India Economic Update
Milind S. Kothari
Managing Partner
BDO India

While the world copes with the winter of the economic cycle, the Indian economy continues to go from strength to strength, with several of the macroeconomic parameters showing resilience and robustness that are warmly welcome.

The predominant high-frequency indicator, the GDP, has shown promising growth of over 7% in the past two quarters despite global headwinds to the contrary. Another parameter, the foreign exchange reserves, continue to be in the comfort zone, hovering over USD 620bn.

However, mirroring the global trend of decline in Foreign Direct Investment (FDI) that decreased by 12% overall, India also witnessed a drop of nearly 16%, although the overall inflows were USD 71bn. But the surprise was that India's stock market crossed USD 4.33tn, now becoming the fourth biggest equity market globally for the first time, overtaking that of Hong Kong - now at USD 4.29tn. Even with reforms slowed down owing to the impending elections, India’s relevance in the global scenario continues to dominate discussions. In the recently concluded Davos summit, India’s recognition as a favoured destination of investment was re-emphasised against the backdrop of impressive spending on public infrastructure.

The reset of the relevance of China in the global economic outlook bodes well for India. The consensus thinking is that the Indian economy will gain from supply chain diversification away from China, while strong domestic markets will provide support to weather global headwinds, riding on the advantage that two-thirds of the economy is consumer-oriented. The story of the economic transformation in India continues unabated.

One of the silent transformations that have taken place over the past decade and more is the arrival of captives, or Global Capability Centres (GCCs) in India that provide round-the-clock support to MNCs. With the slowdown witnessed by the thriving IT sector in India, the GCCs are adding to the headcount fervently, with more than 3,50,000 jobs added in just last year, bringing the total headcount to more than 1.6 million professionals. With nearly 1,600 GCCs already in operation, the promise of the sector continues to rise, with multi-fold growth expected in the next decade.

Another transformation under intense Governmental focus is the Gujarat International Finance Tec-City (GIFT City), India’s first International Finance Centre (IFC), set up a decade ago, conceptualised on the lines of the IFC of Singapore and Dubai. While it started as a state initiative of Gujarat in 2007, it is now being helmed by the Government of India (notified in 2015) and has taken centre stage with more policy and regulatory clarity on its operating model. The ambition of the regulator, the International Financial Services Centres Authority (IFSCA), is to make GIFT City a global financial destination. With the multitude of policy reforms, the target of the regulator is to relocate Indian businesses located overseas.

Blessed by Prime Minister Mr Narendra Modi, it is expected to set new benchmarks for innovation, efficiency, and global collaboration. Business entities set up in the GIFT City are eligible for a free trade area that provides financial services in foreign currency, 100% tax exemption for ten years with concessions thrown in the application of several central and state duties. However, the physical infrastructure and connectivity need significant improvement backed by several policy changes in the offing, such as direct listing by companies. GIFT City should provide an answer for a funding gap of USD10.1tn to honour its net-zero-emissions commitment by 2070. Another interesting target segment for relocation is to enable ships with foreign flags to operate from GIFT City.

Artificial Intelligence (AI) regulations would need to be in place as the world embraces it in the coming years across all activities. Undoubtedly, AI is likely to become a major growth area, and India will play an important role in the future; restricting misuse of AI and the possible havoc it may end up with will become a high priority. A policy framework that facilitates innovation and limits potential risks would be needed. A hybrid between a laissez-faire versus a heavier approach would be ideal.

As the present Government serves the last leg of its second consecutive five-year mandate, the Government is likely to come back for a third successive term with an agenda of several small process reforms alongside reforms in the administrative bureaucracy as well as in the judicial system. For now, the stage is set for the summer of 2024, when the elections in one of the world’s largest economies will take place and set the pace for the next five years!

M & A Tracker
Rajesh Thakkar
Partner and Leader

M&A Tax and Regulatory

Deal Advisory Services

M&A in India

Between 30 November 2023 and 29 January 2024, around 114 M&A deals were announced, of which 44 were closed. The aggregate value of deals announced is USD 6,224.16mn; dominated by 95 domestic deals (USD 5,451.99mn) and 19 cross-border deals (USD 772.17mn).

In terms of sectors (considering only closed deals), the Consumer Discretionary sector saw deals worth USD 127.29mn, followed by the Industrials sector with deals worth USD 51.92mn and the Information Technology sector with deals worth USD 15.8mn.

Significant deals closed between 30 November 2023 and 29 January 2024

Target Company
Pinnacle Mobility Solutions Private Limited
Acquiring Company
Mitsui and Co., Limited, VDL Group
Deal Value (in mn USD)
Consumer Discretionary
  • Mitsui and Co., Limited (Mitsui) and VDL Group invested USD 100mn (INR 8.32bn) in Pinnacle Mobility Solutions Private Limited (Pinnacle Mobility) for a minority stake.
  • As part of the transaction, VDL Bus & Coach (a subsidiary of VDL Group) will support Pinnacle Mobility by transferring technology to produce electric buses for the Indian market. Mitsui, on its part, would extend support to Pinnacle Mobility for exports to select emerging markets as well as in the establishment of systems and processes.
Target Company
PNP Maritime Services Private Limited
Acquiring Company
JSW Dharamtar Port Private Limited
Deal Value (in mn USD)
  • JSW Infrastructure Limited, via its subsidiary JSW Dharamatar Port Private Limited (JSW Dharamatar Port), entered into a share purchase agreement and acquired a 50% stake in PNP Maritime Services Private Limited (PNP Maritime Services) for USD 32.45mn (INR 2.7bn) from SP Port Maintenance Private Limited in an all-cash deal.
  • As a part of the transaction, JSW Dharamatar Port acquired 10,00,001 equity shares, representing 50% plus one share of PNP Maritime Services.
  • After the transaction, PNP Maritime Services would operate as a subsidiary of JSW Dharamatar Port.
Target Company
Jumbo Tours Group, Online Business
Acquiring Company
TBO Tek Limited
Deal Value (in mn USD)
Consumer Discretionary
  • TBO Tek Limited (TBO), via its subsidiary Tek Travels DMCC, acquired the online business of Jumbo Tours Group (Jumbo) for USD 27.29mn (INR 2.27bn).
  • The acquisition would give TBO access to great supply across Europe, the Caribbean and North America, among other destinations, along with Jumbo's extensive client portfolio across Europe.
  • As a part of the transaction, Mustafa Korkmaz and Anurag Aggarwal will lead the Jumbo line as Chief Executive Officer and Chief Financial Officer.
  • After the transaction, Jumbo will operate under the ownership of TBO.
Target Company
Class 21A Technologies Private Limited
Acquiring Company
Allen Career Institute Private Limited
Deal Value (in mn USD)
Information Technology
  • Allen Career Institute Private Limited (Allen Career Institute) acquired Class 21A Technologies Private Limited (Class 21A Technologies) for USD 10mn (INR 0.83bn).
  • As a part of the transaction, the Class 21A Technologies team joined Allen Career Institute to build a world-class doubts platform for the future. Class 21A Technologies' team would continue with their focus on building doubts resolution experience for students of Allen Career Institute and Class 21A Technologies.
  • After the transaction, Class 21A Technologies would operate as a subsidiary of Allen Career Institute.

Significant deals announced between 30 November 2023 and 29 January 2024, but not closed

Target Company
ATC Telecom Infrastructure Private Limited
Acquiring Company
Data Infrastructure Trust
Deal Value (in mn USD)
Telecommunication Services
  • Data Infrastructure Trust entered into a securities purchase agreement to acquire ATC Telecom Infrastructure Private Limited (ATC Telecom Infrastructure) for USD 1,981mn (INR 165bn)
  • With this acquisition, Data Infrastructure Trust will look to expand and enhance its existing telecom tower portfolio in India. ATC Telecom Infrastructure will continue to retain the full economic benefits associated with the INR 16bn optionally convertible debentures issued to it by Vodafone Idea.
  • The transaction is expected to close in the second half of 2024, subject to regulatory, unitholders and government approval.
  • After the transaction, ATC Telecom Infrastructure will operate as a subsidiary of Data Infrastructure Trust.
Target Company
PNC Infratech Limited, 12 Road Assets
Acquiring Company
Highways Infrastructure Trust
Deal Value (in mn USD)
  • Highways Infrastructure Trust entered into a master securities purchase agreement to acquire 12 road assets of PNC Infratech Limited for USD 1,086mn (INR 90.06bn).
  • The closing of the transaction is subject to the fulfilment of certain regulatory, customary conditions, third-party approvals and regulatory approvals.
  • After the transaction, 12 SPVs of PNC Infratech Limited will operate under the ownership of Highways Infrastructure Trust.
Target Company
Capital Foods Private Limited
Acquiring Company
Tata Consumer Products Limited
Deal Value (in mn USD)
Consumer Staples
  • Tata Consumer Products Limited (Tata Consumer Products) entered into an agreement to acquire Capital Foods Private Limited (Capital Foods) for USD 613.95mn (INR 51bn), in a phased manner.
  • 75% of the equity shareholding will be acquired upfront and the balance 25% equity shareholding will be acquired within the next three years.
  • This acquisition will enable Tata Consumer Products to expand its product portfolio and further strengthen its pantry platform.
  • After the transaction, Capital Foods will operate as a subsidiary of Tata Consumer Products.
Feature Story
Jiger Saiya
Partner & Leader/ Tax & Regulatory Services

Interim Budget 2024: An inclusive outline with fiscal prudence and a long-term vision

Ahead of the upcoming general elections, the Indian Finance Minister (FM), Ms. Nirmala Sitharaman, presented an Interim Budget on 1 February 2024. During the budget speech, the FM outlined the progress made by the current Government over the past decade and laid out a vision for a developed India by 2047, the centennial year of Indian independence.

While presenting the budget, the FM emphasised that the Government is focused not only on achieving high growth in terms of Gross Domestic Product but also on a broader 'GDP', i.e., 'Governance, Development, and Performance’; she emphasised that the Government's highest priority is meeting the needs, aspirations, and welfare of the underprivileged, women, youth and farmers. She also announced that to boost Micro, Small, and Medium Enterprises (MSMEs) and improve global competitiveness, the Government will provide timely and adequate finances, relevant technologies, and appropriate training for MSMEs. She promised a conducive regulatory framework for MSMEs. The FM stressed on the spirit of ‘First Develop India’ while encouraging foreign direct investment by negotiating Bilateral Investment Treaties with foreign partners.

The Government has announced major outlays towards:

  • Research and innovation
  • Infrastructure development
  • Green energy, green growth, e-vehicle ecosystem and sustainability
  • Development of tourist centres
  • Housing for the middle class
  • Setting up of more medical colleges
  • Maternal and child healthcare
  • Startup and deeptech

There is a clear focus on capital outlay towards infrastructure growth, financial inclusion, sustainable development, job creation, enhanced public healthcare and promoting medium and small enterprises. The announced initiatives are likely to create significant business opportunities within the sectors and supporting sectors like services and technology.

On the tax front, as anticipated, the FM made no major changes or announcements. The tax rates are proposed to remain unchanged for the interim period till the new Government comes into effect.

Some of the income tax proposals include:

  • Extension by one year (until 31 March 2025) of the sunset timeline for certain tax benefits in relation to the International Financial Services Centre, Sovereign Wealth or Pension funds
  • Modifications to procedural provisions related to faceless assessments and appeals
  • Proposals to enact the promised provisions of tax collection at source on certain foreign remittances
  • The withdrawal of outstanding small tax demands for years up to FY 2014-15

Key proposals around indirect taxes include:

  • Input Service Distributor (ISD) mechanism to be made mandatory
  • Procedural mechanism for distribution to be included in CGST Rules
  • Special procedure for the registration of machines by manufacturers of certain pan masala/ tobacco products has been issued effective 1 April 2024. Amendments in relation to penalty and confiscation on failure to register

In this Interim Budget, the FM gave a pass to some highly anticipated measures including provisions enabling Base Erosion and Profit Shifting (BEPS) Pillar 2 - Global minimum tax; extension of sunset clause for setting up new manufacturing units enjoying a lower corporate tax; personal tax reliefs; and some other populist expectations.

Despite no major changes, the tax buoyancy is likely to continue on account of a thriving economy, past tax reforms, increased compliance, efficient administration, a wider tax base and rising taxpayer confidence.

Overall, the Budget proposals are expected to bring down the fiscal deficit to 5.1%.

Despite being an Interim Budget, it aligns with the path of long-term vision and fiscal prudence; and exudes a confident march towards a Viksit Bharat (Developed India) by 2047.

Guest Column
Dr. Shubhada Rao
Past Chairperson-Economics Committee, BCCI and Co-ChairEconomics Committee at ASSOCHAM
Founder - QuantEco

Imparting Growth Impulses Judiciously

The Interim Budget 2024-25 is the epitome of fiscal discipline. It strongly reinforces India’s macroeconomic stability at a time when the global economic environment remains jarred by a plethora of risks (war, geopolitics, deglobalisation, and slower growth). The complete miss of populist measures, with no tinkering of direct or indirect tax rates, underscored an intended smooth continuity of fiscal machinery until the newly elected government presents the full budget in July 2024.

Digging deeper, the fiscal math displayed credibility with realistic tax revenue assumptions, a tepid growth in revenue expenditure and a pull-back in the pace of capex in FY25 without compromising on the quality of public expenditure. This allowed the Government to target a bold fiscal consolidation of 70 bps, pegging the fiscal deficit to GDP at 5.1% for FY25. In turn, it enables the aim of lowering the fiscal deficit further to 4.5% by FY26 achievable.

From a sectoral perspective, the Government’s focus on hard infrastructure and inclusive growth was well-resonated in the Interim Budget. The Finance Minister (FM) announced the identification of three major economic rail corridors under the PM Gati Shakti program to improve logistics efficiency and reduce cost; the upgradation of 40,000 normal rail bogies to Vande Bharat standards; renewal of Pradhan Mantri Awas Yojana (PMAY) with a target of 20 million additional houses over the next five years; and an elevated outlay towards Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). In addition, the focus on green infrastructure will find some fillip with the proposed 100 MT capacity creation for coal gasification and liquefaction along with the adoption of e-buses for the public transport network. Further, a new scheme would be launched for strengthening deep technologies for defence purposes and expediting ‘atmanirbharta’ along with the creation of five Integrated Aquaparks.

The FM highlighted that 10 million households will obtain 300 units of free electricity per month through rooftop solarisation. This is expected to generate annualised household savings of INR 15000-18000. This dovetails with the Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyaan (PM KUSUM) scheme, which is doing a splendid job of promoting energy security through solar capacity creation in rural areas.

These announcements need to be seen in conjunction with the near three-fold increase in capex spending since FY19; unwavering focus on redistribution of resources to the vulnerable segments of farmers, poor, youth, and women; and efforts to create a sustainable manufacturing ecosystem over the last decade.

Accompanying the fiscal austerity, the gross government borrowings for FY25 were pegged at a 3-year low of INR 14.1tn (vs. INR 15.4tn in FY24) compared to the market consensus of INR 15-16tn. Notwithstanding the utilisation of some receipts from the GST compensation fund to lower the redemption pressures, the reduced supply is expected to be met with robust demand led by India’s inclusion in global EM bond indices later this year. This should free up lendable resources for the private sector, at a time when private capex turnaround appears imminent, hopefully at a lower rate. Another noteworthy move that warrants a mention is the newly announced corpus of INR 1tn that can be tapped at low or nil interest rates towards research and innovation by the private sector.

India’s economic recovery in the early post-pandemic phase was distinctly underscored by the strong performance of exports and domestic investments. While the former benefitted from the easing of global supply chains and a structural pick-up in services exports, the latter was a manifestation of the Government’s relentless capex push. The Interim Budget keeps the capex thrust for growth intact, while also paving the way for a broader capex recovery. This should allow India to retain its disposition as the fastest-growing large economy in 2024, a feat that is admirable in the current global context.

Expert Reel

Watch India’s Finance Minister Ms. Nirmala Sitharaman, as she discusses the policies announced in the Interim Budget 2024 in an exclusive interaction with Network 18 - One of the largest media conglomerates in India having successful strategic alliances with global media players such as Viacom, CNBC, CNN, A+E Networks and Forbes.


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