India should prioritise public banking sector reforms: IMF

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
Country's growth is expected to accelerate in the medium-term as temporary disruptions due to demonetization and GST.
Country’s growth is expected to accelerate in the medium-term as temporary disruptions due to demonetization and GST.

India must prioritise implementation of public banking sector structural reforms, enhance the efficiency of labour and product markets, and modernise agriculture sector to accelerate its growth, the IMF said Friday.

The country’s growth is expected to accelerate in the medium-term as temporary disruptions due to demonetisation and the Goods and Services Tax (GST) fade, the International Monetary Fund said in its Asia and Pacific Regional Economic Outlook Update.

The economic growth slowed in India in recent quarters due to the temporary disruptions from the currency exchange initiative demonetisation that took place in November 2016, and the recent rollout of the GST, it said.

 

The GST is a landmark tax reform that should help unify the domestic market and encourage businesses to move from the informal to the formal sector, the IMF noted.

Inflation has been low compared with the mid-point target in recent months, driven by lower food prices, allowing the central bank to cut its policy rate in August, it added.

“Growth in 2017 was revised downward to reflect the recent slowdown, but is expected to accelerate in the medium term as these temporary disruptions fade,” it said.

In India, growth was revised down to 6.7 per cent in FY2017 and to 7.4 per cent in FY2018.

“Growth will be underpinned by private consumption, which has benefited from low food and energy prices, as well as civil service allowance increases,” IMF said.

Headline inflation is projected to stay close to the midpoint of the target band (4 per cent 2 per cent) in FY2017, while moving to the upper half of the target band in the medium term as food prices recover, it said.

The current account deficit should remain modest, financed by robust foreign direct investment inflows, it noted.

According to the outlook, in India, priorities should be strengthening public banks loss-absorbing buffers, implementing further public banking sector structural reforms, and enhancing public banks debt recovery mechanisms.

“Reform efforts should aim at tackling supply bottlenecks, enhancing the efficiency of labour and product markets, and modernising the agricultural sector,” the IMF said, adding that labour market reforms should be a priority to facilitate greater and higher-quality job creation.

 

Source: Deccan Chronicle

IMF favors three structural reforms in India

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
According to IMF’s Regional Economic Outlook, India’s growth slowed in recent quarters due to the temporary disruptions from the currency exchange initiative– demonetisation and GST.

The IMF has suggested a three- pronged approach for structural reform in India that includes addressing the corporate and banking sector weaknesses, continued fiscal consolidation through revenue measure, and improving the efficiency of labour and product markets.

Deputy Director Asia Pacific Department of IMF, Kenneth Kang, said the favorable outlook for Asia was an important opportunity for India to push forward with difficult reforms.

“As such, there should be three policy priorities in the area of structural reforms,” Kang, Deputy Director Asia pacific Department IMF told reporters at a news conference here.

“First priority is to address the corporate and banking sector weaknesses, by accelerating the resolution of non- performing loans, rebuilding the capital buffers for the public sector banks, and enhancing banks’ debt recovery mechanisms,” he said.Secondly, Kang said, India should continue with the fiscal consolidation through revenue measures, as well as further reductions in subsidies.

“And lastly, it’s to maintain the strong momentum for structural reforms in addressing the infrastructure gaps, improving the efficiency of labour and product markets as well as furthering agricultural reforms,” said Kang.

Responding to a question on labour market reforms, Kang suggested reforming the market regulations in order to create a more favorable environment for investment and employment.

“There is a need to reduce the number of labour laws which currently number around 250 across the central and the state level,” said Kang.He said India should also focus on closing the gender gap which may help a great deal in boosting the employment opportunities for women in India.

“Improvements in infrastructure can be one important way to facilitate the entry of women into the labour force. But in addition, there is a need to strengthening the implementation of specific gender regulations, as well as to invest more in gender-specific training and education,” Kang said.

According to IMF’s Regional Economic Outlook, India’s growth slowed in recent quarters due to the temporary disruptions from the currency exchange initiative– demonetisation– that took place in November 2016, and the recent roll-out of the Goods and Services Tax (GST).

The report, however, went on to say that the growth in 2017 was revised downward to reflect the recent slowdown, but is expected to accelerate in the medium term as these temporary disruptions fade.

IMF says global growth recovery an opportunity for Indian economy

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
IMF expects the Indian economy to recover sharply in 2018 to grow at 7.4%, though 30 basis points lower than its earlier estimate in April.

The International Monetary Fund (IMF) on Tuesday pared its growth forecast for the Indian economy by half a percentage point to 6.7% for 2017, blaming the lingering disruptions caused by demonetisation of high value currencies last year and the roll out of the Goods and Services Tax (GST).

However, IMF said the structural reforms undertaken by the Prime Minister Narendra Modi-led government would trigger a recovery—above 8% in the medium term.

In its latest World Economic Outlook, IMF said the global economy is going through a cyclical upswing that began midway through 2016. It raised the global growth estimate marginally for 2017 to 3.6% while flagging downside risks. The upward revisions in its growth forecasts including for the euro area, Japan, China, emerging Europe, and Russia more than offset downward revisions for the United States, the United Kingdom, and India.

“In India, growth momentum slowed, reflecting the lingering impact of the authorities’ currency exchange initiative as well as uncertainty related to the midyear introduction of the countrywide Goods and Services Tax,” it said in the WEO.

However, IMF expects the Indian economy to recover sharply in 2018 to grow at 7.4%, though 30 basis points lower than its earlier estimate in April.

One basis point is one-hundredth of a percentage point.

In its South Asia Economic Focus (Fall 2017) released on Monday, the World Bank reduced India’s GDP growth forecast to 7% for 2017-18 from 7.2% estimated earlier, blaming disruptions caused by demonetisation and GST implementation, while maintaining at the same time that the Indian economy would claw back to grow at 7.4% by 2019-20.

Both the Asian Development Bank as well as the Organisation for Economic Cooperation and Development (OECD) have also cut their growth projections for India to 7% and 6.7%, respectively, for fiscal 2017-18.

IMF said a gradual recovery in India’s growth trajectory is a result of implementation of important structural reforms. GST, “which promises the unification of India’s vast domestic market, is among several key structural reforms under implementation that are expected to help push growth above 8% in the medium term,” it added.

The multilateral lending agency said India needs to focus on simplifying and easing labour market regulations and land acquisition procedures which are long-standing requirements for improving the business climate. It also called for briding the gender gap in accessing social services, finance and education to accelerate growth in developing countries like India.

IMF said given faster-than-expected declines in inflation rates in many larger economies, including India, “the projected level of monetary policy interest rates for the group is somewhat lower than in the April 2017 WEO.”

In its monetary policy review last week, the Reserve Bank of India (RBI) kept its policy rates unchanged and marginally raised its inflation forecast for rest of the year.

Highlighting the growing income inequality within and among emerging market economies, IMF said a country’s growth rate does not always foretell matching gains in income for the majority of the population. “In China and India, for example, where real per capita GDP grew by 9.6% and 4.9% a year, respectively, in 1993–2007, the median household income is estimated to have grown less—by 7.3% a year in China and only 1.5% a year in India,” it said.

Source: Live Mint

India is world’s 40th most competitive economy: WEF

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
The Global Competitiveness Index (GCI) is prepared on the basis of country-level data covering 12 categories or pillars of competitiveness.

India has been ranked as the 40th most competitive economy — slipping one place from last year’s ranking — on the World Economic Forum’s global competitiveness index, which is topped by Switzerland.

On the list of 137 economies, Switzerland is followed by the US and Singapore in second and third places, respectively.

In the latest Global Competitiveness Report released today, India has slipped from the 39th position to 40th while neighbouring China is ranked at 27th.

“India stabilises this year after its big leap forward of the previous two years,” the report said, adding that the score has improved across most pillars of competitiveness. These include infrastructure (66th rank), higher education and training (75) and technological readiness (107), reflecting recent public investments in these areas, it added.

According to the report, India’s performance also improved in ICT (information and communications technologies) indicators, particularly Internet bandwidth per user, mobile phone and broadband subscriptions, and Internet access in schools.

However, the WEF said the private sector still considers corruption to be the most problematic factor for doing business in India.

“A big concern for India is the disconnect between its innovative strength (29) and its technological readiness (up 3 to 107): as long as this gap remains large, India will not be able to fully leverage its technological strengths across the wider economy,” it noted.

Among the BRICS, China and Russia (38) are placed above India.South Africa and Brazil are placed at 61st and 80th spots, respectively.

In South Asia, India has garnered the highest ranking, followed by Bhutan (85th rank), Sri Lanka (85), Nepal (88), Bangladesh (99) and Pakistan (115).

“Improving ICT infrastructure and use remain among the biggest challenges for the region: in the past decade, technological readiness stagnated the most in South Asia,” WEF said.

Other countries in the top 10 are the Netherlands (4th rank), Germany (5), Hong Kong SAR (6), Sweden (7), United Kingdom (8), Japan (9) and Finland (10).

The Global Competitiveness Index (GCI) is prepared on the basis of country-level data covering 12 categories or pillars of competitiveness.

Institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation are the 12 pillars.

According to WEF’s Executive Opinion Survey 2017, corruption is the most problematic factor for doing business in India.

The second biggest bottleneck is ‘access to financing’, followed by ‘tax rates’, ‘inadequate supply of infrastructure’, ‘poor work ethics in national labour force’ and ‘inadequately educated work force’, among others.

The survey findings are mentioned in the report.

“Countries preparing for the Fourth Industrial Revolution and simultaneously strengthening their political, economic and social systems will be the winners in the competitive race of the future,” WEF founder and Executive Chairman Klaus Schwab said.

India growing pretty robustly: World Bank President Jim Kim

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
Jim Kim said Japan, Europe and the US along with India were growing and there was a levelling-out in developing countries.

India has been growing “pretty robustly”, World Bank President Jim Yong Kim has said as he predicted a strong global growth this year.

Speaking at the Bloomberg Global Business Forum meeting here on Wednesday, Kim also called for more cooperation among the multilateral system, private sector and the governments to take advantage of the current win-win situation.

“That dormant capital will earn a higher return, where developing countries will have access to much more capital for the infrastructure needs, even for investing in health and education, investing in resilience to climate change and other factors,” Kim said.

He said Japan, Europe and the US along with India were growing and there was a levelling-out in developing countries.

“A country like India is growing, has been growing pretty robustly. We think, Japan is growing. Europe is growing in a much more healthy way. The United States continues to grow. There is a levelling-out in developing countries,” he said, adding that the growth will be more robust this year.

In June, the World Bank predicted a 7.2 per cent growth rate for India this year against 6.8 per cent growth in 2016. India remains the fastest growing major economy in the world, the World Bank officials had said.

“It used to be that commodity importers were doing much better than commodity exporters. But that’s levelling out. So the growth is relatively more evenly distributed,” Kim said.

He said in terms of indebtedness, the bank was watching very carefully the debt-to-GDP ratios of every single country.

“In Africa, the debt-to-GDP ratios are still very manageable…We would not be moving toward providing more financing for countries if we thought there was a real problem with over indebtedness in the countries. Because we follow this very closely, along with the IMF,” he said.

“We think that there are tremendous opportunities for investment. But sometimes, purely based on perception, investors in sovereign wealth funds – I’ve heard them say, Africa is risky. Right, as if Africa was a single country.

Africa’s not a single country and the risk profiles from country to country have enormous differences,” he said.

Source: Economic Times

 

FDI likely to rise further after GST: Moody’s

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
FDI in India grew by 18% during 2016 to touch $46 billion, data released by the Department of Industrial Policy and Promotion showed.

India is likely see increased foreign direct investment (FDI) inflows on the back of reforms such as introduction of the goods and services tax and the bankruptcy code, international ratings agency Moody’s said in a report on Monday.

“Combined with reforms such as the introduction of a goods and services tax, which lowers the cost and complexity of doing business, and a simplified and clarified bankruptcy code, FDI is likely to rise further,” the agency said in its report on how structural reforms by Asia Pacific sovereigns could become more effective from stronger global demand.

In India, Moody’s said, the government has raised ceilings for authorised FDI in a number of sectors. “FDI has already increased substantially, albeit from a low base,” the report said.FDI in India grew by 18% during 2016 to touch $46 billion, data released by the Department of Industrial Policy and Promotion showed.

The Narendra Modi government has liberalised FDI framework for a number of sectors including insurance, defence and civil aviation and also taken steps towards the ease of doing business. Moody’s said the positive economic impact of India and Indonesia’s measures to attract higher levels of FDI, combined with steps to improve business conditions, are likely to be more apparent in a stronger global macroeconomic environment. The agency has maintained India’s sovereign rating at Baa3 positive.

“India and Indonesia’s governments have both implemented reforms over the past few years to improve the overall business climate and, more specifically, to attract FDI,” Moody’s said, adding that a robust global environment is likely to amplify the positive impact of the reforms on the two countries’ attractiveness to foreign investors.

Moody’s Investors Service said the strengthening in global demand since the end of last year has buoyed Asia Pacific’s trade-reliant economies, but added that faster export growth has yet to feed into a sustainable acceleration in output growth.

Nuclear deal between India and Japan opens up new vistas of cooperation

by | posted in: Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

Prime Minister Shinzo Abe is visiting India nearly two months after operationalisation of the historic Indo-Japan civil nuclear deal, which has added a new dimension to bilateral ties that could scarcely be imagined in the wake of the 2011 Fukushima tragedy.

The journey traversed by the two nations over the past six years reflects growing confidence in each other and depth of the strategic partnership.

Japan and India signed a memorandum of understanding for civil nuclear cooperation in December 2015, when Abe was in Delhi for the annual bilateral summit, overcoming reservations over India’s status as a nation which has not signed the Non-Proliferation Treaty.

This was transformed into a deal in November last year when PM Narendra Modi was in Tokyo for the summit.

Subsequently the Japanese government got approval from the Diet (parliament) for the nuclear deal with India.The landmark deal came into force in July this year with the completion of necessary formalities in both countries. This will enable Japan to export nuclear power plant technology as well as provide finance for nuclear power plants in India.

Besides, Japan will assist India in nuclear waste management and may undertake joint manufacture of nuclear power plant components under Make in India initiative, people familiar with the development told ET. Growing civil nuclear ties will be highlighted during Abe’s trip as one of the key elements of Indo-Japan strategic partnership, they said.

Japanese conglomerate Toshiba, which owns US-based Westinghouse, will have a major role when the US nuclear firm supplies technology for the set of six reactors in Andhra Pradesh following its bankruptcy.

Westinghouse, which was to set up six nuclear reactors in Andhra Pradesh, will supply technology while construction will be undertaken by an Indian partner. This was discussed as a way out during Modi’s visit to Washington, D.C. for ensuring the presence of Westinghouse in India following the troubles the company faced over bankruptcy.

The finance for the project from the US Exim Bank remains intact and the initiative may kick-start only in 2018. Westinghouse, which was acquired by Japanese conglomerate Toshiba in 2006 for $5.4 billion, had filed for bankruptcy in March this year. HitachiBSE 2.80 %, another Japanese firm, has a stake in GE, which is also proposed to set up reactors in India.
ET View: Enhance areas of partnership

The partnership in space, like that on the African continent, will give a new dimension to the longstanding India-Japan ties. It makes sense for India to partner with Japan to focus such opportunities in areas where the two countries have complementary strengths. The space partnership will serve as another plank in the effort to present a counter to Beijing. For New Delhi, it is also a spring board for a bigger role in the global arena. India must seize this opportunity with a clear plan.