BUSINESS & FINANCE
The World Bank’s world development
indicators show India’s GDP grew stead- ily by 8.8%-9.8% per year for the five years to 2010, with the exception of 2008 when it fell to 4.93% during the last down- turn. However, the effects of the macro economic turmoil in Europe in 2011 have compounded India’s own economic prob- lems, and in December ratings firm Crisil cut its forecast for India’s GDP growth in fiscal 2011-12 to 7% from 7.6%. “The immediate outlook for India is
weak,” warns Justin Wood, the Economist Intelligence Unit’s corporate network director in Singapore. “The economy is slowing, inflation is uncomfortably high, persistently driven by high food prices.” He is also concerned by India’s large
current account deficit (CAD). The Reserve Bank of India put CAD at $16.9 billion during the July-September 2011 quarter. The figure was flat on-year, helped by growth in net foreign direct investment to $4.4 billion from $3.6 billion a year earlier. The government has also been strug-
gling to rein in the country’s fiscal deficit, which has widened in recent years due to heavy borrowing to fund a stimulus package aimed at mitigating the impact of the 2008 downturn. “It was the right policy at the time,” said Prime Minister Manmohan Singh, in his New Year address. “But like other countries that resorted to this strategy, we have run out of fiscal space and must once again begin the process of fiscal consolidation.” Singh aims to steer India back to finan-
cial stability with the introduction of a new goods and services tax, and a phased reduction in certain subsidies. “This is important to ensure that our growth process is not jeopardised,” he said. India is also reeling from allegations that the allocation of 2G spectrum in
2008 was rigged, costing the government an estimated $7 billion in lost revenue. Executives from a number of telcos including Loop Mobile, Reliance Telecom, and Swan Telecom (now Etisalat) have been investigated and charged. Former telecoms minister A. Raja is still behind bars for his alleged involvement in a scandal that is embarrassing for the government and hangs like a dark cloud over India’s entire corporate sector. “Corruption makes people wary and it
makes foreign companies wary until the dust settles,” warns OBS’ Mahadevan. In the short term, “enterprises will worry about the investment climate.” However, there is an upside to corrup-
tion being brought to light. “[It] is good news because the government has been forced to take action,” says Wood. Indeed, Mahadevan says growing anti-
corruption sentiment has led to the creation of more regulatory bodies, some of which have certain judiciary powers. “There is a lot more
transparency...Scams are coming to light a lot faster,” he says. There are also regulatory uncertainties
for would-be investors to consider. The government is still preparing its new tele- coms policy, which is expected to relax rules on mergers and acquisitions and therefore ease some of the competitive pressure in the retail mobile market. However, the proposals, which were expected to be finalised by the end of 2011, have been delayed and the new policy is not expected to be approved until June. With some mobile players clearly struggling to compete, selling out altogether might be the most effective means of realising value. Meanwhile, the Telecom Disputes
Settlement and Appellate Tribunal (TDSAT) is still considering whether a deal struck in July 2011 between Bharti
Airtel, Idea, and Vodafone to provide 3G roaming services on one another’s networks in a bid to provide nationwide coverage violated licence rules. There was a piece of good news for
potential investors late last month when the Supreme Court ruled that Vodafone’s 2007 purchase of Hutchison Essar is not subject to local capital gains tax since neither company is registered in India. Vodafone had been facing a $2.2 billion tax bill on the acquisition. “This positive ruling for Vodafone
improves the perception of India as a fair market for foreign investors,” says ratings firm Moody’s. “An unfavourable ruling would have made it more difficult for foreign companies to invest in India.” However, there is a potential sting in
the tail that could still affect foreign investment in Indian companies. The new Direct Tax Code, expected to come into force in April, proposes that transac- tions that take place outside the country but involve a company with assets in India are liable to tax in India. Yet despite the potential stumbling
blocks, many still see India very much as a leading developing economy. “India’s contribution to the world
economy is growing,” says Wood. “Almost every [emerging] country you
can think of is aspiring to the Indian BPO model,” claims Som Mittal, president of NASSCOM, the industry body represent- ing India’s IT-BPO sector. “Clearly China has aspirations too, but we have more experience.” Mahadevan meanwhile believes that
the sheer size of India’s population gives it a distinct advantage over most other fast-growing economies. “The value proposition of a very large, skilled and educated workforce is still very relevant,” he says. n
For All Your
M2M and Remote Monitoring Solutions Visit Us at NTCA Expo - Booth # 130
February 2012
www.totaltele.com 7
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36