“Just two months ago, worried about their slowing economy, Indian officials were promising to promote policies to make the country more hospitable to foreign investment,” Vikas Bajaj writes in The New York Times. “Instead, the government has done the opposite — proposed a budget festooned with new taxes that would make it more difficult and expensive for outsiders to invest here.”
Political handicappers expect legislators to approve the new taxes later this month because “the government desperately needs to raise money to reduce its fiscal deficit,” Mr. Bajaj writes.
There is an ‘Oh, my God’ factor,” about the tax proposals, said Nandan S. Nelivigi, a partner at the law firm White & Case in New York who advises companies that do business in India. He said he knew of at least two foreign acquisition deals involving Indian firms that had been delayed while executives wait to see what happens with the tax measures.
“New deals — there is no question that they are on hold until the tax implications are clear,” Mr. Nelivigi said.
Last week a group of business associations representing 250,000 companies in the United States, Canada, Britain, Japan and Hong Kong sent a letter to the Indian prime minister, Manmohan Singh. They warned that India would “lose significant ground as a destination for international investment” if it adopted the tax changes.
Recent data shows that “India has become increasingly reliant on capital from the United States, Europe and Japan to help offset not only its budget deficit but also its ballooning trade deficit, which was estimated at $175 billion for the 12 months ending in March,” largely a result of oil imports and a big trade imbalance with China, Mr. Bajaj writes.
News Source: Global India
