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.

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.

GST lends more weight to India’s 8% growth projection: S&P

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs, Income Tax,e-Filing- Individuals, Firms, Companies | 0

Calling GST as the most important structural reform till date by the Modi government, S&P Global Ratings today said the passage of the indirect tax law gives it additional conviction of India clocking 8 per cent growth in the next few years.

“India’s GST passage gives us additional conviction around our 8%-ish GDP growth forecast over the next few years,” it said in a report titled ‘Asia-Pacific steadies while China goes silent’.

The rating agency had last month projected India to clock a “steroid-free” growth of 8 per cent in coming years. “The GST passage is arguably the most important structural reform to date by the Modi government and will improve efficiency, cross-state trade and tax buoyancy,” it said today.

It saw a reasonably firm pick-up in Asia-Pacific’s macro momentum indicators, with pick-up in retail sales offering the clearest sign in most of the region’s economies. This, it said, stems from rising income, which in turn is part of the region’s evolving growth dynamics, with consumption playing a larger role.

S&P said China has been nudged up as it raised the GDP growth forecast by about a quarter percentage point in 2016 and 2017 to 6.6 per cent and 6.4 per cent, respectively, and has kept its 2018 forecast roughly unchanged at 6.1 per cent.

Japan’s second-quarter out turn was weaker than expected, it said, adding that its 0.7 per cent GDP growth forecast for 2016 looked like “a mild stretch at this point”.

In its ‘APAC Economic Snapshots — September 2016’ report, it had stated that India’s structural reforms agenda had maintained strong momentum and, most recently with the GST passage, should propel growth higher. “For India, we are still forecasting GDP growth at about 8 per cent over the next few years. Moreover, this is relatively high quality, steroid—free growth backed by a broadening consumption base,” S&P had said.

“Inflation remains a risk, given the large weights on food, fuel, and other volatile items in the Reserve Bank of India’s target basket,” S&P had said.

The latest gross domestic production (GDP) figures showed that India’s growth slowed to 7.1 per cent in the April-June quarter, from 7.9 per cent in January-March.

RBI has also said the near-term growth outlook for India seems brighter than last fiscal’s and the economy is likely to expand at 7.6 per cent in 2016-17.

Source: http://www.thehindubusinessline.com/economy/gst-lends-more-weight-to-indias-8-growth-projection-sp/article9208148.ece

Airtel teams up with Singtel to expand data business in 325 cities globally

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

Bharti Airtel and Singapore Telecommunications (Singtel) have combined resources to form an Internet Protocol Virtual Private Network (IP VPN) to deliver high-speed, secure data network coverage to enterprise customers in Asia-Pacific, the Middle East, Africa, Europe and the US.

The combined network will provide data connectivity to 325 cities across the world through 370 Points of Presence (PoP). Together, Singtel’s 200 PoPs in 160 cities around the world and Airtel’s 170 plus PoPs in 165 cities across India, Africa and Middle East will form a new network that offers a connectivity backbone to enterprises across Asia, Europe, Africa and North America.

“This association will strongly enhance our value proposition for enterprise customers by offering them a wider global reach and the largest reach within India under a single platform. In particular, this will benefit companies in the pharmaceutical, IT and IT-enabled services as well as financial services segments, which are branching out to international locations rapidly,” Manish Prakash, director for strategic ventures at Bharti Airtel, said in a joint statement issued on Tuesday.

Under this global network, multinational corporations can maintain line of sight of their operations across different regions by using high-bandwidth business applications such as cloud applications, unified communications, video conferencing and software-defined networking solutions.

“By tapping on one another’s infrastructure assets, we enhance each other’s capabilities,” said Lim Seng Kong, Managing Director of Global Enterprise Business at Singtel Group Enterprise.

Source :  http://economictimes.indiatimes.com/articleshow/52745963.cms

Financial inequality highest in India, China: International Monetary Fund

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
According to IMF, China and India have grown rapidly and reduced poverty sharply, however, this impressive economic performance has been accompanied by increasing levels of inequality.

Financial inequality is highest in India and China among Asia Pacific countries despite the two being among the fastest growing economies, IMF has said.

According to the International Monetary Fund, China and India have grown rapidly and reduced poverty sharply, however, this impressive economic performance has been accompanied by increasing levels of inequality.

“In the past, rapid growth in Asia came with equitable distribution of the gains. But more recently, while the fast-growing Asian economies have lifted millions out of poverty they have been unable to replicate the ‘growth with equity’ miracle,” the Fund said.

As per the report, China managed to increase middle class in urban areas, as did Thailand, while India and Indonesia struggled to lift sizeable portions of their populations toward higher income levels.

“In India, differences between rural and urban areas have increased, and have been accompanied by rising intra-urban inequality,” it said.

Many factors have been identified as key drivers of the inequality between rural and urban areas in China and India.

In China, rapid industrialisation in particular regions and the concentration of foreign direct investment in coastal areas have led to substantial inequalities between coastal and interior regions. Other factors also include low educational attainment and low returns to education in rural areas.

On India, the report said inter provincial inequality is lower in India than in China, and rising inequality in India has been found to be primarily an urban phenomenon.

Moreover, the rural-urban income gap has increased, and higher rural inflation has been found to be a key driver of this. Educational attainment has also been identified as an important factor explaining rising inequality in India over the past two decades, the Fund said.

The two countries have introduced a number of policies to tackle the rising inequality.

China introduced the Minimum Livelihood Guarantee Scheme (Dibao) for social protection in the 1990s. Moreover, various social programs are aiming to expand social safety nets and provide support for the development of rural areas and western regions.

In India, the government introduced the Mahatma Gandhi National Rural Employment Guarantee Act to support rural livelihoods by providing at least 100 days of employment. Programs to improve education include the National Education Scheme and Midday Meal Scheme.

The Fund lauded the JAM (Jan Dhan-Aadhaar-Mobile) initiative and said that “the JAM trinity initiative helped India in making substantial advances in financial inclusion. More recently, programs aiming for universal bank account coverage were launched”.

Source:
http://economictimes.indiatimes.com/articleshow/52106291.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

 

IMF Sees Rising Debt Challenge as Asia Stays Global Outperformer

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

The International Monetary Fund said rising debt levels in major Asian economies have become a significant risk, even as the region remains on track to post solid economic growth.

Asia-Pacific economies as a group will decelerate only slightly, to 5.3 percent this year and next, from 5.4 percent in 2015, the Washington-based fund said in an annual regional report published Tuesday. The IMF last month trimmed its global forecasts, and said the world was more exposed to negative shocks thanks to a prolonged weaker pace of expansion.

In Asia, domestic demand, particularly consumption, should be a key driver, but worsening global conditions and high leverage in the region may curb growth, the fund said.

“Downside risks continue to dominate the economic landscape,” the IMF said. “In particular, the turning of the credit and financial cycles amid high debt poses a significant risk to growth in Asia, especially because debt levels have increased markedly over the past decade across most of the major economies in the region, including China and Japan.”

Downward Spiral

The IMF’s singling out of debt as a growing worry is in line with recent statements. The institution warned in a report last month against what it called a self-reinforcing “spiral” of weakening growth and rising debt that could require a coordinated response by the world’s major economies.

In Asia, the IMF said Tuesday, debt levels are high, while credit growth and corporate issuance have remained strong as companies try to take advantage of still-favorable global liquidity conditions.

The ratio of corporate debt to gross domestic product has risen faster in Asia than anywhere else in the world since 2009, the IMF added, and the measure is particularly elevated in China and South Korea. Household debt is a growing worry in Hong Kong, Malaysia, Singapore and Thailand, the IMF said.

“Although part of the credit growth reflects financial deepening, some growth has been above that implied by fundamentals,” the IMF said. Financial deepening refers to the spreading availability and use of banking.

Reform Refrain

As in previous reports, the IMF called on policy makers to push ahead with structural reforms to raise productivity, including measures to boost consumption in China. The fund also flagged the risk of an over-reliance on monetary or credit policies to hold up demand, particularly if job losses in manufacturing exceed the gains in services.

On Japan, the only developed economy where it anticipates economic contraction next year, the IMF recommended moves to reduce the difference between life-time and non-regular labor contracts to allow for higher wage increases. It also suggested deregulation and a drive to increase female labor market participation.

The IMF said that recent economic policies in Japan — so-called “Abenomics” — have been “supportive,” but added that “durable gains in growth” are yet to be seen.

The fund also warned against an excess reliance on monetary stimulus. The remark comes less than a week after a surprising Bank of Japan decision to hold off on stepping up its monetary expansion jolted markets and led to a surge of the yen against the U.S. dollar.

Source: http://www.bloomberg.com/news/articles/2016-05-03/imf-sees-rising-debt-challenge-as-asia-stays-global-outperformer