Category — Politics

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 a U.S.- China Trade War, Does India Benefit?

Analysts differ on their opinions on whether India stands to gain if there were to be a trade war between the U.S. and China, but the majority say India stands to benefit from the tensions.

The Economic Times reports that Seshadri Chari, a national executive member of the ruling Bharatiya Janata Party, says,”China’s production strength requires a market, and the U.S. is no longer a Chinese market. At this stage, China cannot risk a meltdown in its economy. It’s too politically risky for Xi Jinping. They need a big market. And in Asia, we are the largest market. Today, India is dealing with China from a position of strength.
 Ship in a port

“A protectionist America hurts China more than it hurts India, though India is not without concerns,” states Ashok Malik, a distinguished fellow at the Delhi-based Observer Research Foundation.

“If the U.S. and China don’t get along, the U.S. will turn increasingly to India as a large Asian actor,” says Shashi Tharoor, a lawmaker with the opposition Congress Party and chair of India’s parliamentary standing committee of foreign affairs. He added, “And China, if its U.S. market contracts, will need to diversify its markets and investment outlets, including toward India.”

It would be “premature” to assume U.S.-China ties will nosedive given the scale of their interdependence, says Ashok Kantha, a former ambassador to China and director of the Institute of Chinese Studies in New Delhi.

April 10, 2017   No Comments

Forbes Says India is ‘Darling of Global Markets’

The major market in the world this year is India, says Forbes, and gives the following reasons to support its claim:

  • It’s not fighting a “trade and immigration battle with the White House”
  • It doesn’t have the “political soap operas like those seen in Brasilia and Moscow”
  • Wall Street loves its 1.2 billion population
  • It’s a “commodity importer like China, though not an autocratic society like it”
  • Investors can buy India’s biggest companies, from banks to energy firms
  • The “GST is a long-term positive for India”
  • Tech savvy

White Tiger

“If you look across the countries the International Monetary Fund tracks across the globe, how many of them are growing over 7%? Iraq, Myanmar and India,” says Gaurav Sinha, an asset allocation strategist for New York based asset manager Wisdom Tree. “India is the only large country posting that kind of growth that is accessible for investors. There is a strong investment case in India,” he says.

 

April 2, 2017   No Comments

Templeton Buys $1.2 Billion India Government Bonds

New York City‘s Franklin Templeton Investments bought about $1.2 billion of Indian government bonds in two days end March. The purchases, made through broker JPMorgan Chase & Co, were largely for tenures maturing in 2021-2023.

Since March 11, when Prime Minister Narendra Modi’s party won an election in the state of Uttar Pradesh in the north, foreign funds have been pouring into India, driving stocks to a record high and pushing up bond prices, reports Mint.

Stock chart

“The outcome of state elections, a dovish hike by the Federal Reserve and relatively attractive valuations have been the key drivers of inflows,” said Nagaraj Kulkarni, a senior rates strategist at Standard Chartered Plc in Singapore.

 

March 30, 2017   No Comments