Category — Economy

India Reduces Tax on 177 items

On Friday, November 10, the Goods and Services Tax (GST) Council announced the biggest concession on taxes since the new indirect tax system took effect on July 1. The Council reduced the list of items attracting the top 28% tax rate to just 50 from 227 previously. The items that were removed were then placed under the 18% tax bracket.

The tax rate was reduced on  177 items ranging rom granite and marble to chewing gum and chocolates, deodorants, and detergents, and will result in a revenue loss of about $3 billion  a year. The tax cut is aimed at making the new indirect tax regime more acceptable to people and to reduce the burden on businesses, reports Mint.

Taxes

Prime Minister Modi said, “There is consensus that slowly the 28% slab should be brought to 18%. But it will take some time because it has a big revenue implication.”

November 10, 2017   No Comments

Paypal Starts India Operations

After offering cross-border payments in India for a decade, global digital payments major PayPal announced the launch of its India operations.

PayPal Holdings, Inc., said, “Merchants offering PayPal will be able to process both local and global payments through PayPal, getting access to PayPal’s 218 million customers around the world and in India through a single integration.”

The Government of India’s recent push towards digital payments led PayPal to partner with government and state-owned banks on a number of initiatives, such as digital financial literacy programs and eTourist Visa (eTV), reports the Economic Times.

PayPal Logo

“India is transitioning away from our biggest competitor – cash – and our digital platform and technology has immense scope to enable this at scale. For us, the marathon has just begun,” Anupam Pahuja, Country Manager and Managing Director, PayPal India said.

India’s digital payments journey is on a high growth trajectory and we are proud to be a part of it. We are excited about our prospects in a market that is highly inspirational and aspirational,” Rohan Mahadevan, CEO PayPal Private Limited and senior vice president, General Manager, APAC said.

 

November 9, 2017   No Comments

Foreign Investment into India at All-Time High

According to India’s Department of Industrial Policy and Promotion,  cumulative foreign direct investment (FDI) into India reached $498.9 billion in the 17 years from April 2000 to June 2017. During the last two financial years,  FDI flows into India totaled $114.4 billion says a new KPMG report; this is an incredible forty percent higher than the three years preceding.

“In the financial year 2017, the country received the highest-ever FDI flow worth $43.5 billion,” KPMG said. UAE investors such as the  Abu Dhabi Investment Authority, NRI-Emirati Investor’s Group announced $2.5 billion worth of investments in India last month alone.

 

Magazine with Investment Report written on itReaders of this blog know that companies such as Coca Cola and PepsiCo have committed to investing over $5 billion in India in the next five years. In the last 12 months alone, The India Expert has reported on billion dollar investments by  Dell-EMC , by Juniper Networks and by Canada’s Brookfield, while FoxConn of Taiwan has committed to $5 billion. We have also blogged about  industry reports indicating $8 billion into India’s automotive business and $4.2 billion into India’s real estate.

Tim Worstall of Forbes notes that FDI inflows into a country is a good thing, but this cannot happen unless there is also a current account, or trade, deficit. What needs to be recognized is that they are the same thing: the balance of payments does indeed balance, always and everywhere. This underscores India’s status as an island of economic stability, especially as FDI flows worldwide slumped 13% in 2016 . India’s FDI in the April-December period rose 22% to $35.8 billion from the year earlier.

The Government of India liberalized the country’s FDI policy in the last two years to bring several sectors under the automatic approval route as part of efforts to encourage overseas investment. “India also witnessed an increase in private equity/venture capital investments led by its growing start-up segment. Between January and September 2017, India received $17.6 billion of private equity and venture capital spread across 402 deals,”  the KPMG report added.

fDi Intelligence, a division of The Financial Times Ltd., says that India retained its position as the world’s topmost greenfield destination for Foreign Direct Investment for the second consecutive year, attracting  $62.3 billion in 2016.  In the 2017 A.T. Kearney FDI Confidence Index,  India jumped one spot to rank 8th. According to Kearney, 70 percent of the respondents planned to maintain or increase their FDI in India in the coming years. Reform efforts by the current government have improved the country’s investment environment. India’s vast domestic market is an added attraction for foreign companies

November 6, 2017   No Comments

India Improves Investor Appeal

You may want to take a fresh look at business opportunities and investments in India, if a new World Bank report is to be believed.

In November 2001, Goldman Sachs published a landmark paper where they identified India, along with Brazil, China, and Russia as the four “BRIC” economies that the world needed to watch. Many companies and investors began investing in these countries.

In 2002, the World Bank launched a project to rank the Ease of Doing Business in countries across the world. For well over a decade, more than 135 countries ranked better than the world’s largest democracy — India continued to be stymied by red tape, limited infrastructure and an army of bureaucrats who seemed to revel in creating complex, conflicting, and even arbitrary rules. India ranked worst among the BRICs and many companies mitigated their enthusiasm for India as a result. Persistent players such as Abbott, Accenture, Boeing, Coca Cola, Cummins, Deloitte, Exxon Mobil, GE, Hewlett Packard, Mylan, Oracle, PepsiCo, Vodafone and Western Union thrived despite some setbacks.

In our consulting, we always advised clients to look at specific Indian states, rather than the entire subcontinent when locating sales offices, subsidiaries, or manufacturing plants; some states welcomed businesses while others did not care. For the first time in India’s 67-year-old democracy, the leader (Chief Minister) of a state was elected as Prime Minister in 2014. One of Prime Minister Narendra Modi’s first goals was to improve India’s business environment.

The latest report from the World Bank, “Doing Business 2018“, published this week, shows that India made important reforms in six of the eight areas that the Bank measures for its report. Small economies can pass reforms relatively easily and it is important to note that Nigeria and India are the only large economies to make significant improvements as shown in this table:

Table

To global companies and investors, it is even more important to note that India jumped by 30 ranks overall to go from 130 to 100 and leapfrogged over Brazil, which is stagnant at 125. Such an improvement in just three years since the new government took over is quite remarkable. The juggernaut of the BRIC countries is China and it is currently ranked at 78. If Modi’s government can keep up the momentum, it is not inconceivable that India might vault ahead of its autocratic neighbor in three to five years.

We often help clients to start a new company or office in India and that process has improved considerably. Getting credit and obtaining construction permits for a business has also become easier according to the World Bank’s research. Minority foreign investors in India felt vulnerable in the past but new procedures protect them a bit better while enforcing contracts might also become easier once the new National Judicial Data Grid starts paying results. Paying taxes electronically is becoming the norm and import of goods is being streamlined with more and more online functions for customs clearance.

Does this mean that India is an easy place to do business now? Not at all. The World Bank only measures a few criteria. Foreign companies have many challenges in India: the weather, the pollution, the current government’s tendency to place non- tariff barriers, even occasional price controls, and most importantly the illusion that they can readily understand India, just because they can understand their Indian-American physician.

Skeptics may ask, will progress continue? What if Modi’s party loses the next general election, scheduled in 2019? One major initiative that cannot be rolled back is that the states of India were encouraged to compete with each other for foreign and domestic investment. State leaders in Andhra Pradesh, Telangana, Maharashtra and at least seven other provinces and territories have led the charge in improving their own attractiveness. This genie cannot be put back in the bottle and we anticipate that up to 20 of India’s 29 states will join the race shortly.

If you have questions about how your company can do better in India or if you want to take a fresh look, Contact Us or drop me a note here on Linked In.

November 2, 2017   No Comments

Ebix to Invest $200 Million on Acquisitions in India

Atlanta, GA-based Ebix Inc., that provides solutions on infrastructure exchanges, enterprise systems and risk compliance in insurance, healthcare and financial services, among others, plans to spend an additional $200 million for acquisitions in India.

Ebix first purchase in India was an 80% stake in ItzCash for $124 million  from the Essel Group and other shareholders in May this year. This investment launched Ebix in the prepaid cards, bill payments and remittances platforms. The company will now look for acquisitions in newer segments such as travel and lending, reports Mint.

ebix logo

Robin Raina, chief executive of Ebix Inc. said, “In India, you have one company doing wallets, one on insurance, some other focusing on remittance, and others focused on travel. However, the consumer remains the same; the same consumer is saying he wants to travel, or buy insurance, or send/receive money. By consolidating all these needs on one platform and using the same last-mile connectivity, you bring ease for the consumer, efficiency of doing the business as back-end costs reduce, and merchants or distributors on your network can also now offer multiple services to their customers.”

 

 

November 1, 2017   No Comments