Category — Banking & Financial Services

India in Top 8 on Global FDI Confidence Index

With 31 percent of the surveyed respondents being more optimistic on the economic outlook over the next three years, India has jumped one spot to rank 8th in the 2017 AT Kearney Foreign Direct Investment (FDI) Confidence Index.

Vikas Kaushal, partner and head of India at U.K.-based AT Kearney said, “Investors see India as a vast and diverse up-and-coming market with plans to increase investments there over the near to medium term. 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. Investors are looking at India’s phenomenal economic performance as a key selling point. It is forecast to be the fastest-growing major economy in the world in the coming years, which should provide a variety of investment opportunities to global firms.”

Magazine with Investment Report written on it

Business Standard reports that according to Kearney, 70 percent of the respondents plan to maintain or increase their FDI in India in the coming years. The government will eliminate the need for FDI approvals in sectors where licenses are also required, such as defense, telecommunications and broadcasting.

April 20, 2017   No Comments

KKR likes India’s new Bankruptcy Code

New York City-based Kohlberg Kravis Roberts, a multinational private equity firm, specializing in leveraged buyouts, proactively engaged with India’s Federal government on the new bankruptcy code. The Code seeks to consolidate and amend laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner.

KKR produced a white paper on the subject after co-chairman Henry Kravis told Narendra Modi that India lacked proper bankruptcy laws during the latter’s first visit to the U.S. in 2014, soon after becoming prime minister.

I have never seen a government move so fast,” Kravis said. “He (Modi) was back in New York six-nine months later and he told me ‘we’re doing it’. And now what I hear from the lawyers is that it is a pretty darn good code.” The bankruptcy code was approved by India’s Parliament in May last year.

Signboard on Bankruptcy
The Economic Times says: Kravis’ prescription is this: Quantify bad loans as per their fair-market value and not by oft-used matrices like replacement costs, and sell them to asset reconstruction companies with a haircut. That will affect the net worth of the banks and that’s where the government needs to step in to recapitalize balance sheets by selling shares to lower state ownership to below 51%.

“You just place a threshold and say across every industry if the loan is substandard by a certain value or percentage then it goes into the pool and the government tells the banks that we bridge your equity. Banks have to go back to lending once again. In India, they are still the main source of capital.”

April 16, 2017   No Comments

IMF: GST Could Raise India’s GDP to Over 8%

The International Monetary Fund said that the adoption of the Goods and Services Tax could help raise India’s medium-term GDP growth to over eight percent and create a single national market for enhancing the efficiency of the movement of goods and services. It also suggested that the GST “should have minimal exemptions, uniform cross-state rates, and as few tax rate tiers as possible.”

Zee News reports IMF’s additional inputs for India:

  • Structural reforms could lead to significantly stronger growth
  • A sustained period of continued low global energy prices would be beneficial to India
  • Key sectors such as energy and real estate should be kept within the tax base
  •  A lower corporate income tax rate with smaller and streamlined deductions and exemptions should continue
  • Efforts to improve tax administration should be stepped up

The Government of India expects to roll out the GST regime by July 1.

Taxes

IMF further noted:

  • Export competitiveness will rise as the cost of logistics fall
  • GST will raise general government tax collection; foster compliance, and help ensure a decline in the share of the informal sector
  • It can support fiscal consolidation efforts which, in addition to economic efficiency gains, should solidify recent monetary policy strides in achieving low and stable inflation in the medium-term
  • Destination-based GST will create a single Indian market, and will greatly enhance India as an investment destination.

 

 

April 16, 2017   No Comments

India Could Outpace China with Shifts in U.S. Policy

In a long article, supported ably by charts, the South China Morning Post compares the differences between the economies of India and China, and puts forth reasons why “India could trump China as U.S. policy shifts“.

China's A50 vs India Nifty 50

Highlights of the publication’s views:

SCMP Views on India China
Debt India’s debt ratios are only half of those of China and have not been growing during the past decade The country is awash in debt. China’s total debt (public + private) portends slower growth
Trade Much less export dependent: Exports account for 13 % of GDP Export dependent: Exports total 21 % of GDP
Exports to US: 1.6% of GDP Exports to US: 4% of GDP
India’s lack of dominance in the traded-goods sector may help avoid the ire of a more insular U.S. Vulnerable to any change in the mood in Washington
Politics India doesn’t appear to be on President Trump’s radar and… President Trump has focused his trade concerns on two countries: China and Mexico
… This is good news for India and worrisome for China A trade war with the US could destabilize China’s economy and augment the probability of a debt crisis and a currency devaluation
Currency The Indian rupee is probably about fairly valued Currency is overvalued
India’s FX reserves rose from $326 billion in early 2016 to $337 billion in early 2017 Spent one quarter of its currency reserves defending the renminbi
Equity Markets India’s Nifty Fifty Index has vastly outperformed the China A50 in recent years; trades at 18.6x earnings China A50 trades 12.8x earnings for Chinese shares
Demographics and Agriculture India’s per capita consumption is 2500 calories per day Chinese per capita consumption is now over 3,000 calories per day
India’s population will probably expand by 30% over the next 25 years China’s will probably stay about the same adding about 0.1 per cent to China’s population per year
India represents an enormous opportunity for the world’s farmers, especially those who can provide lentils, peas, chickpeas, almonds and other dietary staples. Also, as India grows richer, consumption of dairy and vegetable oils will probably grow considerably China, by contrast, has a mature diet and its food consumption needs may not change a great deal going forward

April 13, 2017   No Comments

In 2016, India Held $118.2 Billion U.S. Government Securities

Data available with the U.S. Treasury Department showed that India was the 12th largest holder of U.S. government securities at the end of 2016, with exposure worth $118.2 billion in December.  Among the BRIC countries, India stood at 3rd place after China and Brazil in terms of exposure.
US Currency
Japan – $1.09 trillion
China – $1.06 trillion
Ireland – $288.2 billion
Cayman Islands – $263.5 billion
Brazil – $259.2 billion
Switzerland – $229.3 billion
Luxembourg – $223.4 billion
United Kingdom – $217.1 billion
Hong Kong – $191.4 billion
Taiwan – $189.3 billion
Belgium – $120.4 billion
India – $118.2 billion

April 13, 2017   No Comments