Indian corporates accessing the overseas markets through GDR issues will not be allowed to invest in overseas equities before the funds are brought in to India if the Finance Ministry endorses the stand taken by the RBI. The Reserve Bank Governor, Dr. C. Rangarajan, has written to the Ministry suggesting that the money raised through GDR issues should primarily be invested in government-designated investments.

Peregrine International venture cleared

Peregrine International Holdings has been permitted to set up shop in India with a majority holding in a joint venture. According to the proposal approved by the empowered committee at its meeting under the chairmanship of the Finance Minister, Dr. Manmohan Singh, the Asian banking group would have a 75 equity stake in the joint venture which would provide a comprehensive range of financial services.

States may not benefit from tax sharing formula

State Governments are unlikely to benefit from the new tax sharing formula recommended by the Tenth Finance Commission. Under the existing devolution arrangement, the Centre has to statutorily transfer 85 per cent of its income tax and 45 per cent of basic and special excise duty collections to the States. The commission proposes to augment the States’ share in excise to 47.5 per cent, while lowering it to 77.5 per cent for income tax revenues. The 7.5 per cent reduction in the share of income tax revenues is not expected to cause much harm to the States, since it would be compensated for by the small rise in the more “buoyant” excise component’s share. But the question is: Will the States gain in overall terms, and if so, how much?

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