Thursday, April 26, 2012


1.         Further Liberalization of ECB Policy
Given the ailments afflicting the civil aviation sector in India, the Reserve Bank of India (RBI) has allowed external commercial borrowings (ECBs) in that sector even where the end-use of funds is for working capital requirements. This is permissible under the approval route, and is subject to several conditions stipulated by the RBI.
Earlier, the RBI also announced relaxations in the ECB regulations governing certain infrastructure sectors such as power and toll roads and highways.
2.         Tax Treaties: Mauritius vs. Singapore
This report in the Economic Times suggests that Singapore is becoming an increasingly attractive option for investment funds focusing on India, and that the importance of Mauritius is likely to wane in the future. India’s tax treaties with both Singapore and Mauritius provide substantially the same benefits as far as taxation with respect to Indian investments are concerned. While the advantage of Singapore is that it is an established financial centre with substantial presence requirements for investors, Mauritius has a first-mover advantage and the availability of treaty benefits has been tried and tested successfully before the Indian courts, including in the form of the Azadi Bachao Andolan case ([2003] 132 Taxman 373 (SC)).
3.         Breakout Nations
In the last decade or so, India has enjoyed the branding of an “emerging market” and has also been an integral part of the "BRIC" nations. However, a new book seeks to demystify some of these notions and challenges the continued relevance of these labels and branding. The book, Breakout Nations: In Pursuit of the Next Economic Miracles by Ruchir Sharma, has been reviewed in the Economist, with the following being some extracts from the review:
“EMERGING markets” is a useful term precisely because it is imprecise. Coined for the convenience of investors looking for somewhere exciting to put their money, it covers a bewildering range of economies with little in common, except that they are not too rich, not too poor and not too closed to foreign capital.
The invention of “emerging markets” as an asset class required the invention of experts to manage those assets; experts who could discourse confidently about places as far apart as South Korea and South Africa. It might seem impossible to say anything coherent about such an eclectic mix of places. But in fact emerging markets have shadowed each other surprisingly closely in recent years, as Ruchir Sharma of Morgan Stanley points out in his new book, “Breakout Nations”.
Mr Sharma argues that emerging-market funds have lost sight of local idiosyncrasies in their fixation with global macroeconomic forces. Because of this “macro mania”, funds make “little or no distinction between Poland and Peru, India and Indonesia”, which he suggests further synchronises these markets. Emerging markets may have little in common except the funds created to invest in them, but that in itself creates a powerful affinity between them. The term “emerging markets” has helped to create the world it named.
The review concludes with the following observations:
Mr Sharma does not believe the shared success of emerging economies can continue. Some countries will break out from the pack, others will disappoint. The very concept of emerging markets may lose its appeal, he writes, as investors discover they need to distinguish between them: “These economies are now too big to be lumped into one marginal class, and are better understood as individual nations.” …

1 comment:

Mirza Ghalib said...

The book is about global macroeconomic perspectives, explained very simply. A must read if you want an authentic idea of what’s happening to the global economy. Helps you understand and judge India better – minus the hype - in real terms!