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May 10, 2012 Just because you can now go to Dunkin Donuts in New Delhi, withthe first Starbucks soon to follow, doesn t mean it s morning forforeign investors in India. In fact, judging by some of thegovernment s recent moves, dawn has been postponed by a few years. Wednesday, India s Finance Secretary R.S. Gujral told BloombergNews that if plans to amend India s tax law go through, VodafoneGroup Plc will face a retroactive tax bill of as much as $3.72billion for its 2007 purchase of Hutchison Whampoa Ltd. s Indiancellular operations. Changes to the law would override a decisionissued this year by India s Supreme Court releasing Vodafone fromany tax obligation, and they might also expose companies such asKraft (KFT) Foods Inc., AT&T Inc. and SABMiller Plc. to similarretroactive penalties and levies for previous transactions. The government has also reportedly decided against lifting a 26percent cap on foreign investment in the insurance business. Andthough single-brand niche retailers such as Dunkin Donuts andStarbucks can now own as much as 100 percent of their ventures(provided they source 30 percent of content locally), there is asyet no joy for multibrand retailers such as Wal-Mart Stores Inc.,which remain locked out of the consumer market. These misguided decisions have taken place against a background ofa cooling economy and a deepening political paralysis. India grewby less than 7 percent last year, the slowest pace in three years,and it is saddled with a fiscal deficit and inflation rate that arethe highest among the big developing economies, not to mention aswelling trade deficit driven by oil imports. Its fractious rulingcoalition of frenemies can t agree on whether to order a tall or agrande, let alone on what further reforms to adopt. Faced with those circumstances, Finance Minister Pranab Mukherjeechose to make higher taxes on foreign investors a crucial part ofhis effort this fiscal year to close his country s budget gap. Butthat s exactly the wrong way to attract the capital that Indianeeds: Its 12th Five Year Plan calls for $1 trillion ininfrastructure investment over the next five years. Remarkably, inthe face of widespread investor unease, some government ministershave argued that these tax changes will not have any impact onforeign investment flow in the country. The prospect of a new rule on tax avoidance in Mukherjee s budgetspurred the outflow of hundreds of millions of dollars fromIndia s exchanges. Despite his subsequent decision to postpone therule s implementation until 2013, foreign portfolio investors havenot been reassured. The proposed Vodafone provision, which couldnet India billions in retroactive revenue, sends investors exactlythe wrong signal, not least because it overturns a seeminglysettled court verdict. The government should drop the retroactiveprovisions of the law, and focus more on curbing the subsidies thateat up more than 2 percent of gross domestic product. Secretary of State Hillary Clinton made the case for continuedopening of the Indian economy in her just concluded trip. In fact,we give her major props for going into the lion s den -- a visitwith Mamata Banerjee, chief minister of West Bengal, leader ofcoalition member All India Trinamool Congress, one of Timemagazine s 100 Most Influential People in 2012, and areflexive opponent of economic liberalization. But given India sfragmented polity and the sclerotic state of its national partiesand their central leadership, don t expect much, if any, changeuntil national elections in 2014 -- and then hope that it s forthe better. The e-commerce company in China offers quality products such as GSM Alarm Systems , Personal Alarm Keychain, and more. For more , please visit Wireless Alarms Systems today!
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