US-China Trade War – Advantage India!
The Indian government seems to have given a signal of its plan to remove export subsidies at a time when the global economy is facing unpredictable headwinds while export opportunities are emerging from the ongoing the US-China trade war. All these developments are to India’s advantage.
The government has left out export boosting proposals in the 2019-20 Budget, presented in Parliament on 5 July 2019.
“They (the government) have not provided specific proposals to boost exports,” Sandeep Ladda, Partner global TMT Tax Leader at PricewaterhouseCooper (PWC), noted from the latest Budget reading.
But Ladda was quick to point out the Government’s plan to phase out tax holidays for the economy cannot support such give away incentives over a longer period.
The economy can only survive for so long without taxes being collected in relations to some of the incentives that have been provided, according to the tax veteran.
Ladda noted that past Governments have been giving tax incentives to boost exports and the Pre-Budget Economic Survey, based on feedback from industries, had recommended that exports be given more fillip.
“We should hear more about this plan in the coming budget, hopefully, that will, therefore, boost the investors’ confidence,” Ladda stressed at the Indian Budget 2019-20 forum held by PWC Singapore on 15 July 2019.
Separately, the Federation of Indian Exporter Organizations has been calling on the government year-on-year to improve access to credit and other funding for Indian products to compete in the international markets.
Market observers believe the US-China Trade War is all to India’s advantage as its low-cost manufacturing could replace Chinese products in large volumes though not totally.
India should not ignore new competition in the global markets from new manufacturing hubs such as Vietnam, said the observers.
India, too, has trade irritants with the US, but American manufacturers want to relocate out of China to India based on favourable export tariffs in the coming years and the ongoing Washington-New Delhi negotiations being more amicable with a potential of a broad Free Trade Agreement on the anvil.
The observers feel subsidy support for Indian exporters will help them become more competitive in the global markets, especially the US, the largest consumer base for value-added products.
Continuing his presentation at the Indian budget forum in Singapore, Ladda touched on incentives for MSMEs, saying these enterprises, with ability to be in the international markets with competitive exports, have been given some encouragements in this budget and in the past budgets.
Goods and Services Tax (GST), though challenging, is one area which will provide MSMEs with a lot of smooth transition rather than their dealings with multi-layers of taxes and laws, he explained.
Ladda also expects the direct tax code, which is a new income tax law, to emerge from the next Budget in February 2020. It could be either a roadmap or the law itself, he said, expecting the new tax to help improve business environment in the country.
Ladda feels foreign investors will stay on in India which offers the highest returns on investments for the Indian economy is set to grow at 7% per annum in the year ahead compared to the advanced economies growth of 4.5-4.6 per cent.
“Investors know that their monies will always get the return in India better than other countries,” he said, pointing out Indian banks were already offering fixed deposit interest rates at 6.5%. fiinews.com
