Archive for April, 2015

PM Modi’s Jan Dhan model: Other countries like US, Russia may soon follow

April 27, 2015

The Pradhan Mantri Jan Dhan Yojana programme, the drive launched by Prime Minister Narendra Modi to ensure at least one member in every household in the country had a bank account, could soon emerge as a worldwide template for achieving rapid financial inclusion.

The Financial Action Task Force, a global anti-terror financing agency, has given initial approval to a paper by India on how it achieved the task in a few months while adhering to know your customer (KYC) norms. The study will now be fleshed out further. The agency, which advocates stringent KYC standards in order to stamp out terror financing, is keen to see whether the Indian model can be emulated by other countries. The US, Russia, Spain and the Netherlands have extended support to the paper.

“We have informally given a presentation on the contours of KYC followed under the PMJDY (Pradhan Mantri Jan Dhan Yojana) programme,” a government official told ET. “A proposal has now been approved to study as to how India did it in form of a best practices paper.”

PM Modi's Jan Dhan model: Other countries like US, Russia may soon follow

A working group led by India and including officials from other countries as members will be set up to prepare the template, the official said. FATF prescribes standards for countries to develop policies to combat money laundering and terror financing. India became a member in 2010 and is obliged to ensure that its domestic regime is in compliance with these norms with strict KYC rules for all financial transactions as a key base case requirement.
All financial sector regulators in the country have issued KYC guidelines and rigorous identification norms are in place for opening bank accounts, trading shares, buying insurance or investing in mutual funds.
However, with a large part of the population outside the formal financial sector, India launched a major drive underpinned by more basic KYC requirements to ensure every household had at least one bank account.
The Reserve Bank of India allowed the opening of small accounts, relaxing some of the norms and restricting the features available to customers. Those who don’t have any of the officially recognized support documents can open such small accounts on the basis of a self-attested photograph by signing or affixing their thumbprints in the presence of an official of the bank.
These small accounts cannot have more than Rs 50,000 in them at any point and don’t allow more than Rs 10,000 to be withdrawn in one go in order to prevent misuse. Many countries face the similar challenge of bringing their people into the formal financial sector’s fold.
For example, even the US is said to have an astonishing 30% of its population uncovered. Nations want to repair this situation without compromising on KYC. India’s minimal KYC route thus seems a plausible option.
FATF has already undertaken a sub-project on derisking and KYC norms adopted under the Jan Dhan Yojana as part of this bigger project. Queen Maxima of the Netherlands, who is UN ambassador for financial inclusion, has also thrown her weight behind the model adopted by India. India’s banks opened a record 12.56 crore accounts in a few months after Modi launched the programme in August last year.
Source: Economic Times
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India’s economic growth likely to outpace China in 2016 too, predict IMF and World Bank

April 27, 2015

India’s economic growth clip this year and next will be better than previously assumed, overtaking China in 2015 to become the world’s fastest growing major economy and widening the gap further in 2016, the International Monetary Fund (IMF) and the World Bank have said in separate forecasts.

Both IMF and World Bank see India’s growth rising to 7.5 per cent in 2015 from 7.2 per cent in the preceding year, but have different assessments for 2016. IMF, which last January forecast 2015 growth at 6.3 per cent and 2016 growth at 6.5 per cent, has penciled in 7.5 per cent growth next year while World Bank has the 2016 figure higher at 7.9 per cent. The bank had last January pegged the growth rates at 6.4 per cent this year and 7 per cent in 2016. The Centre had budgeted 8.1-8.5 per cent GDP growth in the year to end-March 2016.

The numbers will be music to the government’s ears, especially because the Indian economy, while being spoken of in the same breath as China in terms of economic potential, has never managed to surpass its giant neighbour’s growth rate. Even with a higher growth rate, India’s $2-trillion GDP will remain much smaller compared with China’s $10-trillion economy.

These estimates were released on Tuesday ahead of the IMF-World Bank spring meetings in Washington. Finance Minister Arun Jaitley is leading the Indian delegation, which includes RBI Governor Raghuram Rajan, to the meetings.

The latest numbers, which are a significant upgrade on earlier assessments, take into account the much-debated and questioned new national accounts numbers of the Central Statistics Office (CSO) as also reforms by the Narendra Modi government.

IMF has pegged China’s growth at 6.8 per cent in 2015 and 6.3 per cent next year while the world economy is forecast to show no material improvement, growing only 3.5 per cent compared with 3.4 per cent in 2014. World Bank sees China growing at 7 per cent in the next two years.

“India’s growth is expected to strengthen from 7.2 per cent last year to 7.5 per cent this year and next. Growth will benefit from recent policy reforms, a consequent pickup in investment, and lower oil prices,” IMF’s World Economic Outlook said.

The strong growth in India has already made South Asia the fastestgrowing region in the world, World Bank noted.

India’s expected growth acceleration, World Bank noted in its twiceyearly South Asia Economic Focus report, is being “driven by business-oriented reforms and improved investor sentiment” and that growth could reach 8 per cent in fiscal year 2017-18 on the back of significant acceleration in investment growth.

“(India) is attempting to shift from consumption- to investmentled growth at a time when China is undergoing the opposite transition,” it noted.

SOFTER OIL GROWTH DRIVER

World Bank said South Asia was the greatest global beneficiary of cheap oil as all countries were net importers.

“Together with favourable food prices, cheaper oil has contributed to a rapid deceleration of inflation. South Asia went from having the highest inflation rate among developing regions to having the lowest in barely one year,” it noted, while urging countries to take greater advantage of cheap oil to reform energy pricing.

IMF said in many economies softer oil will help reduce inflation and lower external vulnerability and open room for structural reforms. IMF sees crude prices on average nearly 40 per cent lower on a year ago in 2015, rising 12 per cent in 2016. “Lower oil prices will raise real disposable incomes, particularly among poorer households, and help drive down inflation,” IMF said for India, as it called upon countries to press ahead with subsidy reforms.

“On the fiscal policy front, and following the lead of India, Indonesia, and Malaysia, countries should seize the opportunity provided by the current low fuel and food prices to further reform or phase out subsidies, which tend to be poorly targeted,” IMF said.

LOWER EXTERNAL VULNERABILITIES

IMF says India’s inflation is expected to remain close to target in 2015. It sees consumer price inflation at 6 per cent in FY15, declining to 5.7 per cent in the following year. The latest data show consumer price inflation at 5.1 per cent in March. RBI has a 6 per cent inflation target by January 2016.

IMF has also forecast a stable current account deficit, pegged at 1.3 per cent in FY15 and 1.6 per cent in FY16. World Bank, on its part, pegged the current account deficit at well below 2 per cent in the medium term and noted that India “has a resilient external position” less than two years after the rupee depreciation episode.

Source: Economic Times

India’s technology sector saw highest ever PE deals in 2014

April 27, 2015

More than 400 deals worth Rs 72,910 crore were announced in the sector in the past year, according to Grant Thornton-IVCA Technology Dealtracker.

India’s technology sector saw the highest ever deal activity in 2014, driven by private-equity investments in the ecommerce sector. More than 400 deals worth $11.5 billion (Rs 72,910 crore) were announced in the sector in the past year, according to Grant Thornton-IVCA Technology Dealtracker.

“The trend has continued into 2015 also, with large IT and BPO players looking at cross-border acquisitions to consolidate service offerings and expand geographic coverage,” it said in a news release.

Ecommerce accounted for three quarters of the total value of deals in the technology sector, up from 30% two years earlier. “While all sub segments within ecommerce have garnered investor interest in terms of number of deals, e-tailers, such as Flipkart and Snapdeal, with their multiple products and brands, have driven big-ticker investments constituting 68% of the total deal value in 2014,” it said.

“India, from being merely a technology adapter or importer, is now becoming a creator for technology-enabled disruptive solutions. There is a clear desire and confidence that Indians can create unique solutions for the local market and also compete actively in the global market,” said Harish HV, partner at Grant Thornton India LLP.

“The presence of a complete lifecycle of investors from angel, to seed to VC to PE to public has no doubt contributed to this trend and we can safely say that the ecosystem for a startup is in place and that combined with entrepreneurship has resulted in an explosive growth of startups and deal activity,” he said.

Despite some big-ticket eye-popping deals, around 80% of private-equity investments were of less than $10 million. “With a stabilising capital market, stable government and hopes of new reforms, we expect heightened interest from global investors in the Indian economy in the coming year,” said Arvind Mathur, president of the Indian Private Equity & Venture Capital Association.

Source: ETTelecom.com

India’s inevitable rise to the top

April 26, 2015

India’s meteoric rise to global prominence is inevitable. Perhaps, US President Barack Obama, writing in Time Magazine on April 16, puts India’s and Prime MinisterModi’s rise to prominence best: “Today, he’s the leader of the world’s largest democracy, and his life story – from poverty to prime minister – reflects the dynamism and potential of India’s rise.”

True enough, both Modi’s and India’s rise to prominence on the global scene has been remarkable. In less than a year since becoming prime minister in May 2014, Modi has puton the path to becoming a global powerhouse. And Modi has made it to Time’s list of the Top 100 Most Influential People.

Christine Lagarde, the managing director of the International Monetary Fund, in an address at Lady Shri Ram College in New Delhi on March 16, highlighted India’s rise, saying: “Just as many countries around the world are grappling with low growth, India has been marching in the opposite direction. This year already, India’s growth rate is expected to exceed that of China, and by 2030, it is will overtake China as the most populous country in the world.”

In fact, the IMF has upgraded India’s growth forecast twice in the past year, most recently in April, from 7.2 percent in 2014 to 7.5 percent in calendar year 2015. The global watchdog said growth will come from policy reforms, a consequent pickup in investment and lower oil prices. The government, on the other hand, believes that GDP growth will accelerate by eight percent to 8.5 percent in fiscal 2015-16 that began on April 1.

In fact, some analysts are forecasting double-digit growth rates in the near future, fuelled by government reforms which are proving to be a huge driver among foreign investors who are pumping record levels of money into India.

Last year, foreign private and institutional investments into India reached record levels, with a dramatic increase expected in 2015. Investors from several major developed countries, including the US, China, Japan, France, Germany and Canada have so far committed massive investments in India, largely due to Modi’s influence.

During his recent visit to Canada, the first by an Indian prime minister since 1973, the two countries completed memoranda of understanding in a range of areas, including civil aviation, rail regulation, education and skills development, space cooperation, and projects focussed on maternal, newborn and child health and social security.

Several commercial agreements between Canadian and Indian companies, valued at some $1.6 billion, were also announced in sectors such as aerospace and defence, education, energy, mining, infrastructure, sustainable technologies, and information and communications technology.

One of the more important commercial agreements involves the Saskatchewan-based Cameco, which will supply India with over seven million pounds of uranium over the next five years as part of the Canada-India Nuclear Cooperation Agreement. Modi had earlier signed agreements with France to build nuclear reactors, aimed at fulfilling his plans to make India energy sufficient.

As India takes off, it represents more than an exciting investment opportunity for Canadian investors. Prime Minister Stephen Harper sees 1.2 million Indian voters in Canada who love Modi, which could be a big boost for him in the next elections. Incidentally, Harper was actively involved in cultural events in Toronto and Vancouver held in honour of Modi – which were attended by “sellout” crowds of Indo-Canadians.

Modi’s visit to Canada will also increase awareness among investors about the opportunities available in India. While India is probably the most over-weighted country among foreign institutional investors, Canadians are now beginning to warm up to investing in the country. Last year, the Excel India Fund was the best performing mutual in Canada out of more than 4,000 such funds, according to Morningstar Canada. This indicates that investors need to place greater credence in India as an investment opportunity.

India has become a priority in Canada’s Global Markets Action Plan, which seeks to increase the number of Canadian companies exporting abroad. During Modi’s visit, Harper stated that “it is exciting to see the commercial deals being signed between Canadian and Indian firms” that “will generate jobs and economic growth in both countries”.

He also indicated that he and Modi are “busy working to advance bilateral agreements that will further increase two-way trade and investment flows” aimed at leveraging the enormous untapped trade potential between the two countries.

Evidently, the relationship between Canada and India will only grow stronger as India takes off. Modi recognizes that the government cannot develop India on its own and is getting the private sector more involved. He has also relaxed foreign institutional and foreign direct investment restrictions and opened the doors to foreign investors, which will drive the equity markets higher to the benefit of investors.

For now, India can only keep rising, benefitting Canadian investors.

Source: Business Standard

Govt to push for foreign funds in education sector

April 26, 2015
The Department of Industrial Policy and Promotion (DIPP) has urged the HRD ministry to open an investment cell to attract foreign investments in the education sector.

This comes at a time when the Foreign Education Providers Bill that could have resulted in setting up of campuses of foreign universities remains shelved.

DIPP secretary has asked departments of school education and higher education to set up their own investment cells. The proposed cell will provide necessary information on a vast range of subjects, such as policies of the ministries, and state governments, various incentive schemes and opportunities available to make it convenient for investors to take decisions.

On the face of it, DIPP’s enthusiasm about investment in education seems slightly misplaced. One, as a policy decision, education in India is considered ‘not-for-profit’. In fact, one of the components of the proposed new education policy currently being discussed from panchayat to state level is the issue of profit in education. HRD ministry wants the issue of profit in education to be settled before the new education policy is finalized. “Successive governments have played safe on profit in education. While the private sector investment in higher education has increased with clear profit motive, the government is still holding on to the Supreme Court order that said education is not for profit. Clarity is needed for the idea of investment cell to work,” a source said.

Another hitch to DIPP’s directive could be that BJP in opposition had opposed UPA’s Foreign Education Providers Bill. The new government has shown no interest in pursuing it so far. In the school sector, the previous government’s decision to set up 2500 model schools in Public-Private Partnership has moved at snail’s pace. The idea germinated during UPA-I and is yet to fructify. “Model schools in PPP mode have faced bottlenecks because of the lack of clarity on profit from education,” one source said.

Source: Times of India

India to host first-ever Global Exhibition on Services

April 26, 2015

Expo to showcase IT, telecom, healthcare, logistics; will also have 5,000 structured buyer-seller meetings

About 60 countries will participate in the first where host India will project itself as a leading service exporter. Prime Minister will inaugurate the exhibition on Thursday. “The IT and ITeS services has grown in leaps and bounds. But there are other areas that have to leverage their strength in trade in services. We are looking at nine to 10 other sectors that have shown tremendous potential,” Minister of State (Independent Charge) for Commerce and Industry said on Tuesday. Sitharaman also said the government plans to organise this exhibition annually in February.

During the two-day event, India will be showcasing its potential in sectors such as IT and telecoms, tourism, healthcare, logistics, education, research and development, space and professional services. It will also have over 5,000 structured buyer-seller meetings.

According to commerce secretary Rajeev Kher, apart from foreign participation, a number of states are also participating in the exhibiton, showcasing there area of strength.

As many as 39 countries, including US, UK, South Korea, UAE, Hong Kong, Germany, Malaysia and Thailand, are going to put up stalls exhibiting their expertise in various services. The states that are participating are Assam, Bihar, Goa, Gujarat, Haryana, Jammu and Kashmir, Punjab, Rajasthan and Odisha.

India has the second fastest growing services sector in the world after China. The growth of services sector has been higher than that of the country’s overall GDP during 2000-2001 to 2013-2014.

The sector contributes 57 per cent to the country’s GDP. India is also a leading exporter of services with a CAGR of 20.2 per cent followed by China at 16.6 per cent.

India had been also pushing for greater access in the services market under the of talks at the World Trade Organization (WTO). However, this has not seen much headway due to lack of interest on the part of the developed countries.

Ironically, India is also not part of the Trade in Services Agreement (TiSA), which is currently being negotiated among 23 countries outside the purview of the WTO. US and the European Union are also part of TISA, the talks for which was launched in 2012. Together, these countries account for 70 per cent of world trade in services. Once concluded, it will open the floodgates of services export from across all sectors such as a banking, telecom and construction among others.

Source: Business Standard

For travel industry experts, Modi is a ‘breath of fresh air’

April 25, 2015

At a time when the global tourism industry is grappling with challenges of political instability, terrorism and disruptions in technology, India and Narendra Modi have emerged as the growth story with an industry expert describing the prime minister as a “breath of fresh air”.

“India is a good news story. India will overtake China in growth for the first time in 16 years and PM Modi is a force to be reckoned with,” Richard Fenning, CEO of global risk consultancy firm Control Risks said at the World Travel and Tourism Council Global Summit in Madrid.

Describing Modi as “canny and smart”, Fenning said after the stagnation India suffered for the last few years, he was like a “breath of fresh air”. The only concern, he said, was the burden of expectations on Modi, even recalling the “travel ban” on the PM by Europe and the US.

“There was previously a travel ban on him in Europe and the United States but this year, he had President Barack Obama sitting next to him,” Fenning said.

Marriott International chief global communications and public affairs officer Kathleen Mathews lauded India’s new online visa scheme as “brilliant” for the country’s economy.

The enthusiasm was reflected in the WTTC forecast which estimated that India will grow by 7.5% in 2015, fueled by visa reforms. In 2014, the tourism industry contributed Rs 7,642 billion and 36.7 million jobs to the Indian economy.

India ranks 11th in the world in total contribution of travel and tourism to GDP while China ranks second. Interestingly, China grew by CNY 5,810.7 billion (9.4% of GDP) in 2014, and is forecast to rise by 7.5% in 2015. The travel industry’s contribution to global GDP is at a sluggish 3.7%, making India and China the heroes of the growth story.

Recent policy changes like the electronic visa scheme and assurances that investor interest will be a priority for the government may have been responsible for this change in outlook for India.

Underlining the impact of “worldwide disruption”, WTTC president and CEO David Scowsill recalled recent aviation tragedies like the two Malaysian aircraft, Germanwings and Air Asia disasters. The impact of oil prices, weaker consumer confidence in China, Eurozone effect and the banking crisis all had its impact on countries and the industry, he said at the two-day summit which started on Wednesday.

“The random power of disruption is no stranger to our sector as it thrives on disruption and we have learned to deal with it. The world’s most successful travel and tourism companies are those which will embrace disruption and focus on the benefits of reinvention and innovation,” Scowsill said.

Source: Times of India

US top FII provider to India

April 25, 2015

The United States of America (USA) has toppled Mauritius to become the top jurisdiction from where India is receiving the highest amount of foreign portfolio investment (FPI) into the equity markets.

Mauritius lost out due to the uncertainty over the double tax avoidance treaty (DTAA) between India and Mauritius and constant threat of them being reviewed.

According to data available with the Securities and Exchange Board India (Sebi), total investment made by fund managers originating from USA accounted for 32.47 per cent of the total portfolio investment in the country. “The US tax laws have become tighter and their disclosure requirements have been strengthened. This is the reason why many fund managers are now preferring to invest in the Indian market directly from the US instead of coming through the Mauritius route,” said U.R. Bhat, managing director, Dalton Capital Advisors. According to him, a lot of exchange traded funds (ETF) and long only funds based out of the US are investing heavily in the Indian market.

“While the fund’s origin is in US, these are typically international finds with their investors coming from different parts of the world,” he added.

“No one wants to be on the wrong side of the government. Every now and then, there were rumours saying that the double tax avoidance treaty (DTAA) between India and Mauritius would be reviewed. This has caused lot of uncertainty among the global investors wanting to invest through the Mauritius route,” said Ambareesh Baliga, a veteran market expert.

According to Sebi data, India has received a total portfolio investment to the tune of Rs 21.32 lakh crore till February, 2015 out of which US-based fund managers have pumped in a record Rs 6.92 lakh crore into domestic equities. This is when compared to Rs 4.75 lakh crores of investment made by Mauritius based fund managers.

Source: The Asian Age

India helping in UN Development Agenda through own targets

April 25, 2015

India is walking the talk in its efforts to contribute to the success of the ambitious post-2015 Development Agenda through the national targets to eradicate poverty and provide access to basic sanitation and electricity to all, the country’s top diplomat at the UN said.

India’s Permanent Representative to the UN Ambassador Asoke Mukerji stressed that India’s diplomatic activity is directly aligned with the country’s primary goal of accelerating national economic development, the main focus of which is the eradication of poverty and generation of employment.

At a seminar at the prestigious International Institute for Strategic Studies on ‘The Multilateral Dimensions of India’s Foreign Policy Since May 2014’, Mukerji noted that the setting of national targets by India in many of the areas covered by the sustainable development goals indicates its seriousness of purpose in walking the talk to contribute to the global success of the post-2015 Development Agenda.

In his address to the UN General Assembly last year, Prime Minister Narendra Modi had mentioned the three sustainable development goals of access to basic sanitation, drinking water and to electricity.

In each of these three areas, India has announced its own national goals, including the ‘Swachh Bharat Abhiyan’ that seeks to reach the targets on basic sanitation and clean water by the 150th birth anniversary of Mahatma Gandhi in October 2019.

Further, India has to generate USD 640 billion to provide for an urban population of over 500 million people, reflecting the urban development infrastructure funding requirements between 2015 and 2031.

In this context, Mukerji stressed that the imperative for the country’s multilateral foreign policy objectives to focus on creating a conducive external environment for its aspirations and needs could not be more emphatic.

For India, the achievement of its national goals would profoundly accelerate the implementation of the post-2015 Development Agenda, given the country’s central role in global poverty eradication agendas.

The acceleration would further lead to a positive effect on the availability of financial and technological resources for the implementation of other international developmental targets.

The Indian envoy described 2015 as a watershed year for India’s multilateral diplomacy since designing the outcomes of different processes of negotiations under the framework of the United Nations will enable India to effectively transform itself, and, in the process, transform the world.

Mukerji pointed out that the five themes identified by the BJP at its recent National Executive Meeting in Bengaluru reflect the new pillars of India’s foreign policy.

The concepts of Samman (dignity and honour), Samriddhi (shared prosperity), Suraksha (regional and global security), Sanskriti (cultural) and Sabhyata (civilizational) linkages find resonance in the Charter and working of the United Nations, he said.
As the international community joins forces to put in place an ambitious post-2015 Development Agenda, the Indian envoy noted that the broad areas for India’s engagement will be the urgent need to make the multilateral system more effective and responsive for maintaining international peace and security and the renewal of the values underlying the UN Charter to sustain an interconnected multilateral system.

On the issue of international peace and security, Mukerji pointed out the UN Security Council has failed in its primary responsibility to maintain international peace and security, underscoring the need to reform the organ to make it more capable, representative and accountable.

The Indian envoy noted that given the huge impact that international peace and security has on its own development agenda, India stands ready to assume the responsibilities as a permanent member of a reformed Security Council.

Source: Economic Times

5 reasons why global institutions expect India to clock 7% plus growth rate

April 25, 2015

Lesser external vulnerabilities, plunging crude oil prices and above all Prime Minister Narendra Modi-led government’s reforms drive have led most global institutions such as IMF, Moody’s and World Bank to lift their economic growth outlook for the Indian economy.

India’s economy is widely expected to clock above 7% growth rate, with both IMF and World Bank stressing that the country will surpass China’s GDP rate very soon. “India’s economic growth clip this year and next will be better than previously assumed, overtaking China in 2015 to become the world’s fastest growing major economy and widening the gap further in 2016,” IMF and the World Bank have said in separate forecasts.

Why are global institutions bullish on the India growth story? We take a look at five key reasons that are making various agencies positive on the India growth story.

1) Domestic demand: Moody’s expects India’s economy to grow at 7.5% this year, helped by interest rate cuts that will buttress private sector spending. India’s economy is on a cyclical upswing and forward-looking indicators suggest domestic demand is gathering momentum, Moody’s Analytics has said.

“Low inflation has enabled the Reserve Bank of India to cut interest rates by 50 basis points (half a percentage point), easing pressure on the private sector. Lower rates as well as the government’s infrastructure and disinvestment programmes should provide a boost to domestic-oriented industries,” it said.

2) Reforms: Most global institutions have given thumbs up to Modi government’s reforms drive. “India’s growth is expected to strengthen from 7.2 per cent last year to 7.5 per cent this year and next. Growth will benefit from recent policy reforms, a consequent pickup in investment, and lower oil prices,” IMF’s World Economic Outlook said.

The strong growth in India has already made South Asia the fastest growing region in the world, World Bank noted.

India’s expected growth acceleration, World Bank noted in its twice-yearly South Asia Economic Focus report, is being “driven by business-oriented reforms and improved investor sentiment” and that growth could reach 8 per cent in fiscal year 2017-18 on the back of significant acceleration in investment growth.

“(India) is attempting to shift from consumption-to-investment-led growth at a time when China is undergoing the opposite transition,” it noted.

Moody’s feels that the government has taken encouraging steps to reduce regulations. “The government wants more foreign businesses to invest in India, with a focus on public and private partnerships, it said. “Foreign investment in India has been weak because of significant red tape and taxes. The government is taking encouraging steps to reduce these burdensome regulations to entice more foreign investment,” said Moody’s.

3) Lower crude oil prices: IMF is of the opinion that in many economies softer oil will help reduce inflation and lower external vulnerability and open room for structural reforms. IMF sees crude prices on average nearly 40 per cent lower on a year ago in 2015, rising 12 per cent in 2016. “Lower oil prices will raise real disposable incomes, particularly among poorer households, and help drive down inflation,” IMF said for India, as it called upon countries to press ahead with subsidy reforms.

“On the fiscal policy front, and following the lead of India, Indonesia, and Malaysia, countries should seize the opportunity provided by the current low fuel and food prices to further reform or phase out subsidies, which tend to be poorly targeted,” IMF said.

IMF says India’s inflation is expected to remain close to target in 2015. It sees consumer price inflation at 6 per cent in FY15, declining to 5.7 per cent in the following year.

World Bank said South Asia was the greatest global beneficiary of cheap oil as all countries were net importers.

“Together with favourable food prices, cheaper oil has contributed to a rapid deceleration of inflation. South Asia went from having the highest inflation rate among developing regions to having the lowest in barely one year,” World Bank has noted, while urging countries to take greater advantage of cheap oil to reform energy pricing.

4) Lower external vulnerabilities: IMF has forecast a stable current account deficit, pegged at 1.3 per cent in FY15 and 1.6 per cent in FY16. World Bank, on its part, pegged the current account deficit at well below 2 per cent in the medium term and noted that India “has a resilient external position” less than two years after the rupee depreciation episode.

Meanwhile, Crisil is of the opinion that India is better prepared to handle any shock from a US Federal Reserve hike. Crisil has said, “India’s strengthening economy now makes it better prepared to face the volatility in capital flows arising from interest rates hikes by the US Federal Reserve.”

5) Better among EMs: In the report titled India’s Economy Is On The Mend, But Corporations Remain Wary, Crisil said the growth prospects “appear brighter”, particularly among emerging markets.

The report noted that India is now the fastest growing economy among the BRICS nations (Brazil, Russia, India, China, and South Africa) and is no longer seen as part of the “fragile five” (Turkey, Indonesia, Brazil, and South Africa).

Source: Economic Times