The Hindu Business Line : NRI Ministry: Diaspora's hope buoyed

IT IS more than three months since the Government created an exclusive ministry to look after the welfare and problems of non-resident Indians. The NRI Ministry is still in its nascent stage. Among its challenging tasks are framing new policies that aim to fulfil the expectations of the large Indian Diaspora of 22 million spread all over the world.

The allocation of work to this new ministry has been a contentious issue since its formation on March 27. Part of the work concerning overseas Indians was hitherto handled by the External Affairs Ministry and the Ministries of Home, Commerce and Industry, and Finance.

Bringing all this under one umbrella is going to be cumbersome as it would require the cooperation of the various ministries. Whatever the initial hiccups, the formation of the ministry has buoyed the hopes of NRIs, who remitted nearly $20 billion to India last year. They hope the new Ministry will meet some of their long-standing demands, such as pension for the spouses and families back home. Some have property problems in India. It is well-known that years of segregation do at times give rise to legal problems, especially in property issues. Some overseas Indians can neither attend the court proceedings nor can they win against powerful real estate tycoons and land-grabbers.

Then there are problems related to returning NRIs. These home-bound citizens are now granted only a two-year tax-exemption on their overseas income, against the earlier nine years. This move has deterred people, especially the elderly, from returning to India permanently. Compare this with some other countries that are wooing their overseas residents back home by ensuring all kinds of sops and tax reliefs.

"Worse is the government's intention to tax NRI deposits from the next financial year," says an NRI in the Saudi Arabian capital, Riyadh. Except for their earnings in India, the NRIs had never paid tax on deposits in Indian banks, either in rupees or any foreign currency. It came as a big shock to them when they learnt earlier this year of the Reserve Bank of India's proposal to tax income accruing from deposits made through Non-Resident External Rupee Accounts (NRE), the Foreign Currency Non-Resident Account (FCNR) and the RFC.

The RFC is a foreign currency bank account for those returning to settle in India permanently. Based on the RBI's recommendation, the new Government imposed tax on NRI deposits amidst heavy protests from NRIs. The latter were told that the interest earned on their deposits would be subject to TDS (tax deducted at source) with effect from September 1, 2004. This has now been postponed till April 1, 2005. This tax proposal has hurt investor confidence, making mockery of a separate ministry created by the Government to look after NRI interests.

Consequently, a large number of NRIs withdrew their deposits and started investing in growing opportunities in West Asia and elsewhere. "As it is, interest rates have hit the rock bottom. Imposing tax in such a situation wasn't a friendly gesture," points out another expatriate Indian.

The previous National Democratic Alliance (NDA) government had shown interest to help NRIs and had organised giant NRI shows (Pravasi Bharatiya Divas) in 2003 and 2004. It had alsoannounced some friendly measures, including higher professional education for children of Gulf NRIs.

By setting up a new and exclusive ministry, the United Progressive Alliance (UPA) Government has made it clear that NRIs are important for them too. It is an opportunity for the minister in charge, Mr Jagdish Tytler, to make a mark as India's first NRI Minister.

It is, no doubt, going to be difficult for him, as he has to begin from scratch, right from establishing the new premises to creating basic infrastructure for himself and his staff, to such complicated issues as forming of investment zones in different parts of the country.

The first major challenge for the Ministry will be to successfully organise the annual Pravasi Bharatiya Divas show, a high-profile gathering for the diaspora, early next year. Ironically, the Ministry will first have to deal with the External Affairs Ministry, which has been wrongly allocated the festival budget because it was "its show" earlier. Some attribute this faux pas to the initial confusion and uncertainty about the new ministry! It seems Mr Tytler and his team will have to face more such gaffes in the days to come. The NRIs, on their part, may not care as long as their interests are looked into.

(The author is Media Editor, SABIC HQ, Riyadh, Saudi Arabia.).