India poised for more growth following approval of new tax bill

Talk about a game changer. On August 3rd 2016, India’sUpper House of Parliament approved a long-awaited Goods and Services Tax (GST) reform that will create a unified tax system across the world’s largest democracy. The new law is expected to help boost the world’s fastest-growing major economy by as much as 2 percent, according to Finance Minister Arun Jaitley.1

“This is big news. The GST is rightly being labeled as a ‘game changer’ for India” notes Bhim D. Asdhir, President and Chief Executive Officer of Excel Funds Management Inc., in Toronto “It is also a huge win for Prime Minister Narendra Modi and his administration, as it shows that the government is capable of implementing historic changes that will enhance growth and development in India even further.”

Excel Funds has a longstanding track record of investing in India, dating back to 1998 with the launch of the Excel India Fund, which is currently the largest and longest-running India-focused mutual fund in Canada. The Excel India Fund is also winner of the 2015 LipperĀ® Fund Award for Best Fund over 3 years, in the Geographic Equity category. Excel Funds expanded its lineup of India-focused investment strategies earlier this year with the launch of the Excel India Balanced Fund and Excel New India Leaders Fund.

The two new funds are actively managed by Aditya Birla Sun Life Asset Management Company Pte. Limited, a wholly owned subsidiary of Birla Sun Life Asset Management Company Limited, which is one of the leading fund managers in India, with approximately US$20 billion in assets under management, as of March 31, 2016.2

Innovative ways

“At Excel Funds, we continue to find innovative ways to provide investors with direct access to the Indian markets,” Mr. Asdhir notes. “Our comprehensive offering of India-focused mutual funds caters to a broad range of profiles, granting access to equities as well as fixed-income securities. Our goal is to help Canadian investors capitalize on high growth opportunities in India and the emerging markets, which are hard to come by given the low growth state of global markets.”

The impact of the GST reform is largely expected to support domestic consumption, a major component of India’s GDP. A new tax rate, expected to be around 18 percent, will lower the cost of manufactured products, naturally leading to more Indians purchasing goods ranging from household appliances to motor vehicles. E-commerce should also receive a lift, as state restrictions and levies are removed. Information technology and consumer discretionary are among the top sector allocations of the Excel India Fund, accounting for 11.9 and 11.5 percent of the total portfolio, respectively.3

Wider tax base

Additionally, GST will widen the tax base and improve fiscal management for the government. With a greater revenue stream, the current administration can continue to invest heavily in infrastructure, which has also been another key sector linked to India’sgrowth. “With the new bill we expect a fiscal boost, improvement in logistics for local companies leading to cost savings, and also increased competitiveness in

“With the new bill we expect a fiscal boost, improvement in logistics for local companies leading to cost savings, and also increased competitiveness in India’smanufacturing sector on the global front,” says Atul Penkar, Head of Offshore Equities, Birla Sun Life Asset Management Company Limited. Mr. Penkar is also the portfolio manager of all three India-focused strategies that are managed by Excel Funds. “The implementation of the GST law will have broad based benefits for the economy over the medium and long-term.” – CNW

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