Leading the Field: India's Position in the Growth Market Group

Junaid Ahmad of the World Bank forecast a stunning GDP growth for India of 7.2% over the coming year, and he didn’t find it hard to explain why: “India remains the fastest growing economy in the world and it will get a big boost from its approach to GST which will reduce the cost of doing business for firms, reduce logistics costs of moving goods across states, while ensuring no loss in equity”. No wonder then that Red Ribbon Asset Management continues to look to India as its key market, with the potential it has to generate solid returns for investors in one of the most innovative and fastest growing markets in the world. And the Goods and Services Tax (GST), referred to by Junaid Ahmad in his Report, is only likely to strengthen those trends; having the potential that it does to eliminate the existing conflicting taxation structures across the subcontinent and allow a more seamless and certain passage of goods and services. It is, shortly put, the most revolutionary tax-related reform to be seen in India since Independence and it is likely to have the most profound impact on India's future.

That’s why the World Bank couldn’t fail but to draw attention to the new tax in its Report last month. The new (indirect) tax will cover all goods and services and will also improve India’s notoriously unpredictable tax collection systems (making it in many ways the more attractive sister to Prime Minister Modi’s controversial Demonetisation Program implemented last year). Tax collection can be expected to become easier, administered (like VAT) through retailers; and in addition, overall taxation levels will be rendered more moderate. One could be forgiven for jumping to the conclusion that everybody wins.

And in a way they do.

Bear in mind that the World Bank’s projection was made on the back of an uncertain global environment, a rising tide of protectionism and a sharp slowdown in the Chinese economy that must inevitably be expected to hamper global demand. Projecting a growth in GDP in those circumstances at anything more than 7% is something of a miracle in itself. Prime Minister Modi’s Government will inevitably also see projected growth on this scale, coupled with an improved tax collection regime, as an essential underpinning for its ambitious infrastructure programme (which is itself an essential foundation for future further growth as part of a rolling virtuous circle) Agiven the scale of the overall investment needed to overcome current global challenges, it is essential that infrastructure investment on the scale currently being embarked on by the Indian Government is seen to be creating a climate for returns at competitive rates; underlying economic growth, coupled with a broadly neutral tax regime will be likely to underpin that objective.  That mirrors the key focus of Mainstream Impact Investment: well-governed businesses operating in the mainstream markets and securing returns at competitive rates; business models that profit by reducing negative impacts of the value they create, not in-spite of the fact that they do.

That’s why Red Ribbon Fund Management places Mainstream Impact Investment at the heart of its portfolio strategies.

Read the World Bank Report on India here: www.worldbank.org/en/country/india

Read about the Goods and Services Tax here: finmin.nic.in/gst/index.asp

Read about Red Ribbon Asset Management here: https://redribbon.co/

Read about Mainstream Impact Investment here: eports.weforum.org/impact-investment/