Economy

India has emerged as a major hub for electronics and electric vehicle (EV) infrastructure, and this momentum is expected to attract investments worth $15 billion from Taiwanese firms, according to a report by the Federation of Indian Chambers of Commerce & Industry (Ficci). The potential for collaboration between India and Taiwan, particularly in electronics manufacturing and EV infrastructure, opens new avenues for both countries, fueling India’s growth ambitions and positioning Taiwan as a strategic partner.

In FY24, India’s exports to Taiwan amounted to $1.84 billion, while imports reached $8.28 billion, primarily driven by electronic components and telecom instruments. Source: Economic Times

Key Highlights of Potential Taiwanese Investment

Overview of Indian Electronics Market

The consumer electronics market in India was valued at USD 73.73 billion in 2022 and is projected to grow at a compound annual growth rate (CAGR) of 6.8% from 2023 to 2030.

Overview of India’s EV Market

The Indian EV market is expected to grow from $3.21 billion in 2022 to $113.99 billion by 2029, achieving a CAGR of 66.52%. The EV battery market is projected to rise from $16.77 billion in 2023 to $27.70 billion by 2028. With increased investments over the next 8-10 years, India will become the largest EV market by 2030.

5 Reasons for Taiwanese Companies to Expand in India

1. Growing Domestic Market: India’s rapidly expanding consumer base offers significant opportunities for Taiwanese companies to tap into new markets and increase sales.
2. Lower Manufacturing Costs: The cost-effectiveness of manufacturing in India makes it an attractive location for Taiwanese firms looking to optimize their production expenses.
3. Pro-Investment Policies: India’s government has implemented favorable policies encouraging foreign investments and simplifying processes for Taiwanese companies entering the market.
4. Technological Collaboration: The synergy between Taiwan’s technological expertise and India’s growing demand for advanced electronics creates a mutually beneficial environment for innovation.
5. Strategic Geographical Location: India’s strategic location provides Taiwanese companies with access to a vast market, making it easier for them to serve neighboring countries and enhance their global supply chains.

Strong Bilateral Ties Between India and Taiwan

India and Taiwan have fostered economic cooperation over the past decade. Taiwan is globally recognized for its advanced technology, particularly in electronics and semiconductors, while India offers an expansive market and a skilled workforce. These complementary strengths make the relationship mutually beneficial. With the rise of global interest in clean energy and electronic innovations, Taiwanese companies are eyeing India for large-scale investments.

Ficci’s report emphasizes that this partnership can focus on sectors like electronics, electric vehicles, and even healthcare technology. As Taiwan’s economy thrives on high-tech exports, India’s growing demand for EV infrastructure and electronics makes it an ideal investment destination.

Government Initiatives Driving Investment

India’s government has made significant strides in improving the investment climate, particularly in sectors related to electronics and EVs. Programs like the PLI scheme incentivize electronics manufacturing by offering financial support to manufacturers, making it easier for Taiwanese companies to set up shop in India. Additionally, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme supports the production and deployment of EVs, further encouraging foreign investments.

The Ficci report underscores that India’s digital infrastructure is rapidly improving, focusing on smart cities, 5G technology, and electric mobility. These initiatives make India an attractive destination for Taiwanese firms looking to expand their global footprint. Source: Economic Times

India’s Competitive Edge

Several factors make India a desirable investment destination for Taiwanese companies:

1. Sizeable Domestic Market: India’s vast consumer base, particularly its middle class, offers a lucrative market for electronics and EVs. As purchasing power increases, demand for high-quality electronic goods and electric vehicles is set to rise significantly.
2. Skilled Labor Force: India’s pool of talented engineers and IT professionals is another attraction for Taiwanese firms, particularly in sectors requiring technical expertise, such as semiconductors and EV technology.
3. Cost Efficiency: India offers a competitive edge in cost, with affordable labor and operational costs compared to other manufacturing hubs. This makes it an ideal location for Taiwanese companies looking to optimize production costs while scaling up operations.

Challenges to Overcome

While the opportunities are significant, some challenges must be addressed to ensure smooth collaboration between India and Taiwan. These include:

• Infrastructure Development: Although India has made progress in infrastructure development, more progress is needed in transportation, energy supply, and logistics. These improvements are essential to attract large-scale foreign investments.
• Supply Chain Issues: The global supply chain disruptions caused by the COVID-19 pandemic have highlighted the need for resilient and diversified supply chains. India and Taiwan must work together to create seamless electronics and EV manufacturing supply chains.
• Regulatory Hurdles: Taiwanese companies entering India may face complex regulatory frameworks. Simplifying these processes through bilateral trade agreements could facilitate smoother entry for Taiwanese firms into the Indian market.

The Road Ahead

India must continue strengthening its ties with Taiwan to ensure the $15 billion investment materializes. Ficci’s report recommends the establishment of joint task forces between the two countries to identify key investment areas and resolve potential roadblocks. The India-Taiwan Bilateral Trade Agreement can be enhanced to include more favorable terms for Taiwanese companies, particularly in high-tech sectors like semiconductors, EV batteries, and electronics manufacturing.

Moreover, the governments of both nations need to collaborate on research and development (R&D) initiatives, focusing on emerging technologies. By pooling their expertise, India and Taiwan can drive innovation in electronics and EVs, accelerating the global adoption of clean energy technologies.

Conclusion

The potential for a $15 billion Taiwanese investment in India’s electronics and EV infrastructure signals a new chapter in the economic partnership between the two nations. With the right policies and collaboration, India and Taiwan can benefit significantly from this strategic alliance.

India stands to gain from Taiwan’s technological prowess, while Taiwanese companies can tap into one of the world’s largest markets. Together, they can drive growth in the high-tech and green energy sectors, fostering a mutually beneficial relationship that supports sustainable development and economic progress.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

FAQ

The Indian government has significantly accelerated its efforts to promote electric vehicles (EVs), reflecting a growing commitment to sustainable transportation. The recently announced PM E-Drive scheme, with a total outlay of ₹10,900 crore, marks a strategic shift towards supporting public transport and commercial sectors.

The latest policy brings significant changes, showing the country’s commitment to reducing pollution and speeding up EV adoption.

Let’s explain how India is reshaping its approach to EVs, what the new policy focuses on, and what it means for the auto industry.

Key Points of the PM E-Drive Scheme:

• Focus on Public and Commercial Sectors: The scheme prioritizes electric vehicles in public transport and commercial applications.
• Total Budget: A significant allocation of ₹10,900 crore is dedicated to supporting these sectors.
• Targeted Approach: Unlike FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles), which offered broader subsidies, PM E-Drive specifically targets areas like buses, trucks, and hybrid ambulances.
• Electric Bus Deployment: The scheme aims to deploy 14,028 electric buses to enhance public transportation.
• Addressing Commercial EV Gaps: PM E-Drive supports the adoption of electric trucks and hybrid ambulances, filling gaps in commercial EV usage.
• Electrifying Public Transport: A key objective is to transition public transportation to electric vehicles.
• Charging Infrastructure: The scheme will focus on building necessary charging infrastructure to support electric buses and other vehicles.
• Strengthening Supply Chain: Efforts will be made to improve the supply chain for sustainable EV growth in India.

The PM E-Drive initiative will enhance charging infrastructure, with ₹2,000 crore allocated to install 22,100 fast chargers for four-wheelers, 48,400 for two- and three-wheelers, and 1,800 for buses. This substantial investment aims to support the growing demand for EVs across different vehicle segments.

How Supply-Side Incentives Boost India’s EV Transition

Key Points:

• Strengthening Domestic Manufacturing: The PLI (production-linked incentive) schemes for the auto sector, with an outlay of Rs.26,000 crore and advanced chemistry cells at Rs.18,000 crore, aim to foster the growth of a robust domestic Electric Vehicle manufacturing base.
• Reducing Import Dependence: By incentivizing domestic production, India can reduce its reliance on imported EV components, leading to greater self-sufficiency.
• Lowering Electric Vehicle Costs: A strong domestic manufacturing base can help drive down the cost of EVs, making them more accessible to consumers.
• Attracting Global Investment: These incentives create a favorable environment for global investors to enter India’s EV market, bringing in expertise and capital.
• Competitive Advantage: A robust domestic EV industry can position India as a competitive player in the global EV market, capturing opportunities for exports and technology leadership.

From FAME to Holistic Action

The FAME  I and II schemes, introduced in 2015 and 2019 with budgets of ₹795 crores and ₹11,500 crores,  respectively, have been instrumental in driving the sale of over 1.6 million Electric Vehicles, mainly focusing on electric two-wheelers, three-wheelers, and buses. These initiatives also prioritized the development of EV charging stations, further propelling market growth. 

FAME II made electric vehicles more affordable by focusing on buses and two-wheelers. These vehicles now represent 7% and almost 6.5% of their respective markets, respectively, which has significantly boosted demand for Electric Vehicles.

 Now, the government’s focus has evolved to a more comprehensive approach. Instead of isolated subsidies, India is embracing a broader, long-term strategy that includes developing infrastructure, boosting local manufacturing, and encouraging international investments in the Electric Vehicles sector.

Under this new framework, India’s electric mobility roadmap includes a shift towards local manufacturing of critical components, such as lithium-ion batteries, and establishing a charging infrastructure. The policy is seen as vital to reducing dependence on imports, especially as the government pushes for lithium-sourcing deals with countries like Australia and Argentina​.

Import Duty Cuts and Tesla’s Entry

The Indian government also cuts import duty to attract global Electric Vehicle giants. Tesla, for instance, has been eyeing the Indian market for years, and the recent policy change could encourage the company to establish a presence in India. The policy allows automakers to import up to 8,000 electric vehicles (EVs) annually at a reduced import duty, provided they invest heavily in local manufacturing​(

Impact on Domestic Players

While the policy encourages international investments, it also safeguards the interests of local companies like Tata Motors and Mahindra & Mahindra, who have significant stakes in the Electric Vehicle market. These companies have been pushing for policies that protect their interests while maintaining India’s attractiveness to global players. 

Holistic Approach to Green Mobility

The policy’s focus is not limited to passenger vehicles. It also aims to promote the adoption of electric two-wheelers, three-wheelers, and public transportation vehicles. Over the next few years, the second phase of the FAME scheme supports one million electric two-wheelers, 500,000 electric three-wheelers, and 7,000 electric buses. This holistic approach addresses multiple segments of the transportation sector, ensuring a widespread shift to cleaner mobility​.

Challenges and Opportunities

Despite the encouraging policy framework, several challenges remain. The lack of a well-developed charging infrastructure and high upfront costs of EVs continue to deter many buyers. However, with the new incentives for infrastructure development and local manufacturing, the Indian Electric Vehicle market is expected to become more accessible in the coming years.

On the flip side, this policy presents significant opportunities. The entry of global players like Tesla and the growth of domestic champions like Tata Motors will drive innovation, creating a competitive EV ecosystem. Additionally, lithium battery production and charging infrastructure investments will spur growth in related industries, from renewable energy to smart cities​.

Conclusion: A Sustainable Future for India

India’s new EV policy marks a pivotal moment in its journey toward a greener future. The policy aims to create a robust ecosystem that encourages Electric Vehicle adoption at all levels by focusing on local manufacturing, infrastructure development, and strategic partnerships.

With global giants like Tesla entering the market and domestic players ramping up production, India’s transition to electric mobility is poised to accelerate in the coming years. The government’s holistic approach, combining incentives, infrastructure development, and local partnerships, is the spark the industry needs to thrive.

As India shifts gears, it is clear that the nation is committed to becoming a global leader in electric mobility, paving the way for a cleaner and more sustainable future​.

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

In recent months, India has become a hotspot for global apparel deals, and this surge is catching the attention of industry insiders. The catalyst behind this trend is the ongoing crisis in Bangladesh, which has long been a leader in apparel manufacturing.

Political instability and disruptions in Bangladesh have made it difficult for the country to meet global demand. This has led international brands to look for new manufacturing options. As a result, India’s strong textile industry is becoming a popular choice. These developments underscore India’s growing importance in the global apparel market and highlight the potential benefits of an India-EU free trade agreement, which could further enhance trade opportunities for Indian exporters.

India exported $14.5 billion worth of apparel in FY24. In the first quarter of FY25, India’s exports of readymade garments reached $3.9 billion, while Bangladesh’s exports stood at $9.7 billion.

India’s Apparel Exports to the World from 2022-23 to 2024-25

A prime example of this shift is Tiruppur, India’s knitwear export hub, which recently secured orders worth ₹450 crore from global brands. This influx of business can be directly linked to the political unrest in Bangladesh, which has made it challenging for manufacturers there to fulfill commitments. Brands like KiK from Germany, Zeeman from the Netherlands, and Pepco from Poland have turned to Tiruppur to meet their holiday season demands, placing substantial orders for kids’ wear, nightwear, and more.

The Bangladesh crisis’s ripple effect is also felt in other parts of India. Noida Apparel Export Cluster, for instance, has seen a 15% increase in orders from well-known brands like Zara. 

Impact of Bangladesh’s Crisis on Apparel Manufacturing

Bangladesh’s crisis, characterized by political instability, labor unrest, and supply chain disruptions, has severely impacted its apparel industry. Bangladesh’s challenges have sent shockwaves through the global apparel market as one of the largest exporters of ready-made garments.

• Political Instability: Bangladesh’s political turmoil has led to protests and strikes, which have disrupted apparel production and caused delays for global brands.
• Labor Unrest: Bangladesh’s apparel industry has faced ongoing labor issues, such as demands for higher wages and better conditions. The crisis has worsened these problems, leading to more strikes and factory shutdowns.
• Supply Chain Disruptions: The COVID-19 pandemic further strained Bangladesh’s apparel industry, causing supply chain disruptions. The ongoing crisis has compounded these challenges, making it difficult for manufacturers to meet international demand.

India’s Competitive Advantage in the Apparel Sector

India’s ability to capitalize on Bangladesh’s challenges can be attributed to several factors that provide the country with a competitive edge in the global apparel market.

• Established Textile Industry: India has a long-standing tradition of textile manufacturing, with a well-established infrastructure and a skilled workforce. This has enabled the country to ramp up production quickly to meet the demands of global brands.
• Diversified Product Range: Unlike Bangladesh, which primarily focuses on ready-made garments, India offers a diversified product range, including textiles, apparel, and accessories. This diversity has made India an attractive option for brands sourcing various products from a single location.
• Government Support: The Indian government has implemented several initiatives to support the textile and apparel industry. These include favorable policies, incentives for exporters, and investments in infrastructure development, all of which have strengthened India’s position in the global market.
• Cost-Effective Labor in India: India offers a more cost-effective alternative with its large pool of skilled labor. The availability of affordable labor and the country’s established manufacturing infrastructure make India an attractive destination for global apparel deals.

Strategic Location and Trade Agreements

India’s strategic location and its extensive network of trade agreements have further boosted its appeal as a global apparel manufacturing hub.

• Proximity to Major Markets: India’s geographic location offers easy access to major global markets, including Europe, the United States, and the Middle East. This proximity reduces shipping times and costs, making India a preferred choice for international brands.
• Trade Agreements: India has signed several bilateral and multilateral agreements facilitating easy access to global markets. These agreements reduce tariffs and trade barriers, making Indian apparel competitive globally.

India’s Growing Focus on Sustainability

Sustainability has become a critical consideration for global brands, and India’s focus on sustainable practices has further enhanced its appeal as a manufacturing hub.

• Eco-Friendly Manufacturing: Indian apparel manufacturers are increasingly adopting eco-friendly practices, such as using organic cotton, implementing water-saving technologies, and reducing carbon emissions. These initiatives align with the sustainability goals of many international brands.
• Government Initiatives: The Indian government has also introduced policies to promote sustainable manufacturing practices in the textile and apparel industry. These include incentives for adopting green technologies and support for research and development in sustainable textiles.

Resilient Supply Chain and Infrastructure

India’s resilient supply chain and robust infrastructure have been key factors in attracting global apparel deals amid the Bangladesh crisis.

• Integrated Supply Chain: India boasts an integrated supply chain that includes everything from raw material sourcing to finished product manufacturing. This integration allows for greater control over the production process and reduces reliance on external suppliers.
• Infrastructure Development: The Indian government has invested significantly in infrastructure development, including modernizing ports, enhancing transportation networks, and establishing industrial parks. These developments have improved the efficiency of India’s apparel manufacturing sector, making it a reliable alternative for global brands.

Increasing Demand for Indian Apparel Globally

As global brands shift their focus to India, there has been a noticeable increase in demand for Indian apparel in international markets.

• Quality and Craftsmanship: Indian apparel is renowned for its quality and craftsmanship. The country’s rich textile heritage, combined with modern manufacturing techniques, has resulted in products that meet the high standards of global consumers.
• Branding and Marketing: Indian apparel manufacturers increasingly invest in branding and marketing to promote their products in international markets. This has helped raise awareness of Indian apparel and drive demand among global consumers.

Challenges and Opportunities for India

While the influx of global apparel deals presents significant opportunities for India, it also comes with challenges that must be addressed.

• Capacity Constraints: The rapid increase in demand for Indian apparel may strain the country’s manufacturing capacity. To sustain this growth, India must continue investing in expanding its production capabilities and upgrading its infrastructure.
• Competition from Other Markets: India is not the only country benefiting from the Bangladesh crisis. Other apparel manufacturing hubs, such as Vietnam and Cambodia, are also vying for a global market share. India must differentiate itself by focusing on quality, sustainability, and innovation.

Conclusion

The ongoing crisis in Bangladesh has created a unique opportunity for India to assert itself as a global leader in the apparel industry. With its established textile industry, strategic location, and focus on sustainability, India is well-positioned to attract global apparel deals and meet the growing demand for quality products. 

However, to fully capitalize on this opportunity, India must continue to address its challenges, invest in capacity expansion, and maintain its competitive edge in an increasingly crowded market. As global brands continue to seek reliable and cost-effective manufacturing partners, India’s role in the global apparel market is set to grow even further.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

According to the Ministry of Youth Affairs and Sports, India’s path to the Paris Olympics 2024 was driven by a significant investment of ₹470 crore. This record-breaking budget was strategically spread across 16 sports disciplines to enhance India’s chances of winning medals. The impact of this investment was felt nationwide. 

India ranked 71st among 206 countries, securing 6 medals in athletics, shooting, wrestling, and hockey and having six near-misses in which athletes finished in fourth place.

A Breakdown of the Olympics Investment

The ₹470 crore was not evenly distributed. Instead, it was meticulously allocated based on each sport’s potential. Athletics emerged as the top beneficiary, receiving a lion’s share of nearly ₹96.08 crore. Javelin thrower Neeraj Chopra’s gold-medal win in the Tokyo Olympics resulted in a significant increase in funding for the athletics discipline at the 2024 Paris Olympics, with the athletics budget experiencing a more than 1600% boost.

Wrestling, another sport with a strong Indian legacy, secured ₹37.8 crore. This investment was channeled into state-of-the-art training facilities, international exposure, and world-class coaching. Despite not securing a medal, Archery received a significant allocation of ₹39.18 crore. While the medal count in these sports might not have been as impressive, the investment is a strategic move to broaden India’s sporting base.  

India’s Performance at Paris Olympics 2024

Government Efforts for Efficiency and Growth

The Indian government has significantly intensified its efforts to support athletes and enhance the country’s Olympic performance. These efforts included a range of initiatives and programs to improve the training, preparation, and overall performance of Indian athletes on the global stage.

Target Olympic Podium Scheme (TOPS)

The Target Olympic Podium Scheme (TOPS) is a flagship program designed to provide targeted support to potential Olympic medalists. TOPS offered assistance in several key areas:

• Training and Camps: National Coaching Camps and international training sessions.
• Foreign Exposure: Opportunities for athletes to compete and train overseas.
• Specialized Support: Engagement of foreign experts, coaches, and support staff.
• Equipment and Facilities: Provision of necessary sports equipment and training facilities.
• Financial Assistance: Direct funding to cover various aspects of athletes’ preparation.

The Indian government’s substantial investment of ₹470 crore in preparing athletes for the Paris Olympics has had a ripple effect on various sectors. While the primary focus is enhancing India’s Olympic performance, the spending has also influenced other areas of the economy and society.

Impact of Olympics Budget on Various Sectors

Sports Sector

• Improved Performance & Wins: The most obvious impact is on the sports sector. The funds were allocated for training, equipment, coaching, and exposure trips for athletes, leading to improved performance and potential medal wins.  
• Infrastructure Development: Most of the investment likely went into upgrading sports infrastructure, such as training facilities, stadiums, and academies. This benefits not only the targeted athletes but also the broader sporting community.
• Talent Identification: The increased focus on sports has led to better talent identification programs, helping discover young athletes with potential. This lays the foundation for future Olympic successes.

Economy

• Sports Industry Growth: The government’s investment can stimulate growth in the sports industry, including sports equipment manufacturing, sports apparel, sports media, and sports tourism.
• Job Creation: Expanding the sports industry can lead to job creation in various sectors, such as coaching, sports management, sports marketing, and event management.
• Brand India: Successful Olympic performances can enhance India’s image globally, attracting foreign investments and tourists, thereby boosting the economy.

Social Impact

Beyond the economic implications, investment in sports has far-reaching social benefits. Sports have the power to inspire and unite people. The success of Indian athletes on the world stage can boost national pride and create role models for the youth.  

• Inspiration and Motivation: The achievements of Indian athletes can inspire young people to take up sports, leading to a healthier and more active population.
• National Pride: Olympic medals boost national pride and unity.
• Gender Equality: Increased focus on women’s sports can promote gender equality and empower female athletes.

Potential Challenges and Considerations

• Ensuring that the funds are used efficiently and without corruption is crucial for maximizing the return on investment.
• While short-term results like medals are important, a long-term perspective is essential for the sustainable development of sports.
• Investing in grassroots sports development is equally important to create a strong talent pool for the future.

As India produces more world-class athletes, the country’s sporting events will attract larger domestic and international audiences. This can lead to increased hotel bookings, transportation services, and merchandise spending, benefiting the hospitality and retail sectors.

A Long-Term Perspective

Viewing the ₹470 crore expenditure as a long-term investment rather than a short-term one is crucial. Building a sporting powerhouse takes time and consistent effort. While the immediate results may not always be spectacular, the foundation laid now will benefit future generations of athletes.

The government’s commitment to sports is a positive step, but ensuring that the funds are utilized efficiently and transparently is equally important. Regular audits and performance evaluations can help identify areas of improvement and maximize the return on investment.

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQs

In the intricate world of investment, understanding the tax implications of your financial decisions is crucial. The Indian government’s contemplation to revise the capital gains tax structure for debt mutual funds is a significant development that could influence investor behavior and fund performance.

Let’s explore the current challenges, potential changes, and implications with illustrative examples.

Understanding Bharat Bond ETF

The Bharat Bond ETF, launched in 2018, is an innovative financial instrument introduced by the Indian government to enable investors to participate in the debt of public sector companies. It is an Exchange-Traded Fund (ETF) listed on the National Stock Exchange (NSE), which means it can be bought and sold like a stock during trading hours.

Key Features of Bharat Bond ETF:

1. Public Sector Bonds: The ETF invests your money exclusively in bonds issued by public sector entities.
2. Fixed Maturity: Each Bharat Bond ETF has a defined maturity date, similar to a bond. At that point, investors receive their principal amount along with the returns.
3. Exchange Traded: The units of the ETF can be traded on the NSE, providing liquidity and flexibility to investors.
4. Low Cost: It is managed very cheaply, making it an economical investment option.
5. Safety and Predictability: Since the fund invests in bonds with high credit ratings (AAA), it offers a safe investment avenue with predictable returns.
6. Tax Efficiency: Investors enjoy the benefit of indexation, which can significantly reduce the tax on long-term capital gains.

Current Taxation Challenges

The Bharat Bond ETF has been a game-changer for public sector borrowing. However, since April 1, 2023, it has faced a taxation hurdle. The Finance Bill 2023 brought it under the same capital gains tax bracket as other debt mutual funds, where the investor’s income tax slab determines the tax rate. This shift from the previous long-term capital gains tax of 20% with indexation benefits for holdings over 36 months has raised investor concerns.

Let’s understand it better with an example: considering that you invested Rs 1 Lakh in the Bharat Bond ETF 2030, and it grows by the current growth rate of 6.48%, then this is what your returns would look like following: 

The profit you gain on maturity can be Rs 45,750, but this can vary due to market fluctuation. According to your tax slab, this would look like a post-tax deduction.

As you move higher in the tax slab, the overall capital gain is lower, making other investment options like the ELSS more attractive for investors. If the same amount of Rs 1 Lakh was invested in ELSS with the category average CAGR of 20.13%, you’ll earn a capital gain of Rs 2,00,545.

And after the 10% long-term capital gain deduction, as returns are over Rs 1 lakh, you’ll be left with Rs 1,80,490. The investment in the same will provide you with tax exemption, making Bharat Bond ETF less appealing to investors from higher tax brackets.

And after the 10% long-term capital gain deduction, as returns are over Rs 1 lakh, you’ll be left with Rs 1,80,490. The investment in the same will provide you with tax exemption, making Bharat Bond ETF less appealing to investors from higher tax brackets.

The lack of investors’ interest is evident in the numbers. Debt funds make less than 35% of total equity investments, while debt funds are less risky than other options. Hence, the Department of Investment and Public Asset Management (DIPAM) will send a formal recommendation regarding the Bharat Bond ETF to the Department of Revenue after the government is formed.

The government is considering a special carve-out for the Bharat Bond ETF from the prevailing tax structure. This could mean reverting to the earlier tax regime or introducing a new, more favorable tax rate for this specific ETF.

Impact on Fundraising

The Bharat Bond ETF has been instrumental in fundraising for CPSEs, CPSUs, CPFIs, and other government organizations. With over ₹33,400 crore raised through bond issuances, any tax relief could further bolster this instrument’s appeal.

A favorable tax change could increase the fund size, as more investors might be attracted to the tax-efficient nature of the ETF. It, in turn, could lower borrowing costs for the entities involved and lead to more efficient capital allocation.

Conclusion

The proposed changes to the capital gains tax for debt mutual funds, particularly the Bharat Bond ETF, could have far-reaching effects on the investment landscape. By providing tax relief, the government aims to make these instruments more attractive to investors, thereby cost-effectively supporting its borrowing needs. As we await the final decision, investors and fund managers keenly observe the developments, ready to recalibrate their strategies based on the outcome.

FAQs

The 2024 Lok Sabha Elections have wrapped up, the results are out, and the entire nation is still discussing them. After all, no one expected the outcome, especially after what the exit polls predicted.

Political experts and regular junta alike are still talking about what happened, and regardless of how the governments will be formed in different states, the elections offer valuable takeaways for investors seeking long-term success.

To translate these election strategies into winning investment approaches, read on…

1. Never Take Your Success for Granted

Just like a political party that dominated the previous elections but faced a stronger challenge this time around, even high-performing investments can’t deliver the same result every time. Diversification is the key. Even a high-performing portfolio needs constant monitoring to stay ahead of potential market shifts. Remember, past performance is not always indicative of future results

2. Some Factors Are Not in Our Hands

Lesson two must be relatable to all of us when there are some things th

at are out of our control. Elections are influenced by external factors like social movements or global events. Similarly, some market fluctuations are beyond your control. However, you can control your investment strategy. Focus on thorough research, develop a sound investment plan, and implement effective risk management techniques. Like a well-prepared candidate, these steps position you for success even in an uncertain market.

3. Build Resilience for Unexpected Events

Life constantly throws challenges, just like elections can have unexpected results. The ability to bounce back from setbacks is crucial. Unexpected events can disrupt the market, similar to how unforeseen scandals can shake up an election. A diversified portfolio can help weather these storms like a well-oiled political campaign team.

4. Stay Humble Despite Your Reputation

We often work hard to build a strong reputation. Even the most respected political leaders face setbacks. The same holds true for investment strategies. Maintain a humble perspective, acknowledging that market conditions can change rapidly. Continuously learn and adapt your approach, just like a savvy politician who adjusts their message based on changing voter sentiment.

5. Collaborate and Don’t Be Shy to Ask for Help

Just as political parties form alliances to strengthen their position, collecting resources and support can make all the difference when facing the biggest and toughest challenges. Asking for help and seeking support is not a sign of weakness but a strength because you have the ultimate goal of winning in mind. Similarly, collaborating with other investors or seeking guidance from a qualified financial advisor can enhance your investment strategy. Sharing knowledge and insights can lead to more informed decisions and improved returns.

6. Adapt to the Changing Situation 

With changing times come changing strategies. Just as political parties adapt their tactics to suit evolving circumstances, you, too, must be willing to change when the situation calls for it. Be flexible and ready to adjust your portfolio allocation or investment strategy as market conditions change, new information emerges, or your financial goals evolve.

7. Be Confident, Not Overconfident

This is true both in elections and in life. No matter how confident we feel about our abilities or the situation’s potential, arrogance can make us fall and curb our growth. A candidate who becomes overconfident and disregards their opponent ultimately loses. The same applies to investments. While confidence is crucial, avoid making risky decisions based solely on past success or current trends. Maintain a balanced perspective and acknowledge the inherent risks involved in any investment.

8. Don’t Underestimate Your Opponent

Just like a political underdog can emerge victorious, unexpected events or new market entrants can disrupt your investment plans. Don’t underestimate the power of market forces or potential competitors. Stay vigilant and be prepared for challenges that may arise from unforeseen quarters. Conduct thorough research, understand your risk tolerance, and be prepared to adjust your strategy as needed.

Conclusion

The political arena might seem far removed from the world of finance, but the recent election season offers valuable lessons for investors. By adopting these insights, you can navigate market fluctuations with greater resilience, build a strong investment strategy, and ultimately achieve your financial goals.

Remember, just like a successful political campaign, investing requires discipline, adaptability, and a willingness to learn and grow. So, stay informed, diversify your portfolio, and approach the market with a healthy dose of respect – and you’ll be well on your way to achieving long-term investment success.

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Have you ever realized what happens when you meticulously plan your budget and save diligently? Your financial situation improves, right? That’s exactly what’s happening with India right now, according to S&P Global Ratings. After a decade of holding a “stable” outlook, S&P upgraded India’s sovereign rating outlook to “positive” on May 29th, 2024. 

At the same time, it affirmed BBB- long-term and ‘A-3’ short-term unsolicited foreign and local currency sovereign credit ratings. It might sound like financial jargon, but it essentially means that S&P is more confident in India’s ability to repay its debts. Let’s figure out what this means for the Indian economy and all of us.

Who is S&P Global Ratings, Anyway?

S&P Global Ratings is a financial credit agency that assesses countries’ creditworthiness, just like your credit score reflects your ability to repay a loan. A higher rating from S&P means investors view India as a more reliable borrower, potentially leading to lower interest rates and increased investment.

Reasons for the Upgrade: A Strong Economy with Solid Fundamentals

S&P’s upgrade reflects their confidence in India’s robust economic performance. Here are some key factors driving this optimism:

Fast-Growing Economy:

India is currently the world’s fastest-growing major economy, and S&P expects this momentum to continue over the next two to three years. Looking ahead, S&P anticipates solid consumer spending and increased government investment to further propel India’s real GDP growth. 

They forecast a healthy 6.8% growth rate for fiscal year 2025 (ending March 2025), followed by an upward trend to 6.9% in FY26 and 7.0% in FY27. This sustained growth strengthens India’s position as a global economic powerhouse.

Improved Fiscal Discipline:

The government’s spending habits seem to be getting a little tighter. S&P acknowledges improvement in the quality of government spending, with more focus on infrastructure projects. This focus on infrastructure is crucial for long-term economic growth by removing bottlenecks that hamper development.

Commitment to Reforms:

Regardless of the outcome of the upcoming June 2024 elections, S&P expects economic reforms and fiscal consolidation efforts to continue. This political stability is another factor that reassures investors.

What are the Challenges Still on the Table?

While S&P is optimistic, they also acknowledge India’s challenges:

• High Debt Burden: India’s government debt remains a significant concern. However, with a recovering economy, the government has more room to maneuver and implement a gradual plan to reduce its debt burden.
• Inflation Management: Managing inflation effectively will be crucial for sustained economic growth. S&P suggests that demonstrating more robust monetary policy effectiveness could lead to a rating upgrade in the future.

What Does This Mean for You?

While a positive outlook doesn’t guarantee a credit rating upgrade, it’s a significant step in that direction. A potential upgrade in the future could translate to lower borrowing costs for the Indian government, potentially leading to more resources for public services and development projects. This can indirectly benefit businesses and individuals by fostering a more stable economic environment.

The Road Ahead: Keeping an Eye on the Future

Another factor to consider is the upcoming general election results in June 2024. S&P, however, expresses confidence that the new government will prioritize economic reforms and infrastructure investment regardless of the election outcome.

The Final Word

S&P’s positive outlook revision on India is a vote of confidence in the country’s economic trajectory. While challenges remain, the focus on growth, infrastructure development, and fiscal responsibility paints a promising picture for the future. As with any financial decision, staying informed and monitoring the situation unfolding is important. This upgrade is a positive step, but India’s economic journey continues.

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Electric vehicles (EVs) have been making a lot of buzz lately, and for good reason! They’re cleaner for the environment, quieter on the roads, and can even save you money on fuel costs in the long run. But the cost of an EV can sometimes be a bit daunting. 

Here’s where the government’s upcoming FAME 3 ((Faster Adoption and Manufacturing of Electric Vehicles) scheme comes in, aiming to be a game-changer for EV adoption in India. With a massive budget of Rs. 10,000 crore, FAME 3 promises to make EVs more attractive for everyday customers. 

FAME 3 will continue the Electric Mobility Promotion Scheme (EMPS), which was introduced as a temporary plan when FAME 2 ended on March 31, 2024. FAME 2  provided a 15% subsidy on the sale price of electric scooters in the country.

FAME 3 will be sent for approval to the Union Cabinet shortly after the new government takes office in June. EMPS, designed to support sales of electric two-wheelers and three-wheelers until the general elections are over, has a total allocation of Rs. 500 Crore and will run for four months until July.  The government aims for a 30% market share of electric vehicles by 2030

Electric vehicle sales in India by year and type.

Let’s delve into how FAME 3 could make owning an EV a more realistic possibility for you.

5 Reasons FAME 3’s EV Push is Good For Everyone

Bringing Down the Price Barrier

FAME 3  offers subsidies to manufacturers and consumers, effectively bringing down the price of electric two-wheelers, three-wheelers, and even public buses. This translates to significant savings for the customer. 

Focus on Two-Wheelers and Public Transport

FAME 3 prioritizes electric two-wheelers, recognizing their immense popularity in India. This targeted approach means a larger chunk of the budget goes towards making these everyday vehicles more affordable. Similarly, the scheme focuses on electric public buses. FAME 3 aims to make these electric buses a regular sight on our roads, benefitting your wallet and the environment.

 A Wider Electric Vehicle Ecosystem

The beauty of FAME 3 isn’t just about immediate savings. By making EVs more accessible, it encourages manufacturers to invest in research and development. This, in turn, leads to a wider variety of electric vehicles in the market. This competition between manufacturers can also drive down prices in the long run, creating a win-win situation for you and the environment.

Economic Growth and Job Creation

The shift to electric vehicles will stimulate economic growth through the development of a new industry sector. This includes the manufacturing of EVs, batteries, and charging infrastructure. The investment is expected to create numerous jobs in these areas, from research and development to production and maintenance. Additionally, it can boost ancillary industries such as software development for vehicle management systems and renewable energy sectors for charging infrastructure.

A Greener Future

Saving money is great, but there’s a bigger picture here. FAME 3 isn’t just about getting EVs cheaper but will promote a cleaner and more sustainable future for our planet. Traditional gasoline-powered vehicles contribute significantly to air pollution. You’re actively reducing your carbon footprint by opting for an electric vehicle. Think of it as a small step you can take towards cleaner air for your family, friends, and everyone around you.

Key Takeaways of FAME 3

Here’s a breakdown of the key points regarding the upcoming FAME 3 scheme:

• Fresh Start for Incentives: Existing certifications under FAME 2 won’t be valid. Manufacturers will need to re-apply for incentives under the new scheme.
• Shorter Duration: The initial rollout of FAME 3 is expected to be for two years, compared to the five-year span of FAME 2.
• Electric Buses Get Priority: FAME 3 is likely to increase the number of electric buses subsidized for purchase by state transport departments, promoting cleaner public transport.
• Uncertain Future for Electric Cars: Subsidies for electric cars, even for commercial use, are currently out of scope. Discussions are ongoing regarding the need for such incentives. A proposal suggests offering subsidies only for electric cars priced below Rs 15 lakh, similar to FAME 2. Hybrid cars might also be included if passenger cars are considered.
• Focus on Two-Wheelers and Three-Wheelers: FAME 3 will likely prioritize two-wheelers and three-wheelers, the dominant segment in Indian transportation. While the exact subsidy amounts are yet to be confirmed, reductions compared to FAME 2 are expected (around Rs 10,000 for electric two-wheelers and Rs 50,000 for three-wheelers). Incentives based on battery capacity (Rs 5,000 per kWh) will likely continue.
• Promoting Electric Vehicle Adoption through EMPS Incentives: EMPS is designed to boost the sales of 372,215 electric vehicles, comprising 333,387 electric two-wheelers and 38,828 three-wheelers. Incentive benefits are exclusively provided to vehicles equipped with advanced batteries to promote the adoption of cutting-edge technologies.
• Promoting Advanced Technology: FAME 3 aims to encourage the adoption of the latest technologies. Incentives will likely be linked to vehicles equipped with advanced batteries.
  

When Can You Get Your Hands on an Electric Vehicle?

The exact rollout date for FAME 3 is yet to be announced, but reports suggest it’s coming soon. The government is likely waiting for the new administration to take office and finalize the details. However, with a dedicated budget of Rs 10,000 crore, the future of electric vehicles in India looks promising.

A Few Things to Keep in Mind

While FAME 3 is exciting news, it’s always good to do your research before making a big purchase. Here are a few things to consider:

• Charging infrastructure: Are there enough charging stations in your area? This is an important factor, especially for electric cars.
• Range anxiety: How far can an electric vehicle travel on a single charge? This will depend on the specific model you choose.
• Maintenance costs: Electric vehicles generally require less maintenance than traditional gasoline vehicles.

The Road Ahead

The government’s commitment to electric vehicles, highlighted by initiatives like FAME 3, marks a significant step towards a cleaner future. With increased affordability, a wider variety of options, and a growing charging network, owning an EV is becoming more accessible for everyone.

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

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