India Inc gives thumbs up to hike in foreign office expenses

MONETARY POLICY 2006-07

Cap on initial, recurring expenses of branch offices up at 10% and 5% of average income of last two years.

Terming this as a step in the right direction, India Inc has welcomed the Reserve Bank of India's (RBI) move to increase the cap on remittances towards initial and recurring expenses of overseas branch offices of Indian companies.

The hike in the limits will help domestic companies, especially the ones engaged in the IT and pharmaceutical sectors and on an acquisition spree, in gaining a strong foothold in international markets.

The RBI has, in its 2006-07 annual policy, raised the cap on initial and recurring expenses of branch offices of Indian entities to 10 per cent and 5 per cent of average annual income or turnover of the last two accounting years respectively. It has been increased from 2 per cent and 1 per cent respectively.

The central bank said the increase in allowable expenses is a measure of further liberalisation and simplification of the policy.

Infosys Chief Financial Officer V Balakrishnan said, "This will result in an increase in velocity of business as it helps Indian companies hike overseas spends. However, this will only be of incremental help to big companies "" not to be of much help."

Terming this as a "progressive and liberative" move, he added it would also help small and medium enterprises "think big" and ramp up overseas presence.

Wockhardt Group Chairman and Managing Director Habil Khorakiwala said the group has immensely benefited from the RBI steps aimed at promoting globalisation of Indian companies in the recent years.

"This is another move in this direction and will specially help Indian pharma companies," he said.

Intelenet Global Services Chief Financial Officer Ramachandra Panickar said, "We are pleased with the move to increase remittances towards initial and recurring expenses of branch offices of Indian entities abroad."

"Intelenet has a global vision and is planning forays into different countries. Keeping in mind this expansion plan, an increased limit of remittances will go a long way towards facilitating growth of operations and help companies like ours achieve their vision," Panickar said.

---

OVERSEAS PUSH

Earlier, initial, recurring expenses of branches abroad were 2%, 1% of the average income or turnover for the last 2 accounting years respectively

RBI says the hike in allowable expenses is a measure of further liberalisation and simplification of policy