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
Jan. 13 – Foreign companies can set up wholly owned subsidiaries in sectors where 100 percent foreign direct investment is permitted under India’s national FDI policy. For registration and incorporation, a set of applications have to be filed with Registrar of Companies (ROC). Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies. Continue reading
Jan. 11 – The Indian government on Tuesday agreed to allow 100 percent foreign ownership in single brand retail stores, paving the way for international businesses such as Starbucks, Ikea and Adidas to operate independently in the country without having to involve local partners. Foreign single brand retailers were previously limited to 51 percent ownership.
Besides the entrance of new companies into the Indian market, the decision is also likely to result in several existing foreign players operating under tie-ups with Indian companies to convert their existing ventures into wholly-owned subsidiaries. Continue reading
Jan. 10 – The Indian government has resolved to double the force of the Finance Ministry’s crucial foreign tax division which handles classified tax-related information between India, tax haven nations, and other countries.
The Ministry recently gave sanction for developing a new unit in the Foreign Tax and Tax Research (FTTR) division under the Central Board of Direct Taxes – which will be headed by a senior Income Tax Department officer and two under-secretary ranking officers. Continue reading