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Emerging markets like India to see tightened monetary policy in 2019: Moody’s

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New Delhi: Moody’s Investors Service said larger emerging markets like India are expected to continue to tighten their monetary policies next year.

“India, and Indonesia are likely to grow near trend despite external and domestic challenges… We expect larger emerging markets, like India, Indonesia, Brazil, Turkey and Argentina, to continue monetary tightening in 2019,” Moody’s said in a report.

In its Global Macro Outlook for 2018-19 released in August, the US-based agency had said that it expects Indian economy to grow by around 7.5 per cent in 2018 and 2019 as it is largely resilient to external pressures like those from higher oil prices.

 

Indian economy grew by 7.7 per cent in the January-March quarter, and touched a two-year high of 8.2 per cent in the April-June quarter.

Moody’s said India could also face political risks, as also uncertainty around economic and fiscal reforms, on account of upcoming general elections next year.

The report further noted that the outlook for global sovereign creditworthiness in 2019 is “stable”, balancing the slowing growth momentum against rising uncertainty over longer-term economic and financial stability.

The agency expects G-20 growth to peak in 2018 at 3.3 per cent before slowing to 2.9 per cent in 2019. For advanced economies in the G-20, Moody’s believes growth will fall to 1.9 per cent in 2019 from 2.3 per cent in 2018, a pattern that is mirrored in key economies, including the US and Germany.

Emerging markets in G-20 would see a slower growth at around 4.6 per cent in 2019 than 5 per cent in 2018.

“Our stable outlook for sovereign ratings in 2019 balances the benefits of continued global growth against emerging domestic and geopolitical risks,” Moody’s Managing Director — Global Sovereign Risk Alastair Wilson, said.

Despite the stable outlook overall, we are more mindful than in previous years of the potential for unforeseen shocks to disrupt economic and financial stability over the next 12-18 months, Wilson added.

Slowing growth means that the window for global sovereigns to address longstanding credit challenges – including high levels of public and private debt, as well as longer-term trends related to ageing and inequality – is closing. High debt, falling growth and rising rates expose sovereigns to the risk of shocks that undermine debt affordability and sustainability.

A number of emerging and frontier markets are particularly exposed to tightening global financial conditions and rising US trade protectionism, Moody’s said. As in previous years, the potential for disruptive domestic or geopolitical events poses the greatest tail risk.

“Geopolitical risks could have implications beyond a particular country’s economic and fiscal fundamentals and affect cross-border capital flows and thus funding conditions for many sovereigns,” Moody’s said.


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Business

Cabinet clears setting up of centralised GST appellate authority

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New Delhi: The Union Cabinet on Wednesday approved setting up of a centralised Appellate Authority for Advance Ruling (AAAR) under the goods and services tax that would decide on cases where there are divergent orders at the state level.

The setting up of a centralised AAAR would require amendments to the GST Acts. The centralised authority as an appellate body will only take up cases wherein the Authority for Advance Ruling (AAR) of two states have passed divergent orders.

The Goods and Services Tax (GST) Council, headed by Finance Minister Arun Jaitley, and comprising state counterparts, in December decided to establish the centralised AAAR.

 

“The Cabinet has cleared the GST appellate authority,” a source said after the meeting of the Cabinet headed by Prime Minister Narendra Modi.

In view of the confusion created by contradictory rulings given by different AARs on the same or similar issues, the industry had been demanding a centralised appellate authority that could reconcile the contradictory verdicts of different AARs.

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Urbanisation to be big driver of Indian economic growth: Kant

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Davos: Urbanisation will be a big driver of economic growth in India going forward, supported by favourable macroeconomic factors, accelerated infrastructure building and continuing reforms, NITI Aayog CEO Amitabh Kant said.

Speaking here at an event on sidelines of the World Economic Forum Annual Meeting, he also said the Indian economy may even exceed the IMF growth forecast of 7.5 per cent for the country.

Kant said IMF has forecast 7.5 per cent growth for India despite a gloomy outlook for the global economy and this itself is good, though there are expectations that this estimate would be surpassed. He said India is giving a big push to urbanisation with more than 100 smart cities being developed.

 

The country is also using technology in a big way to change the way business and governance is done, he added. Besides a massive infrastructure building is happening, bank credit flow has rebounded and macroeconomic factors like inflation and fiscal deficit are also being supportive, Kant said.

DIPP Secretary Ramesh Abhishek noted that states are competing with each other to attract investments and all political parties have adopted the economic reform process. He listed various reform initiatives undertaken in India, including on areas like ease of doing business, FDI, manufacturing and taxation.

They were speaking at Institutional investors’ breakfast roundtable, organised by the industry chamber CII and Kotak Mahindra Bank. Other participants included CII Director General Chandrajit Banerjee and leaders from Indian and foreign companies.

On questions about some persisting issues in doing business including on tax and insolvency related issues, Abhishek said a lot of efforts have been put in to remove all bottlenecks and starting a business doesn’t take more than a day. Besides, special provisions have been made for startups and angel investors, he added.

Kant said efforts are also being made to remove all physical intervention and digitise the entire process of inter-ministerial and inter-department consultations to fast-track the decisions.

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India will surpass China, says Raghuram Rajan

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Davos: India will eventually surpass China in economic size and will be in a better position to create the infrastructure being promised by the Chinese side in South Asian countries, former RBI Governor Raghuram Rajan said.

Addressing a session on Strategic Outlook for South Asia, Dr Rajan said that the Indian economy would continue to grow while growth rate is slowing down in China.

“Historically, India had a bigger role in the region but China has now grown much bigger than India and has presented itself as a counter-balance to India in the region,” Dr Rajan said at the WEF Annual Meeting 2019.

 

“India will become bigger than China eventually as China would slow down and India would continue to grow. So India will be in a better position to create the infrastructure in the region which China is promising today. But this competition is good for the region and it will benefit for sure,” he said.

The comments assume significance with China working on a lot of infrastructure projects across the region. In 2017, India became the sixth largest economy with a GDP of $2.59 trillion while China was the second large with a GDP of $12.23 trillion.

At the same session, Nepal PM K.P. Sharma Oli cited collaboration with China as well as India as reasons for the economic growth.

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