Seeking to check terror funding, India and the United States today discussed ways to combat money laundering and illicit fund flows as the two nations look to boost economic engagement.
Visiting US Treasury Secretary Jacob Lew and Finance MinisterArun Jaitley discussed a range of issues, including taxation and long term investment strategies, at the 5th Indo-US Economic and Financial Partnership meeting here today.
“We discussed the state of the economy. There were several sectors about which we had detailed discussions — the financial sector, the macro-economic situation in both the countries, taxation, banking, problems facing entire world with regard to funding of terrorism,” Jaitley told reporters at a joint press conference after the meeting.
Cooperation at global level is needed to check money laundering, Jaitley said, adding that the issue of India becoming a part of Foreign Account Tax Compliance Act (FATCA), which will lead to automatic exchange of information between the two countries, were discussed at the meeting.
Appreciating the reforms undertaken by the Narendra Modi government, Lew said: “We can significantly advance our interest by promoting economic ties and increasing trade between the two growing markets.”
India and the US are increasing cooperation in a number of important areas such as strengthening of the financial sector, resolving tax disputes, combating illicit finance and facilitating long term investments through deepening of capital markets in India, he added.
“And over the last few years, we have seen significant progress. Trade between our countries has reached nearly USD 100 billion,” Lew said.
Seeking to check terror funding, India and the United States today discussed ways to combat money laundering and illicit fund flows as the two nations look to boost economic engagement.
India is on route to becoming the world’s fastest growing e-commerce market, if currentprojections are anything to go by.
This growth story is being driven by robust investment activity in the sector and the rapid increase in internet users. Internet users in India have gone up from 50 mn in 2007 to 300 million in 2014.
Last year, smart phone shipments doubled to 80 mn from a year-ago period. The prospect of connecting 1.24 billion people to the internet may be an opportunity in itself.
But what analysts are excited about is the prospect of selling products and services to this digital population. Investment banks believe India is on way to becoming one of the largest internet markets in the world, with implications for consumers and investors.
Morgan Stanley expects the size of the Indian internet market to rise from $11 bn in 2013 to $137 bn by 2020 and market capitalisation of these internet businesses could touch $160-200 bn from the $4 bn at present.
Currently, only three internet companies are listed in India but with the pace at which venture capital (VC) firms and private equity (PE) firms are pumping money into India, several internet companies could possibly look at listing in the next couple of years.
India’s internet market was at $11 bn (gross merchandise value) in 2013, of which $11 bn was online travel and e-commerce was $3 bn.
As the market matures and more companies get listed, the market cap of internet companies will expand too.
Analysts at Morgan Stanley believe that India’s internet market can grow to $137 bn by 2020 (a CAGR of 43 per cent) and e-commerce will form the largest part of the internet market at $102 billion.
In relatively more advanced markets like China and the US, top 30 listed internet companies account for 12 per cent and four per cent, respectively, of the total market capitalisation.
Internet commerce tends to account for more than 50 per cent of the market cap among listed internet firms.
Morgan Stanley expects India’s e-commerce market (revenues) to grow from $2.9 bn in 2013 to over $100 bn by 2020, making it the fastest growing e-commerce market in the world.
The basis of this argument is the kind of equity investments made by PE and VC firms in 2014. The total equity investments made in Indian internet companies is $4.5 bn.
The growth in internet businesses will also give a fillip to other related businesses like logistics and payment solutions.
Some good news for Prime Minister Narendra Modi with early revenue figures indicating an uplift in business sentiment. Nine months of the NDA government has seen the highest growth in manpower recruitment and supply services, besides those providing consultancy and engineering knowhow. Airports too have been among the highest contributors to the tax kitty.
During the April-December period of 2014-15, service taxcollection from all services was to the tune of Rs 1.20 lakh crore compared to Rs 1.10 lakh crore last year. Interestingly, the growth in contribution from business support services and manpower recruitment agencies have been highest at 24% and 23% respectively.
With Reserve Bank of India’s sixth bi-monthly monetary policy review slated for Tuesday, bankers and economists have divided opinion if the central bank will reduce policy rate further by 25 bps this week.
It may be noted that last month, the RBI had surprised everyone with an unexpected rate cut after maintaining a hawkish monetary stance for 20 months.
While a section of the industry is hopeful that a further reduction in policy rates is round the corner as inflation remains under control and fiscal situation improving, others feel, it could happen only after Union Budget slated for February, 28.
According to Pranjul Bhandhari, Chief India Economist, HSBC India, while a rate cut was on the table next week, the base case is for the RBI to ease next in March, after just having delivered a surprise cut.
Similarly, Saumya Kanti Ghosh, Chief Economist, SBI in a recent research report said, “We continue to maintain that the first rate cut could happen anytime after the Budget, though the probability of a token cut on February 3 may have increased. We are pencilling in a 75 basis point rate cut in 2015.”
While lowering the policy repo rate to 7.75 per cent from 8 per cent, RBI last month had also said further rate cuts would depend upon inflationary expectations and improvement in the fiscal situation. While the retail inflation slipped to 5 per cent in December, the WPI inflation remained near zero level at 0.1 per cent.
Similarly, concerns over fiscal deficit have eased, with the government last week garnering a record Rs 22,577 crore through disinvestment of 10% stake in Coal India.
On the other hand banks like Oriental Bank of Commerce are hoping for an immediate rate cut. “Most macroeconomic indicators favour a rate cut and he hopes that the RBI would consider a rate cut on February, 3 by 25 bps,” said Animesh Chauhan, chief, OBC.
Though the industry feels the recent 25 bps reduction ‘too little too late,’ expectations of one percentage point reduction in the coming months is gaining momentum.
“With inflation coming down, I believe, all rates such as deposit, lending rates will come down to more credible levels soon. I cannot second guess RBI, as it is their prerogative, but I feel when you have stable, low inflation, the policy rates have to come down,” said Rajan Dhawan, ED, Bank of Baroda.
Wealth accumulated by the richest one percent will exceed that of the other 99 percent in 2016, the Oxfam charity said on Monday, ahead of the annual meeting of the world’s most powerful at Davos, Switzerland.
“The scale of global inequality is quite simply staggering and despite the issues shooting up the global agenda, the gap between the richest and the rest is widening fast,” Oxfam executive director Winnie Byanyima said.
The richest one percent’s share of global wealth increased from 44 percent in 2009 to 48 percent in 2014, the British charity said in a report, adding that it will be more that 50 percent in 2016.
The average wealth per adult in this group is $2.7 million (2.3 million euros), Oxfam said.
Of the remaining 52 percent, almost all – 46 percent – is owned by the rest of the richest fifth of the world’s population, leaving the other 80 percent to share just 5.5 percent with an average wealth of $3,851 (3,330 euros) per adult, the report says.
Byanyima, who is to co-chair at the Davos World Economic Forum taking place Wednesday through Friday, urged leaders to take on “vested interests that stand in the way of a fairer and more prosperous world.”
Oxfam called upon states to tackle tax evasion, improve public services, tax capital rather than labour, and introduce living minimum wages, among other measures, in a bid to ensure a more equitable distribution of wealth.
The 45th World Economic Forum that runs from Wednesday to Saturday will draw a record number of participants this year with more than 300 heads of state and government attending.
Rising inequality will be competing with other global crises including terrorist threats in Europe, the worst post-Cold War stand-off between Russia and the West and renewed fears of financial turmoil.
France’s Francois Hollande, Germany’s Angela Merkel and China’s Li Keqiang will be among world leaders seeking to chart a path away from fundamentalism towards solidarity.
Italian Prime Minister Matteo Renzi and US Secretary of State John Kerry are also expected.
Beyond geopolitical crises, hot-button issues like the Ebola epidemic, the challenges posed by plunging oil prices and the future of technology will also be addressed at the posh Swiss ski resort.
The Government will go for its stake sale in ONGC after finalising a new subsidy sharing formula as it would help in fetching better price in the market.
“The Government is looking at new subsidy sharing formula. As far as ONGC is concerned, they have some issues regarding subsidy sharing formula. Let’s have re-look on the issue. I am sure ONGC will get better price,” Oil Minister, Dharmendra Pradhan said.
However, the Department of Disinvestment will take a call on time of divestment of ONGC, he said after meeting with Finance Minister Arun Jaitley here.
During the meeting, also attended by senior officials, discussions were focused on selling of government stakes in oil companies other than ONGC, a source said.
“Well I am not ruling out ONGC but today’s meeting was on other oil companies. I can tell you all options are open and I am watching the market and getting enough stocks in place, when the market is good I will do,” the source added.
The Cabinet has approved 5 per cent stake sale in ONGC, which could fetch an estimated Rs 11,500 crore to the exchequer. The Government holds 68.94 per cent in ONGC.
Source said the Oil Ministry is reworking the fuel subsidy sharing formula to cut ONGC payout by a quarter through adjustment of statutory oil cess against its share.
The move to lessen the subsidy burden is expected to give a fillip to government’s plan to sell 5 per cent stake in Oil and Natural Gas Corp (ONGC).
Upstream producers like ONGC met nearly half of the revenue loss or under-recoveries that fuel retailers incurred on selling cooking fuel and diesel until recently at government controlled rates.
In 2013-14, ONGC paid a record Rs 56,384 crore subsidy, which this fiscal is likely to come down to around Rs 32,000 crore.
The manufacturing and services sectors in India expanded at a faster pace than those in China in December, an HSBC survey said today.
The HSBC Emerging Markets Index (EMI), a monthly indicator derived from PMI surveys, rose to three-month high of 51.7, from November’s six-month low of 51.2, but still signalled only a modest rate of expansion.
The EMI averaged 51.4 over 2014 as a whole, the lowest for a calendar year since the series began in late-2005.
“Although growth picked up slightly across the world’s main emerging markets on an average, rates of expansion remain subdued,” Markit Chief Economist Chris Williamson said.
Data for the four largest emerging economies portrayed mixed fortunes in December.
China registered growth for the eighth month running, while India’s tentative recovery continued. Brazil saw a decline in activity for the eighth time in nine months, while Russia endured a steepening downturn.
During December, the HSBC composite index for India, that maps both manufacturing and services, stood at 52.9, whereas for China it was 51.4, Brazil (49.2) and Russia (47.2).
An index measure of above 50 indicates expansion.
“Of the four ‘BRIC’ economies, India saw the strongest rate of expansion in December, despite the rate of expansion slipping from November’s five-month peak,” said Williamson, adding that the rate of growth for both India and China slowed from an already “lacklustre pace”.
The outlook for global emerging markets remained muted in December.
The HSBC Emerging Markets Future Output Index, which tracks firms’ expectations for activity in 12 months’ time, picked up from November’s record low on the back of strengthening sentiment in Brazil and India.
Overall inflationary pressures across emerging markets remained subdued, HSBC said, adding that both new orders and employment in emerging markets increased in December.
According to a study conducted by research firm eMarketer, India is all poised to become the second largest market for smartphones anywhere in the world. The year 2016 has been predicted as the year this will happen. It has been said that India will surpass the US to reach this spot.
The report of eMarketer says “India will exceed 200 million smartphone users, topping the US as the world’s second largest smartphone market by 2016″, and goes on to say “Inexpensive smartphones are opening new opportunities for marketing and commerce in emerging markets where many consumers previously had no access to the Internet.”
The report also claims that China will still be the foremost market for smartphones even in 2016 with 624.7 million smartphones. The number of smartphones in India is predicted to be 204.1 million , followed by the US-198.5 million, Russia-65.1 million and Japan-61.2 million.
It is also being predicted that while more than 1/4th of the population of the world will be using smartphones in 2015, this figure will reach 1/3rd in the year 2016, and that smartphone users globally in 2016 will number more than 2 billion.
India remains a consensus favourite investment destination for US companies, largely on the back of a ‘Modi-Rajan-Commodities trinity’, global financial major Citigroup said in a report today.
While India is not totally insulated from the adverse global cues emanating from falling crude prices and depreciation in Russian currency, “it is relatively better-off”, the Citi economists said.
Listing out factors in favour of India, they said in the report that India is a net importer of crude, its macro fundamentals are improving and rising forex reserves are giving a further boost.
In a report today, Citigroup said: “Unsurprisingly, India remains a consensus favourite both as an absolute and relative play due to a trinity of factors — business-friendly Modi government; pro-active RBI Governor Raghuram Rajan and commodity tailwinds.
“Following a strong market performance in 2014, most investors were of the view that the on-going cyclical and structural upturn could result in India continuing to outperform in 2015, albeit at a modest pace.”
However, the report said that despite high expectations, memories of the 2013 taper tantrums have resulted in investors remaining on guard and watching out for potential risks.
NPA issues in the banking sector, standoffs in Parliament denting the reform momentum and limited space on the fiscal side are among the major concerns for investors.
“Many feel that the first full budget of the BJP government in February 2015 will provide useful insights on the path ahead,” the report said.
While estimating that Indian economy is likely to edge back to 7 per cent growth rate and lower inflation, Citigroup noted that “unlike the 2013 taper tantrums, when India had a high current account deficit, elevated inflation and weak growth, India’s fundamentals have improved”.
“However, we re-iterate there is no room for complacency as generalised EM risk aversion could result in reversal in portfolio flows and external debt de-leveraging,” it added.
President Vladimir Putin said on Thursday Russia’s economy would inevitably rebound after the ruble’s dramatic slide this year but offered no remedy to a deepening financial crisis.
Under pressure to show he has a plan to fix the economy, Putin told an end-of-year news conference the actions of the central bank and government had been “adequate” in a crisis he blamed on external factors.
But hinting at internal divisions, he said more measures were needed and the central bank should have halted foreign exchange interventions to support the rouble sooner. Earlier, more decisive action by the central bank, he implied, might have made this week’s big interest rate rise unnecessary.
“If the situation develops unfavorably, we will have to amend our plans. Beyond doubt, we will have to cut some (spending). But a positive turn and emergence from the current situation are inevitable,” Putin said.
“The growth of the global economy will continue and our economy will rebound from the current situation,” he said, sitting at a large desk and looking confident as he spoke to a studio audience and live on television.
He said Russia must diversify its economy to reduce dependence on oil, its major export and a key source of state income, and a recovery could start at some point next year.
But he stuck largely to broad promises rather than going into details and announced no major new proposals. He has said many times during 15 years in power that he will reduce Russia’s reliance on energy exports but has failed to do so.
The rouble slipped as he spoke, moving to around 3 percent weaker on the day. The bank increased its key lending rate by 6.5 percentage points to 17 percent on Tuesday, and has spent more than $80 billion trying to shore up the rouble this year, but to little avail.
HEADS TO ROLL?
Analysts said Putin’s assessment of the government and central bank’s performance was lukewarm and could indicate that heads would roll.
“All this implies pretty big divisions within the administration as to how to react to the crisis and pressure on the rouble,” Timothy Ash, head of emerging market research at Standard Bank in London, said in a note.
A prominent opponent, former Prime Minister Mikhail Kasyanov, said the crisis showed Putin had mismanaged the economy and his problems would increase because prices are expected to surge next year because of the ruble’s weakness.
“Russia is going into decline,” Kasyanov told Reuters in an interview late on Wednesday, suggesting Putin should accept that “he needs an exit strategy” to leave power.
Economy Minister Alexei Ulyukayev said in a newspaper interview the Western sanctions were likely to last “a very long time” and Russia was paying the price for failing to carry out structural reforms, describing events as “the perfect storm”.
But Putin said: “Under the most unfavorable external economic scenario, this situation may go on for about two years. But it may also start improving in the first quarter, in the middle, at the end of the next year.”
Opinion polls show Putin has high popularity ratings since annexing the Crimea peninsula from Ukraine in March, but the ruble’s decline and Russia’s slide toward recession could erode faith in Putin’s ability to provide financial stability.
Asked about Ukraine, where Russia has irked the West by backing separatists fighting government forces in the east, Putin said Moscow wanted to restore political unity and denied any link between the conflict and Russia’s economic problems.
He said he wanted the conflict, in which more than 4,700 people have been killed, resolved by political means. But he criticized NATO over its eastward expansion following the fall of the Berlin Wall and said Kiev had been wrong to use forces against the separatists.