Challenges of Mining in India

The recent global macroeconomic uncertainties including plummeting commodity price cycles, currency devaluation in Brazil, the cost reduction strategies of the firm, the falling economic growth in China, the lowering capital expenditure (CAPEX) investment on infrastructure projects have had tremendous impact on the firm level competitiveness and the underlying earnings before interest, depreciation, taxes and amortization (EBIDTA) of mining firms, inevitably affecting mining in India as well. The turmoil in the European Union and the Quantitative Easing in USA can also affect the mining firms in terms of financing and trade. Despite the increasing recognition by economists, mining executives and macro policy makers on the impact of macroeconomic policies on the competitiveness of mining sector, there is hardly any systematic analysis on this issue. This paper attempts to bridge this gap by exploring the impact of macroeconomic policies—especially fiscal policy on mining in India. The question relevant to ask here is, whether efforts to increase the fiscal space through additional taxes and levies and tying up fresh auctions with royalty is burdening  mining in India, which is already overburdened by ‘tax terrorism’, given India has the highest rates of mining tax in the world. Would it augment the state exchequer in the long run if firms are adversely affected in terms of competitiveness and productivity? Foreign firms, one finds, have undertaken many strategies in the backdrop...

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