India's big leap in World Bank's Ease of Doing Business rankings

India leapfrogged to the 77th rank in the World Bank's latest Ease of Doing Business rankings, jumping 23 notches from last  year.    This is a  significant achievement  in short term  as India has improved its rank by 53 positions in the last two years, and 65 positions in the last four years (2014-18)

In    dealing with construction permits, India has implemented an online single window system, introduced deemed approvals and reduced the cost for obtaining these permits. In the electricity sector, the time taken for obtaining a new connection has reduced from 105 to 55 days. For resolving insolvency, India has put in place a new Insolvency and Bankruptcy Code and time bound reorganization procedure for corporate debtors. 

India did make starting a business easier by integrating multiple application forms into a general incorporation form. It enforced GST, for which the registration process is faster. Abolishing in Mumbai  the practice of site inspection   under the Shops  & establishing act.

As many nations have cut down on procedures to improve their rankings, India needs to make   further drastic changes to rank higher. World Bank factors in cost of starting a business as a percentage of income per capita. India’s low income per capita makes the cost look higher

In the World Bank Group’s annual ease of doing business rankings, the top 10 economies are New Zealand, Singapore and Denmark, which retain their first, second and third spots, respectively, for a second consecutive year, followed by Hong Kong SAR, China; Republic of Korea; Georgia; Norway; United States; United Kingdom and FYR Macedonia.

Key Features of Indian Budget 2016- 2017

·  TAXATION

o   Will not resort to retrospective taxation in future; one time tax dispute resolution proposed for retrospective taxation

o   To rationalise corporate tax for new manufacturing companies

o   To implement general anti avoidance tax rule from April 1, 2017

o   Security transaction tax on options raised to 0.05 percent

o   Proposes to levy infrastructure cess of 1-4 percent certain  models of cars  (1 % on small petrol, LPG, CNG cars, 2.5% on diesel  cars of certain capacity and 4% on other higher engine capacity vehicles

o   Raises factory gate tax on various tobacco products by 10-15 percent.

o   Proposes to abolish 13 different levies

 INVESTMENT

o   100 percent foreign direct investment to be allowed in food processing industry

o   Promises further reforms in foreign direct investment policy in insurance, pension, asset recast companies

DISINVESTMENT

o   Total stake sales in 2016/17 seen at 565 billion rupees

o   To encourage central public enterprises to divest own assets for raising resources for new projects

o   Strategic divestment seen at 205 billion rupees

 FISCAL DEFICIT

o   Fiscal deficit seen at 3.9 percent of GDP in 2015/16

o   Fiscal deficit seen at 3.5 percent of GDP in 2016/17

o   Plan expenditure seen at 5.5 trillion rupees in 2016/17

o   Proposes to set up panel to review fiscal responsibility management act

 RURAL ECONOMY

o   Rural jobs programme allocated 385 billion rupees ($5.61 billion) in 2016/17

o   Farmer welfare budget to total 359.84 billion rupees

o   Rural road development to get 190 billion rupees

o   Target of agriculture credit at 9 trillion rupees

o   Interest subvention towards farm loans at 150 billion rupees

o   To set up dedicated irrigation fund worth 200 billion core

o   Allocates 55 billion rupees for crop insurance programme for 2016/17

 POLICY REFORMS

o   Bankruptcy code for financial firms to be introduced in parliament in 2016/17

o   RBI act is being amended for implementing monetary policy framework

o   To list general insurances companies on stock exchanges

BANKING REFORMS

o   Government to infuse 250 billion rupees capital into state-run banks in 2016/17; will find resources for additional capital for banks if required

 INFRASTRUCTURE

o   Allocates 2.21 trillion rupees for infrastructure development for 2016/17

o   Allocation for roads and highways development at 550 billion rupees

o   Capital expenditure on roads and rail development at 2.18 trillion rupees

 Budget Highlights :  Click  to download.

Oil Prices drops Below $30 a Barrel

Since  the new year, the price of oil has surprised even the most bearish punters, plunging  below $30 a barrel, its lowest level since 2003.  ( Lost almost 70% in last eighteen months) Turmoil in Chinese markets and the expected increase in Iranian crude exports added to concerns that a global glut will linger.

The trouble is that apart from India and a shaky China ( consumes about 12% and second only after US of total  global oil demand), demands are not looking promising anywhere  else this year.  Europe is unlikely to see  strong oil-demand.  Although America’s economy continues to grow, tightening fuel-efficiency standards,  caps the upside.  In  Middle East, where fuel use rose last year,  however citizens are more likely to keep their cars off the road after their governments raised petrol prices/ eliminated fuel subsidies altogether to shore up  their public finances.

Selective  oil  & allied  industries  has began  big cutbacks. But as of now they are not yet enough to reduce the glut. Global inventories are at record highs. An estimated 2,50,000 oil workers have lost their jobs,  manufacturing of drilling and production equipment has also fallen sharply. About 40 companies in North America have gone into bankruptcy protection.

Goldman Sachs said this week, it is sticking to its call that oil prices could fall to $20 a barrel but added that it is still not the bank’s base-case forecast.  Such low prices  seems possible as we   expect  a  surge  in Iranian  oil ( likely to add about 500,000 barrels within weeks of the sanctions relief)  to the already oversupplied global market.