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The Vodafone-Hutchison Case: The Final Judgement

Posted on April 27, 2012 in Business and Economy

By Madhav Gupta:

The apex court gave its verdict on the Vodafone-Hutch case which has been going on for last 5 years. The Supreme Court gave it judgement in favour of the UK telecom giant Vodafone and ordered Indian Government to refund Rs. 2,500 crore along with 4% interest.

On Tuesday, Supreme Court even dismissed the review petition filed by the government. “You can only tax on the basis of existing law. We have no right to tax them, current law will prevail so long [as] law is not changed,” Salman Khursid said after a meeting with the Finance Minister Mr. Pranab Mukherjee and other top ministers.

It is clear that the verdict given by Supreme Court is as per the Book of Law. And the current law book doesn’t have much sight on overseas deals like this. But as soon as the Finance Bill 2012 will be in action, which would be covering latest enhancement of the Business world, the apex court will have to follow it. Any decision on the IT will obviously affect similar foreign deals and a strict act may even lead to high fiscal deficit.

The main problem being faced by the government in the current scenario is of dismal foreign trade and increasing Current Account Deficit. And in the current global scenario, any decision which is not fruitful for the overseas investors is not advisable. Vodafone is the single largest overseas investor in India. So any decision which doesn’t go their way will have an intense impact on the Indian economy.

The only way to get over this scenario is to make the domestic economy strong, especially by giving a greater importance to the primary activity of our country i.e. agriculture and reducing taxes on the domestic companies, providing low interest rate loans to small and medium scale industries, encouraging the youth to start-up their own business i.e. encouraging entrepreneurship and educating youth about the service industry.

Whatever the verdict is, the government has to take corrective measures and make sure the foreign investment is not lost.