S&P Claim India’s Economy Less Vulnerable to Outside Shocks
Ratings agency Standard & Poor’s has claimed that the Indian economy isn’t as vulnerable to external shocks as many currently fear. It cites the fact that growth is driven mainly by household consumption and government spending, not ‘hot money’ which is quickly moved around. S&P also expect the Current Account Deficit to remain level around 1.4% of GDP.
‘Brexit’ would push UK into snap Recession, Claims Credit Suisse
‘If the UK votes to leave the EU, it is likely to entail an immediate and simultaneous economic and financial shock for the UK,’ claims Swiss bank Credit Suisse. The bank has predicted an immediate drop in GDP of up to 2%, while a drop in business confidence would impact wages, spending, investment and the Pound. The deficit would also become difficult to sustain. The prediction comes just after ‘Brexit’ uncertainties were somewhat calmed by the heads of Toyota and Unilever stating that they would not cut back on UK operations in the event Britain left the European Union.
Pound Sterling (GBP) has been weakened today by criticism of the government’s tax deal with Google, while the Indian Rupee (INR) is softened by questions regarding India’s economic strength.
GBP/INR Advance Sluggish as Tax Experts Blast George Osborne Over Google Tax Deal
Google has agreed to pay an additional £130 million in back taxes ahead of new regulations that will be brought into effect in April which will see a 25% tax levied on profits deemed to have been moved outside the UK artificially. The sum brings Google’s total tax contribution since 2005 up to £200 million and the deal has been lauded by George Osborne as a victory for the UK government.
Experts, however, aren’t convinced. Several critics claim that Google effectively pays 2.8% tax on earnings in the UK; the rate of corporation tax for UK businesses is 20%. The £200 million total tax that Google will have paid since 2005 comes from profits of £7.2 billion, which experts claim should have yielded tax revenues of £1.6 billion. It is feared George Osborne will make similar deals with Facebook and Amazon in the near future, which critics are claiming will lose the UK billions in underpaid tax. The Chancellor needs to find a surplus £5.3 billion in order to bring the deficit down to his target of £68.9 billion by April.
Pound Sterling has received some support from survey figures released by the Confederation of British Industry (CBI), showing that the outlook for the coming quarter is becoming increasingly positive. A net 8% of UK businesses are expecting an increase in total new orders, while 7% are anticipating that domestic orders will rise. The net balance of companies predicting a rise in output has shot up from 5% previously to 14%, while the index for employment has leapt out of negative territory to hit 8%.
The Pound Sterling to Indian Rupee (GBP/INR) exchange rate is currently trading around 96.6090.
Indian Rupee to Pound Sterling (INR/GBP) Exchange Rate Soft on Doubts Over India’s 2016 Outlook
Credit rating agency Moody’s has released a report in which a survey of over 100 large investors, issuers and intermediaries showed that there is considerable concern over the headwinds facing the global economy. The prospect of further monetary policy tightening from the US Federal Reserve and a continued slowdown in China have been highlighted as key concerns. 35% of respondents to the survey thought external shocks were the most significant risk to the Indian economy, a huge jump from the 10% figure from a survey carried out in May 2015.
The Indian economy is expected to grow 7.5% this year. The low price of oil has helped the government reduce the deficit as it removed the need for fuel subsidies, while the slowdown in China has been seen as an opportunity for India to become the world’s next manufacturing hub.
Pound Sterling to Indian Rupee (GBP/INR) Exchange Rate Forecast: Slow Data Week Until UK GDP on Thursday
Data for India is sparse this week, with only the Foreign Reserves figures and the Government Budget Value for December due for release on Friday. The UK calendar is slightly less quiet, with the headline for the week being the 4Q average Gross Domestic Product figure released on Thursday.
The Pound Sterling to Indian Rupee exchange rate is currently trading between 96.2730 and 96.8020.