India’s economic slowdown and pre-election introspection has probably had its most serious impact on ties with the United States. Economics were the starting point for the expanded U.S.-India relationship, and economic and commercial issues have an unusually large impact on a country’s profile in Washington. In the five years since the global financial crisis started, the U.S.-India bilateral economic agenda has made relatively little progress. Long-standing issues important to U.S. business, such as the cap on foreign investment in insurance, have stalled. Recent Indian legislation, especially on land acquisition, has raised hackles among prospective investors. Compulsory licenses for pharmaceuticals in 2012 and 2013 may, as India argues, be consistent with India’s intellectual property laws and its agreements with the United States, but American businesses that went through the IP dispute in earlier years wonder whether India is moving back toward its former policy that basically disallowed foreign patents. The result is an extraordinarily sour mood among senior U.S. officials concerned with economic ties with India. The problems of course come from both sides. Indians are worried and frustrated over the immigration bill that passed the U.S. Senate in late June. It includes provisions that appear aimed at the heart of India’s most successful information technology companies’ business model for working with the United States, through dramatically increased visa fees and a prohibition on stationing their employees at a client’s workplace. And India’s pre-election distraction has probably met its match in the U.S. administration’s preoccupation with dysfunctional partisan warfare that threatens a government shutdown.India’s economic slowdown and pre-election introspection has probably had its most serious impact on ties with the United States.
Econmy survey 2012-13
India must create more productive jobs, perhaps not by sarkari schemes, but through economic growth, labour reforms and a hassle-free business climate. This is the vision held out by chief economic advisor RaghuramRajan, who has continued with the tradition of his predecessor KaushikBasu and scripted a special chapter, 'Seizing the Demographic Dividend'.There's room for RBI to cut rates, spur growth
India may be on the edge of an external shock due to reliance on short term
flows from portfolio investors to bridge the current account deficit,
as the inflows can reverse at short notice, causing damage to the
currency. Raising exports in the short term may be difficult given the
grim economic scenario in the US and Europe.
But imports, especially of oil, should be curbed by linking the sale price to market, says the Economic Survey 2012-13. Gold imports, touted as the root cause of the record current account deficit should be curbed, it says. India's external trade position is at its worst, with the current
account deficit for the September quarter at a record 5.4% of the Gross Domestic Product ( GDP)Raising tax-GDP ratio, broadening tax base & raising savings good for India Inc
One, while it is imperative to cut the fiscal deficit, it should be
done by raising the tax/GDP ratio, rather than by curtailing expenditure
and hitting development. Two, tax collections should be increased by
broadening the tax base rather than by raising marginal rates of tax.Raising savings is the way to cut the worryingly large current account
deficit, which is an outcome and measure of domestic savings falling
short of investment. The way to reduce the savings-investment gap
without sacrificing investment and hurting growth is to step up savings.
India's
GDP climbed 4.8 per cent year-over-year in the January-March quarter.
This was the slowest pace of growth in a decade. For the fiscal year
ending March 31, growth was 5 per cent, down from 6.2 per cent the
previous year, according to Business Insider.
SEBI approved Major Reforms to Attract Overseas Investors
SEBI(Security Exchange Board of India) ushered in major reforms to attract overseas investors. It has announced new Foreign Portfolio Investor regulations for easier registration process and operating framework for investors from abroad. The new class of investors - FPIs - will encompass all Foreign Institutional Investors, their sub-accounts and Qualified Foreign Investors. They will be divided in three categories as per their risk profile.The Know Your Client - KYC requirements and other registration procedures will be much simpler for FPIs compared to current practices. The SEBI has also decided to grant them a permanent registration.
SEBI also approved setting up 'Designated Depository Participants which will register FPIs on behalf of the market regulator subject to compliance with KYC norms.
RBI Banned Zero Percent Interest Rate Schemes for Purchase of Consumer Goods
Reserve Bank of India on 25 September 2013 banned zero per cent interest
rate schemes for purchase of consumer goods. The decision has taken in
order to protect consumer interest.
In this regard Reserve Bank of India issued a notification to all the Schedule Commercial Banks and local area banks.
