Why India is still on track
As Philip Hammond is about to find out, the end for any Chancellor of the Exchequer is rarely other than nasty, sharp and brutal. When Hugh Dalton was sacked for leaking budget information to the Standard (of all papers), Clement Attlee got rid of the grand old man of the party with a shrugged “not up to the job”. And when Norman Lamont went prematurely French while sterling crashed out of the ERM in 1992, he quickly found out that far from having “rien” to worry about he actually had plenty to “regrette”. He was out on his ear in days. So the lengthening shadow of Boris outside Downing Street is, indeed, plenty for Mr Hammond to worry about.
Of course politics on the subcontinent can be equally nasty and brutish and we saw some of that in this year’s election, but India’s Prime Minister hasn’t had a Chancellor of the Exchequer to kick out since 1947 (a certain Hugh Dalton as it happened, ironically enough) and nowadays Nardendra Modi doesn’t even have to drive to the Palace so think of the savings in petrol. In truth, India’s State Finance structures have changed beyond all recognition since the Raj retreated to Whitehall.
For a start, The Chancellor of the Exchequer is now the Finance Minister and he is now a she. The redoubtable Nirmala Sitharaman ditched the colonial red box in favour of a red “bahi-khati” or “ledger book”, which sounds a much more professional accessory for this very modern Minister, tasked with stewarding the finances of the world’s fastest growing large economy. The Chief Economic Adviser, Krishnamurthy Subramanian, went even further, claiming the new look ledger symbolises India’s “departure from the slavery of Western thought”.
And the first Union Budget of the new Modi Administration wasn’t short on radical departures either.
Looking to kick start a growth rate of 7% GDP that Philip Hammond would die for, the Finance Minister has introduced cuts in corporate tax rates, provided improved support for digital payment systems (that will make life easier for small businesses) and additional tax breaks for the Real Estate sector.
That last one, Real Estate, has of course become something of a totemic theme for Modi’s Government and there will now be a slew of new tax incentives as part of the Affordable Housing Programme: additional interest deductions on loan payments, stamp duty breaks, a realignment of the definition of “affordable housing” itself to conform with GST and income tax legislation and a new model Tenancy Law to encourage rentals. Conditions relating to tax exemptions for long-term capital gains on property have also been relaxed…and the list goes on…
So it’s obvious if only from the focus given to it in the Budget, that Prime Minister Modi’s Government will continue to pay close attention to the subcontinent’s real estate markets for the foreseeable future: given the exponential growth and increasing urbanisation of India’s population that’s certainly not a surprise, with these trends only likely to increase in significance over the coming years it’s hardly an area the Government can afford to ignore.
And unlike India’s last Chancellor of the Exchequer, Nirmala Sitharaman has shown on her first major public outing in the role that she’s certainly up to the job…
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I was pleased to read the terms of the Union Budget that struck me as setting exactly the right tone for the new Administration: continuing where they left off before this year’s elections and with an added focus on critical areas like housing and real estate generally. I feel sure that with this drive and determination the new Modi Government will be more than capable of rising to meet the challenges and opportunities the subcontinent’s real estate sector has to offer.
Here at Red Ribbon we’ll certainly be keeping a close eye on what comes next…