Modi government announces FDI (Foreign Direct Investment) reforms in 15 sectors

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Giving the much needed reforms impetus to the economy, Prime Minister Narendra Modi-led NDA government on Tuesday announced Foreign Direct Investment (FDI) reforms in as many as 15 sectors.

According to the government’s release, “The crux of these reforms is to further ease, rationalise and simplify the process of foreign investments in the country and to put more and more FDI proposals on automatic route instead of government route where time and energy of the investors is wasted.”

These FDI reforms are set to benefit sectors such as agriculture and animal husbandry, plantation, defence, broadcasting, civil aviation and manufacturing. “Further refining of foreign investments in key sectors like construction where 50 million houses for poor are to be built. Opening up the manufacturing Sector for wholesale, retail and e-Commerce so that the industries are motivated to Make In India and sell it to the customers here instead of importing from other countries,” the release added..

The proposed reforms also enhance the limit of Foreign Investment Promotion Board (FIPB) from current Rs 3,000 crore to Rs 5,000 crore. The proposal also contains many other long pending corrections including those being felt by the limited liability partnerships as well as NRI owned companies who seem motivated to invest in India. Few other proposals seek to enhance the sectoral caps so that foreign investors don’t have to face fragmented ownership issues and get motivated to deploy resources and technology with full force.

India got FDI of $19.39 billion in the April-June period, according to government data, up 29.5% over the year earlier. The Modi government has been pushing hard to drum up overseas investment, easing FDI regulations in various sectors including the railways, medical devices, insurance, pension, construction and defence.

Last week, ET had reported that the government plans to launch a series of policy reforms, signalling its intent to get moving again on economic changes and putting the Opposition on notice before Parliament convenes for the winter session.

Key to the Narendra Modi government’s renewed development push will be power, labour and infrastructure, three senior government officials had told ET. Among the highlights are a revival package for power distribution companies, freeing up labour rules and a possible push for the railways, ET had said in its report.

The road map for the phasing out of corporate tax exemptions and reduction in the tax rate to 25% is being drawn up. Besides this, the Startup India, Standup India plan and the rollout of the National Investment and Infrastructure Fund (NIIF) are also being worked on.

A simpler foreign direct investment (FDI) policy, further easing of the external commercial borrowing (ECB) regime and changes in the public-private partnership (PPP) framework to attract more private investment could also announced.

Source: http://economictimes.indiatimes.com/articleshow/49735873.cms

 

India, UK strike 3.2 bn pound deal on energy, climate change

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The package encompasses 3.2 billion pounds of commercial agreements and initiatives to share technical, scientific, and financial and policy expertise.

Ahead of the Paris climate summit, India and Britain have agreed on a comprehensive package of collaboration on energy and climate change which includes commercial deals worth 3.2 billion pounds.

During Prime Minister Narendra Modi’s ongoing UK visit, the two countries reaffirmed the importance of addressing climate change and promoting secure, affordable and sustainable supplies of energy that will support economic growth, energy security and energy access.

“The UK and India’s partnership on energy is going from strength to strength. We share world-class expertise in research and innovation. The UK’s experience in green finance and technology in particular makes us well-placed to work together to promote secure, affordable and sustainable supplies of energy and address climate change,” said UK energy and climate change secretary Amber Rudd.

“The upcoming talks in Paris will be a crucial moment in the fight against climate change and I am pleased to be able to work closely with India to ensure that the deal we secure helps to keep the below 2 degree limit on global warming within reach,” she added.

The package encompasses 3.2 billion pounds of commercial agreements, joint research programmes and initiatives to share technical, scientific, and financial and policy expertise.

This is aimed at encouraging the research, development and eventual deployment of clean technology, renewables, gas and nuclear.

As part of the package, Britain also announced the UK Climate Investments joint venture with the Green Investment Bank. This will invest up to 200 million pounds in renewable energy and energy efficiency in India and Africa.

The two countries also agreed on the need for an ambitious and comprehensive global agreement to tackle climate change in Paris later this month and that the agreement should signal to investors and innovators the long term commitment of governments to clean and more sustainable economies.

Modi and his UK counterpart David Cameron also welcomed the completion of negotiations for a Nuclear Cooperation Agreement and the signing of a Memorandum of Understanding (MoU) related to closer civil nuclear collaboration between the UK and India.

 

Source: http://economictimes.indiatimes.com/articleshow/49768488.cms

 

RBI allows foreign currency-rupee swap transactions

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RBI said that such swap transactions could be undertaken by the MFI/IFI concerned on a back-to-back basis with an authorised dealers (AD) Category-I bank in India

The Reserve Bank of India (RBI) on Thursday allowed residents having a long-term foreign currency liability to enter into foreign currency-rupee swaps with multilateral or international financial institutions (MFI/IFI) in which the government of India is a shareholding member, subject to certain conditions.

RBI said that such swap transactions could be undertaken by the MFI/IFI concerned on a back-to-back basis with an authorised dealers (AD) Category-I bank in India. The tenure of such swaps should be at least three years, according to a notification issued by the central bank.

In the event of a default by the resident borrower on its swap obligations, the MFI/IFI concerned will have to bring in foreign currency funds to meet its corresponding liabilities to the counter-party AD Cat-I bank in India, the central bank said.

The AD Cat-I bank will have to report the FCY-INR swaps transactions entered into with the MFIs/IFIs on a back-to-back basis to CCIL reporting platform, including the details of the foreign currency borrower. Furthermore, the banks will have to bring the contents of this circular to the notice of their constituents and customers concerned.

Services sector growth hits 8-month high in October

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India’s services sector activity touched an eight-month high in October driven by a significant rise in new business orders even as growth in manufacturing output eased, a Nikkei survey said.

The Nikkei Business Activity index climbed to 53.2 in October, from 51.3 in September, as fresh orders expanded at a solid pace and were most pronounced since February.

“Services companies saw a faster rise in new businesses than their manufacturing counterparts,” said Pollyanna De Lima, economist at Markit, which compiled the survey.

Meanwhile, the seasonally adjusted Nikkei India Composite PMI Output index, which maps manufacturing and services sectors, rose to 52.6 in October from 51.5 in September helped by new businesses.

A reading of 50 divides growth and contraction.

“India’s economic growth shifted into higher gear in October driven by the services sector. Although manufacturing production continued to expand, the growth eased and was sluggish by historical standards,” Lima added.

Lima noted that “the upward trend in private sector output reflected stronger inflows of incoming new works, one that was most marked since March”.

Going forward, services business sentiment regarding the 12-month business outlook remained positive in October.

Notwithstanding the growth in services activity, October data indicated that services sector employment remained unchanged. Around 98 per cent of respondents reported no change in payroll numbers since the preceding month.

“Private sector firms remained wary of costs and payroll numbers, once again, were unchanged,” Lima said.

On the prices front, the Nikkei survey said average input costs rose in both services and manufacturing sectors, albeit at a slower pace.

Reserve Bank Governor Raghuram Rajan on September 29 effected a more-than-expected interest rate cut of half a per cent to spur the economy.

Moreover, RBI has also lowered its economic growth forecast for the current fiscal to 7.4 per cent, from its previous projection of 7.6 per cent.

The April-June quarter GDP slipped to 7 per cent, from 7.5 per cent in the preceding quarter.

Source:http://economictimes.indiatimes.com/articleshow/49654978.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Global re-insurers gearing up to open branch offices in India

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Global reinsurance majors, such as Swiss Re, Munich Re and SCOR, have firmed up plans to apply for a composite licence to carry on reinsurance business through a branch office in India.

Last week, the Insurance Regulatory and Development Authority of India (IRDAI) released final regulations for registration and operation of branch offices by foreign re-insurers.

Currently, all global re-insurers have representative offices in India and operate from overseas while the Indian market has only one domestic re-insurer, General Insurance Corporation (GIC Re).

Kalpana Sampat, Principal Officer and Managing Director of Swiss Re, said the Indian direct insurance market has seen very good growth and the company plans to apply for the licence shortly to operate in a full-fledged manner in the domestic market.

Hitesh Kotak, Chief Representative for India at Munich Re, said the company is in the process of preparing its application for branch office in accordance with the Indian regulator’s requirements.

A representative of SCOR SE said the company intends to apply to the regulator for a composite licence. Ankur Nijhawan, Managing Director of Hannover Re, said his company is currently evaluating the regulations.

In its guidelines aimed at making it attractive for global re-insurers to set up operations in India, IRDAI has put in place a level-playing field for foreign re-insurers, which have a minimum retention of 50 per cent vis-à-vis the domestic re-insurer GIC Re. Minimum retention is the minimum amount of business that will be ceded to the re-insurer on an automatic basis to avoid the expenses associated with small cessions.

Swiss Re’s Sampat said the regulations allow an equal opportunity to the foreign re-insurer with an Indian branch, which in turn will help facilitate setting up a vibrant domestic reinsurance market.

Build local base

Industry experts also said that the presence of foreign re-insurers would help the Indian market developing technical expertise and underwriting skills.

Hitesh Kotak of Munich Re said, “We are keen to work on the best ways to combine Munich Re’s expertise and establish ourselves by closely working with clients and brokers to identify new opportunities.”

“We plan to achieve this through developing a strong local team which is closer to the clients and, at the same time equipped to explore our rich knowledge base and experience,” he added.

http://www.thehindubusinessline.com/money-and-banking/global-reinsurers-gearing-up-to-open-branch-offices-in-india/article7838538.ece?homepage=true

Global Financial Secrecy Index: Hong Kong, Singapore’s ranks rise

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Hong Kong and Singapore have increased their ranking for financial secrecy, with the Chinese territory rising to number two, behind only Switzerland in a 2015 index of the world’s offshore havens, compiled by the Tax Justice Network (TJN).

Both the Asian financial hubs have made insufficient reforms to their corporate secrecy regimes, according to the London-based TJN, which campaigns for greater transparency in finance. Singapore’s ranking moved to fourth from the fifth place it held in the organisation’s previous index in 2013, when Hong Kong placed third.

“Singapore, in fourth place, poses many of the same threats that Hong Kong does: a lack of serious reforms to its corporate secrecy regime; a lack of interest in creating country-by- country reporting or in creating public registries of beneficial ownership,” the TJN said.

The two cities each account for about 4 per cent of the global market for offshore financial services, the organisation said. The hubs are well exposed to offshore flows because of rising assets under management and their status as regional financial hubs, according to the TJN.

“We do not have laws protecting bank secrecy and so we have never attracted foreign capital by such means,” a spokesman for Hong Kong’s Financial Services and the Treasury Bureau said in an e-mailed response to the TJN survey. “Hong Kong has all along been highly supportive of international efforts to enhance tax transparency and combat tax evasion,” the spokesman added.

The US was ranked third for its refusal to take part in a global system for exchanging bank data created by the Organisation for Economic Cooperation and Development.

Source: http://www.business-standard.com/article/economy-policy/global-financial-secrecy-index-hong-kong-singapore-s-ranks-rise-115110301720_1.html

 

Moody’s Raises Indian Banks’ Outlook to Stable

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Rating agency Moody’s Investors Service revised its outlook on India’s banking system to “stable” from “negative” on Monday, saying an improving economy would help temper problem-loans on banks’ books.

Moody’s, however, cautioned that any recovery in asset quality would be gradual given the high debt levels in Indian companies.

Indian banks, particularly state-run banks, have been saddled with bad loans estimated at nearly $50 billion as the economy slowed sharply in the last three years.

But recent earnings reports, including from top private sector lender ICICI Bank, suggested asset quality may be stabilising.

Moody’s said it expected India’s economy to grow around around 7.5 per cent in 2015 and 2016 each, supported by low inflation and gradual implementation of structural reforms.

“The stable outlook on India’s banking system over the next 12-18 months reflects our expectation that the banks’ gradually improving operating environment will result in a slower pace of additions to problem loans, leading to more stable impaired loan ratios,” Moody’s said in the statement.
“However, the recovery in asset quality will be U-shaped rather than V-shaped, because corporate balance sheets remain highly leveraged.”
Moody’s also noted that capital levels remained weak for state-owned banks, with common Tier 1 ratios of only 6 to 10 per cent, though lenders retain plentiful of access to funding and liquidity.

Moody’s had downgraded India’s banking system outlook to “negative” in November 2011.

The ratings agency had upgraded India’s sovereign outlook to “positive” in April, while retaining its rating at “Baa3”.

Source: http://profit.ndtv.com/news/banking-finance/article-moodys-ups-indian-banking-sector-outlook-to-stable-1238974