The third wave of Covid 19 pandemic in India abated as quickly as it has engulfed the entire country in a very short span of time. All activities have resumed in the country as the situation improved in the last few weeks. The forecasts by global financial institutions are still showing signs of uncertainly. The Union Finance Budget had some announcements on the international financial services centre. The personal data protection bill appears to be delayed as it missed the budget session. The Government of India has undertaken coordinated efforts to rescue Indians from the war-hit Ukraine.

Moody’s ForecastMoody’s Investors Service recently raised India’s growth forecast to 9.5 per cent for the calendar year 2022 and to 8.4 per cent for the coming fiscal beginning April 1, even as it flagged high oil prices and supply distortions as a drag on growth. Stating that the economic recovery from the first and second Covid wave in 2020 and 2021, respectively has been stronger than expected, Moody’s said Goods and Services Tax (GST) collection, retail activity and Purchasing Managers’ Index (PMI) suggest ‘solid momentum’. ”We have raised our 2022 calendar year growth forecast for India to 9.5 per cent from 7 per cent, and maintained our forecast for 5.5 per cent growth in 2023. This translates into 8.4 per cent and 6.5 per cent in fiscal years 2022-23 and 2023-24, respectively,” Moody’s said in an update to its Global macroeconomic outlook 2022-23. The speed of the recovery from the first lockdown-led contraction in the June quarter of 2020 and subsequently in the June quarter of 2021 during the Delta wave was stronger than expected. In November last year, as reported by Asia Law Portal, Moody’s had forecast India’s economy to expand 7.9 per cent in the 2022-23 fiscal beginning April 1. As per official estimates, Indian economy is estimated to grow at 9.2 per cent in the current fiscal ending March 31.

Fitch UncertaintiesFitch Ratings recently reported that India’s economy is rapidly recovering from the pandemic but uncertainties remain around its medium-term debt trajectory. In its report ‘What Investors Want to Know: Indian Sovereign and Financial Institutions in 2022’, it said financial institutions face an uneven recovery due to lingering asset-quality risks and capital limitations. Fitch projects India’s real GDP growth at a robust 8.4 per cent in 2021-22 and 10.3 per cent in next fiscal year, as the economy rebounds from its sharp pandemic-induced slowdown in 2020-21. “Nonetheless, the medium-term debt trajectory remains core to our sovereign assessment and fiscal consolidation may be slower than we previously expected based on the February 1, 2022 budget,” Fitch said.

Union Budget & GIFT City – The Union Minister of Finance, Nirmala Sitharaman presented the 2022-2-2023 Union Budget in the Parliament and announced the following with respect to IFSC in GIFT City:

  • World-class foreign universities and institutions will be allowed in the GIFT City to offer courses in financial management, fintech, science, technology, engineering and mathematics free from domestic regulations, except those by IFSCA to facilitate availability of high-end human resources for financial services and technology.
  • An International Arbitration Centre will be set up in the GIFT City for timely settlement of disputes under international jurisprudence.
  • Services for global capital for sustainable & climate finance in the country will be facilitated in the GIFT City.
  • Tax incentives – Taking forward efforts to further promote the IFSC, it is proposed to provide that income of a non-resident from offshore derivative instruments, or over the counter derivatives issued by an offshore banking unit, income from royalty and interest on account of lease of ship and income received from portfolio management services in IFSC shall be exempt from tax, subject to specified conditions.

Gujarat International Finance Tec-City (GIFT City) is an integrated development on 886 acres of land with 62 mn sq. ft. of built up area which includes office spaces, residential apartments, schools, hospital, hotels, clubs, retail and various recreational facilities. Government of India operationalized International Financial Services Centre (IFSC) at GIFT Multi Services SEZ in April 2015. In the past, the Government has promoted IFSC with various incentives including tax benefits. As reported by Asia Law Portal in February 2021, the previous Union Budget (2021) had provided certain tax holidays. Setting up of an international arbitration centre in GIFT City could be an outcome of the 2017 proposal to make India an arbitration hub, which was reported by Asia Law Portal.

Personal Data Protection BillExtensive deliberations are on over various aspects and suggestions related to the draft data protection bill, and the government hopes to resolve certain complex issues soon and get Parliament’s approval on the legislation latest by the monsoon session, according to Union Information Technology Minister Ashwini Vaishnaw. He said there is no plan to scrap the current draft data protection legislation that has undergone detailed consultation and parliamentary panel deliberations. To a specific question on the issues that need to be ironed out, Vaishnaw said some of the stakeholders had expressed concerns over implementation structure, in the context of the fast-changing digital landscape. Some tweaking, on the draft legislation, will be needed to make sure that the implementation is smooth, he informed.

Posted by Sourish Mohan Mitra

Sourish Mohan Mitra is an India-qualified lawyer from Symbiosis Law School, Pune and currently working as an in-house counsel with a global research firm in Delhi, India; views expressed are personal; he can be reached at sourish24x7@gmail.com; Twitter: @sourish247

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