Category — Banking & Financial Services

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

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

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

Indian Government to Bail Out State-Owned Banks

Over the next two years, New Delhi plans to pump about $32 billion into state-owned banks in a bid to increase money flow, significantly spur economic activity, loosen credit conditions, and boost investment and growth.

The Economist explains that according to the plan unveiled on October 24th, the ailing banks will lend the government $21 billion, about a third of their combined market value. The government will reinvest this money in bank shares, thus ensuring they no longer need a bail-out. Bankers are being encouraged to use a new bankruptcy code to deal with bust borrowers; raise 580 billion rupees themselves, perhaps by selling non-core assets, and receive a further 180 billion rupees from government coffers left over from a previous scheme.

Indian Rupee Symbol

The total funds for the initiative equal roughly 1.3 percent of the country’s GDP. Within one year of implementation, the drag on bank credit growth is expected to decrease by up to 10 percentage points, while GDP growth could rise by up to 5 percentage points, Goldman Sachs said.

CNBC reports that according to analysts at both Goldman Sachs and ING Bank, the Indian rupee is expected to gain in strength over the next year as a result of recapitalization.

This move is associated with risks:

Interest payment on the bond will come at a budgetary cost, which may increase government expenditure and the fiscal deficit, according to Radhika Rao, economist at Singapore headquartered DBS Bank.

The move could “sustain the risk of more public sector bank loans turning sour, swelling the country’s [bad loan] ratio,” according to a note by ING Bank.

October 28, 2017   No Comments

India’s Digital Transformation Exciting says IMF

India is undergoing an ‘exciting digital transformation,’ that can be a learning experience for everyone, according to the International Monetary Fund which will feature a case study on the country’s digital revolution in its new book.

Vitor Gaspar, director of the IMF’s Fiscal Affairs Department, said that the book Digital Revolutions in Public Finance will featurewhat is happening in the world in terms of the use of digital technology in public finance. It is also looking at the future trying to foresee what is coming as a true set of revolutions. One of the case studies in the book is India. It was also possible to make sure that there were no leakages of any significance in the system, that monies were not being diverted to other ends,”reports the Deccan Herald.
digital technology
Gaspar said that viewed as a social policy, the efficiency and growth of the country’s digital transformation are quite impressive. “So that seems to be the route that India is taking. And from the viewpoint of the Fund, we hope that we’re going to be able to learn a lot from it. And we’re following it closely,” Gaspar added.

October 25, 2017   No Comments