India News Wrap: January 19
In this section, ASG covers a few relevant developments and announcements of the last two weeks, with insights on their implications for businesses.
India to shine while other emerging economies face slowdown
As all major emerging economies including Brazil, Russia, China and South Africa struggle with slow growth, India has remained resilient. India’s strong fundamentals, coupled with buoyant investor confidence and lower oil prices, have helped the country avoid the global slump and maintain robust growth. Several international organizations, including the World Bank and Moody’s, have also endorsed India’s growth story. Most recently, PwC, in its outlook for emerging economies, deemed India a “star performer”. The report has projected a high growth of 7.7% for India, ahead of all other emerging economies, including China.
Government to revamp taxation regime and prioritize agriculture, infrastructure and banks
In 2016, India’s economy will grow faster than China’s for the first time in 16 years, helped by policy reforms designed to encourage investment. In this year’s budget, the government is planning to implement several structural reforms to stimulate demand and improve the ease of doing business in India. To make compliance easier and drive up revenues, the government plans to simplify and rationalize direct taxes and reduce corporate tax rates. It will also take steps to recapitalize state-run banks, raise investment in the agricultural sector and remove bottlenecks in infrastructure development.
Winter session of parliament washed out
The Winter Session saw several disruptions in Parliament as members of the main opposition party, the Indian National Congress, blocked proceedings to protest “vendetta politics.” This backlash followed the Delhi High Court’s direction to senior party leaders Sonia Gandhi and Rahul Gandhi to appear in court and answer charges of cheating and misappropriation of funds. Several key legislative reforms like the Real Estate Bill and Goods and Services Tax (GST) Bill remain stalled. The government is planning to use the executive route to implement certain reforms.
Andhra Pradesh state introduces landmark retail policy
The southern state of Andhra Pradesh has announced a retail policy in an effort to promote the region as a leading retail hub. The state, which currently accounts for nearly 8% of India's total retail market of 13 million stores, is looking to attract investment of at least $7.5 million into the sector by 2020.
To this end, Andhra Pradesh has liberalized its labor policies. Enterprises may now engage workers on a part-time or hourly basis to operate distribution centers and warehouses for extended hours. The government will grant approvals through a single desk system and allot land to retailers for setting up distribution centers and warehouses. Mega retail enterprises that have invested more than $16 million or employ more than 2,000 people will be offered additional incentives. Retailers like Walmart and Future Group, among others, have already committed investments to the tune of $224 million and together will provide at least 25,000 new jobs.
Andhra Pradesh ranks second among India’s 28 states in the ease of doing business index. The success of the state’s landmark retail policy is likely to set an example for others to follow suit.