Foreign exchange fluctuations have a tax impact, too

Ireo Victory Valley, located in Sector 67, Gurgaon, will be home to a majestic 51-storey tower

Ireo Victory Valley, located in Sector 67, Gurgaon, will be home to a majestic 51-storey tower

The dramatic fall in the value of the rupee over the past few weeks has been hitting the headlines consistently. There has been substantial analysis of the impact of these changes on the profits of various companies, which would indirectly affect investors in these companies. There is a direct tax impact of the foreign exchange fluctuations on certain types of investors—non-resident Indians (NRIs) investing in India and residents investing overseas.

Impact on NRI investors

NRIs investing in India in shares or debentures of Indian companies have the advantage of having their gains computed in terms of the foreign currency in which they acquired the shares or debentures. Such gains computed in foreign currency are then converted into Indian rupees at the prevailing exchange rate and are then accordingly taxed. This effectively protects them from paying taxes in India on the loss that they have made on their investments in India, due to the depreciation in the Indian rupee.

Read more: Mint

Long-term investment prospects still bright for NRIs

Imagine a non-resident Indian (NRI) who shifted money to India two years back when the exchange rate was Rs.44 to a dollar. The Indian rupee has depreciated to Rs.59 per dollar now, leading to a staggering loss of 34%. On the other hand, in the last two years, equity markets have been almost flat, fixed income investment would have grown by 20%, while real estate investments may have appreciated around 25%. The net result is negative return on the investment in almost each asset class. So should NRIs invest in India now? To examine this issue better, we should break the problem into four parts. How is the long-term scenario of the Indian rupee vis-à-vis other currencies? Which are the asset classes that an NRI should invest in? What kind of tax regime is there in the source country? And finally, what is the time horizon for investments?

Read more: Mint

Economy

Industry gives thumbs-up to government’s FDI decisions

%20%28Government%27s%20decisions%20to%20relax%20limits%20for%20FDI%20in%20a%20dozen%20sectors%20are%20%27most%20timely%27%20and%20will%20boost%20investor%20sentiments%2C%20India%20Inc%20said.%29Government’s decisions to relax limits for FDI in a dozen sectors are ‘most timely’ and will boost investor sentiments, India Inc said today.

“While industry looks forward to more, this revision of caps is a huge step in setting off these reforms,” CII Director General Chandrajit Banerjee said in a statement.

On hike in FDI limit to 49 per cent for the insurance sector, the chamber said the move would unshackle insurance industry and drive orderly growth and long-term development of the insurance and pension sector in the country.

On defence sector, CII said that “critical concepts such as ‘state-of-the-art’ technology would need to be defined”.

“Clarity and transparency needs to be ensured while allowing higher FDI,” Banerjee added.

Assocham said the “welcome move” should be followed by easy rules on the mergers and acquisitions so that much needed consolidation in the insurance sector is facilitated.

Read more: The Economic Times

Green growth is necessary and affordable for India: World Bank

Stating that environmental degradation is costing 5.7 per cent of GDP annually, World Bank today said India can make green growth a reality by putting in place plans to lower environmental degradation at minimal cost of 0.02-0.04 per cent of gross domestic product.

“Like in many other countries, the debate over growth versus environment is also active in India. This report suggests there are low-cost options that could significantly bring down environmental damage without compromising long-term growth objectives,” said Onno Ruhl, World Bank country director.

“The costs of doing this are not only affordable in the long-term but would also be offset by the significant health and productivity benefits,” he said.

Failure to act now could also constrain long-term productivity and hence India’s economic growth prospects, said the report titled ‘Diagnostic Assessment of Select Environmental Challenges in India’.

Read more: The Economic Times

Dow, S&P 500 end at record highs on earnings, Bernanke

The Dow and S&P 500 closed at record highs after Morgan Stanley & others reported better-than-expected earnings.

The Dow and the S&P 500 closed at record highs on Thursday after Morgan Stanley and others reported better-than-expected earnings and Federal Reserve Chairman Ben Bernanke’s comments further reassured markets.

Shares of Morgan Stanley jumped 4.4 per cent to $27.70, its highest close since April 2011, after the bank posted a 42 per cent increase in quarterly profit as stock trading revenue soared. Earlier, Morgan Stanley’s stock hit a session high of $27.95, its highest intraday level since April 2011. The S&P financial index climbed 1.3 per cent.

Of the 21 financial companies that have reported quarterly earnings so far, 76 per cent have surpassed analysts’ estimates, Thomson Reuters data showed.

UnitedHealth shares rallied, bolstering the Dow and other health insurers’ stocks. UnitedHealth gained 6.5 per cent to $70.55 after the company’s results beat expectations, while the Morgan Stanley healthcare payor index rose 3.1 per cent.

Read more: The Economic Times

Infrastructure

L&T shares rise after Rs 2,085 crore project win in Oman

Shares of Larsen & Toubro inched higher in trade after its transportation infrastructure business bagged a new order worth riyal Omani 135.6 million (approximately Rs 2,085 crore) for the construction of the Al-Batinah Expressway Package 4.

At 12:20 p.m.; the stock was at Rs 978.25, up 0.71 per cent, on the BSE. It touched a high of Rs 987.90 and a low of Rs 975.60 in trade today.

The project is scheduled to be completed in 36 months and involves building a 50-km, four lane dual carriage expressway, two grade separated interchanges, seven overpass, five wadi bridges and cross drainage works.

Source: The Economic Times

Retail

Multi-brand retail FDI policy riders might be eased

Under pressure from international retailers, the government might soon amend the foreign direct investment (FDI) policy on multi-brand retail trading (MBRT) by easing some conditions which had drawn sharp criticism from global investors. However, there is no proposal to hike the FDI limit in the sector from 51 per cent.

The department of industrial policy and promotion (DIPP), nodal agency for FDI policy under the ministry of commerce and industry, seems to have prepared a note for the Cabinet Committee of Economic Affairs (CCEA) to consider. It would mean changes in the FDI policy approved in September.

The government will seek to change three main conditions that have invited the most criticism by retail conglomerates such as Walmart, Tesco and Carrefour. This pertains to the riders concerning back-end infrastructure, mandatory sourcing and establishment of retail stores only in cities having more than a million population.

Read more: Business Standard

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