The five year term of the current Indian Government led by Prime Minister Narendra Modi is coming to an end as the electoral process commenced in the world’s largest democracy. The elections are being carried out phase-wise across the country and results are scheduled to be declared on May 23, 2019.
The slowdown in the global economy appears to be impacting India, marginally though, with ADB, IMF and RBI reducing India’s economic growth forecast. There seems to be conflicts within Government ministries with respect to the proposed data privacy law. The India-US pact to check tax evasion has been notified now.
ADB Cuts India Growth Forecast.
In its Asian Development Outlook (ADO) 2019, ADB projects gross domestic product (GDP) growth in India to rise to 7.2% in fiscal year (FY) 2019 and reach 7.3% in FY2020, reversing two years of declining growth as reforms to improve the business and investment climate take effect. India’s fiscal year starts on 1 April and ends 31 March of the next calendar year. ADO is ADB’s annual flagship economic publication.
“India will remain one of the fastest-growing major economies in the world this year given strong household spending and corporate fundamentals,” said ADB Chief Economist Mr. Yasuyuki Sawada. “India has a golden opportunity to cement recent economic gains by becoming more integrated in global value chains. The country’s young workforce, an improving business climate, and a renewed focus on export expansion all support this.”
RBI reduces GDP Growth Forecast.
The Reserve Bank of India (RBI) earlier this month lowered India’s GDP growth forecast for the current fiscal to 7.2 per cent from the earlier estimate of 7.4 per cent amid probability of El Nino effects on monsoon rains and uncertain global economic outlook.
In its February monetary policy statement, the central bank had projected the GDP growth for 2019-20 at 7.4 per cent — 7.2-7.4 per cent in first half of the fiscal (April-September). Since then, there are some signs of domestic investment activity weakening as reflected in a slowdown in production and imports of capital goods, it said after the three-day meeting of the Monetary Policy Committee (MPC).
The MPC, headed by RBI Governor Shaktikanta Das, noted that the output gap remains negative and the domestic economy is facing headwinds, especially on the global front. The need is to strengthen domestic growth impulses by spurring private investment which has remained sluggish, the RBI added.
IMF Lowers India Growth Forecast.
The International Monetary Fund (IMF) recently released its World Economic Outlook April 2019 report titled ‘Growth Slowdown, Precarious Recovery’. The report had India’s economic growth projections of 7.3% and 7.5% for 2019 & 2020 respective.
This was lower than the World Economic Outlook for January 2019, as covered by Asia Law Portal. The report mentioned ‘In India, continued implementation of structural and financial sector reforms with efforts to reduce public debt remain essential to secure the economy’s growth prospects.
In the near term, continued fiscal consolidation is needed to bring down India’s elevated public debt. This should be supported by strengthening goods and services tax compliance and further reducing subsidies. Important steps have been taken to strengthen financial sector balance sheets, including through accelerated resolution of nonperforming assets under a simplified bankruptcy framework.
These efforts should be reinforced by enhancing governance of public sector banks. Reforms to hiring and dismissal regulations would help incentivize job creation and absorb the country’s large demographic dividend; efforts should also be enhanced on land reform to facilitate and expedite infrastructure development.’
Conflict with proposed data privacy law.
Asia Law Portal had reported release of the draft national e-commerce policy by the Government in February 2019 to provide for consideration and discussion, a policy framework that will enable the country to benefit from rapid digitization of the domestic, as well as global economy.
This e-commerce policy has created a conflict with the proposed Personal Data Protection Bill. The draft ecommerce policy’s section on ‘data’ is interfering with the proposed Personal Data Protection (PDP) Bill 2018, officials at IT ministry say, adding that other ministries should have waited for its bill to become a law before forming sectoral policies around data privacy.
Ministry of Electronics and IT (MeitY) has already received representations from top technology firms such as Google and IBM, pointing out overlaps and contradictions between the draft ecommerce policy with the PDP Bill, which is scheduled to be tabled in Parliament later this year.
India-US pact to check tax evasion.
India has notified the inter-governmental agreement with the US for exchange of country-by-country (CbC) reports on multinational companies regarding income allocation and taxes paid in order to help check cross-border tax evasion. The agreement, which was signed by Central Board of Direct Taxes Chairman P C Mody and US ambassador to India Kenneth Juster in March, was notified by the revenue department on April 25.
This agreement for exchange of CbC reports, along with the Bilateral Competent Authority Arrangement, will enable both the countries to automatically exchange CbC reports filed by the ultimate parent entities of multinational enterprises (MNEs) in the respective jurisdictions, pertaining to the years commencing on or after January 1, 2016.