very high concentration of basic raw materials such as ores, slag, ash, iron and steel and plastic, with minor contribution from organic chemicals, inorganic chemicals, cotton yarn, fabric, salt, sulphur, earth stone, precious stones and metals, food waste, animal feed, hides and skins fish and seafood.

On the other hand, India's imports from China include machinery, electrical machinery, organic chemicals, which together account for 50 per cent of India's total imports from China with the rest consisting of silk, silk yarn, fabric, impregnated textile fabrics, iron/steel products, glass and glassware, tanning dye, paint, putty and manmade filament, fabric and plastic.

As regards investment, the Chinese have been upset with the recent decision by New Delhi to prevent higher volume of investment by companies such as Kaidi Electric Power Company, Huawei Technologies (telecom equipment major) and China Harbour Engineering Company on grounds of security.
Back to News Review index page  

Top freighter firms coming to India
Mumbai: Leading freighter companies are racing to to enter India in a big way while existing cargo airlines are also busy augmenting their capacities in view of the 8 per cent growth in international air cargo over the last few years. Industry analysts say the boom in retail, textile and pharmaceutical sectors is a major reason for this projected growth.

According to estimates made by rating agency CARE the more than Rs7,000-cr domestic air cargo market is also a major attraction for them. Integrated air cargo media house Stattimes says India's air freight market is expected to grow by 20 per cent this year.

A study by Drewry and APL Logistics has said that the country's air cargo traffic is expected to register 8-10 per cent annual gains over the next 5 to 10 years.

International freight majors including The Great Wall Airlines of China, Cargoitalia of Italy, Gulf Air's Gulf Air Cargo, Lufthansa, Emirates SkyCargo, Cathay Pacific, and SriLankan Cargo are looking at scaling up capacity in India.

Domestic airlines like Kingfisher Airlines, GoAir, Jet Airways, Air Deccan, and IndiGo have already announced plans to launch dedicated cargo operations.

Gulf Air Cargo has started a series of scheduled freighter charters with an Airbus A300 aircraft with a 40-tonne capacity that will operate twice a week on the Bahrain-Chennai-Bangalore-Amsterdam route. In the domestic space, besides Blue Dart Aviation, First Flight Couriers has forayed into the air cargo space with flights to Mumbai, Delhi and Chennai.
Back to News Review index page  

Sharp cut in subsidies on anvil in 11th Plan
New Delhi: The Planning Commission's projections for the 11th Five Year Plan, starting April 2007, reveals a sharp cut in subsidies to 0.8 per cent of the gross domestic product (GDP) in 2011-12 from 1.2 per cent in 2006-07, the last year of the 10th Plan.

The Planning Commission has projected a progressive decline in the subsidy expenditure right through the five years of the 11th Plan — starting from 1.1 per cent of GDP in 2007-08 to 0.8 per cent in 2011-12.

The central government does not expect a squeeze in expenditure, which it sees being maintained at around 13.93 per cent of GDP during the entire period of the 11th Plan.

The projections also do not expect the net burden on account of pay and allowances to go up, even though a new pay commission has been announced and the impact of its recommendations on the government's salary bill are likely to be felt during the Plan period.

For the states also, the impact of the new pay commission's recommendations will be substantial. The projections for state finances expect the net burden on account of pay and allowances to be at 3.10 per cent for the period. The annual burden is expected to go down from 3.24 per cent in 2007-08 to 2.94 per cent by 2011-12.

A recent Fitch Ratings report has also pointed out that most of the states' fiscal woes in the past stemmed from one single item of non-discretionary expenditure — salaries.
Back to News Review index page  

Tax rejig expected for gems sector
New Delhi: There may be significant changes in the 2007-08 Budget in the duty structure for the gems and jewellery sector.

The recommendations of an expert group set up by the finance ministry under former revenue secretary MR Sivaraman may are expected to be used for reworking the tax structure and will be submitted to the government soon.

Under the new regime, tax will be paid on the basis of the expected turnover. The ministry, in its recommendations, had said that the presumptive tax regime would result in higher tax collections, expand the tax base and lower the cost of tax administration.

A study by the commerce department had recently compared the tax regime in India with Thailand, a gems and jewellery hub. The study noted that cut and polished coloured gemstones attract customs duty of around 22 per cent in India and zero duty in Thailand. Similarly, gold in bars and biscuits attracts a customs duty of Rs102 per ten grams compared with zero per cent in Thailand.

Silver in bars and biscuits in India attracts an import duty of Rs510 per kg compared with zero duty in Thailand. The sector also attracts 12.5 per cent service tax, octroi of 2-4 per cent and 4 per cent central sales tax (CST). These taxes are nil in Thailand.

The study has also pointed out that Thailand gives exemption from corporation tax for five to eight years while in India, the income, net of exemptions and deductions, is subject to a tax of 33.66 per cent.

In addition to the tax break, Thailand allows an eight-year tax holiday for re-location of existing gems and jewellery units inside the gemopolis.

Export of gems and jewellery is a significant part of India's merchandise trade. During 2005-06, India exported gems and jewellery worth $ 15.54 billion.
Back to News Review index page