By Cherry Bansal, Accounts Associate, Dezan Shira & Associates

Feb. 3 – As India develops into an important market for foreign investors, we’ve seen a significant increase in the volume of questions that our firm is regularly asked to deal with. An important issue that is beginning to crop up concerns royalty payments for licensed component parts, and technology transfer fees. In fact, since December 2009, there have been no limits regarding lump sum payments and royalties payable, however the method of calculation needs attention to detail in order to structure the invoicing process correctly. Continue Reading

New opportunities and developments lie in store for foreign retailers

By Chris Devonshire-Ellis and Ankit Shrivastava, Dezan Shira & Associates

Feb. 2 – As India has liberalized its single brand retail industry to permit 100 percent foreign investment, we take a look at the regulatory issues and legal structures pertinent to establishing operations in this new dynamic market. That India should be well on the radar for foreign retailers was recently supported by A.T. Kearney, whose 2011 Global Retail Development Index ranks the nation as fourth globally.

India’s retail industry is estimated to be worth approximately US$411.28 billion and is still growing, expected to reach US$804.06 billion in 2015. As part of the economic liberalization process set in place by the Industrial Policy of 1991, the Indian government has opened the retail sector to FDI slowly through a series of steps: Continue Reading

Feb. 1 – India’s average income for the fiscal year 2010-2011 rose 16.9 percent to reach a US$1,000 average for the first time, according to data released by the Central Statistics Office this week.

“Real GDP growth is outstripping population growth so per capita income has been on the rise,” stated D.K. Joshi, chief economist at Crisil. Continue Reading

New ruling will encourage India FDI and increase M&A activity

Jan. 31 – India’s Supreme Court has ruled that the British telecom giant Vodafone does not have to pay taxes and penalties for the transaction in 2007 that saw the company acquire a 67 percent stake in Indian mobile phone operator Hutchison Essar. The deal was for US$11.5 billion, and absolves Vodafone from a potential tax liability of US$2.5 billion.

The Supreme Court said that Indian tax officials do not have jurisdiction over a deal between two global companies, even if the assets involved in that deal are located in India. The ruling is expected to boost foreign investor confidence in India, and the M&A sector in particular. Continue Reading

Jan. 30 – The Reserve Bank of India cut cash reserve requirements (CRR) for banks by 50 basis points last Tuesday to relieve tight liquidity, indicating a policy shift towards reviving growth after nearly two years of fighting inflation. With core inflation still inflexibly high, the RBI left its policy repo rate unchanged at 8.50 percent for the second consecutive review. The central bank had raised rates 13 times between March 2010 and October 2011, which made it one of the most hawkish central banks over that time period. Continue Reading

Jan. 26 – The Indian government is loosening its foreign direct investment regulations and is now allowing foreign investors the opportunity to repatriate their original investment before the expiration of a three-year lock-in period from the day it completes its minimum capitalization norm for the sector.

While the Department of Industrial Policy and Promotion has expressed misgivings about the policy change, the government has contended that this restriction can be done away with if the investor offers an acceptable reason for not making the investment. Continue Reading

Jan. 20 – India’s exports grew by 25.8 percent over the period running from April to December 2011, reaching a total of US$217.6 billion. The Ministry of Commerce informed that over that same time-frame, imports grew by 30.4 percent and were valued at US$350.9 billion, resulting in a negative trade balance of US$133.3 billion.

The Ministry also informed that India’s exports for the month of December 2011 were US$25 billion and imports stood at US$37.8 billion – coming out to a negative trade balance of US$12.8 billion. Continue Reading

Jan. 17 – Moody’s Investor Services has upgraded its rating on India’s long-term government bonds denominated in the domestic currency from Ba l to Baa 3 (from speculative to investment grade). The long-term country ceiling on the overseas currency bank deposits was also upgraded from Ba l to Baa 3 (from speculative to investment grade). Also, Moody’s had upgraded the short-term government bonds denominated in the domestic currency from NP (not prime) to P-3 (from speculative to investment grade). This short-term rating had been upgraded for the first time since it was newly assigned in 1998. Continue Reading