India continued to receive high economic growth forecast, as per reports issued by the International Monetary Fund and United Nations (UN). However, the UN reported highlighted some concerns and worrisome factors. Government of India recently amended the external commercial borrowings rules to further enable ease of doing business in India. The data protection bill appears to be ready to be tabled in the upcoming Parliament session.

IMF World Economic Outlook Update.

As per World Economic Outlook Update, January 2019 issued by the International Monetary Fund (IMF), India’s economy is poised to pick up in 2019, benefiting from lower oil prices and a slower pace of monetary tightening than previously expected, as inflation pressures ease.

India’s projected economic growth for 2019 is 7.5%, which make it the fastest growing economy in the world. The report also mentioned that the Indian rupee has staged recoveries from their 2018 valuation lows last August-September. The forecast for 2019 is slightly higher now in comparison to the World Economic Outlook Update issued in October 2018 (as reported by Asia Law Portal).

External Commercial Borrowing (ECB) Liberalisation.

The Reserve Bank of India (RBI) recently issued a revised ECB policy to rationalise the extant framework for ECB in light of the experience gained to improve the ease of doing business. The list of eligible borrowers has been expanded to include all entities eligible to receive FDI.

Additionally, port trusts, units in Special Economic Zones, Small Industries Development Bank of India, Export-Import Bank of India, registered entities engaged in micro-finance activities, viz., registered not for profit companies, registered societies/trusts/cooperatives and non-government organisations can also borrow under this framework.

The Minimum Average Maturity Period (MAMP) will be 3 years for all ECBs. However, for ECB raised from foreign equity holder and utilised for specific purposes, as detailed in the Annex, the MAMP would be 5 years. Similarly, for ECB up to USD 50 million per financial year raised by manufacturing sector, which has been given a special dispensation, the MAMP would be 1 year as given in the Annex.

ECB up to USD 750 million or equivalent per financial year, which otherwise are in compliance with the parameters and other terms and conditions set out in the new ECB framework, will be permitted under the automatic route not requiring prior approval of the Reserve Bank.

Data Protection Bill Update.

A recent media report claimed that Data Protection Bill is likely to be introduced in the budget session of the Indian Parliament. “There is very little work left to be done. The Law Ministry has gone through it the last couple of weeks and they will be giving it a final okay in a day or two post which we will take it to the Cabinet. Once the Cabinet approves it, the Bill will be taken to the Parliament,” said a government official on condition of anonymity.

UN World Economic Situation and Prospects 2019.

The United Nations recently released the World Economic Situation and Prospects 2019. The report offers timely warnings about a range of macroeconomic challenges facing policymakers as they aim to deliver on the 2030 agenda for sustainable development. As per the report, the Indian economy is expected to expand by 7.6 and 7.4 per cent in 2019 and 2020, respectively, after expanding by 7.4 per cent in 2018.

Economic growth continues to be underpinned by robust private consumption, a more expansionary fiscal stance and benefits from previous reforms. Yet, a more robust and sustained recovery of private investment remains a crucial challenge to uplifting medium-term growth.

The report further mentioned that in India, the acceleration in investment growth was mainly driven by public infrastructure spending. India also experienced considerable declines in equity markets and depreciation of domestic currencies. As risks to financial stability increased, central banks in several large economies, including India, raised interest rates to stem outflows and support domestic currencies.

This in turn contributed to even tighter domestic financing conditions, weighing on the short-term growth outlook. Notwithstanding the increase in global financial market volatility, the emerging economies on aggregate continued to receive sizeable capital inflows in 2018, supported by sustained foreign direct investment (FDI) flows.

The report also highlighted areas of concern. It stated that in India job creation rates in the formal sector have been feeble, leaving many workers underemployed or in low-salary jobs, with the situation for youth particularly worrisome. In fact, well-educated youths are struggling to find jobs in the formal sector, and most of them are absorbed into low-paying and vulnerable jobs in the informal sector.

Posted by Sourish Mohan Mitra

Sourish Mohan Mitra, India-qualified lawyer from Symbiosis Law School, Pune and currently working as an in-house counsel in Delhi, India; views expressed are personal; he can be reached at; Twitter: @sourish247

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