The Government of India should be ready with its new year resolutions and timelines to achieve the same, as 2020 ushered in the lowest GDP forecast in the last 11 years, continuing the year-end gloomy economic situation in the country. The Government has an opportunity to reconsider its withdrawal from the RCEP as it has been invited to the upcoming RCEP Summit next month. The Personal Data Protection Bill has now been opened up to stakeholders for suggestions.
IMF reduces growth forecast – The International Monetary Fund (IMF) recently released its World Economic Outlook (WEO), January 2020 report titled ‘Tentative Stabilization, Sluggish Recovery?’. The report mentioned that ‘The growth markdown (in emerging and developing Asia) largely reflects a downward revision to India’s projection, where domestic demand has slowed more sharply than expected amid stress in the nonbank financial sector and a decline in credit growth. India’s growth is estimated at 4.8 percent in 2019, projected to improve to 5.8 percent in 2020 and 6.5 percent in 2021 [1.2 and 0.9 percentage point lower than in the October WEO (as reported by Asia Law Portal)], supported by monetary and fiscal stimulus as well as subdued oil prices.’ IMF’s forecast is in line with its chief economist Gita Gopinath’s statement last month that India’s growth forecast is likely to revised down “significantly” in the upcoming January review, as reported by Asia Law Portal.
World Bank pulls down growth forecast – The World Bank recently released its January 2020 Global Economic Prospects Report which stated that in India, where weakness in credit from non-bank financial companies is expected to linger, growth is projected to slow to 5% in FY 2019/20, which ends March 31 and recover to 5.8% the following fiscal year. The report, in the South Asia chapter, further mentioned that in India, activity slowed substantially in 2019, with the deceleration most pronounced in the manufacturing and agriculture sectors, whereas government-related services subsectors received significant support from public spending. GDP growth decelerated to 5 percent and 4.5 percent (y/y) in the April-June and July-September quarters of 2019, respectively—the lowest readings since 2013. Sharp slowdowns in household consumption and investment offset the rise in government spending. High-frequency data suggest that activity continued to be weak for the rest of 2019.
Lowest GDP growth forecast – The National Statistical Office (NSO) has released its first advance GDP estimates for fiscal 2019-20 recently, indicating a 5% growth in the economy. This will be the lowest growth rate since 2008-09 (FY09), the year of the global financial crisis. Therefore, raising more concerns for an economy already facing a slowdown. The economic forecast suggests a 5% rise in the second half of the fiscal, a slight recovery against 4.8% in the first half. The 5% growth is in line with the Reserve Bank of India’s (RBI) December policy, sliding the bar downwards from its 6.1% growth prediction in its October policy.
Improving Ease of Doing Business – A plethora of regulatory changes covering startups is in the works to reduce time spent on tax compliance by them to less than one hour a month along with easier incorporation processes and boosting the availability of global and domestic capital. The Department for Promotion of Industry and Internal Trade (DPIIT) is in talks with the ministries of finance and corporate affairs, the Securities and Exchange Board of India and the (RBI) over the new measures. “We are working on regulatory changes that would aim at easier incorporation of a company, easier compliances, reduction of tax compliance to less than one hour per month,” said DPIIT secretary Guruprasad Mohapatra. India is at 136 on ‘starting a business’ in the World Bank’s ease of doing business table against an overall rank of 63. Some of the measures in the works are also expected to tackle this.
India invited to RCEP Summit – The ASEAN Secretariat has invited India to participate in a meeting called in Bali on February 3 and 4 on Regional Comprehensive Economic Partnership (RCEP) agreement to sort out concerns of India, an official said. India had, at a meeting in November last year in Bangkok, decided to withdraw from this mega free-trade agreement as its concerns were not addressed adequately by the RCEP, as reported by Asia Law Portal last month. “India has received the invitation for the meeting, but it has not yet taken any decision on this,” the official said.
Foreign investment ups and downs – Foreign investment has come to rescue India’s sagging economy by catalysing the growth by boosting investment. In the first half of the current fiscal year, Foreign Direct Investment (FDI) in India rose by 15 per cent (in $ terms), according to the DPIIT. The investment has come at a time when the global economy and investment environment have shown subdued growth. This also reflects the confidence of international investors in India’s market. FDI inflows play an important role as India faces huge infrastructure funding requirements to boost growth. However, the monthly trend of FDI inflow doesn’t show a very positive movement. In H1 FY20, the maximum FDI was received in the month of June ($ 7282 million), which drastically fell in the following months to a mere $ 2,741 million in the month of September 2019, according to DPIIT.
Law proposed to protect foreign investment – India is planning a new law to safeguard foreign investment by speeding up dispute resolution, aiming to attract more capital from overseas to boost stuttering domestic growth, two officials with direct knowledge of the matter told Reuters. In a 40-page initial draft, India’s finance ministry has proposed appointing a mediator and setting up fast-track courts to settle disputes between investors and the government, one of the sources said. The draft proposal is aimed at diffusing investor mistrust around the sanctity of agreements, which has worsened recently after some state governments decided to review approved projects, or threatened to cancel contracts.
Personal Data Protection Bill – The Joint Parliamentary Committee (JPC) on the Personal Data Protection Bill, 2019 (formed last month, as reported by Asia Law Portal), has invited comments from stakeholders. Those who want to submit their views must do so in three weeks. The submissions would form part of the records of the committee and will be treated as confidential, the notice said. Those who wish to appear before the committee can indicate that in the submission.