Why national carrier Air India could remain with an Indian owner

The government is unlikely to allow foreign bidders to have a majority stake in Air India, which is in the process of privatisation. The group of ministers (GoM) exploring ways to privatise Air India is of the view that Indian ownership is important for the national carrier tag to be retained, sources said.

However, foreign investors will be able to participate in the bidding to own up to a 49 per cent stake in the loss-making carrier in a partnership with an Indian entity, it is learnt.

The international rules on airline ownership and control especially make it difficult for foreign entities to have a majority stake in Air India, a top official said. “International norms mandate certain ownership rule for airlines which cannot be bent for Air India in isolation. Also, the government wants to keep the national carrier tag status,” he said. Not adhering to the rules might make it difficult for Air India to utilise the flying rights it has to operate in foreign countries.


Even as a decision has not been taken yet, the GoM seems to be in favour of vesting majority ownership for Air India in an Indian entity, another source said. The process of disinvestment of Air India is being guided by a GoM, referred to as a committee for an alternative mechanism, headed by Finance Minister Arun Jaitley. The committee has held two rounds of meetings.

graph The International Civil Aviation Organisation (ICAO) guidelines on ownership and control have two aspects. The first involves placing limits on foreign nationals’ ownership of the voting equity share capital of airlines.

For instance, USA places a limit of 25 per cent on foreign ownership of its airlines; for Japanese airlines the limit is 33 per cent; and the European Union (EU) limits non-EU ownership of the airlines of its member states at 49 per cent. The second element of the restrictions involve the nationality clauses present in the bilateral air services agreements between countries. In essence, the traffic rights granted under these bilaterals require that airlines benefiting from these rights are substantially owned and effectively controlled by nationals of the state in question.

Although the regulation is not binding and the countries are free to set their own terms, India will have to amend the clause in its agreement with countries adhering to the regulations, the official said. “The government has to discuss and convince all the countries in order to change the norms. It is unlikely that the government will want it,” he said. Air India has flying and landing rights across the world.

Among foreign airlines, several including British Airways, Lufthansa and Qantas were privatized, but foreign ownership was not allowed, one of the officials quoted above said.

Why national carrier Air India could remain with an Indian owner

I-T dept has compiled a list of 8,000-odd non-filers: Report

In a bid to meet stiff revenue targets amid sluggish growth, the income tax (I-T) department has reportedly initiated prosecution proceedings against a large number of individuals and business entities for not filing tax returns and for delaying remittance of tax deducted at source (TDS).

This is probably the first time that prosecution proceedings, which was primarily used against wilful tax evaders, have been initiated for such charges.
“A list of 8,000-odd non-filers (of tax return) with a past record of earnings has been compiled (by the tax department). Many in that list have been issued prosecution notices,” a senior tax official in Mumbai, told The Economic Times.

“Notices have also gone to companies which even after deducting TDS (from salaries, rent, or other heads) have failed to submit it to the government,” the official said.

According to the business daily, some small and mid-sized companies who had cleared the tax in phases along with interest after admitting their inability to pay on time, have also received prosecution notices.

The ones who have received such a notice will now have to explain reasons for delay in paying taxes. The assessee might also have to present himself before the magistrate’s court if the tax assessing officer is not satisfied with the explanation.

The assessee can also move the high court seeking to quash the notice.

Tax practitioners and business heads said the move will result in unnecessary hardship to assessees.

I-T dept has compiled a list of 8,000-odd non-filers: Report

No easier rules for foreigners, say home retailers

India-based multi-brand retail giants are questioning any demarcation in labelling rules between them and single-brand retailers.

In the hope of billions of dollars in foreign direct investment (FDI), the government is planning major changes in the labelling norms to exempt international single-brand retailers from stamping the Maximum Retail Price (MRP) on every product.
This has been a major demand of a host of global entities, including furnishing giant Ikea and infotech major Apple. They want to follow the international labelling norms for both aesthetic and cost reasons, they say. Indian multi-brand retailers question this. “Why should foreign retailers get this preferential treatment? In Thailand or the Middle East, they have to print the labels in local languages and they obey. What is the problem here?” asks Rakesh Biyani, joint managing director, Future Retail.

In an interview to Business Standard sometime earlier, Mikael Palmquist, retail president (Asia- Pacific) for Ikea, had said individually labelling the MRP on every product drove up their cost. “In India, there is an MRP slip on every product and we are 100 per cent aligned with that. But, in a modern retail society, we can use things like phones to check prices on the website to maintain transparency. Labelling of items individually drives costs. We work with some of the international retailers and relabelling that has to happen when the products enter India is a concern,” he had said.

European Business Group, which includes retailing majors Ikea, Hennes & Mauritz AB and Decathlon, have had several discussions with the government on labelling norms. In January this year, the government had indicated it was ready to tweak the norms for single-brand retailers and to make changes in the Packaged Commodities Rules, 2011.

Sources say discussion on this has been held at multiple levels and the general consensus is to allow the change in the rules, in the interest of consumers and the companies alike. “When we have allowed multinational single brand retail companies to set up businesses in India, there is no reason why this should not be allowed,” said a senior official from the department of consumer affairs, the nodal ministry in this regard.

Indian retail sector bodies want the rules to be the same for all. “The MRP and Packaged Commodities Acts are dated and not in line with the modern world’s digital price mechanisms and comparisons. Also, the distinction between single-brand and multi-brand is unique to India and truly confusing. Neither FDI in retail nor consumer affairs policies should be based on this,” says Kumar Rajagopalan, chief executive at Retailers Association of India.

“The government’s plan seems unclear. We have to see what happens with the final rules. This is an evolving process and I think the government will realise that there is no need for a dual policy and things would change for us as well,” said Anand Agarwal, finance head at V-Mart Retail.

No easier rules for foreigners, say home retailers

After job cuts in 2017, India Inc to offer 10-15% fatter pay hikes in 2018

India Inc is promising better pay hikes of 10-15 per cent for the right talent in 2018 after a challenging year for the job market, stunned by post- demonetisation layoffs in traditional sectors like textiles and due to the advent of artificial intelligence in new-age ones.

The catch would be ‘right’ talent which HR experts broadly define as those who are able to re-skill themselves as per the changing work profile requirements, even as they warn that further ‘rationalisation’ — the sugar-coated jargon for layoffs that came aplenty in 2017 including by some large groups — cannot be ruled out for the corporate workforces.


But, the overall hiring sentiment of employers in India, as per major staffing consultancies, should continue on the revival path that has got underway in the last quarter of 2017 after three consecutive quarters of downtrend.

As per various estimates, just about 20 per cent firms have made workforce additions in 2017, though a majority of 60 per cent managed to retain their staff strength unchanged without any major layoffs.

But the layoffs were huge for some, including in IT, telecom, manufacturing, engineering and banking sectors and quite often demonetisation — announced in November 2016 but had a long-lasting impact — was seen as the culprit. Several corporates adopted a wait and watch approach and the negative hiring sentiments lasted until at least September this year.

Leading consultancy Manpower Group’s India Economic Outlook showed a dip in the employers’ hiring intentions in the first three quarters of 2017, before rising again in the October-December period.

Its surveys showed the percentage of employers planning to hire dipping to 22 per cent in January-March, further down to 19 per cent in April-June and to 16 per cent in July- September, but rebounded to 24 per cent in October-December.

Experts hope that the recruitment landscape recovery will continue and companies in mobile manufacturing, fintech and start-ups, among others, may hire the most in 2018.

Even the better good news is expected on pay hikes, which experts are pegging at 10-15 per cent across most sectors — up from 8-10 per cent mostly in 2017.

“2018 is set to swing the pendulum further into the job growth zone. Businesses in almost all sectors — notably, financial services, retail and ecommerce and media and entertainment — are looking to hire talent at an even faster pace,” said Rituparna Chakraborty, co-founder of employment services provider Teamlease Services.

The year 2017 saw growing adoption of new business models and newer technologies like Artificial Intelligence (AI) and robotic process automation that significantly reduces the manpower requirements especially at the bottom of the pyramid. But this has also created a huge demand for specialists in these emerging technologies.

“Change in business environment is leading to obsoleteness of existing skills and have created demands for new skills as must-haves. IT skills are out now, while data science and digital skills are in demand,” said Zairus Master, CEO of Shine.com a leading online job portal.

The labour landscape in India is changing significantly, and some of the emerging trends include rise temp staffing (employee is recruited on a temporary basis) and flexi workforce and this has led to companies adopting various models in addition to their full-time employees, like freelancers as well as alternate sources of workers like retirees, alumni, and online talent communities.

“India’s flexi workforce is currently 13 lakhs and is expected to grow to 90 lakhs by 2025. Importantly, 82 per cent of total flexi workforce in India is under the age of 30. Companies will naturally evolve to use contract services for all skill sets that are not needed on a constant basis,” said Thammaiah BN, Managing Director, Kelly Services India, a human resources and workforce solutions firm.

Sectorwise, HR experts believe infrastructure, telecom, manufacturing and IT will be among the industry verticals that will grow substantially in the coming year.

“These segments have the focus of government, besides these industries are going to work as a framework for the growth of economy and development which in turn creates job opportunities for everyone,” said Sunil Goel, MD GlobalHunt an executive search firm.

In terms of increments, 2017 saw the median rate of pay hike dip to sub-10 per cent level at around 9.2 per cent. This varied by sector, and most importantly, by job role, while specialised talent and key performers still got well rewarded.

In the new year, the median increment is expected to improve to above 12 per cent across sectors and profiles.

According to GlobalHunt’s Goel, the average hike was 8-10 per cent in 2017 across the sectors, which should grow to 10- 12 per cent in 2018. TeamLease Services’ Chakraborty said the figure should breach 11 per cent in the new year.

Kelly Services’ Thammaiah said employees in IT sector can expect average appraisal of 8 per cent; e-commerce and start- ups of 15 per cent; pharma and life sciences as also FMCG and consumer goods of 8-15 per cent; and ITES at 10-15 per cent.

Some of the recruitment trends that corporates are likely to adopt in the coming year include hiring through social media, online assessment, and focus on delivering an unparalleled experience to candidates, experts say.

“With 243.2 million internet users and 106 million active social media users among a total population of over 1200 million, the social media wave is yet to get into the heart of India,” Thammaiah said.

Corporates will increasingly adapt innovative tools like video interviewing, asynchronous interviewing and online assessments that not only will increase the efficiency of the hiring process by 50-60 per cent, but at the same time help in increasing the quality of hire, he added.

GlobalHunt’s Goel observed that overall in 2017 the job market has gone well wherein a lot of global organisations went on expanding their base in India and many new companies also came to set up their base in the country. This led to the creation of a decent number of job opportunities in sectors like BFSI, technology, e-commerce and also in manufacturing.

Moreover, skill development initiatives have boosted the capacity of unorganised sector and small industries which used to struggle for trained resources, he added.

After job cuts in 2017, India Inc to offer 10-15% fatter pay hikes in 2018

Shocks from GST, note ban and bad loans to last for 2 more years: Y V Reddy

Refusing to hazard a guess on gross domestic product (GDP) growth in the short term, given the “shocks” such as GST, note ban and the mountain of bad loans, former Reserve Bank Governor Y V Reddy has said the economy requires two more years to “consolidate” and claw back to higher growth levels.

It is very difficult to make a forecast on economic growth now or say when the economy will return to the potential growth levels of 7.5 to 8 per cent, which is unlikely in the next 24 months, he said.

“In a shock, the negative element is front-loaded. There will be some moderation, and there can be some gains. The pain is there now, the gains will come later. How much gains and in what gap are the issues,” Reddy told a select group of reporters over the weekend.


“My guess is it might take a couple years to consolidate. In a couple of years, we should at least aim to go back to 7.5-8 per cent growth,” the former central banker said.

Reddy said the economy was helped by a positive shock for almost three years following the massive drop in crude oil price, which he underlined was at a third of what it was during his governorship.

However, the negative shocks such as the implementation of the goods and services tax, note ban last November, and the high quantum of non-performing assets of banks have hurt the growth rate, he said.

Reckless lending in the high growth years during the previous government and certain development in the telecom, power and coal sectors following graft charges created a lot of stress in the corporate world and left many of them over-leveraged. As a result, the bad loans in the system has jumped to almost 15 per cent, or over Rs 10 lakh crore, as of the September quarter.

Reddy, whose conservative approach to regulation is lauded and described as one of the reasons which limited the impact of the 2008 global financial crisis, said the potential output growth has come down to 7 per cent now from the 8.5 per cent levels before the crisis.

The decline is due to both international factors, where global economic growth has been declining and also domestic issues like the negative shocks mentioned above, said Reddy, who was chairman of the 14th Finance Commission.

Reddy said opinion is divided on how to look at these negative shocks, which he said are looked at by foreigners as “institutional changes”.

“All these three shocks, according to some analysts, have permanently affected potential output, whereas some others say it is a (temporary) shock. So, the question is how much is a shock? I think there is some element of a shock, some element of permanent improvement can also be there after a lag,” Reddy said.

Such shocks, he said, makes the methodology of estimating growth “undependable” in the short-term.

The RBI is expecting growth on a gross value added basis to shoot up to 7.8 per cent by the fourth quarter of this financial year, which it feels will pull the yearly growth rate up to 6.7 per cent, which was maintained in the December 6 policy review.

Some analysts have said the central bank is too optimistic in its expectations, while some have backed it.

“All short-term projections can be subject to more differences of opinions. I am not following short-term forecasting at all; it is not worth it,” Reddy said.

The lingering note-ban impact had seen the growth rate plunging to a three-year low of 5.7 per cent in the June quarter but improved to 6.3 per cent in the September quarter.

But implementation issues related to GST is still gnawing at the small and medium industries, the impact of this on overall growth will be visible only in the forthcoming quarters.

Policymakers consider any growth rate below 8 per cent is below the potential of the economy, whose 1.3 billion people result in a huge domestic market and also its exports penetration. They want to take it up to 8 per cent and beyond in the medium-term.

Shocks from GST, note ban and bad loans to last for 2 more years: Y V Reddy

Bitcoin regulation: Why it makes sense to recognise it as a currency

One of the challenges that Bitcoin poses is that it lends itself very easily to bypassing currency regulations. It was designed that way, with its decentralised verification network and built-in anonymity. As a result, the cryptocurrency has also been used for all sorts of criminal transactions on the Dark Web. Copycat virtual currencies designed on the same principles have also been used for similar purposes.

The first time Bitcoin was known to facilitate currency flight on a large scale was during the Greek euro crisis of 2015. As the Greek economy went into a meltdown, there was an attempt to prevent currency flight by barring the exchange of euros for other currencies within Greece. The loophole was that Bitcoin isn’t considered a currency. So, Greek traders got around this by buying Bitcoins and swapping those for the US dollar. Bitcoins have even facilitated enormous capital flight out of China in the past couple of years. Mainland traders have bought Bitcoins using the Chinese renminbi and then swapped those for hard currencies.
It is likely that Bitcoin has been used for the same purpose by Indians as well, especially after the Narendra Modi government’s demonetisation decision late last year. Rupee volumes of Bitcoin trades have risen considerably over the past 12-18 months. News reports also confirm that Bitcoin has been used as an alternative to conventional remittances as well. This avoids paying bank charges and arbitrages on the considerable premium of 5-10 per cent that Bitcoin receives in rupee-denominated trades. Non-resident Indians (NRIs) can buy Bitcoin in dollars and sell in rupees, picking up premiums.

Another major trend has been that of initial coin offerings (ICOs). There have been multiple types of ICOs. One is that of a start-up doing an IPO, which raises subscriptions in Bitcoin. These range from normal business ideas to wild schemes or frauds.

This is actually less popular now because the rise of Bitcoin has made investors reluctant to use it. Another type of ICO is the launch of yet another digital cryptocurrency – there are hundreds of Bitcoin imitations available now. Many of these ICOs are outright Ponzi schemes or based on dubious “blockchains” which are not actually blockchains and open to rampant manipulation. The advantage for a fraudster is that the ICOs are completely outside of normal regulatory controls because, after all, digital cryptocurrencies are not recognised as currency. China has overtly banned ICOs but it required special regulations.

Japan recognised Bitcoin as a currency back in September which is probably a sensible thing to do. Australia is following suit, and so is South Korea. Japan has brought digital currency exchanges under supervision by its market regulator, imposed net worth norms and KYC norms. It has also brought them under the purview of money-laundering laws. At the same time, it allows Bitcoin to be used in transactions. South Korea and Australia are headed in the same direction. Chances are that other large economies will also impose similar controls.

This is very likely to happen in India as well. Once a signification proportion of India’s major trading partners recognises these instruments and imposes controls, India will follow suit – it will have to. It would be good if that happened proactively, but the country is far more likely to follow in the footsteps of such controls being imposed abroad.

Will such recognition drive out a certain class of speculators? Sure. It will also make Bitcoin less attractive as a clandestine cross-border instrument. But it will enable its use for legitimate purposes. Right now, for example, you cannot buy a new car in India using Bitcoin because no auto-dealer would accept it. Ditto for Flipkart, Ola, Zomato, Paytm, etc, to name some businesses at the forefront of India’s digital economy. If it is a recognised currency, that situation might change and allow for a more widespread usage. This could in itself reduce the arbitrage premium on rupee-denominated Bitcoin trades. So, be prepared for that particular shock if you are involved in Bitcoin trading.

Bitcoin regulation: Why it makes sense to recognise it as a currency

Sensex ends 205 pts higher, Nifty above 10,300; PSU banks, IT stocks lead

Benchmark indices ended higher on Monday, tracking Asian peers that climbed on positive US payrolls and Chinese trade data, with investors continuing to bet on a possible win for the country’s ruling party BJP in a Gujarat election.

Markets are hoping for a big success by Prime Minister Narendra Modi and his ruling Bharatiya Janata Party in assembly elections in Gujarat, with tens of thousands voting in the first stage of the polls on Saturday.

A victory would help boost the government’s re-election prospects during general elections in 2019 and reinforce its reform agenda, although analysts said it was already being priced into markets, making the margin of a win crucial to further boost shares.


Investors also await retail inflation data which likely breached the central bank’s 4.0% medium-term target in November after unseasonably heavy rains sent food prices soaring, a Reuters poll showed.

In the poll of more than 30 economists, annual consumer inflation, due to be released on Dec. 12, was seen surging to a 13-month high of 4.20% in November from October’s 3.58%.

Sensex ends 205 pts higher, Nifty above 10,300; PSU banks, IT stocks lead