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Making sense of falling currencies, oil prices and effect of waving-off MAT in India

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By Gaurav Sharma

The world economy is at crossroads. Hit hard by the yuan depreciation and the slowdown of growth in China, the world currencies have pummeled under the fear of currency wars being waged to boost the domestic export market.

Vietnam and Kazakhstan have already loosened the grip on exchange rates. Russian rouble has declined between 4-7 per cent while the Indian rupee has fallen more than 3 per cent in the last two weeks.

Economists’ take on it:

However, economists have warned against such a move while pointing out that the Great Depression of 1930’s, a period during which economies raised import tariffs and cut currency rates through competitive devaluation of currencies further exacerbated the slowdown in growth.

multi-currencyExperts say that such tactics are a zero-sum game, which would lead to a race to the bottom. This is due to the fact that in any market situation, exports must be equal to imports, and therefore, cutting imports and boosting exports would be a futile gambit in the global scenario.

What does this mean in India?

In the Indian context, economists such as C Rangarajan, Prachi Mishra, Jehangir Aziz and Sajjid Chinoy have clarified the fact that the Indian export is not driven by exchange rate but is rather influenced by global growth.

Furthermore, the apparent devaluation of global currencies is more due to the strengthening of the dollar against other currencies rather than a deliberate devaluation by central banks.

Instead of succumbing to such a desperate measure, the country should smoothen out the kinks in its tax structure. But the failure to pass through the much-anticipated Goods and Service Tax (GST) Bill in the Parliament has prevented that eventuality from taking place.

The passage of the bill could have boosted the investor sentiment and would have given a fillip to growth in the country. Moreover, the development would have had the effect of erasing the haunting memory of retrospective tax levied on firms such as Vodafone, an image makeover which would have cemented Narendra Modi led BJP government’s commitment to a stable and fair tax regime.

If GST could not have been passed due to certain contentious clauses in the bill and the blockade by the opposition, another relief has been announced by the finance minister Arun Jaitley in the form of scrapping of the minimum alternate tax (MAT) retrospectively.

currency_83 by priyanka--621x414

Jaitley had earlier exempted capital gains made by FPI’s from the levy of 20 per cent MAT from the current year but not retrospectively.

Foreign companies had come under the MAT bracket when the Authority for Advance Ruling in 2012 stated that the Income Tax law did not make a distinction between Indian and foreign companies and therefore, MAT applied to them as well.

The ruling meant that the tax authorities started chasing foreign investors, demanding taxes on capital gains from the sale of securities.

Mauritius-based Castleton Investment Limited was subsequently asked to pay MAT, a decision whose validity will be tested in the Supreme Court in late September this year.

Is the government doing anything?

Now, with the government likely to accept the AP Shah panel’s recommendations,  the Foreign portfolio investors (FPI) will likely be saved from paying the tax even before April 1, 2015 and not just after the date mentioned in the next budget, by amending the tax law.

“The government should quickly issue a circular stating that MAT should not be applied to FPI’s from the period prior to April 1, 2015 as well”, said Suresh Swamy, partner, PwC while speaking to ET on the need for removing arbitrariness in the tax regime.

124119132Along with the clarity on tax structure which will reduce red-tapism in the country, the fall in global fuel prices will bring much cheer to the Indian economy. New shale gas discoveries in the US, record volume production of oil by OPEC and lifting of sanctions on Iran has meant that Indian oil imports (almost 75 percent of the domestic demand) would be lower in dollar value.

The current account deficit (difference between imports and exports) would fall and therefore, fuel (transport) and other prices would also decline, cooling down rising inflation which has brought much tears to the aam aadmi.

A $1 fall in global crude prices means India’s import bill falls by Rs 6,700 crores. This, coupled with the shift to direct benefit transfer (DBT) of LPG subsidy and deregulation of diesel price would rekindle the fortunes of oil marketing companies (OMC) such as OIL, ONGC, Reliance and Essar by overturning their under-recoveries.

It has been reported that the under-recoveries of OMC’s have been slashed by Rs 139,869 crores in 2013-14 to Rs 72,314 crores last financial year due to the above measures.

So, the big picture is that the Indian economy is on the right track. The hidden problem of burgeoning import dependence can be further ameliorated by removing bottlenecks such as bureaucratic sloth and complex regulatory processes.

Obliterating MAT for foreign portfolio investors is a step in that direction.

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Hiring for Your Business? Get it Right First Time

If you can keep these things in mind, you should have no issues coming up with ideas that will help you to hire the right kinds of people for the business.

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You have to keep in mind the fact that there are a lot of different types of people .Pixabay

There are so many things that you need to keep in mind these days if you are running a business, and one of the essential things is the fact that you need to get your workforce right. There are a lot of people out there who you will have the chance to hire for your business, and it is so important to make the right choice here. There are a lot of things to take into account when you are doing this.

Think about what you want to get from your employees, as well as what you can do to make sure you are focused on bringing things forward in a business sense. There are a lot of things you need to think about when it comes time to hire the right staff, and there are plenty of things to consider. This is how you can get right the process of hiring, and make sure you choose the right people.

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Small businesses take advantage of co-working spaces like this one, in Ho Chi Minh City, VOA
Interview Them Yourself

One of the best ways of getting this right is making sure you are focused on conducting the interview yourself. This is one of the best ways of getting a feel for the person you are interviewing and making a judgement about what you think they are like. There are so many things that might play a role in your decision-making, and you should consider what it takes to get this right immediately.

Background Checks

Think about carrying out a background check on prospective candidates before you actually commit to hiring. Of course, a more professional and in-depth one will be carried out once they accept the job, but you can conduct your own before even offering them the role in the first place. Carrying out an online people search can be an eye-opener when it comes to improving the way you conduct yourself as a business, and making the right choice for the future.

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There are a lot of issues to keep in mind when you try to make a decision about who suits the business. Pixabay
Look at Their Qualifications

When hiring a person, it is important to make sure you keep an eye on their qualifications and suitability for the job at hand. There are so many different ideas and options that play a role in the employment process, but it’s clear that experience and qualifications play one of the biggest roles. So, you need to make sure you are looking at those people with the right qualifications.  

What is Their Personality Like?

Also consider what their personality is like and what you can do to ensure you are hiring someone who is going to fit. There are a lot of issues to keep in mind when you try to make a decision about who suits the business. This is why you have to make sure you keep this in mind so that you can hire the right sort of person for the task at hand.

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Think about what you want to get from your employees. Pixabay

If you can keep these things in mind, you should have no issues coming up with ideas that will help you to hire the right kinds of people for the business. You have to keep in mind the fact that there are a lot of different types of people, and the better you can do this, the better choices you will make.