The Indian economy’s consecutive contraction in 2 back to back financial quarters ensured that it entered a phase of technical recession. This is what was feared at the start of Covid-19 pandemic when Asia Law Portal reported that the International Monetary Fund had projected India’s worst economic performance as the global economy hit the worst recession since the Great Depression. There was recovery in the contraction in the 2nd quarter giving hopes of a revival, which was backed by a marginal upward increase in forecast by an international rating agency. The government enhanced ease of doing business by relaxing a telecom regulation. On the other hand, the Regional Comprehensive Economic Partnership (RCEP), touted as the world’s largest free trade pact, was signed and its members have left a window open for India to join in future. The RBI reiterated that foreign lawyers or law firms are not permitted to open an office in India.
Recession and Contraction of Economy – The Reserve Bank of India (RBI) recently released the November 2020 issue of its monthly Bulletin. As per the Press Release, Economic Activity Index for India nowcasts GDP growth at (-) 8.6 per cent in Q2:2020-21, implying that India is likely to have entered a technical recession in the first half of 2020-21 for the first time in its history with two successive quarters of GDP contraction. Subsequently, the Ministry Of Statistics And Programme Implementation issued a Press Note containing estimates of gross domestic product for the second quarter (July-September) of 2020-21. As per this estimate, for the second quarter (July-September) Q2 of 2020-21, GDP showed a contraction of 7.5% as compared to 4.4% growth in Q2 2019-20. With this publication, commencement of technical recession is now confirmed. In the previous quarter i.e. Q1 of 2020-21 (April-June), India’s GDP had contracted by 23%, (as reported by Asia Law Portal here), which was the worst contraction in decades. The RBI also mentioned that incoming data for the month of October 2020 have brightened prospects and stirred up consumer and business confidence. With the momentum of September having been sustained, there is optimism that the revival of economic activity is stronger than the mere satiation of pent-up demand released by unlocks and the rebuilding of inventories. If this upturn is sustained in the ensuing two months, there is a strong likelihood that the Indian economy will break out of contraction of the six months gone by and return to positive growth in Q3:2020-21.
Moody’s Marginal Upward Shift in Forecast – Moody’s Investors Service recently forecasted that India’s economy will shrink by 10.6% this fiscal year, raising its projection from the 11.5% contraction it had projected in September. The global ratings agency said the Indian government’s latest ₹2.65 trillion stimulus package, aimed at increasing the competitiveness of the manufacturing sector, improving access to credit and nurturing the economic recovery, is a credit positive. The addition of 10 more sectors to the production-linked incentive (PLI) scheme is expected to improve competitiveness of India’s manufacturing sector, revive private investment and create jobs, Moody’s said. “As countries have increasingly looked to greater diversification in their supply chains since the coronavirus pandemic, the timely introduction of these measures could boost India’s manufacturing industry, which contributed around 15% of GDP in 2019,” Moody’s said, adding that widening the scope of the credit guarantee scheme will drive credit flow and aid recovery. The ratings agency, however, said that consumer confidence in India continues to remain relatively low amid rising number of new coronavirus cases, while acknowledging that the daily rise in cases has come down from its peak in September. Moody’s also raised its forecast for India’s GDP for fiscal 2021-22 to 10.8% from 10.6% projected earlier.
Liberalisation of Telecom Regulations – The Department of Telecommunications (DOT), Ministry of Communications, Government of India, recently released the new guidelines for other service providers (OSP). The most significant change is relaxation in the registration requirements. As per this, no registration certificate will be required for OSP centres in India. Further, the definition of OSP has been limited to an Indian entity providing voice based business process outsourcing (BPO) services. The OSPs are now allowed to operate under work from home and/or work from anywhere in India. The collection, conversion and exchange of the PSTN/PLMN/ISDN traffic over the virtual private network (NPLC, MPLS VPN) interconnecting the different OSP centres is permissible. The OSPs continue to be responsible for any violation related to toll-bypass. The new guidelines possibly stem from the recommendations made by the Telecom Regulatory Authority of India (TRAI) in October 2019 in response to a reference received from DOT earlier in that year.
RCEP Keeps Door Open For India – Countries that have signed the Regional Comprehensive Economic Partnership (RCEP) agreement can start negotiations with India for joining the pact once India submits a written request stating its intention for the same, according to a declaration. On November 4 last year, India walked out of mega free trade agreement RCEP as negotiations failed to address New Delhi’s outstanding issues and concerns, as reported by Asia Law Portal. The remaining 15 member countries have signed RCEP agreement and have stated that the pact would remain open to India. Now the members of RCEP are 10-nation bloc ASEAN (Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia), China, Japan, South Korea, Australia and New Zealand. “The RCEP signatory states will commence negotiations with India at any time after the signing of RCEP agreement once India submits a request in writing of its intention to accede to RCEP agreement to the depositary of the RCEP agreement, taking into consideration the latest status of India’s participation in RCEP negotiations and any new development thereafter,” according to the Ministers’ Declaration on India’s Participation in RCEP. It said the pact is open for accession by India from the date of entry into force of the agreement. It also stated that any time prior to its accession, India can participate in RCEP meetings as an observer and in economic cooperation activities undertaken by the signatory states, on terms and conditions to be jointly decided upon by the 15 countries. Further, according to a joint leaders’ statement on RCEP, India’s accession accession to the agreement would be welcome in view of its participation in the negotiations since 2012 and its strategic importance as a regional partner in creating deeper and expanded regional value chains.
RBI Continues Ban on Foreign Law Firm – In a recent Circular, the RBI has reiterated its 2015 position that foreign law firms/companies or foreign lawyers or any other person resident outside India, are not permitted to establish any branch office, project office, liaison office or other place of business in India for the purpose of practicing legal profession. The Circular mentions that was done to take into consideration the Supreme Court’s final judgement in the matter of Bar Council of India v A. K. Balaji and Others, as reported by Asia Law Portal in 2018.