October 10 to 16
According to Invest India, foreign companies have indicated they aim to invest approximately $85 billion in India in the next five years, potentially creating about 700,000 new jobs. Invest India is the agency leading promotion of India as an investment destination. Invest India’s aim is to attract 200 companies that are not yet in the Indian market, to “achieve a $100 billion target of foreign investment in the next two years.” Some of the companies that plan to invest in the next few years are Chinese companies Sany Heavy Industry ($9.8 billion), Pacific Construction ($5 billion), Dalian Wanda ($5 billion), among others.
Other News: Exports, GST & Inflation
According to the global brokerage company Morgan Stanley India’s economic growth will recover and exports will expand during the September quarter. Robust consumption trends and export growth caused the recovery, as India’s exports were $28.61 billion in September, which is better than expected. Furthermore, a growing import trend shows a healthy growing economy. The GST modifications are aiding with growth as well.
After facing problems with the implementation of the Goods and Service Tax (GST), the GST Council (GoM) has introduced changes in the composition of the tax scheme to ease the filling process. Only 15.50 lakh (hundred thousand) out of 98 lakh companies were registered under the GST regime, so the GoM decided to discuss ways to make the GST more attractive. Some of the businesses with filling problems are restaurants, as the tax is 12% for non-AC restaurants and 18% for air-conditioned ones. The GoM will be discussing the possibility to pass the cost-reduction benefit of AC restaurants to the consumers, or to exclude restaurants from input tax credit claims, the exclusion of turnover of exempted goods in the composition scheme, and manufacturers’ possible benefits such as input tax credit.
The Wholesale Price Index (WPI) inflation registered a fall in inflation from 3.24% in August to 2.6% in September, due to a decrease in food and vegetables prices. In September 2016, the WPI was 1.36%. The correction of vegetable prices such as tomato and the base effect of moderation in inflation for fuel and power caused the stabilization. Nevertheless, the Consumer Price Index, which excludes some commodities, remained unchanged for September at 3.28%, same data as for August.
Fight Against Corruption:
After the implementation of the Aadhaar card scheme, which assigns unique identifying numbers to India’s residents, the architect of this project, Nandan Nilekani, in a speech at the recent World Bank and IMF meetings affirmed that this program helped PM Modi’s government save about USD 9 billion by eliminating fraud. To date the program has enrolled more than 1 billion people and about half a million have linked their bank account to their ID number, easing the cash transfer systems without having duplicates or fake ID problems. Nilekani’s speech encouraged the use of electronic systems as they are paperless and reduce several costs.
Jaitley’s US trip:
During his recent trip to the United States, India’s Finance Minister Arun Jaitley argued that government efforts to boost the economy have helped the expansion of India’s middle class, which will help maintain the path of growth. The Minister visited United States to strengthen the relationship between both countries, as meetings with US Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross. The conversations included trade imbalance between the two countries and the critical issue of H-1B visas. At the end of his 10 days tour, Minister Jaitley spoke at the India Strategic Partnership Forum where he asserted that India’s 300 million middle class made India a very attractive investment destination.
October 3 to 9
Prime Minister Narendra Modi seeks to boost investment in India’s energy market by meeting with CEOs from foreign and local oil companies. These include Russian giant Rosneft, Saudi Aramco, BP, Exxon Mobil, Reliance Industries, Cairn India, among others. The meeting occurred on Monday October 9, and aimed to discuss “exploration and production, processing, transportation and distribution network in oil and gas.” India, the third largest oil importer, wants to reduce dependence on external oil and gas, creating reforms in these sectors.
The international oil company Aramco announced its “mega investment” plan for India. Aramco aims to partner with Indian companies to establish itself in the market, as projections show an increase in oil demands of double the current number of barrels per day and triple the current gas demand by 2024. Aramco would like to become India’s top oil supplier.
Other News: RBI and GST
The Reserve Bank of India decided to retain the policy interest rate at 6%. The monetary policy committee took this decision in order to achieve its medium-term target of 4% inflation, measured by Consumer Price Index (CPI). The inflation path for the rest of the year is considered risky as many factors could impact the economy, some of them being food prices, GST, farm loan waivers, among others. The CPI “edged up sequentially in July and August to reach a five-month high.” The central bank also lowered its economic growth forecast for 2018 from 7.3% to 6.7% due to adverse shocks in the manufacturing sector and the implementation of the GST.
After discussing the Good and Services Tax Network (GSTN) failure to achieve the expected returns to traders within the stipulated dates, the possibility to extendthe return filing deadlines was discussed. In the previous meeting, the GST Council decided to establish October 10 as the GSTR 1 deadline (for sales), October 31 for GSTR 2 (for purchases) and November 10 for GSTR 3 (for sales and purchases with tax liability). Nevertheless, several member states complained that the system was causing problems for traders to file returns and make payments, compromising the ease of doing business.
The GSTN committee met again on October 6, and decided to extend the return filing cycle for MSMEs and to speed up the returns to exporters- GSTR 1. The refunds for July and August were scheduled for October 10 and 18 respectively, and for the rest of the year an exemption would apply. By April 1st an e-wallet will be created for exporters. Businesses are expected to fill a quarterly form instead of a monthly one, with a ceiling of up to Rs 1.5 crore (crore=10 million). The limit of composition scheme was changed to 1 crore. Special conditions apply for other products.
India and the European Union once again failed in their attempt to pick a date to re-start negotiations on a Free Trade Agreement (FTA), after putting conversations on hold in 2013. The first negotiations were the Broad-based Trade and Investment Agreement (BTIA), which started in 2007 and stopped in 2013. Different views regarding free labor mobility, duties for specific products and investment protection have been some of the causes of disagreement between the two parties.