Category: Economy

India’s free-market oasis, Gujarat International Finance ­Tec-­City or GIFT City in Gujarat is ready to face global financial hubs such as Singapore and Dubai.

The financial hub occupies 886 acres between Gujarat’s capital, Gandhinagar, and its biggest city Ahmedabad. It has the presence of companies such as JPMorgan Chase & Co. and HSBC Holdings Plc with a combined employee base of 20,000. Being located in the city brings the companies exemption from many rules and taxes that hinder business and trading in the rest of the country.

Prime Minister Narendra Modi began planning the hub in 2008, when he was the Chief Minister of Gujarat. His ascension to the top post in 2014 allowed him to give the project more policy help and a higher profile.

GIFT City is an experiment in free markets. The goal is to create a welcoming place where India-centric trading that’s moved to Dubai, Mauritius or Singapore can return to the country. Here, companies can escape India’s rules and bureaucracy, as this is an attempt to lure billions of dollars back to onshore markets.

The free-market hub is the first in India to offer district cooling, an energy-efficient air conditioning system, and central waste, water and electricity management. Its other attractions include beautiful streets and boulevards and pristine sports centres, and recent additions such as a school and a hospital. Employees working in the hub have electric buses to take them home, while nearby cities have amenities such as cinemas and fast-food restaurants.

Bilateral trade for India and the United Arab Emirates (UAE) is set to exceed $88 billion this year. This will make the UAE India’s third largest trading partner after the United States and China.

Sheikh Abdullah bin Zayed Al Nahyan, the Foreign Minister of the United Arab Emirates, was recently in India for a two-day official visit to advance relations between the two nations.

The UAE Foreign Minister on Tuesday met External Affairs Minister S Jaishankar to discuss ways to strengthen the bilateral relationship between the two nations. The leaders published a Joint Vision Document, which serves as a guide for continued exploration of fresh fields, including the establishment of IIT, Green Hydrogen cooperation, fintech, the creation of a specialised food corridor, health cooperation (including efforts to develop Africa), skills, and defence exports.

The bilateral trade reached $36.82 billion in the five months of the current fiscal year, from April to August. The trade was $73 billion in the previous fiscal year.

In February of this year, the two countries inked their first-ever Comprehensive Economic Partnership Agreement, which became effective in May 2022. It was India’s first economic partnership in the last ten years. Now, the partnering countries are deliberating using UPI as a platform for payments for the 3.5 million-strong Indian community living in the UAE.

HDFC Chairman Deepak Parekh has said that India is not separate from the world and will face some economic slowdown, but will still continue to be among the fastest growing world economies.

Addressing The Institute of Chartered Accountants of India 21st World Congress of Accountants on Monday, Parekh said that India’s GDP growth for 2022 may be slightly lower than 7 per cent, but what is important to note is the inherent resilience that is now embedded in its economy. He believed that India can grow from a $3.4 trillion economy to a $7.5 trillion economy within the next five years.

Citing a recent research report, Parekh acknowledged the country’s increasing middle class, possible rise in per capita income, anticipated rise in services share in overall GDP, and a flourishing stock market to be helping the country. He also credited initiatives towards digitalisation and financial inclusion.

Underlining India’s political stability, vaccine security and food security, and its good relations with most countries, Parekh also highlighted the Centre’s diversification of countries it imports oil from and drive to get it at lowest cost to minimise the impact on trade deficit and currency. “There has been a huge policy thrust to support India’s energy transition and there are large investments being made in renewable energy, green hydrogen, e-mobility, batteries, fuel cells, solar panels amongst several others,” the banker added.

India and the Gulf Cooperation Council (GCC) are expected to launch negotiations for a free trade agreement (FTA) on Thursday, November 24, to boost economic ties between the two regions. The two sides are likely to discuss issues related to food security, logistics and regulatory measures.

GCC is a union of six countries in the Gulf region — Saudi Arabia, the UAE, Qatar, Kuwait, Oman and Bahrain. India has already implemented a free trade pact with the UAE in May this year.

The talks would be a kind of resumption of FTA talks after two rounds of negotiations held in 2006 and 2008 between India and GCC, said Minister of Commerce and Industry Piyush Goyal last week. The third round did not happen as GCC deferred its negotiations with all countries and economic groups.

After its exit from China-dominated Regional Comprehensive Economic Partnership in November 2019, India has stepped up efforts to forge “fair and balanced” trade pacts with key countries. In February, an FTA with the UAE was signed, followed by an interim trade deal with Australia in April. Currently, India is either negotiating or planning to start FTA talks with other key economies, such as the European Union, the United Kingdom, Canada, Israel and GCC members.

Led by high-frequency indicators and economic prediction models, an article in Reserve Bank of India (RBI) monthly bulletin envisaged that India’s gross domestic product (GDP) will grow between 6.1 per cent and 6.3 per cent in the June-September quarter of financial year 2022-23. “If this is realised, India is on course for a growth rate of about 7 per cent in 2022-23,” said the article in the State of the Economy report.

The RBI bulletin reasoned that supply responses in the economy are gaining strength. The cumulative procurement of rice during this kharif marketing season has already crested last year’s collection. Rabi sowing is up year-on-year backed up by good northeast monsoon rainfall and reservoir water storage levels.

The bulletin added that industrial production (IIP) overcame contraction in August to gain positive momentum in September after a gap of two months. The manufacturing purchasing managers’ index (PMI) for October confirmed this. In the services sector, the PMI for October sped up from a six-month low in September. The construction sector also maintained its expansion, while contact-intensive services such as hospitality, travel, and recreation experienced massive growth.

RBI Governor Shaktikanta Das in his note acknowledged Centre’s prudent, targeted and time-bound policies across fiscal, monetary and regulatory domains for the healthy indicators.

India’s foreign exchange reserves increased by $14.721 billion to $544.715 billion in the week ended November 11, said Reserve Bank of India data released on Friday.

The increase marks the fastest pace of growth registered in the country’s foreign exchange reserves since August 2021. The sharp rise was mainly due to an increase of $11.8 billion in the central bank’s foreign currency assets to $482.53 billion.

Last week, the rupee strengthened sharply against the dollar, appreciating 2 per cent. The analysts cite this as a reason for the increase in the RBI’s reserves. It was a good opportunity to buy dollars and rebuild reserves.

Separate data released by the RBI on Friday showed that the central bank net sold $10.36 billion dollars in the spot market in September versus sales of $4.25 billion a month ago. In September, surprisingly aggressive guidance on policy tightening by the US Federal Reserve led to huge gains for the dollar. The rupee depreciated 2.3 per cent versus the dollar.

The RBI data showed that the central bank’s outstanding net forward purchases had reduced by $9.7 billion to $10.42 billion. The net forward purchases were at $65.79 billion at the end of the previous financial year.

UK Prime Minister Rishi Sunak has said that his government remains committed to working “as quickly as possible” for the successful conclusion of the free trade agreement (FTA) with India, as most of the substantive negotiation conversations were completed at the end of last month.

At a House of Commons session on the G20 Summit in Indonesia on Thursday, the leader updated Parliament that he reviewed progress on the FTA during his first meeting with the Prime Minister of India, Narendra Modi, since taking charge as the UK Prime Minister.

He was questioned by Opposition Labour Party Leader Keir Starmer and his own Conservative Party MPs on the timeline for the completion of the agreement with India.

The British Indian leader said that the UK’s relationship and partnership with India are much broader than just a trading relationship.

“We also announced the mobility scheme to enable young people from India to come here and young Brits to go there, which is a sign of what is possible. Such exchanges are positive both for our countries and for the young people who benefit,” he said, referring to the new UK-India Young Professionals Scheme launched at the summit, involving 3,000 new reciprocal visa offers annually for under-30s.

India’s economy is positioned positively compared to other Asian emerging markets such as Korea and Taiwan and set to surpass Japan and Germany to become the world’s third-largest economy by 2027, said Jonathan Garner, Chief Asia and Emerging Market Equity Strategist, Morgan Stanley, in an interview. The expert added that India will have the third-largest stock market by the end of this decade.

The expert called India to be one of the most expensive markets and has enjoyed earnings growth in the current financial year, while Korean and Taiwanese economies have suffered blows due to semiconductor shortages. According to Garner, India’s market outlook is positive for 2023 on lower inflation and lesser rate hikes.

In a new Morgan Stanley Research Bluepaper, analysts working across sectors expect a boost in India’s share of global manufacturing, growing credit availability, new businesses, improved quality of life, and a boom in consumer spending. “Consequently, India is gaining power in the world order, and in our opinion, these idiosyncratic changes imply a once-in-a-generation shift and an opportunity for investors and companies,” added Ridham Desai, Morgan Stanley’s Chief Equity Strategist for India.

The paper also underlined multinationals’ sentiment on the investment outlook in India to be at an all-time high. The positive sentiment could lead to increased share of manufacturing in the Indian GDP from 15.6 percent to 21 percent by 2031 and lead to doubling India’s export market share.

India and the Association of Southeast Asian Nations (ASEAN) on Saturday advanced their relations to a Comprehensive Strategic Partnership, vowing to augment cooperation in diverse areas, including maritime, cyber security, and interoperability of digital financial systems.

Vice President of India Jagdeep Dhankhar led the Indian delegation to the Asean-India Summit held in Phnom Penh, Cambodia. The delegation included Union External Affairs Minister S Jaishankar.

Under maritime cooperation, India and Asean will work on maritime security, countering piracy, search and rescue operations, and humanitarian assistance and disaster management. The sides will explore activities to execute the Asean Outlook on the Indo-Pacific and India’s Indo-Pacific Oceans Initiative, said a joint statement issued after the summit.

The other key areas under the partnership are sustainable development with the focus on new and emerging technologies for renewable energy, smart agriculture, healthcare and space, revival of tourism, activities involving youth, and regional and international issues of common concern.

The two sides committed to work for the early completion of the India-Myanmar-Thailand trilateral highway and its eastward extension to Laos, Cambodia and Vietnam, and explore synergies between the Master Plan on ASEAN Connectivity 2025 and India’s connectivity initiatives under its Act East policy.

German Chancellor Olaf Scholz discussed energy and trade ties with Vietnam’s Prime Minister Pham Minh Chinh during a visit to Hanoi on Sunday.

On the first visit of a German leader to Vietnam in more than a decade, Scholz stopped in Vietnam before visiting the G20 leaders’ summit in Indonesia. The visit underlined Vietnam’s rising role in global supply chains and interest of German firms to take their manufacturing operations beyond China in Asia.

Speaking at the joint news conference with Pham Minh Chinh, Scholz called for deeper trade relations with Vietnam and committed to help the Asian country in building a greener economy, such as in the expansion of Hanoi’s metro system.

Olaf Scholz also visited China a week before the G20 summit and Singapore before heading to the summit. Singapore is the second country after Vietnam in Southeast Asia that has a free trade agreement with the European Union. The two countries are the EU’s biggest trading partners in the region.

Germany is Vietnam’s second-largest trading partner among EU states after the Netherlands, with exchanges worth $7.8 billion last year. About 500 German firms operate in Vietnam, of which around 80 have manufacturing plants in the country. Engineering giant Bosch, energy firm Messer, and many smaller companies part of the global automotive supply chain are located here. Many German companies located in China are keen to move some of their operations to other countries in Asia.