25February2009

Duty cut of 2%

Using every privilege it has to lure voters just before code of conduct for the next general elections is applicable, Finance Minister Mr. Pranab Mukherjee announced 2% cut in excise duty. This will be in addition to the 4% excise duty cut made in December and will continue in the next Fiscal. Note here that the duty cut is only for the items with current excise duty at 10%. There are other slabs with duty more than 10% and other at 4%, though these are not affected. But the items with 10% duty (which now will be at 8%) are 96% of all. So more or less this cut is across the commodities. There is 2% cut in the service tax as well, bringing it down from 12% to 10%. So we see cut in bills if the benefit is transferred to consumer. 

S&P Lower India Rating

Standard & Poor’s (S&P) lowered the outlook for India’s credit rating from stable to negative (BBB-) indicating higher possibility of a downgrade. The revision has increased expectations of a rate cut aimed at boosting sentiment. S&P’s revised outlook has came less than three weeks after it said India will be the second-fastest growing economy after China. But economy prospects and fiscal position are separate issues. India fiscal deficit was as high as 6% as against 2.5% expected budget deficit. Also with the current duty cuts (mentioned above) there will be higher fiscal deficit. Note here that on the same ratings (Long term debt, Local currency) some other countries stands as:

Pakistan: CCC+

Sri Lanka: B+

Kazakhstan: BBB

Israel: AA-

Jordan: BBB

Russia: BBB+

US: A+

Australia, New Zealand: AAA

China: A+

Hong Kong: AA+

Singapore: AAA

Argentina: B-

Brazil: BBB+

Venezuela: BB-

France, Germany, Ireland, Portugal, Netherland, Switzerland, UK, Sweden, Norway: AAA

Iceland: BBB+

SEBI clearance for Satyam sale

SEBI has laid the way for Satyam to issue preferential shares at a price which can be lower than what rules allowed till now. At present, the pricing of a preferential issue is based on the average price of the stock for two weeks or six months, whichever is higher, from the relevant date (which is 30 days prior to shareholders’ approval). This is now relaxed to two weeks average price.