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INDIAN ECONOMY: OVERVIEW, GROWTH & DEVELOPMENT
India moves up to 43rd in competitiveness; Singapore tops chart

India has moved up one place to rank 43rd most competitive economy in the world on the back of its robust economic growth, a large labour force and its huge market size, while Singapore has toppled the US to grab the top position, a global study showed. Singapore has moved up to the top, from the third position last year, while the US has slipped to the third place in the 2019 edition of the IMD World Competitiveness Rankings. Hong Kong SAR has held onto its second place, helped by a benign tax and business policy environment and access to business finance. Economists regard competitiveness as vital for the long-term health of a country’s economy as it empowers businesses to achieve sustainable growth, generates jobs and, ultimately, enhance the welfare of citizens. The IMD World Competitiveness Rankings, established in 1989, incorporate 235 indicators from each of the 63 ranked economies to evaluate their ability to foster an environment where enterprises can achieve sustainable growth, generate jobs and increase welfare for its citizens.

India was ranked 45th in 2017, but higher at 41st in 2016.

The IMD study said the challenges before India remain maintaining high growth with employment generation, digital literacy and internet bandwidth in rural areas, managing fiscal discipline, as also issues related to the implementation of Goods and Services Tax and resource mobilisation for infrastructure development. In the 2019 rankings, India has scored well on several economic parameters and tax policies but has lagged in terms of public finance, societal framework, education infrastructure, health and environment. In the top-five, Switzerland has climbed to fourth place from fifth, helped by economic growth, the stability of the Swiss franc and high-quality infrastructure. The Alpine economy ranked top for university and management education, health services and quality of life. The United Arab Emirates – ranked 15th as recently as 2016 – entered the top five for the first time. The effects of rising fuel prices influenced the ranking, with inflation reducing competitiveness in some countries. Stronger trade revenues helped oil and gas producers such as this year’s biggest climber Saudi Arabia, which jumped 13 places to 26th, and Qatar, which entered the top 10 for the first time since 2013. Venezuela remained anchored to the bottom of the ranking, hit by inflation, poor access to credit and a weak economy.

Supreme court agrees to examine power of tax authorities

The Supreme Court Wednesday agreed to examine the powers of tax authorities to arrest an individual for Goods and Services Tax (GST) evasion. A vacation bench comprising Chief Justice Ranjan Gogoi and Justice Aniruddha Bose issued notice to the Centre and sought its reply on a batch of pleas challenging the provision of arrest under the CGST Act. The bench said that different high courts had taken different views in granting anticipatory bail to individuals accused of GST evasion and therefore, it needs to decide the question of law on the power of arrest. The bench also asked all the high courts to keep in mind, while dealing with grant of anticipatory bail in GST evasion cases, its earlier order by which it had upheld the Telangana High Court verdict which had said that individuals can’t be given protection from arrest in such cases.

India removed from US currency monitoring list, China stays

The US Treasury Department has removed India from its currency monitoring list of major trading partners. In its semi-annual report to US Congress on International Economic and Exchange Rate Policies, the department on Tuesday removed India and Switzerland from the previous currency watch list of countries with potentially questionable foreign exchange policies. India, along with China, Japan, Germany, Switzerland and South Korea, was placed in the bi-annual currency watch list in October last year. The US, however, continued to keep China on its watch list, while urging the Asian nation to take necessary steps to avoid a “persistently weak currency”.

Amazon, flipkart unlikely to fully participate in Indian antitrust body’s study: report

Amazon.com Inc and Walmart Inc’s Flipkart are unlikely to fully participate in an Indian antitrust body’s study of the e-commerce sector for fear of revealing trade secrets, two people with direct knowledge of the matter said. The Competition Commission of India (CCI) is engaged in what it describes as a “fact-finding exercise” aimed at better understanding the e-commerce sector. The CCI document features 88 questions over 12 pages requesting recipients volunteer pricing strategies, product information and the identities of their biggest-selling vendors. Amazon and Flipkart are among India’s largest e-commerce companies so their participation in any such survey could carry significant weight. Yet the pair are unlikely to answer questions in full as doing so would involve disclosing commercially sensitive information, the two people told. “This survey is very detailed,” said one of the people, who declined to be identified as they were not authorised to speak publicly on the matter.

 

Liquidity management gets new guidelines from the RBI

The Reserve Bank of India (RBI) has issued draft guidelines on liquidity management for the Non-Banking Finance Companies (NBFCS) and proposed a liquidity coverage ratio for large NBFCS covering all deposit-taking NBFCS and non-deposit taking NBFCS with an asset size of ₹5,000 crore and above. Here is a look at what it means and how it will impact you: The key takeaway from the draft guidelines are that a bank-like liquidity coverage ratio (LCR) for NBFCS to be put in place, granular management of asset liability mismatch and board-led liquidity policies or monitoring.

“The guidelines require NBFCS to hold adequate level of high quality liquid assets (to cover the estimated net cash outflows in case of a severe liquidity stress scenario over the next 30 calendar days). This is to ensure NBFCS have enough liquid assets that can be converted to cash to fund the outflows for 30 days in a scenario of acute liquidity stress. With these guidelines, NBFCS will need to stick to ALM and liquidity discipline at all times. More importantly, this will provide comfort to debt market participants that NBFCS will always be prudent on liquidity,” said Kotak in a note.

Day after Modi was re-elected, foreign funds bought Indian bonds

Global investors piled a net $216.3 million into Indian bonds on Friday, the day after Prime Minister Narendra Modi’s sweeping election victory. The second-biggest daily inflow in two months turned foreign funds into net buyers of rupee-denominated notes for May, signalling the debt’s appeal may be rising as wagers grow that the Reserve Bank of India will soon add to its two interest-rate cuts this year. Modi’s re-election put to rest any uncertainty about a diverse group of political parties coming to power at a time when growth is already slowing. The benchmark 10-year yield slipped as much as seven basis points to reach 7.16percent on Monday, the lowest since April 2018, with traders citing overseas demand as a reason for the rally in bonds. Foreign funds “have no choice but to look at India now,” said Lakshmi Iyer, chief investment officer for debt at Kotak Mahindra Asset Management Co. “If your forwards are bearable and yields are high, that is when they make a nice and attractive carry,” she said. The yield could touch 7percent if the RBI’s June policy is positive for bonds, she said.

Indians get notices from Switzerland to share bank info

As Switzerland strives hard to re-establish its global financial centre position after clamping down on secrecy walls of its banks, there has been a significant surge in the number of cases where it has initiated process to share information on Indians with Swiss bank accounts and shot off letters to about a dozen such individuals last week itself. Since March, at least 25 notices have been issued by the Swiss authorities to Indian clients of Switzerland-based banks in which they have been given one last chance to appeal against sharing of their details with India. An analysis of the notices issued by the Federal Tax Administration, Switzerland government’s nodal department for sharing of information on foreign clients of Swiss banks, shows that the Swiss government has stepped up its efforts in sharing such details with a number of countries in the recent months, but the surge in India-related cases is noticeable in the past few weeks. At least 11 such notices were issued to Indian nationals on May 21 itself, though the gazette notifications of the Swiss government has redacted full names for several of them while making public only their initials besides the nationality and the dates of birth.

Fiscal deficit may see upward revision in budget from 3.4pc to beat slowdown

The upcoming Budget in July may revise the fiscal deficit of 3.4 percent upwards in view of the need to step up public expenditure to beat the economic slowdown while keeping in mind tax revenue are not going to grow at the required pace to match up with increased expenditure. Fiscal deficit for 2018-19 is also pegged at 3.4 percent and the final yearly figure is awaited. The Budget which will be presented amidst a gripping slowdown, is slated to address the concerns by taking measures for tax rationalisation, undertaking public spending in infrastructure, job creation, social and farmers’ schemes. Though the fiscal deficit figure of FY19 fiscal is yet to be out, the NDA government in the last five years has brought down the deficit and largely avoided any big slippage since 2014. But it could not strictly adhere to the Fiscal Responsibility and Budget Management (FRBM) Act glide path due to structural disruptions in the economy like implementation of the GST. Yet, Moody’s Investors Service did do rating upgrade of India during this time solely crediting the government for containing fiscal deficit.

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