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Navigating India’s E-Commerce Landscape

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By: Tracie Frost

According to a study by PricewaterhouseCoopers and The Associated Chambers of Commerce and Industry of India, India’s e-commerce industry could experience a compounded annual growth rate of 35 percent and reach US $100 billion in annual sales over the next five years.  The sector is estimated to realize a 72 percent jump in annual online purchases per individual in 2016.  Additionally, the number of consumers purchasing something online has been increasing by 60 percent or more year over year.

The opportunity for continued growth in India’s e-commerce industry is substantial.  A young population, rising standards of living, better internet penetration, and improved infrastructure for deliveries make e-commerce a tempting investment.  However, anyone contemplating investing in India’s e-commerce sector should carefully consider the many constraints on the industry, the lack of clarity with respect to regulatory guidelines, and India’s political environment.

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Tapping into India’s Dynamic Consumer Market – Major Patterns and Trends

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By: Kimberly Momin & Melissa Cyrill

India’s GDP is growing at a rate of 7.5 percent, making it one of the fastest emerging economies in the world. Breaking down growth statistics in real terms, the consumer economy grew at a rate of 5.7 percent annually between 2005 and 2015. Based on this, estimates hold that the annual growth of the consumer market could reach 6.7 percent between 2015 and 2020, and 7.1 percent between 2021 and 2025. This creates a consumer market worth about US $507.46 billion (Rs 34 lakh crore) for the ongoing financial year, which could expand to US $746 billion (Rs 50 lakh crore) by the financial year 2021.

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India Market Watch: E-Commerce Companies Expand Services, Aviation Sector Soars, Exports Continue to Decline

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E-commerce Companies Expand to On-Demand Services

The e-commerce industry in India has identified on-demand services like installation, servicing, and after-sales services as key to improving the online shopping experience. This is particularly relevant for categories like large appliances and furniture that may require additional services like setting up, repair, and maintenance. Such services are easily accessible to customers when buying from brick and mortar stores, and online portals are catching up to the lucrative market.

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Incentives for International Financial Service Centers in India

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By: Tracie Frost

In an effort to infuse cash into India’s economy and jump start the Make in India and Smart Cities initiatives, India’s Securities and Exchange Board (SEBI) last year codified guidelines for special international financial services centers (IFSC). In the 2016 budget, the Modi government took the move further by providing tax incentives aimed at attracting billions of dollars in financial services investment from global hubs like Dubai, Singapore, and Hong Kong. By some estimates, as much as US $30 billion per year worth of trading in rupee derivatives goes to locations outside India.

The idea of an international foreign services center in India has been a long time coming.  IFSCs serve customers outside the domestic economy and handle cross-border financial products and services. Nearly a decade ago, the Ministry of Finance commissioned a report on making Mumbai an international foreign services center. However, the global financial crisis dampened those early plans.  Now India is again looking at the benefits of opening the financial sector to greater foreign investment. 

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Why do Onion Prices Cause Such a Stink in India?

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By: Dezan Shira & Associates
Editor: Melissa Cyrill

The humble onion, a staple in Indian diets, is predisposed to volatile pricing, routinely affecting households and businesses throughout the country. This is why the furor over pricey onions quickly reaches the corridors of power where electoral folklore paints a punishing story for incumbent governments. A multitude of factors, ranging from the state of monsoon rains, lacking storage facilities and a nexus between traders and suppliers, contribute to these conditions. Most is a result of India’s outdated food supply chain that is riddled with redundancies, and provides ample scope for corruption and wastage. Delving deeper reveals the curious nature of India’s status as an onion exporting economy that simultaneously exhibits shortages.

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India Regulatory Brief: Government Retracts Pension Tax, Regulator Improves Taxpayer Services

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Government Retracts Pension Tax Introduced in Budget

Indian Finance Minister, Arun Jaitely, has withdrawn a proposal aimed at taxing withdrawals beyond 40 percent of the Employment Provident Fund (EPF) corpus in the Union Budget for 2016-17. Jaitely initially argued that this would discourage full withdrawals and help create a pension society in India. Taking salaried tax payers by surprise, the government was almost immediately inundated with heavy criticism from all political quarters. Assessing this overwhelmingly negative feedback, and with the fear it would hold up key legislation stated for the Budget session, the Prime Minister’s Office (PMO) recommended the complete withdrawal of the proposal. The Labor Ministry also stated its opposition to any kind of taxation on the EPF after coming under fire from trade unions and opposition parties.

In response to the public review, the finance ministry has rolled back both its decisions – to tax EPF withdrawals and the proposal to limit tax-free contribution by the employer to the EPF to US $2270 (Rs 1.5 lakh) per annum. Additionally, the proposal to offer 40 percent rebate on the already taxable National Pension System (NPS) stays in place, bringing relief to NPS subscribers.

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India Budget 2016: Business Elements

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By Dezan Shira & Associates
Editor: Tracie Frost

When Finance Minister Arun Jaitley released the 2016 Union Budget on February 29, the response was mostly positive.  The budget aims to stick to the 3.5 percent fiscal deficit target, addresses pressing social and infrastructural needs, and, for the most part, uses reasonable assumptions to forecast India’s growth over the next three years.

The Modi government has consistently focused on increased ease of business, opening markets to foreign investment, building India’s industrial sector, and improving transparency in taxation and regulation. While this budget delivered more on rural and infrastructure spending, it certainly includes some business elements that are worth exploring in detail.

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Railway Budget 2016-17 – Aspirational to a Fault

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By Dezan Shira & Associates
Editor: Melissa Cyrill

The Minister of Railways, Suresh Prabhu, presented the government’s annual railway budget on February 25. Preceding the announcement of the annual Union Budget, the railway budget holds importance as it is India’s largest employer; last year it transported 8.4 million passengers.

‘Reorganize, Restructure, and Rejuvenate Indian Railways’ serves as the ambitious theme of the 2016-2017 railway budget, which will be achieved through 3 three pillars of strategy – New Revenues, New Norms, and New Structures.

Emphasis has been placed on capacity creation and completion of ongoing projects. Passenger fares will not be hiked, contrary to earlier expectations. This begets a central challenge for the Indian railways – how to raise productivity and increase profit earnings – while continuing to deliver on project implementation.

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