There were mixed forecasts for India’s growth in reports issued by Fitch and Moody’s. While one showed a continuous decline the other one appeared stable. There is a proposal to liberalise foreign direct investment in foreign portfolio investments. India and South Korea came together to create a startup hub.

Fitch Cuts India Growth Forecast.

Fitch Ratings recently released its Global Economic Outlook – March 2019 report, which had a section on India. The report stated India’s GDP growth softened for the second consecutive quarter in 4Q18, with the economy growing by 6.6% yoy after increases of 7% and 8% in 3Q18 and 2Q18, respectively. The slowdown has been driven by cooling activity growth in the manufacturing sector and, to a lesser extent, agriculture.

Weaker momentum has been mainly domestically driven. First, credit availability has tightened up in areas heavily dependent on non-bank financial company (NBFC) credit, such as autos and two-wheelers, where sales have dropped. Second, food inflation has been muted and fell into negative territory late last year, weighing on farmers’ incomes.

The report further stated that while Fitch has cut its growth forecasts for the next fiscal year (FY20, ending in March 2020) on weaker-than-expected momentum, it projected that Indian GDP growth to hold up reasonably well, at 6.8%, followed by 7.1% in FY21. This March report lowers India’s growth rate forecast by Fitch in its report in December 2018, as reported by Asia Law Portal.

Moody’s Retains Growth Forecast.

Indian economy is expected to grow at 7.3 per cent in calendar year 2019 and 2020, and the government spending announced ahead of elections this year which will support near-term growth, Moody’s recently said in its quarterly Global Macro Outlook for 2019 and 2020.

The country is less exposed to a slowdown in global manufacturing trade growth than other major Asian economies and emerging markets and is poised to grow at a relatively stable pace in the two years. Moody’s growth estimates is based on calendar year. India, however, measures its economic growth on the basis of fiscal year (April-March).

In 2018-19 fiscal, ending March 2019, Indian economy is estimated to have grown 7 per cent, lower than 7.2 per cent in 2017-18. Moody’s said the announcement in India’s interim budget 2019-20 on direct cash transfer programme for farmers and the middle-class tax relief measures will contribute a fiscal stimulus of about 0.45 per cent of GDP. This recent growth forecast retains the earlier one in November 2018, as reported by Asia Law Portal.

Estimated Liberalisation of FPI.

A Securities and Exchange Board of India (Sebi) panel headed by former Reserve Bank of India deputy governor HR Khan is set to recommend liberalisation of investment caps for foreign portfolio investors (FPI). At present, foreigners can own up to 24 per cent in a listed Indian company with any further increase requiring approval from the firm’s board.

The panel is considering to propose removal of the 24 per cent restriction and making the different sectoral caps under foreign direct investment (FDI) rules as the new ceiling. This will give companies room to raise money from foreign investors while improving India’s weightage on the MSCI Index.

The committee is expected to submit its recommendations to Sebi in April. The panel is also likely to propose harmonisation of rules for FPI and FDI when it comes to usage of funds. Existing rules don’t allow investors to use FPI money for FDI investments. Every time an investor makes an FDI investment, he has to get money from abroad.

Several big investors have asked regulators to allow them to use existing FPI money for FDI investments. The panel will also propose a fast track registration process for certain types of foreign investors. There would be reduced documentation for FPIs that are already regulated and those that come from FATF jurisdictions.

FPIs coming in through global custodian banks will also be given easier access. The panel is likely to propose several changes to the FPI regulations. It would also propose uniform know your customer (KYC) guidelines for FPI, FDI and FVCI (foreign venture capital investors).

India Korea Startup Hub.

India Korea Business Symposium was hosted by Invest India and Korean Chamber of Commerce and Industry (KCCI) in Seoul reently. The Symposium was organized to felicitate the Korean business community on their success in India and to present more opportunities for Korean business in India.

Prime Minister of India, Narendra Modi, addressed the business gathering on the way ahead to further strengthen bilateral ties between India and the Republic of Korea. Over 400 Korean business leaders were present on this occasion. To further strengthen the bilateral ties between India and Republic of Korea, Prime Minister, Narendra Modi, launched the India-Korea Startup Hub and Startup Grand Challenge.

The Hub is hosted on the Startup India digital platform, the world’s largest virtual incubator with over 300,000 registered startups and aspiring entrepreneurs. The Hub will enable access to resources for market entry and innovation exchange between India and the world.

The Startup Grand Challenge, on the India-Korea Startup Hub, will channelize the entrepreneurial capacity between Indian and Korean Startups to work together and build solutions for the challenges facing the world.

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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