India has become the world’s sixth-biggest economy, pushing France into seventh place, according to updated World Bank figures for 2017. India’s gross domestic product (GDP) amounted to $2.597 trillion at the end of last year, against $2.582 trillion for France. India’s economy rebounded strongly from July 2017, after several quarters of slowdown blamed on economic policies pursued by Prime Minister Narendra Modi’s government.
India, with around 1.34 billion inhabitants, is poised to become the world’s most populous nation, whereas the French population stands at 67 million. This means that India’s per capita GDP continues to amount to just a fraction of that of France which is still roughly 20 times higher, according to World Bank figures.
Manufacturing and consumer spending were the main drivers of the Indian economy last year, after a slowdown blamed on the demonetisation of large banknotes that Modi imposed at the end of 2016, as well as a chaotic implementation of a new harmonised goods and service tax regime.
India has doubled its GDP within a decade and is expected to power ahead as a key economic engine in Asia, even as China slows down.
According to the International Monetary Fund, India is projected to generate growth of 7.4% this year and 7.8% in 2019, boosted by household spending and a tax reform. This compares to the world’s expected average growth of 3.9%.
The London-based Centre for Economics and Business Research, a consultancy, said at the end of last year that India would overtake both Britain and France this year in terms of GDP, and had a good chance to become the world’s third-biggest economy by 2032.
At the end of 2017, Britain was still the world’s fifth-biggest economy with a GDP of $2.622 trillion. The US is the world’s top economy, followed by China, Japan and Germany.
Qatar’s economy has proven its resilience and continues to perform well amid the blockade, improving local liquidity and gaining the confidence of international investors, said Doha Bank CEO Dr R Seetharaman.
“The blockade (on Qatar by a quartet of nations) came as a rude shock to us. But Qatar has withstood… it has proven to be a resilient model. Qatar’s economy was performing around 2.5% last year.
This year we are not expecting less than 3.1% growth,” Seetharaman told Gulf Times in an interview.
He said Qatar improved local liquidity by disinvestment last year.
“If you look at Qatar economy, liquidity was under stress to start with. The government improved local liquidity. Now international investors have reposed confidence in Qatar. The banking system as a whole is improving.
“The loan to deposit ratio in the Qatari banking system has significantly improved and now stands at 112%. This is an improvement of the level, immediately post blockade, which was at 116%.”
Qatar’s banking sector had witnessed credit expansion of around 9%, the deposit book has grown of more than 10.4%, he noted.
He said in the days that followed the blockade, there were challenges in terms of international investors slowing down on Qatar.
“They were concerned about the Qatar economic momentum. Even the rating agencies looked sceptical, which explains the negative outlook on the sovereign.”
But, Seetharaman said, Qatar’s ‘AA’ rating, which is still very high, has not been challenged although the international rating agencies have changed the sovereign outlook to negative. The high rating (A) of Qatar’s banks is also not challenged.
Currently, Qatar holds Aa- by Fitch, AA- by S&P and Aa3 by Moody’s.
“With strong exports, positive economic outlook, and natural gas markets unaffected by the economic blockade, the overall growth for Qatar remains sustainable,” Seetharaman noted.
The International Monetary Fund (IMF) in its latest World Economic Outlook revised up its forecast for world economic growth in 2018 and 2019, saying sweeping US tax cuts were likely to boost investment in the world’s largest economy and help its main trading partners.
Seetharaman also said new global forecast has a 3.9% growth this year and next. The advanced economies are expected to grow by 2.3% in 2018 and 2.2% in 2019.
The emerging and developing economies are expected to grow by 4.9% in 2018 and 5% in 2019.
India is projected to grow at 7.4% of its gross domestic product (GDP) in 2018 making it the fastest growing economy among emerging economies following last year’s slowdown due to demonetisation and the implementation of goods and services tax.
China, which is spearheading the ‘Belt and Road’ concept is expected to grow up to 6.6% this year, he added.
Revenues from the Goods and Services Tax could cross Rs 1 lakh crore a month towards the end of next fiscal once anti-evasion measures like matching of tax data and e-way bill are put in place, finance ministry officials said on Tuesday.
Once the GST return filing process stabilises completely, the Directorate General of Analytics and Risk Management (DGARM) will be put to action for 360 degree profiling and matching the database of people filing GST with Income Tax returns filed, they said.
The government has budgeted about Rs 7.44 lakh crore from GST in the 2018-19 fiscal beginning April 1. The estimated collection for 8 months (July-February) of the current fiscal is Rs 4.44 lakh crore. The March collection will take place in April, the start of new financial year, 2018-19.
Officials said the revenue estimates for next fiscal are conservative and could go up depending on enforcement actions taken by the government.
Collections under the GST, implemented from July 1 last year, were over Rs 95,000 crore for the first month, while in August the figure was just over Rs 91,000 crore. In September, it was over Rs 92,150 crore, October (Rs 83,000 crore), November (Rs 80,808 crore) and December (Rs 86,703 crore).
As of December 2017, 98 lakh businesses were registered under the GST regime.
“We will soon start matching of the turnover shown in GST returns with the income returns filed with the I-T department. It could begin by second half of next financial year,” a senior finance ministry official said.
“Once these measures are put in place, there is no reason why GST revenues would not average Rs 1 lakh crore every month,” he added.
Another official said that the focus of the department will also be on plugging the gaps in the gold and jewellery industry.
“Gold imports have been rising every month despite a 10 per cent customs duty. But where is this imported gold channelled to? With GST in place, the revenue authorities now have the power to seek details about end supplies,” the official said.
Import of gold attracts a 10 per cent basic customs duty. On top of that, a 12.5 per cent countervailing duty (CVD) was levied prior to GST. Since GST subsumed CVD, the GST rate on gold at 3 per cent has to be paid at the time of imports in the form of Integrated GST with effect from July 1.
India is the world’s second biggest gold consumer after China. The import mainly takes care of the demand of the jewellery industry.
The official said that once the system stabilises, the intelligence agencies within the revenue department could better monitor end usage of the imported gold.
“DGARM would be utilised to provide intelligence inputs and do big data analytics for taxmen for better policy formulation and taking action against tax evaders,” he said.
Set up under the Central Board of Excise and Customs (CBEC), DGARM will use internal and external sources for detailed data mining and risk management.
As per data on GST returns filed by companies opting for composition scheme, as many as 5 lakh firms reported such a turnover which works out to annual sales of Rs 5 lakh only.
Out of 10 lakh businesses that opted for the composition scheme during the July-September period, about 7 lakh have filed GST returns for the quarter.
The official further said that currently, there is little tracking of goods movement from one state to another and the e-way bill would act as a tool to check tax evasion as then movement of stock and its end use would be monitored.
E-way or electronic way bill is for the movement of goods and can be generated on the GSTN (common portal). Movement of goods of more than Rs 50,000 in value cannot be made by a registered person without an e-way bill.
Private equity firms invested $23.8 billion across 591 deals in 2017, making it the biggest year for PE investments in India, says a report.
According to deal tracker Venture Intelligence, the investment value is 39 per cent higher than the previous high of $17.1 billion (recorded in 2015) and 55 per cent higher than $15.4 billion invested during 2016. In terms of number of deals the year 2017 saw 21 per cent less activity as compared to 2016 (731 deals), indicating large number of big-ticket transactions.
“The year witnessed 31 investment deals with size greater than USD 200 million, aggregating to $15.4 billion or 65 per cent of the total investments,” the report said. These figures include venture capital investments, but exclude PE investments in real estate.
In terms of industries, IT/ ITeS companies accounted for 45 per cent of the value pie attracting $10.7 billion worth investments across 325 transactions.
Flipkart received India’s largest ever PE investment of $2.5 billion in a single round from Softbank and another $1.4 billion from strategic investors Tencent, eBay and Microsoft. Softbank also invested $1.4 billion in mobile wallet and payments firm One97 Communications, which owns the Paytm brand. BFSI (Banking, Financial Services and Insurance) companies continued to enjoy the second spot attracting $4.40 billion across 61 transactions.
The sector was led by Bain Capital’s $1.04 billion investment in Axis Bank — the largest ever single investment in the sector — and Warburg Pincus’ $384 million pre-IPO investment in ICICI Lombard General Insurance.
On the back of its two mega bets (Flipkart and Paytm), Softbank emerged as the largest investor during the year with investments totaling over $4 billion (including a $250 million investment in Oyo Rooms).
Other top investors include Canadian pension fund CPPIB with $2 billion investments across five companies; while Warburg Pincus invested $1.6 billion across nine companies, and KKR invested about $680 million.
China’s Tencent emerged as a significant strategic investor in the Indian Internet and mobile sector with investment of $1.1 billion across home grown leaders like Flipkart, Ola, Byjus Classes and Practo.
India’s growth rate in 2018 is projected to hit 7.3 per cent and 7.5 per cent in the next two years, according to the World Bank, which said the country has “enormous growth potential” compared to other emerging economies with the implementation of comprehensive reforms.
India is estimated to have grown at 6.7 per cent in 2017 despite initial setbacks from demonetisation and the Goods and Services Tax (GST), according to the 2018 Global Economics Prospect released by the World Bank here yesterday.
“In all likelihood India is going to register higher growth rate than other major emerging market economies in the next decade. So, I wouldn’t focus on the short-term numbers. I would look at the big picture for India and big picture is telling us that it has enormous potential,” Ayhan Kose, Director, Development Prospects Group at the World Bank, told PTI in an interview.
He said in comparison with China, which is slowing, the World Bank is expecting India to gradually accelerate.
“The growth numbers of the past three years were very healthy,” Kose, author of the report, said.
India’s economy is likely to grow 7.3 per cent in 2018 and then accelerate to 7.5 per cent in the next two years, the bank said.
China grew at 6.8 per cent in 2017, 0.1 per cent more than that of India, while in 2018, its growth rate is projected at 6.4 per cent. And in the next two years, the country’s growth rate will drop marginally to 6.3 and 6.2 per cent, respectively.
To materialise its potential, India, Kose said, needs to take steps to boost investment prospects.
There are measures underway to do in terms of non- performing loans and productivity, he said.
“On the productivity side, India has enormous potential with respect to secondary education completion rate. All in all, improved labour market reforms, education and health reforms as well as relaxing investment bottleneck will help improve India’s prospects,” Kose said.
India has a favourable demographic profile which is rarely seen in other economies, he said.
“In that context, improving female labour force participation rate is going to be important. Female labour force participation still remains low relative to other emerging market economies,” he said.
Reducing youth unemployment is critical, and pushing for private investment, where problems are already well-known like bank assets quality issues…If these are done, India can reach its potential easily and exceed, Kose asserted.
“In fact, we expect India to do better than its potential in 2018 and move forward,” he said.
India’s growth potential, he said would be around 7 per cent for the next 10 years.
The Indian government is “very serious” with the GST being a major turning point and banking recapitalisation programme is really important, Kose said.
“The Indian government has already recognised some of these problems and undertaking measures and willing to see the outcomes of these measures,” he said.
“India is a very large economy. It has a huge potential. At the same time, it has its own challenges. This government is very much aware of these challenges and is showing just doing its best in terms of dealing with them,” the World Bank official said.
The latest World Bank growth estimate for 2017 is 0.5 per cent, less than the previous projection, and 0.2 per cent less in the next two years.
“It is slightly lower than its previous forecast, primarily because India is undertaking major reforms,” Kose said.
These reforms, of course, will bring certain policy uncertainty, he said, “but the big issue about India, when you look at India’s growth potential and our numbers down the road 2019 and 2020, is that it is going to be the fastest growing large emerging market.”
“India has an ambitious government undertaking comprehensive reforms. The GST is a major reform to have harmonised taxes, is one nation one market one tax concept. Then, of course, the late 2016 demonetisation reform was there. The government is well aware of these short-term implications,” Kose said.
He said there might have been some temporary disruptions but “all in all” the Indian economy has done well.
“The potential growth rate of the Indian economy is very healthy to 7 per cent. I think the growth is going to be at a high rate going forward,” the World Bank official said.
In a South Asia regional press release, the World Bank said India is estimated to grow 6.7 percent in fiscal year 2017-18, slightly down from the 7.1 percent of the previous fiscal year.
This is due in part to the effects of the introduction of the Goods and Services Tax, but also to protracted balance sheet weaknesses, including corporate debt burdens and non- performing loans in the banking sector, weighing down private investment, it said.
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.
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.