Monday, September 29, 2014

NAMORICA - Modi pledges a stable tax policy to woo US business

`Will Use Coal Scam Order To Clean Up Past'
Prime Miniser Narendra Modi made a powerful pitch on Monday to top honchos of American business and industry , with the promise of a stable tax policy and an assertion that he wants to convert the Supreme Court ruling on coal block allocation into an opportunity to move forward and "clean up the past".

"It is my conviction that tax stability is essential for confidence building," Modi told the chiefs of top US companies over a breakfast meet, among them Google chairman Eric Schmidt, Citigroup chief Michael Corbat, Mastercard CEO Ajay Banga, Pepsico's Indra Nooyi, Cargill's David W MacLennan, Caterpillar's Douglas Oberhelman, Merck's Kenneth Frazier, Carlyle Group's David Rubenstein, and Warburg Pincus' Charles Kaye. He also met CEOs of six other companies, including Boeing, IBM, and GE, in oneon-one meetings.

Modi's comment on a stable tax regime comes amidst severe criticism of the UPA's policies, including retrospective amendments to the law to claim taxes from Vodafone after it acquired Hutch's telecom assets in India. Modi and his team have not shied away from referring to the policies as "tax terrorism".

Asking the CEOs to be part of India's growth story, Modi pledged to smoothen the path for them. "Infrastructu re development is a big opportunity; it creates jobs & enhances the quality of life of our citizens," Modi said.

"India is open-minded. We want change that is not one-sided. Am discussing with citizens, industrialists & investors," the MEA spokesman quoted Modi as saying in a tweet. PM Narendra Modi, during a breakfast meet with industry leaders in the US on Monday, promised a stable tax policy. In the past, tax administration and frequent changes in government policies have been cited as major hurdles to investing in India. In recent years, even Indian business houses have often shunned investing in the country, preferring to go overseas.

The Modi government is keen to revive the investment cycle and is wooing investors, especially in the manufacturing sector, although the PM made it clear last week that the government does not believe in doles and concessions to attract flows into the country. Describing the meeting as "excellent and very good", business leaders said the PM heard their concerns and listed out the government's priority areas. "He answers questions brilliantly and is very focused on improving India. So, we are thrilled to be working with him," Nooyi said.

Mastercard CEO Ajay Banga said Modi can execute plans like he did in Gujarat.

"I have every belief he can do that. I believe then you can have a very good decade or ahead of growth in India and that would make every American investor happy to put their capital, technology and their people into India." Banga said Modi was focused on generating jobs for which there was a need to improve manufacturing, tourism and infrastructure. "His view is that he will get those with clear policies as well as about willingness to execute and he made the point many times over and I think from his perspective of his focus and his energy around Asia," he said.

While Boeing CEO James McNerney, who met Modi separately, promised to "accelerate engagement with India", GE's Immelt said his company is looking to scale up investments. "We discussed India. We are enthusiastic about the changes and the reforms in India and we are anxious to do our part in making India a better place," Goldman Sachs CEO Lloyd Blankfein said.

Friday, September 26, 2014

In a boost to govt, S&P revises India outlook to `stable'

First Such Rating Since Modi Took Over
After years of pessimism on the economy , there were finally signs of positive perception on Friday as Standard & Poor's revised India's rating outlook from `negative' to `stable'. This indicates that there are fewer chances of government and other public sector bonds being treated as junk papers.

The revision is the first measure undertaken by any rating agency since the Modi government took office about four months ago, "Our outlook revision reflects our view that India's improved political setting offers a conducive environment for reforms, which could boost growth prospects and improve fiscal management," S&P said in a statement, which coincided with PM Narendra Modi's US visit, where he will court international investors.

Although India still retains the lowest investment grade rating of BBB+, the news made the rupee gain the most in six weeks and closed 61.15 to a dollar, compared to 61.35 on Thursday . Bond prices too strengthened on expectation that a better outlook may result in higher investment and more dollar flows into the economy .

Besides, it raised hopes of a rating upgrade in the coming months. Finance secretary Arvind Mayaram said the agency is expected to upgrade India's rating in the future."The country is well on a path of faster than anticipated fiscal consolidation and it could be a positive surprise going forward," SBI chief Arundhati Bhattacharya said. But S&P—the only major agency that threatened a downgrade of India's rating in the wake of rising current account and fiscal deficit in April 2012—said it will wait for the economy to grow faster and the fiscal, external or inflation parameters to improve before it decides on an upgrade. It cited at least two constraints—India's weak public finances that may stay weak for some time and low per capita income, which results in a low tax base and gives the government less flexibility in taking dramatic measures during times of economic stress.

The change in S&P's outlook was, however, driven by several factors, which included an improvement in the current account situation on the back on curbs on gold imports as well as India's credit strength, from low level of foreign debt and improved cash availability overseas. The country's "well entrenched democratic political system" and the strong electoral mandate were cited as the third key reason by the agency. "Although the paralyzing effect of legislative gridlock can blunt government effectiveness, our outlook revision indicates that we believe the current government's strong mandate will enable it to implement many of its administrative, fiscal, and economic reforms."

The ratings company said it expected the government to adhere to the fiscal consolidation plan and estimated an improvement in the fiscal performance due to the possible rollout of goods and services tax (GST)--something that the BJP government has identified as a key thrust area.

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