2. Content:
US POLICIES AND ITS EFFECT ON INDIAN
BUSINESS
BREXIT AND ITS IMPACT ON INDIAN BUSINESS.
INDO-CHINA POLICIES.
3. WHAT IS A FOREIGN POLICY
Foreign policy consists of self interest strategies
chosen by the state to safeguard its national interests
and to achieve goals.
It is also called “Foreign Relations” or “Foreign affairs
policy”.
Creating Foreign Policy is the job of the head of
Government and the foreign minister.
4. Effect of US Policy on Indian
Business
The trump administration has a two part strategy for
stimulating stronger growth in the future.
1. reduce government regulations that discourage
business activity .
2. to reform the tax system to encourage business
investment.
5. Corporate Tax Reform
The core of the corporate tax reform is to lower the tax
rate on corporate profits from 35% to 15% ,the highest
rate among industrial countries - to approximately half
that level.
The lower corporate tax rate will attract capital from
non corporate uses in housing and other activities that
contribute less to overall GDP growth.
6. Border Adjustment Tax
It’s a VAT like tax on imports.
Features
1. If an American business pays to foreigners it is going
to be non deductible.
2. If an American business exports, the income from it
is non-taxable.
Border Adjustment Tax may have a devastating
implication for India, especially its IT sector.
7. Reforms in the H-1B visa
H1B visa is an employment-based, non-immigrant visa
category for temporary workers. An employer must
offer a job and apply for your H1B visa petition with the
US Immigration Department.
Proposed changes to H-1B visa norms
1. Doubling minimum salaries of H-1B visa holders to
$130,000.
2. Prohibit spouses of H-1B visa holders from working
in the US.
8. 3. Crack down on outsourcing companies that import
workers for temporary training and then send them
back home to do the same job.
4. Remove ‘per country’ cap for employment visas to
ensure equal distribution.
5. Firms hiring H-1B visa holders need to make a “good
faith” effort to recruit Americans first.
9. How does this affect India?
The biggest beneficiaries of H-1B visas are Indians,
followed by the Chinese. In 2014, 70% of total H-1B
petitions approved were from Indians.
Indian outsourcing firms such as Infosys, Wipro, Tata
Consultancy Services will be badly hit. In reaction to
the news, , stock prices of information technology
companies fell by 9%.
10. Brexit is a commonly used
term for the United Kingdom's
planned withdrawal from the
European Union.
11. The UK's decision on June 23, 2016 referendum
to leave the European Union (EU).
13. MACRO VIEW
o Lower growth and a weaker currency are likely to
impact businesses in India.
o Short-term impact on several Indian businesses across
sectors.
o If the UK becomes a member of the European
Economic Area (EEA), like Norway, it could be
advantageous for India in terms of trade.
14. Contd.
Trade between India and the EU through the UK could
be hampered.
o If the UK and India finalise a free trade agreement, it
will boost trade.
15.
16. SECTORAL IMPACT
Automobiles
• The UK and the EU account for 4% and 16% of India's
automobiles exports.
• accessibility to the single market is important.
17. Travel & Tourism
• The travel and tourism sector will be affected by
the Brexit developments, as it is directly affected by
currency fluctuations.
• Travel to the UK could get a boost, as the British
economy gains competitiveness via a weaker currency.
But, it also means fewer British tourists in India and
lower spending.
18. Pharmaceutical
• India's pharmaceutical sector has significant exposure
to the UK and the EU, with exports of $0.46 billion to
the UK and $1.51 billion to the EU.
• A drop in demand in the UK and the EU will impact
profits and sales
19. Garment Exports
• Garment exports accounted for a fifth of India's
exports to the UK.
• Indian garment exporters have already witnessed a 5%
drop in demand last year, and could see lower sales due
to a slowdown in growth.
20. Precious stones
• Trade in precious metals and stones between the UK
and India amounted to about $2 billion in FY16.
• A weaker pound will make imports cheaper
21. o Effect on the gold market
• Britain's decision to leave the EU has forced many to sell
their risky assets and rush towards safe haven
investment option like Gold. Gold prices in India had
breached Rs 31,000 per 10-gram level.
22. LIKELY SCENARIO: POST BREXIT
• Scenario 1: EEA, formed in 1994, serves as a bloc that gives
non-members of the EU access to the single market
Implications for India: Indian businesses are expected to
remain largely unaffected.
• Scenario 2: Does not come under EU but has a sequence of
bilateral treaties governing their relationship
Implications for India: Access to single market remains
but with some restrictions.
23. • Scenario 3: The UK's relations with EU and rest of the
world to be governed by WTO rules
Implications for India: India-EU trade through the
UK could be hampered.
• Scenario 4: Similar to what Canada is negotiating
with the UK - preferential access, with elimination of
most trade tariffs.
Implications for India: India could still be able to
use it as a gateway to the EU and India would be able
to negotiate a separate trade deal with the UK
24. INDIA-CHINA TRADE
o Bilateral trade between India and China touched $65 bn
in FY16.
o India's trade deficit with China mounted to a
whopping $46.56 billion last year as Indian exports
continued to decline.
25. Contd.
India has a double taxation treaty with China
Indian exports are expected to reach $30 bn in next ten
years.
26. • The overall trade between the two countries in 2015
touched $71.64 registering a marginal increase
compared to $70.59 in 2014.
• As per the data from Chinese customs, The trade
deficit has mounted to $46.56 billion in 2016 from
$44.87 billion in 2015.
27. EXPORTS
• Cotton: $3.2 billion
• Gems, precious metals, coins: $2.5 billion
• Copper: $2.3 billion
• Ores, slag, ash: $1.3 billion
• Organic chemicals: $1.1 billion
• Salt, sulphur, stone, cement: $958.7 million
• Machines, engines, pumps: $639.7lmillion
• Plastics: $499.7 million
• Electronic equipment: $440 million
• Other Raw hides excluding furskin: $432.7 million
29. RCEP
• Regional Comprehensive Economic Partnership
(RCEP) , that would allow Chinese-made products to
enter the Indian market with tariff concessions.
• RCEP is a 16-nation trade pact that includes the
Association of Southeast Asian Nations (ASEAN),
along with China, Australia, India, Japan, South Korea
and New Zealand, a region that accounts for 46 per
cent of the world's population and that produced
nearly 30 per cent of global GDP in 2016.