Combination of Abenomics and Modinomics can be big

Japan can play an important role in developing India’s infrastructure and in bringing India’s manufacturing sector into Asia’s cross-country supply chain, while India offers low costs, burgeoning markets and soon, the world’s largest population, says Nomura

There is a growing symbiotic relationship between India and Japan as both countries share large comparative advantages and are embarking upon significant market-opening reforms under Abenomics and Modinomics. "Japan, being a wealthy net creditor nation can be an important investor in India's much-needed infrastructure. Japan, by outsourcing production, can also play an instrumental role in bringing India into Asia's elaborate cross -country manufacturing supply chain, as it has done for so many other Asian countries over the decades," says Nomura in a research report.


Nomura said it believes that landslide victory by Prime Minister Narendra Modi, combined with Governor Raghuram Rajan at the helm of Reserve Bank of India (RBI), is a potential game changer for India, the world’s third-largest economy in terms of purchasing power parity. It says, "The current landscape offers the best opportunity India has had in decades to implement bold economic reforms and to put the inflation genie back in the lamp. India has so much untapped growth potential: from a young population and a budding middle class, to how much easier business would become if investment bottlenecks can be unclogged. It is not an exaggeration to say that India is set to be Asia's biggest turnaround story. We expect GDP growth to rise to about 6.5% in 2015 and to over 7% in 2016, marking a watershed year when India's economy likely starts to outpace that of China. Growth in India is largely domestic driven, which offers a huge pool of opportunity for investors."


About 1,000 Japanese companies operate in India – some have for many decades – and some brands command immense respect for being synonymous with high quality – for example, Honda and Suzuki in automobiles; Sony and Panasonic in electronic goods; Cannon, Ricoh and Nikon in optical instruments; Hitachi and Mitsubishi in capital goods.


Talking about India, the research note says, the RBI's inflation fight will go hand in hand with the proactive, business orientated Modi government’s strong mandate to cut red tape and jump-start supply-side reforms. "In our base case, we expect reforms to revitalise real investment growth to 10% per annum (pa), lifting potential output growth to around 7% in the next five years; if reforms are fast tracked, real investment could hit 15% pa, raising potential growth to above 8%. It is not an exaggeration to expect India to stand out as the biggest EM turnaround story in the next five years," Nomura said.


Japan and India signed a Comprehensive Economic Partnership Agreement (CEPA) which went into force in 2011, and to illuminate the potential, India’s accounts for only 1.2% of Japan’s total foreign direct investment (FDI) and 1.0% of Japan’s total trade.


The overseas production ratio for Japanese manufacturers was 20.6% in FY12, much higher than FY11’s 17.2%, but the FY18 forecast for the ratio is 25.5% –which would be the highest on record. Surveys of Japanese MNCs show that China is losing its attractiveness as an investment destination due to its rising labour costs, whereas India has moved up the rankings to now be Japan’s most attractive destination over the next decade, Nomura said.


Perhaps serendipitously, much of what India needs, Japan can offer. Engineering and construction companies can help with massive infrastructure projects such as the Delhi-Mumbai Industrial Corridor – the poster project of its sort. High-speed railway networks, roads, power generation and renewable energy are all areas where Japan can offer its cutting-edge technological know-how and expertise. Japan can bring India into Asia’s vertical manufacturing supply chain, as it has done for so many other Asian countries. As it happens, infrastructure-system exports are a key plank of Abenomics, looking to target 30 trillion yen of infrastructure-system orders in 2020 (a tripling from 10 trillion yen today).


A recent Nomura survey of Japanese institutional investors revealed that they too have a positive outlook on India’s financial markets, ranking India No1 among key EMs for investment potential. India offers opportunities for Japan to diversify its enormous financial assets (both public and private); Japanese households are have 1,630 trillion yen of funds, with just over half held in investable cash holdings and deposits, Nomura added.


Talking about India equities, Nomura said, despite its strong 25% gain over the past four months, it expect the Sensex to continue to outperform Asia ex-Japan and Global indexes in the quarters ahead. "We remain Overweight India in both contexts. Over the next five years, we expect the market to provide about 15% CAGR, driven initially by multiple expansion and then by earnings growth as economic growth picks up. Sector-wise, conditions favour those leveraged to a secular rebound in growth, such as financials, industrials and infrastructure," it added.


Mutual fund distributors earned Rs2,572 crore as commission in FY14

According to AMFI data 329 distributors earned Rs2,572 crore as commission from selling mutual fund schemes. Citibank leads the chart with Rs181.16 crore, while SBI earned just Rs29 crore as commission

Income earned by distributors from selling mutual fund (MF) schemes surged 9% to a staggering Rs2,572 crore in 2013-14, driven by improved market conditions, even as their number fell during the year.


According to latest data available with Association of Mutual Funds in India (AMFI), the total income earned by 329 distributors stood at Rs2,572 crore. Citibank topped the chart with highest commissions.


This was 9% higher than the total commission of Rs2,367 crore given by the fund houses to their 332 distributors during the fiscal year 2012-13.


Public sector banks, meanwhile, are far behind their private peers when it comes to selling MF products.


Interestingly, the top 10 distributors contributed about 47% of the overall commissioned earned in the past financial year. There were seven banks among the top-ten mutual fund distributors.


Market participants attributed the spike in commission to better capital market conditions in the past fiscal coupled with measures taken by SEBI for the benefit of the sector.


However, the year ahead is going to be tricky for the MF industry as the recent budget proposals may dealt a big blow to the sector, mainly on debt and gold oriented funds.


The Union Budget 2014-15 increased long-term capital gains tax on debt funds to 20% from 10%, and changed the definition of long-term for debt funds to 36 months from 12 months.


As per the latest disclosure of commission and expenses paid by various fund houses to their distributors, Citibank led the list earning a commission of Rs181.16 crore followed by HDFC Bank (Rs158.51 crore), NJ IndiaInvest (Rs149 crore) IIFL Wealth Management (Rs130 crore) and SPA Capital Services (Rs121 crore).


Besides, other among the top-ten commission earners - ICICI Bank (Rs118 crore), Kotak Mahindra Bank (Rs99 crore), Axis Bank (Rs94 crore), Standard Chartered Bank (Rs89 crore)and HSBC Bank (Rs83 crore).


As per AMFI data, State Bank of India (SBI), the largest lender, could manage to get a commission payment of Rs29 crore, followed by IDBI Bank (Rs9 crore), Union Bank of India (Rs6 crore), Canara Bank (Rs5 crore) and Bank of Baroda (Rs4 crore.)


AMFI discloses commissions of those MF distributors who meet any of the four criteria -- presence in at least 20 locations or manage assets of at least Rs100 crore, or should have received commissions worth a minimum of Rs1 crore from all MFs collectively, or received above Rs50 lakh from one fund house.




3 years ago

With the growth in the stock markets in the past year mutual funds have gained immensely.The distributors have made a lot in commissions.With the new rules in the debt sector threatening to derail the party distributors would lose a very lucrative sector which no longer yields tax benefits to the clients.


3 years ago

I guess we all need to find answers for the following questions if we want the mutual fund industry to serve its basic purpose i.e. to reach Indian masses.

If all the mutual fund distributors are making crores of commissions then why are thousands of mutual fund distributors leaving the industry?

If all the mutual fund distributors are making huge sums in commissions one would expect lakhs of mutual fund distributors in the country(similar to insurance industry), but why the number of active mutual fund distributors in the entire country is hardly around 5000?

Is the current payment structure (predominantly upfront commissions + small / negligible trail commissions) causing the balance to tilt towards big distributors?

We all know that higher upfront commissions induce churning and are detrimental to the client interest and the industry as well (due to the mistrust it creates). We also know that organized distributors are more prone to churning. But, do we know that higher upfront commissions and lower trail commissions penalize honest and small distributors who don’t move the assets quite frequently (because of the lower trail commissions of around 0.5% from the second year onwards)?

Raise your TDS grievances before the Standing Committee

CA Vimal Punmiya, who is member of the Committee, has promised to raise the grievances and suggestions from taxpayers on TDS during the meeting on 22nd July

In a proactive initiative, Chartered Account (CA) Vimal Punmiya, a member of the Standing Committee on tax deducted at source (TDS) is seeking people's feedback, suggestions and grievances that he has promised to raise during the Committee meeting on 22 July 2014.


TDS has been a pain in the neck for all middle class assesses and despite repeated representations, the government has not agreed to do away with the TDS, particularly in respect of bank deposits. As per the amendment to the Finance Act, senior citizens were not required to pay any advance tax before the close of the year, but need to pay appropriate tax, if liable, before filing the tax return. But this was only a half-hearted measure, as the government had not waived TDS even for senior citizens even though they are not required to pay advance tax, thereby putting them into great inconvenience. Moreover, the I-T department has been most reluctant to reimburse the TDS, claims several senior citizens.


Last month, even the Tax Administrative Reforms Commission (TARC) in its first report has addressed grievances faced by the tax payers in claiming credit for TDS. The TARC has suggested introduction of a passbook scheme for TDS, albeit with built in safeguards. It also suggested a new initiative, that would enable a taxpayer to make corrections in the TDS statement filed by the deductor like a bank or an employer.


If you have any issues with your TDS deductions, then you can send details at [email protected] , which Moneylife Foundation will forward to Mr Punmiya to take up during the meeting.


The Committee, appointed by Commissioner of Income Tax, is meeting with a view to make the administration of TDS more effective, transparent, fair and tax payer friendly.



sivaraman anant narayan

3 years ago

My take on this issue is as follows:
1. The Govt is authorised by law to collect taxes from its citizens, as may be approved by parliament.
2.Rule making is a process of delegated legislation to allow facilitation of this process of tax collection.
3.By a process of empowerment the Govt sub-delegates this function of tax collection to certain third party agencies like banks, employers etc.
4.The relationship between Govt. and these agencies should be as between Principal and Agent.
5. As far as citizens are concerned, when these agencies recover TDS from their entitlements, it is as good as Govt. having collected its taxes and the citizens are absolved of paying taxes, to the extent collected by these agencies.
6. The recourse Govt. has against these agencies is as between Principal and Agent and Govt cannot penalise the citizens for what its agents do not do as per its empowerment.
7.The agents are duty bound to account to the citizens what it has recovered from them and such account(and to that extent) should be legally a discharge of obligation by the citizen.
8.Rules of empowerment should provide a recourse to citizens against the Govt./Agents if they do not give account of their actions to the concerned citizens.
In my view Income-tax rules which are violative of the above are null and void and are justiciable. The Committee should recommend amendment of rules to reflect above proposition to safeguard rights of citizens.


3 years ago

Today when IT return is filed online why IT Dept is not crediting online to my bank account when refund is below Rs 100/-. Even if refund is Rs 10- or anything below Rs 100/- IT Dept should remit the refund online. Actually i ensure i remit a tax amount of more than Rs 10 to 100 than my due so that i can collect a refund and this way i know my return is settled.


3 years ago

i know a case where a PAN Card holder is unable to get an item of Income Tax recovered and remitted by a PSB which is having U status. The remitting back having outsourced the return filing job is unable to set right the issue. IT Department is sending notice to tax payer demanding dues where AS26 is showing PSB has recovered tax and remitted. IT officer is not able to get it set right. So the return of PAN holder is not cleared. Why does Assesing officer expect the tax payer to visit him. Why he cannot use official mail to correspond with tax payer so that tax payer can bring the Tax remitter PSB into picture so that Tax recoverer and IT Dept can sort out the muddle. IT Dept is not able to guide as to how to set right this muddle.

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