Page 37 - DIY Magazine June 2018

It will take a while for GST to be fully implemented, and a number of adjustments are still being made, but we believe the long-term benefits of this landmark reform are likely to be significant and far reaching.
Business should shift from the informal sector towards businesses that are already tax compliant, resulting in an increase in tax takings for the government. Logistics should also become more efficient, as taxes no longer need to be paid between states. While companies may see some benefit from lower logistics costs, we think most of the savings will be passed onto consumers, which should reduce inflation.
2018: INDIA STACK – THE LARGEST OPEN API IN THE WORLD
Implementation of India Stack is now well underway. It is the largest open Application Programme Interface (API) in the world6 , combining infrastructure for biometric identification (through Aadhaar) with digital lockers, e-signatures, digital payments and e-KYC (Know Your Customer).
India Stack is made up of four layers, each of
which performs a basic function and can operate independently: the consent layer (permission), the cashless layer (financial transactions), the paperless layer (documents) and the presence-less layer (authentication made possible anywhere).
We believe that India Stack will have positive implications for people at all income levels. It boosts financial inclusion for the lowest income citizens, and improves access to benefits. Wealthier citizens should also stand to benefit, as India Stack makes it easier to do business and should also lead to greater productivity levels. Finally, it provides a massive opportunity for companies to reach the masses, as it allows people to innovate using the comprehensive set of APIs, without the burden of upfront costs.
LOOKING FORWARD
The modernisation and reforms of Prime Minister Modi’s administration are helping to lay the foundation for strong growth in India.
Despite the disruption caused by some of the most recent events, such as demonetisation and the introduction of the Goods & Services Tax, the Indian
economy is expected to grow at around 6.5% this financial year7 , and at more than 8% next financial year (to 31 March 2019)8 .
This year’s fiscal deficit is estimated to be higher than originally expected at 3.5% of GDP, but we note that this year’s implementation of GST resulted in only 11 months of indirect taxes being collected, and the fiscal deficit is expected to reduce to 3.3% during the next financial year8 .
While it is likely that the recent series of major economic reforms will remain disruptive to India’s economy for at least the first half of 2018, we see significant benefits from digitisation and the ongoing economic reforms in India, and we are positive both on the long-term trajectory of the Indian economy and on the profitability of Indian businesses held in the fund.
JUPITER INDIA FUND
1 https://www.forbes.com/sites/oliviergarret/2017/06/28/ india-is-likely-to- become-the-first-digital-cashlesssociety/#4a9e7c843c80
2 https://portal.uidai.gov.in/uidwebportal/dashboard.do
3 https://economictimes.indiatimes.com/news/politics-andnation/dbt- payments-cross-rs-1-lakh-crore-in-17-18-govtmay-declare-savings-of-rs- 75000-crore/ articleshow/62826784.cms
4 http://www.business-standard.com/article/pti-stories/ nearly-87-crore-bank- accounts-seeded-withaadhaar-118030400394_1.html
5 Source: Citi, India Economics View, ‘The Demonetization Project – Macro and Market Implications’, 15 November 2016
6 Forbes website, 09.04.2017
7 Source: https://www.ft.com/content/67a84f31-a26b33c3-8b26- 822e3a0f1249
8 Source: India Union Budget 2018-19, http://www. indiabudget.gov.in/ub2018- 19/bs/bs.pdf
37 DIY Investor Magazine | Jun 2018