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Q2 M&A Developments in India

24 Oct 2012

Q2 of the financial year 2013 has seen a lot of activity on the domestic political and economic front, which is likely to impact India's economic growth prospects, investor sentiment and M&A activity. Taxand India explores these recent developments in the Indian marketplace.

The Government initiated impending reforms to create a positive investment sentiment and propel economic growth. This creates hope amidst repeated downward revisions of GDP growth and the looming threat of rate cuts by rating agencies impacting capital flows into the country.

In deal activity, Q2 of the financial year 2013 remained subdued as the global and domestic headwinds continue to play-out and impact deal making in India. While the recent reforms are expected to propel deal activity, this may take time. In the near to mid term, the deal momentum is expected to be moderate and sector specific. For instance for Technology & BPO, reforms impacted sectors like retail, aviation, real estate, logistics, etc are expected to be more active.

On the tax and regulatory front, continuing with the liberalisation of FDI policies and foreign borrowings in Q1, Q2 also witnessed the same, with the continued focus on infrastructure sector. The Union Cabinet made some changes in the Companies Bill and the Competition Act. A late arrival is the expert committee report on taxation of indirect transfers, which was released recently for public comments. The impact of these changes, as and when introduced in law, are still to be seen.

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Taxand's Take

The economy worldwide is still recovering from the recession. New legislation and initiatives are regulary being introduced by governments in response to this, in the hope of making their country more attractive to investors, as well as supporting the needs of the nation. Due to this, multinationals who conduct cross-border business must keep up to date with any adjustments of legislation in order to be legally correct.

Your Taxand contact for further queries is:
Gokul Chaudhri
T. +91 124 339 5040

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