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Benefits of GST in India

Benefits of Gst In India

The Goods and Service Tax (GST) was brought into force in July 2017 with the objective of bringing uniformity in the taxes on goods and services replacing multiple indirect taxes viz.

Excise Duty, Service Tax, VAT which were levied at different stages of the supply chain. GST is anticipated to be a positive move towards building a more transparent tax structure offering greater ease of doing business in India.

The system of mapping a corresponding input credit against taxes already paid is expected to reduce the end price of the product/service to the consumer and facilitating greater availability of cash for business operations.

Uniformity in taxes will also simplify the movement of goods across states in India – a great boost for businesses targeting pan-India presence. GST aims to remove the cascading effect of indirect taxes by simplifying and unifying tax systems.

The system will align India with international standards of Taxation easing out sales in global markets alongside reducing the costs associated with collecting multiple taxes- thus increasing government’s revenue collections.

This move is expected to benefit the government not only with greater revenues but also increasing voluntary registrations for GST.

There has been a 50% increase in the number of indirect tax payers in India. The complexity of tax compliance has also boiled down to filing through a single platform.  The Ministry of Finance revealed that 1 crore tax payers have been registered under total revenue collections under GST as of January 2018.

India GST advantage Anakeen Business Networks

Just as any a new system temporarily disrupts the existing equilibrium; the enforcement of GST has had its own impact on businesses due to lack of awareness of the rules, provisions and processes.

The introduction of GST during the course of the financial year created confusion in moving to the new system.

It also increased the cost of compliance (accounting software etc.) with changing rates on different goods in the short run.

The GST revenue which is shared with state governments has also resulting in loss of revenue for some state governments.

However, the GDP growth rate of 6.3% in the second quarter of the current financial year signals a recovery from the three-year low of 5.7% in the first quarter.

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Defence Sector of India – An Overview

Defence Sector of India - Anakeen Business Networks


Defence Sector of India has experienced a vast Growth in past 5 years. India has the third largest armed forces in the world which also reflects in its budget – ranked fourth after US, China and UK. This year, the government proposed a total budget allocation of INR 2,74,114 crores for FY 2018 which was up 6.2% from INR 2,58,589 crores allocated last year. Despite the increase in allocation, the growth of capital expenditure for the year stood at 0.3% as a significant share of the pool went towards funding revenue expenses that have grown 8.83% from previous year. The table below highlights how the defence budget is broken into sub-categories and how these numbers have changed over the years.

Particulars (INR cr)FY14FY15FY16FY17FY18
Defence Budget            2,03,449.00            2,22,370.00            2,30,125.00            2,58,589.00            2,74,114.00
Growth (y-o-y)12.0%9.0%3.5%12.4%6.2%
Revenue Expenditure            1,24,799.00            1,40,404.00            1,48,561.00            1,72,401.00            1,87,626.00
Growth (y-o-y)12.15%7.70%5.81%16.05%8.83%
Share of Revenue Expenditure in Defence Budget61.27%60.01%64.54%66.67%68.44%
Capital Expenditure               78,872.23               81,965.20               81,564.17               86,188.09               86,488.01
Growth (y-o-y)11.88%4%-0.49%5.67%0.30%
Share of Capital Expenditure

in Defence Budget



A major share of defence related capital requirements are met by imports and has been a key area of interest for the government to work on import substitution by bringing world-class technology to India and making it locally.  Favourable government policies and frameworks for local manufacturing have taken shape over the years with foreign companies getting into strategic collaborations with Indian manufacturers.

Some of these foreign companies include Airbus (France), BAE India Systems (UK), Pilatus (Switzerland), Lockheed Martin (USA), Boeing India (USA), Raytheon (USA), Israel Aerospace Industries (Israel), Rafael Advanced Defense Systems Ltd. (Israel) and Dassault Aviation SA (France).

FDI Policy for Investing in Defence

  • 100% FDI in defence sector: Up to 49% under automatic route; FDI above 49%, through Government route where it is likely to result in access to modern technology.
  • The defence industry is subject to industrial licenses under the Industries (Development and Regulation) Act, 1951 and manufacturing of small arms ammunition under Arms Act , 1959
  • The requirement of single largest Indian ownership of 51% of equity removed.
  • A lock-in period of three years on equity transfer has been done-away with in FDI for defence.
  • FDI in the defence sector is subject to other security conditions.


Sector Policy

1. Procurement Policy:

  • The defence procurement is governed by the Defence Procurement Procedure (DPP 2016).
  • Latest revision of DPP was released in March 2016.

2. Offset Policy:

  • The key objective of the defence offset policy is to leverage capital acquisitions to develop the domestic defence industry. Mandatory offset requirements of a minimum of 30% for procurement of defence equipment in excess of USD 307.69 million have been envisaged.

3. Procedures for the Grant of Industrial Licenses have been streamlined:

  • The initial validity period of industrial licenses has been increased from 3 years to 15 years with a provision to grant extension for a period of 3 years.
  • Guidelines for the extension of validity of industrial licenses have been issued.
  • Partial commencement of production is treated as commencement of production of all the items included in the license.

According to a leading newspaper, the government seeks to make India self-reliance by indigenization and technology upgradation in partnership with foreign companies.


The government identified 12 military platforms and weapons systems for production in India to achieve the aim of “self-reliance”.

They are fighter aircraft, medium lift and utility helicopters, warships, land combat vehicles, missile systems, gun systems, small arms, ammunition and explosives, surveillance systems, electronic warfare (EW) systems.

Despite efforts on making defense equipment available in India with International collaborations and support, we still lag behind significantly due to shortage and delays in acquisition of weapons as sited in a news report published by Economic Times. The army needs basic items like assault rifles as well as high-end anti-aircraft missile systems. There are enormous delays in the acquisition processes for these. There’s also a concern about ammunition supplies. Army insiders said at the current levels of supply, India can sustain an all-fronts war for just four days. New orders have been issued and India should be in a far better position, they said.

Interestingly, six of the top 10 largest arms importers in the period 2011-15 are in Asia and Oceania.

India tops the list with 14 per cent of global arms imports. China ranks second with 4.7 per cent, Australia (3.6 per cent), Pakistan (3.3 per cent), Vietnam (2.9 per cent) and South Korea (2.6 per cent).

“A major reason for the high level of imports is that India’s arms industry has so far largely failed to produce competitive indigenously-designed weapons,” it claimed.

The 10 largest importers of major arms and their main suppliers, 2013–17

10 Largest Importers of Arms & Suppliers - Anakeen

Note: Percentage of total is rounded to 1 decimal place (except for percentages over 10 which are rounded to whole numbers).



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Current Indian Economy Overview

Indian Economy - Anakeen Business Networks

Good news is underway for Indian Economy as India has emerged as the fastest growing major economy in the world as per the Central Statistics Organisation (CSO) and International Monetary Fund (IMF) and further, as the short term disruptions caused by major reforms such as the Goods and Services Tax (GST) and demonetization recede, the economy is on the rebound and is likely to achieve higher growth targets.

India’s GDP is estimated to have increased 6.6 per cent in 2017-18 and is expected to grow 7.3 per cent in 2018-19. India’s gross domestic product (GDP) at constant prices grew by 7.2 per cent in September-December 2017 quarter as per the Central Statistics Organisation (CSO).

Sectoral Growth : Overview

According to the CSO, sectors that are expected to grow at a higher pace in FY 2018 relative to the advance estimates include mining, quarrying, manufacturing, construction, trade hotels, financial, real estate and professional services.

The agricultural sector registered moderate growth as erratic monsoon in several parts and flooding in some states impacted performance. The economy saw high inflation during October 2017 owing to elevated food prices. Going forward, this is likely to be contained on account of a good harvest and favourable monsoons.

Industrial growth accelerated sharply during the second quarter of FY 2018 and jumped to 6.9% from 1.5% in the previous quarter, on account of a sharp increase in manufacturing and electricity, gas, water supply and utility services. Manufacturing registered an impressive growth at 7% in 2QFY18 as compared to 1.2% posted in the first quarter.

Services sector grew only marginally at 6.6% in the second quarter as compared to 7.8% in the previous quarter.

The strong emphasis on ease of doing business, where India has improved 42 ranks has now impact on the ground. Starting a business, paying taxes, trade facilitation and obtaining permits are being emphatically taken up. CII highlighted that with active participation of state governments, a facilitative investment climate is evolving. India has retained its position as the third largest startup base in the world with over 4,750 technology startups, with about 1,400 new start-ups being founded in 2016, according to a report by NASSCOM.

graph - Indian Economy - Anakeen Business Networks

Source: CII

Union Budget 2018 – 19 : Policies to Uplift the Economy

  • Agriculture Sector– The government is committed towards doubling the farmers’ income by 2022. A total of Rs 14.34 lakh crore will be spent for creation of livelihood and infrastructure in rural areas.
  • Health and Education – Budgeted expenditure on health, education and social protection for 2018-19 is Rs 1.38 lakh crore which is expected to increase by Rs 15,000 crore. The world’s largest government funded health care programme will be launched which will cover over 10 million poor families with a coverage of up to Rs 5 lakh.
  • Employment – As per an independent study conducted, over 7 million formal jobs will be created in the country during 2018-19. The Government of India will contribute 12 per cent of the wages of the new employees in the Employees’ Provident Fund for all the sectors in the next three years.
  • Infrastructure – Investments in excess of Rs 50 lakh crore are required in the country’s infrastructure to increase the growth of GDP and connect and integrate country’s transport network. Budgetary allocation for infrastructure is set at Rs 5.97 lakh crore for 2018-19.


A FY 2018 budget skewed to benefit rural incomes should also boost private consumption. Nonetheless, risks of fiscal slippage, concerns over India’s banking sector and higher oil prices cloud prospect.

The World Bank said key risks to India are domestic in nature such as setbacks to reforms to resolve corporate and financial sector balance sheet deterioration and debt write-offs for farmers. “Corporate debt overhangs and high levels of non-performing loans have been long-standing concerns in some countries (e.g. Bangladesh, India). Setbacks in efforts to resolve these domestic bottlenecks would continue to weigh on investment, and more broadly on medium-term growth prospects in the region,” it added.  The World Bank said strong private consumption and services are expected to continue to support economic activity.

Inflationary pressures also remain a concern. Though food prices are likely to be contained on account of favourable monsoons, caution must be exercised as upside risks still remain in the form of implementation of farm loan waiver and 7th Pay Commission hand-outs.

The economy benefitted from increased foreign inflows during the latter half of 2017. While this is good news, efforts to contain further appreciation of the rupee should be in place as further strengthening may affect exports and job creation.

Other challenges for the economy include addressing infrastructural bottlenecks in the agricultural sector, investment in human resources to leverage the demographic dividend, increasing expenditure on education and healthcare sectors, and social security provision for the unorganized sector.


Inspite of facing so many challenges the economic visage is not so bleak as they say every cloud has a silver lining so is the view point of the experts regarding future of Indian economy.

With on-going reforms that are beginning to positively impact the economy, CII is optimistic about Indian growth prospects in 2018. At the same time, policymakers need to be watchful and address the current macroeconomic challenges for a sustainable and fruitful recovery.

“In all likelihood, India is going to register higher growth rate than other major emerging market economies in the next decade. So, I wouldn’t focus on the short-term numbers. I would look at the big picture for India and big picture is telling us that it has enormous potential,” Ayhan Kose, director, development prospects group, World Bank, told PTI in an interview.

India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and expenditure pattern, according to a Boston Consulting Group (BCG) report; and is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by the year 2040, according to a report by PricewaterhouseCoopers.

References : IBEF, CII, News reports.