The Government of India has forged a financial relationship for wallet transactions with Singapore, which is a first for going beyond borders to simplify transactions. This is landmark achievement and is expected to be beneficial for residents of both countries. The Union Budget has proposed a series of new measures including some which potentially may cover a sizeable foreign investor community and also aim to settle existing dispute through a one-time settlement scheme. India also hosted a special negotiating round for Indo-Pacific Economic Framework for Properity.
Singapore Payments – The Monetary Authority of Singapore (MAS) and the Reserve Bank of India (RBI) recently launched the linkage between Singapore’s PayNow and India’s Unified Payments Interface (UPI). This will enable customers of participating financial institutions in Singapore and India to send and receive funds between bank accounts or e-wallets across the two countries in real-time. They can do this using just the mobile phone number, UPI identity, or Virtual Payment Address (VPA). The linkage provides customers with a safe, simple, and cost-effective way to make cross-border fund transfers. The launch was officiated by Prime Minister of Singapore, Lee Hsien Loong, and Prime Minister of India, Narendra Modi. MAS Managing Director Ravi Menon and RBI Governor Shaktikanta Das executed live cross-border fund transfers to each other from their respective locations in Singapore and India. The PayNow-UPI linkage is the world’s first real-time payment systems linkage to use a scalable cloud-based infrastructure which can accommodate future increases in the volume of remittance traffic. It is also the first linkage to feature a non-bank financial institution as a participant. The service will be made available to Singapore customers of DBS Bank and Liquid Group under a phased approach, where these institutions will progressively increase the number of eligible user groups and transaction limits from the launch till end-March 2023. Indian customers of all participating Indian banks will be able to receive funds through the service from the onset. Sending of funds is limited to customers of four Indian banks at the time of launch, with this scope to be gradually expanded.
Highest Foreign Inward Remittance – During 2021-22, India received foreign inward remittances of $89,127 million which was the highest ever inward remittances received in a single year. This was stated by Union Minister of State for Finance Shri Pankaj Chaudhary in a written reply to a question in Rajya Sabha.
Union Finance Budget – As mentioned in the previous update by Asia Law Portal, the Finance Minister, Nirmala Sitharaman, presented the Union Budget 2023-2024. The following are some of the announcements which is likely to impact foreign investors and their investments in India.
- GIFT City: To enhance business activities in GIFT IFSC, the following measures will be taken
- Delegating powers under the Special Economic Zones (SEZ) Act, 2005 to International Financial Services Centres Authority (IFSCA) to avoid dual regulation,
- Setting up a single window IT system for registration and approval from IFSCA, SEZ authorities, Goods and Services Tax Network (GSTN), Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority of India (IRDAI)
- Permitting acquisition financing by IFSC Banking Units of foreign banks,
- Establishing a subsidiary of EXIM Bank for trade re-financing,
- Amending IFSCA Act for statutory provisions for arbitration, ancillary services, and avoiding dual regulation under SEZ Act, and
- Recognizing offshore derivative instruments as valid contracts.
It may be recalled that GIFT City was also covered in the previous budget and announcements related to it were covered by Asia Law Portal.
- Investment: It is proposed to extend taxability of the consideration (share application money/ share premium) for shares exceeding the face value of such shares to all investors including non-residents.
- Start-up: India is now the third largest ecosystem for start-ups globally, and ranks second in innovation quality among middle-income countries. The date of incorporation for income tax benefits to start-ups has been extended from 31.03.23 to 31.3.24. The benefit of carrying forward of losses on change of shareholding of start-ups has been increased from seven years of incorporation to ten years. Certain start-ups were eligible for some tax benefit if they were incorporated before 1st April, 2023 – this has now been extended by one year to before 1st April, 2024.
Ease of Doing Business – The Government has recently circulated a draft scheme for consultation with stakeholders. The scheme is aimed at bringing quick finality to certain contractual disputes in which Government of India or its agencies is a litigant. The draft scheme has been framed in accordance with the announcement made by the Union Finance Minister in the Union Budget 2023-24 ‘To settle contractual disputes of government and government undertakings, wherein arbitral award is under challenge in a court, a voluntary settlement scheme with standardized terms will be introduced. This will be done by offering graded settlement terms depending on pendency level of the dispute.’ The Government has appreciated that special efforts are required to clear the backlog of old disputes and litigation. Such cases are not only holding back fresh investment but are also reducing the ease of doing business with the Government. Therefore, after due study of the past cases, the government intends to bring one time settlement scheme called“Vivad se Vishwas II (Contractual Disputes)” to effectively settle pending disputes.
Indo-Pacific Economic Framework for Prosperity – India hosted the special negotiating round for the Indo-Pacific Economic Framework for Prosperity (IPEF) in New Delhi, India, from February 8-11, 2023. The round covered IPEF Pillars II (Supply Chains), III (Clean Economy), and IV (Fair Economy). Approximately 300 officials from India, the United States, Australia, Brunei, Fiji, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam participated in the deliberations. Building on the discussions that took place during the previous round in Brisbane, Australia, in December 2022, in-depth text-based discussions of the three pillars were held in New Delhi. The IPEF Partners engaged in a productive exchange of ideas and feedback and agreed to continue working intensively in the period ahead in order to make further progress in each of the three pillars. The IPEF Partners reaffirmed their commitments to continuing collaboration to expeditiously conclude agreements that include concrete benefits to enhance a shared vision for economic competitiveness and prosperity in their respective economies.
