สรุปข่าวเศรษฐกิจอินเดียประจำวันที่ 29 มกราคม 2557

Foreign investors trading Indian cos' shares abroad won't be liable to capital gains tax

After allowing unlisted Indian companies to list overseas, the finance ministry has decided to sweeten the deal for such listings. Foreign investors buying or selling shares of Indian companies listed overseas will not be liable to capital gains tax. The finance ministry has decided to treat the shares issued by unlisted Indian companies on overseas bourses on par with American depository receipt (ADR) and global depository receipt (GDR) schemes. The Central Board of Direct Taxes, the apex direct taxes body, will soon issue a notification in this regard. Unlisted companies were allowed to list overseas in 1990, but the government banned such listings in 2005. This was essentially aimed at preventing export of Indian market overseas and shift in regulatory jurisdiction for such companies to foreign regulators. High current account deficit and the need for long-term stable capital flows prompted a rethink last year. In September, the government again allowed unlisted companies to list on foreign bourses. It also brought in a balance in policy as unlisted companies are already allowed to raise foreign debt. The scheme, launched by the department of economic affairs, will run for two years on a pilot basis. However, lack of clarity on taxation has held back Indian companies from pursuing overseas listing. At present, foreign investors trading in ADR/GDRs of Indian companies do not have to pay capital gains tax on their profits. The same tax regime would be extended to this scheme. Experts say a clarification in this regard is welcome. As per the scheme, companies can use capital raised to retire outstanding overseas debt for operations abroad including for acquisitions, but will have to remit the funds raised to India within 15 days if they are not utilised. The listing company will also have to comply with the foreign direct investment policy and sectoral caps. Listing has been allowed only on exchanges in IOSCO or Financial Action Task Force-compliant jurisdictions with which market regulator Sebi has signed bilateral agreements.

(Source: Economic Times)

Big boost for manufacturing

The Gujarat government is promoting the manufacturing sector in a big way with the aim of improving the income and employability of the people of the state, said Industries and Energy Minister Saurabh Patel. The government further plans to increase the manufacturing sector's contribution to Gross State Domestic Product (GSDP) to 32 per cent from the present 27 per cent in the next five years, the minister added. While manufacturing has always been Gujarat's strength, Patel clarified that more emphasis on this sector was being given to secure future generations. "We are giving more importance to this sector because we believe that students coming out from schools and colleges from rural areas will require employment. This is what we plan to do - improve the income of the people of the state, improve employability and bring investment in industry and agriculture. As the per capita income increases, everything will fall in place," the minister added. According to him, the financial stability of the state is good from all points. The fiscal responsibility and budget management norms have been met, and even exceeded. The urban sector, particularly urban housing, is also a priority for the Gujarat government over the next five to seven years. Gujarat is a revenue-surplus state, taxation revenue is buoyant and most important, confidence in the state is on the high side.

(Source: Business Standard)

India cheaper than average but pricier than peers

The Indian market continues to command valuations that are at a premium to peers in the emerging markets pack. This is somewhat surprising given that India runs a current account deficit while Taiwan runs a surplus. India now trades at a forward PE multiple of 14.1 times, cheaper than its long-term average of 14.5 times. The premium has traditionally been paid because of India’s robust domestic consumption story and the fact that the economy stands to gain from any correction in commodity prices in the event of a hard landing in China. Whether investors will continue to pay a premium given how it is export-oriented stocks that are now driving up earnings — thanks to a weaker rupee — and, consequently, benchmark indices to all-time highs remains to be seen. Strong foreign institutional investor inflows, which averaged $22 billion in the last two years — a period in which India’s GDP grew at the slowest pace in a decade while the rupee hit its lowest — prove that liquidity is as important as economic fundamentals. It is possible that a further taper by the US Federal Reserve will mean a little less liquidity and, therefore, allocations to EMs may come off somewhat, bring down the price-earning multiples of these markets.

(Source: Financial Express)

RBI projects modest economic recovery to set in next fiscal

The central bank on Tuesday projected a modest economic recovery to set in the next fiscal year. But for the 12 months through this March, the economy may post a weaker growth rate than last year's decade-low pace of 5%, the Reserve Bank of India said in its quarterly macro and monetary development review. The RBI, for the first time, released its growth and inflation projections in the quarterly review, instead of the monetary policy statement. If policy steps succeed in delivering the desired inflation outcome, the real growth in gross domestic product could firm up from a little below 5% this fiscal year to 5-6% next fiscal year, with risks balanced around the central estimate of 5.5%. It also sought steps to secure the expected recovery, and said a pickup in investment in an environment in which external demand continues to be supportive of export performance could impart an upside to its forecast. Better investment prospects, improving sales, new orders and improved export performance have contributed to rising optimism, the survey showed. It cited weak local demand, political uncertainty and high inflation as possible factors that could restrict the optimism. The central bank, however, said the prospects of a pickup in real GDP growth in the second half of 2013-14 have been dampened by a fall in industrial production in October and November, sluggishness in services sector activity as well as weakening private consumption and investment demand. Notwithstanding the improved export performance and buoyant outlook for agricultural production, GDP growth for 2013-14 could be somewhat lower than the central estimate of 5% projected at the time of the second quarter review.

(Source: Economic Times)

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