The World Bank on Sunday maintained its forecast that global growth will improve to 2.7 percent this year, citing a pickup in manufacturing and trade, improved market confidence and a recovery in commodity prices. The update of the multilateral development lender’s Global Economic Prospects report marked the first time in several years that its June forecasts were not reduced from those published in January due to rising growth risks.The World Bank’s 2017 global growth forecast of 2.7 percent compares to its 2.4 percent estimate for 2016, a figure that was increased by a tenth of a percentage point since January. The World Bank said advanced economies were showing signs of improvement, especially Japan and Europe, while the seven largest emerging markets – China, Brazil, Mexico, India, Indonesia, Turkey and Russia – were again helping to drive global growth.“With a fragile but real recovery now under way, countries should seize this moment to undertake institutional and market reforms that can attract private investment to help sustain growth in the long term,” World Bank President Jim Yong Kim said in a statement.The bank boosted its 2017 growth forecast for Japan by 0.6 percentage point since January to 1.5 percent, while the euro zone’s forecast was increased by 0.2 percentage point to 1.7 percent. In both cases, a pickup in exports and unconventional monetary easing are helping to support growth.The World Bank said U.S. growth also is improving but it shaved 0.1 percentage point off its forecast for 2017 to 2.1 percent after weak growth early in the year caused by a pullback in consumer spending it viewed as temporary. It slightly lifted its 2018 U.S. growth forecast to 2.2 percent.Such restrictions could fall disproportionately on China and other Asian economies, the bank said. “Significant disruption to China’s exports would undermine its growth with large spillovers on the region,” the bank said in the report. “Furthermore, trade-restricting measures in the United States could trigger retaliatory measures.”It said exports and investment in Mexico also could be negatively affected by the looming renegotiation of the North American Free Trade Agreement, causing spillovers to Central America as well.
The Goods and Services Tax, to be implemented from next month, will be an exciting development from data point of view and help provide a more complete description of the economic activity, Chief Statistician T C A Anant has said. GST will provide data from the point of production to the point of sale because all these would be captured properly under the new indirect tax regime, he said. `The government proposes to roll out GST from July 1 that will subsume all major levies including excise, service tax and VAT. “The GST network (GSTN) from a data point of view is a very exiting development because it is on single network, the transaction chain is being captured and leaves a lot of exiting possibilities,” Anant told PTI in an interview. “From the point of view of a statistician, this will eventually give us much more complete description of economic activities,” he added.On whether GST will give real time data, Anant replied, “There is data on collection of excise, VAT, service tax and sales tax. We use these in our GDP compilation at various places.“GST continues to give us all these but now all of these would be collected through single framework. What we were getting earlier through multiple sources would now be from single source (the GSTN)”. The new set up will also give transactional data, movement of goods and services across borders, he said, adding that there will be a lot of information captured on GSTN. “We will presumably get much faster data. But let’s see how it comes out.” Touted as the biggest taxation reform since the Independence, GST will create a uniform market in the country and is expected to boost GDP growth by about 2 per cent besides checking tax evasion. The powerful GST Council, comprising Centre and states has recommended a four-tier tax structure — 5, 12, 18 and 28 per cent for goods and services.On top of the highest slab, a cess will be imposed on luxury and demerit goods to compensate the states for revenue loss in the first five years of GST implementation. All states have agreed to the GST rollout from July 1.
Foreign investors have pumped $4.2 billion in the country’s capital market in May due to finalisation of GST rates for bulk of the items and prediction of a normal monsoon. Interestingly, most of the funds have been invested in the debt markets by the foreign portfolio investors (FPIs). “The differential spread between 10-year bond yields in the US and India is still around 4.5-5 per cent, this, coupled with stable outlook for the Indian currency bodes well for FPI flows into debt market,” Sharekhan Head Advisory Hemang Jani said. According to latest depository data, FPIs invested a net Rs 7,711 crore in equities last month, while they poured Rs 19,155 crore in the debt markets during the period under review, translating into a net inflow of Rs 26,866 crore ($4.2 billion).This comes following a net inflow of close to Rs 94,900 crore in the last three months (February-April) on several factors, including expectations that BJP’s victory in recently held assembly polls will accelerate the pace of reforms. Prior to that, such investors had pulled out over Rs 3,496 crore from debt markets in January. “FPIs sold into Indian equities in the first few days of May. It was only in the second week that they started buying. The most prominent reason is expectation from the government that it would speed up development and economic reforms in their last two years in office before going for elections in 2019.“The government finalising GST rates and expectation that it will be rolled out on time, in addition to forecast of normal monsoon also led to positive sentiments,” Himanshu Srivastava, Senior Analyst Manager Research at Morningstar India said. Going forward, there are few challenges but not strong enough to disrupt the current trend. Markets and the rupee are surging higher, which offer a good profit booking opportunity for FPIs. They did that in April and they can again use this opportunity to book profits going forward. “The flow is largely driven by expectation, and for the flows to sustain, the government has to meet those expectation. Monsoon will be another thing to watch out for as it tends to have big economic implications,” he added. With the latest inflow, total investment in capital markets (equity and debt) has reached Rs 1.21 lakh crore this year.