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Wednesday, September 4, 2019

economic news of india - world economic news - economics news for students - indian economy news

economic news of india - world economic news - economics news for students - indian economy news


Can a GST tweak get India back on track? Govt does the math

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NEW DELHI: Ahead of the crucial Goods and Services Tax (GST) Council meeting on September 20, the finance ministry has begun crunching the numbers to estimate the revenue it would lose in the event of rate reductions aimed at boosting demand during the festive season.The fitment panel that examines rate changes is expected to meet shortly to consider suggestions mooted by some states as well as industry, two officials aware of the development told ET. The panel comprises central and state officials.Among big-ticket consumer items, automobiles, tyres, cement, air conditioners and large LCD televisions are currently in the 28% bracket. Automobiles also bear a cess, depending on the size of the vehicle, further increasing the total tax incidence."Issues are being examined in detail… Numbers are also being looked at," said one of the officials. Some states have already written to the Centre highlighting the need to cut rates on autos and cement to provide a boost to the economy. Some state policymakers are of the view that a more radical view of the rate structure needs to be taken, for instance merging the 12% and 18% slabs into one.The key issue before the council meeting in Goa will be a possible cut in the tax incidence on automobiles, though there are differences among states on this issue. Punjab has suggested a comprehensive look at the rate structure while reducing levies for sectors such as automobiles to help turn the economy around. But Kerala is opposed to any such move. 70986156 West Bengal has also sought steps for the auto sector, particularly hybrid and Bharat Stage VI vehicles. BS VI prescribes more stringent emission norms for vehicles.The Centre is weighing all options, one of the persons quoted said.After the Reserve Bank of India cut the policy rate by 35 basis points in August, market watchers say it's now up to the government to take fiscal measures to boost the economy. A basis point is 0.01 percentage point.India's economy grew 5% in the June quarter, its slowest pace in six years. Private consumption expenditure slowed to 3.1%, an 18-quarter low, while manufacturing grew 0.6%. With consumption having helped prop up growth in the past few years amid sluggish private investment and exports, any revival plan hinges on Indians loosening their purse strings during the festive season, which is when the bulk of sales take place traditionally.High-frequency indicators have pointed to the slowdown getting more entrenched. The country's largest car maker Maruti Suzuki said Wednesday that it will halt production for two days this month as inventory piles up.On Sunday, most companies including Maruti Suzuki, Hyundai, Mahindra & Mahindra, Tata Motors and Honda reported a further drop in sales in August. While Maruti Suzuki reported a 33% decline, Tata Motors witnessed a 58% drop.GST rate cuts do not necessarily lead to a reduction in collections as they spur demand as well, experts said."Given the economic slowdown, there is certainly a case for reduction in rates for a few sectors such as auto," said Pratik Jain, national leader, indirect taxes, PwC. "This has been done in the past and worked more often than not. Of course, this has to be backed up with other economic stimulus (measures) as well."For sectors such as real estate and railways, where input tax credit is restricted, there is a case for reduction in rates on key inputs, he said.Jain said the GST Council may also want to consider merging the 12% and 18% slabs into a single one of possibly 15% or 16%, which will also simplify the rate structure. "However, it will not be an easy decision for the council and a larger consensus needs to be built for any major rate change," he said.

Another Anil Ambani firm running out of time

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By Anurag KotokyReliance Naval & Engineering Ltd., controlled by Indian tycoon Anil Ambani, said it is facing an acute cash-flow crunch after orders dried up amid efforts to restructure a pile of debt.The disclosure in the company's annual report comes just ahead of a court hearing whether to put the debt-laden company under insolvency proceedings, potentially dealing another blow to the former billionaire's shrinking empire. His wireless carrier slipped into the bankruptcy earlier this year."There is an acute cash-flow crunch as the expected debt resolution is yet to be actualized," Reliance Naval's Chief Executive Officer Debashis Bir said in the report. "This is impacting the progress of the existing projects leading to extended timelines and thereby leading to erosion of confidence amongst clients."The revival of the shipyard is crucial for Ambani, 60, who's counting on potential government defense contracts to turn the company's fortunes around as Prime Minister Narendra Modi steps up spending on national security. India's government has invited bids for $2.2 billion of warships and support vessels, part of Modi's $250 billion military modernization plan.Policy changes brought in by the government has not led to increased shipbuilding contracts for private companies, Bir said.Reliance Naval is facing the prospect of bankruptcy after lenders rejected its debt repayment plan, Bloomberg News reported Tuesday. The firm has defaulted on a debt of more than 64.6 billion rupees as of March 31, to lenders including Union Bank of India, IDBI Bank and Central Bank of India according to its auditors' report.Anil Ambani's wider conglomerate is planning to dispose of assets spanning roads to radio stations, aiming to raise about 217 billion rupees ($3 billion) to help pare debt that has ballooned to about 939 billion rupees at four of its biggest units -- excluding the telecom business Reliance Communications Ltd.

RBI money won't solve Modi's fiscal problem

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NEW DELHI: India is likely to miss its fiscal deficit target for the current financial year, despite receiving an additional dividend from the central bank, five government officials and advisers said, as tax collections have sunk amid a sharp slowdown.With economic growth falling to a six-year low of 5% in the April-June quarter, the sources said the government could toward the end of 2019 be forced to raise the fiscal deficit target to 3.5% of GDP from 3.3%, amid pressure for additional stimulus measures.The officials asked not to be identified as they have not been authorized to discuss the matter with media.A Finance Ministry spokesman did not immediately respond to the requests for comment.Tax collections could fall by as much as 1 trillion rupees ($14 billion), or 4% of $344 billion annual target, two of the officials said, noting that sharp shortfalls are expected both in goods and services tax (GST) and income tax collections."Overshooting the fiscal deficit target is inevitable this year as the economic slowdown has hit government revenue," a senior adviser said, adding the deficit would rise unless the government resorts to hefty spending cuts.Separately, a finance ministry official said plans to sell minority stakes in some state-run entities including electricity producer NTPC, state insurer General Insurance Corp and construction finance company HUDCO could be deferred, as market sentiment has weakened.Two government advisers said they have also urged the Prime Minister Narendra Modi-led government to defer the fiscal target to tackle the economic slowdown and outline stimulus steps to help the hard hit sectors such as autos and textiles.

Flipkart makes space at top, picks 5 Vice Presidents

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BENGALURU: Online retailer Flipkart has promoted five executives across businesses as vice presidents, according to an internal email sent by group chief executive Kalyan Krishnamurthy to employees. ET has a copy of the email.The newly appointed VPs include Chanakya Gupta, head of 2GUD; Saurabh Tandon from engineering; Nishit Garg, who manages a few categories; Nandita Sinha, who leads Big Billion Days (BBD) planning, and Regunath B, who heads BBD tech architecture."These leaders have an outstanding track record of delivering impact and creating long-term value for Flipkart; and truly exemplify our core values," Krishnamurthy said in the email.The promotions come ahead of Flipkart's flagship sale, The Big Billion Days.Sources in the know said Flipkart plans to hit $3 billion in sales this festive season, ET reported on September 4. "This is the first round of letters issued to senior directors. Over the next two weeks, the company will continue to issue promotion letters across levels along with additional Esops (Employee Stock Ownership Plans)," said a company executive requesting anonymity.Flipkart conducts a bi-annual performance assessment in June and December. When contacted, a Flipkart spokesperson did not respond till the time of going to print.70986399 The announcement comes less than a week after Krishnamurthy told employees that the company board had received approval to offer current employees a chance to cash out 10% of their vested stock options at $125-130 apiece.Flipkart's stock options are granted over a four-year period, with employees vesting them every month after a one-year minimum threshold.In May, ET reported that Flipkart disbursed a fresh set of Esops worth $100 million to senior and mid-level staff as part of the e-commerce company's efforts to retain key talent a year into Walmart buying a majority stake.

Coming soon: BS VI-compliant Splendor iSmart 110 motorcycles

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New Delhi: Hero MotoCorp has commenced dispatch of the first batch of BS VI-compliant Splendor iSmart 110 motorcycles to its dealers for product familiarisation and training purposes, signalling its imminent launch, according to two people familiar with the development. "The dispatches were made earlier this week, and bikes are expected to reach some of the dealerships in a day or two," one of the persons cited above, told ET. A spokesperson for Hero MotoCorp said they do not want to comment on speculations. The Splendor iSmart 110 is likely to be competitively positioned and priced 12-15% higher than the current Splendor iSmart, said one of the sources. As we have stated earlier, our preparation towards migration to BS-VI is well on track and we will bring our range of BS-VI motorcycles and scooters well before the stipulated timeline. We will make the announcements on specific launch dates at an appropriate time."One of the persons cited earlier said, "The Splendor iSmart 110 is likely to be competitively positioned and priced 12-15% higher than the current Splendor iSmart. Although the company has not informed the dealers of the exact pricing as yet, the product familiarisation and training initiative is a clear indication that the motorcycle is likely to be commercially launched soon."In June 2019, Hero MotoCorp became the first two-wheeler manufacturer in the country to receive the BS VI certification from the International Centre for Automotive Technology (ICAT). The company received the certification for its Splendor iSmart 110 motorcycle.The BS VI-compliant motorcycle has been designed and developed at the company's R&D hub, the Center of Innovation and Technology (CIT), in Jaipur, Rajasthan.In the first four months of the fiscal, Hero MotoCorp sold 2.32 million units in the domestic market, down by 15% from the year-ago period.

Volkswagen ready to bring CNG cars to India if govt policy helps

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MUMBAI: The world's largest carmaker Volkswagen is considering CNG as an alternative fuel for the near future before mobility technology eventually transitions to electric.If there is a stable policy framework from the government in terms of identifying CNG as one of the solutions to the rising pollution crisis, the German carmaker, which already has a considerable presence in Europe in terms of CNG vehicles, will consider bringing these to India, Steffen Knapp, director of Volkswagen Passenger Cars, told ET."We are the biggest player globally in CNG. Depending on the infrastructure, we can do this very fast (in India)," he said.If the government pitches for adoption of CNG in terms of setting up fuel stations across the country, increase the import of the fuel to the country, and buy more CNG vehicles for its fleets, it will make a business case for Volkswagen to invest in the technology in India, Knapp explained.Being successful in any segment in India requires high level of localisation and being a small player in terms of volumes, the company cannot invest in every technology unless there's a clear trend backed by policy, he said.Maruti Suzuki has announced that it will introduce CNG as an option on all its small cars as the company plans to stop making diesel vehicles after April 2020 when the BS-VI norms kick in.In the mid-term, Volkswagen will focus on petrol-powered SUVs for the Indian market, the executive said. "Our future lies in petrol," he said.At present, over 60% of the company's sales in the country are of petrol-powered vehicles. The future of diesel-powered vehicles in India for the company is uncertain and Knapp was non-committal on whether it will upgrade its diesel engines for the BS-VI emission norms.The customer, too, has been confused lately due to the lack of a stable policy stance, he said.

IT stocks shine as depreciation in rupee helps improve margins

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MUMBAI: A sliding rupee has come in as a big positive for India's technology services providers, which are struggling with weak margins amid declining spending by big companies.IT stocks have outperformed the benchmark in the last few weeks as every 1 per cent depreciation in the rupee against the dollar improves their earnings margin before interest and tax by 20-25 basis points, said analysts.Tech Mahindra, HCL Technologies, Infosys, Tata Consultancy Services, NIIT Technologies, Hexaware, Mastek, Mphasis and L&T Infotech are some of the top picks of analysts.The rupee depreciated by 5.3 per cent to 72.39 against the dollar in the past one month, its steepest monthly decline in six years. The BSE IT index gained 4.4 per cent in the same period, compared with a 1 per cent decline in the broader Sensex index. IT stocks such as Infosys, HCL Tech, Tech Mahindra, L&T Infotech and Hexaware have rallied between 5 per cent and 11 per cent. 70986416 Analysts believe the rupee weakening would result in margin benefits in the short term.It would act as a "margin tailwind for the Indian IT service players while tight labour markets in the key markets are increasing cost structures", said Sanjeev Hota, the head of research at brokerage firm Sharekhan. "However, the material rupee depreciation benefits will not stay for long term as it would be passed on to customers during contract renewals or bidding for new contracts," he said.With the NSE IT index's returns consistently outperforming the benchmark Nifty over FY2018 to so far this fiscal year, the IT index is trading at +1standard deviation above its mean price-to-earnings readings for the past three years."In the current situation, IT is a safe sector, what we would advocate investors to take fresh positions in because the rupee depreciation is providing a cushion to IT company earnings," said Mahantesh Sabarad, the head of retail research at SBICAP Securities.Analysts remain optimistic about the demand scenario for IT services in the medium-tolong term, but see concerns over rising global macro issues.

Mkt looking reasonably cheap for small, midcaps: Nilesh Shah

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The market is in neutral to negative territory from a sentiment perspective with lower-than-expected earnings growth and multiple levels of taxes like STT and LTCG, said Nilesh Shah, managing director at Kotak Mahindra Asset Management Company. Unless fundamentals improve, there is unlikely to be an upturn in sentiment or flows and consequently the market, said Shah in an interview with Sanam Mirchandani. Edited excerpts:The market sentiment remains weak despite government's announcements. GDP growth has slowed further. What is your reading of the situation?The markets are driven by flows, fundamentals and sentiments. From a flow point of view we are in neutral to minor negative territory. FPIs, HNIs and retail are sellers. There is a supply overhang from minimum public shareholding norm. Mutual funds are the only buyers. From a sentiment point of view, we are in neutral to negative territory with lower than expected earnings growth and multiple levels of taxes like STT and LTCG. Fundamentals are suffering from subdued June quarter GDP growth at 5%. The market is not optimistic about second quarter GDP growth based on the data so far for July and August. The market right now has ignored two small positives - subdued oil prices despite US-Iran skirmishes in the Middle East and average monsoon, which has recovered from deficiency mode. At this juncture unless fundamentals improve, we are unlikely to see upturn in sentiment or flows and consequently market. There is heightened global uncertainty because of US-China tariff war but that creates an opportunity for us. If we can bring many of the manufacturers leaving China to our country, we will be on our way to close the gap with China, which has grown five times faster than India since 1980. Fundamentals of the economy need to be improved by giving growth priority over inflation and fiscal prudence, providing adequate debt and equity capital through better transmission of credit from PSU banks and NBFCs, reducing the burden of very high real interest rate on entrepreneurs, taking structural reforms in land and labour laws, improving ease of doing business through creating Rule of Law whereby simple laws like cheque bunching don't end up creating unsolved 60 lakh-plus cases, etc.There is also an issue about the fund transfer that the RBI has given to the government. The market has been a bit divided about the idea of such a transfer and how the government should use it. What are your thoughts?There could be a challenge on the fiscal side in FY20 because of the slowdown in taxation revenue and with this transfer, to that extent, fiscal slippage fear gets reduced and now it is up to the government where they want to use it. Our recommendation would be to use it either for infrastructure spending, which has a multiplier effect on the economy, or use it to recapitalise PSU banks so that there is transmission of credit which has been stalled.Do you see further rate cuts from the RBI after Friday's GDP data?Undoubtedly, the RBI has pronounced an accommodative stance and since they have kept inflation and inflationary expectations well below the target level, they can now focus on growth. At this point, real interest burden on Government of India is about 3%, for corporate India it is about 6%. One doesn't make that kind of return even in equities worldwide so how can our entrepreneurs bear the burden of such high real interest rates? I believe the RBI will take appropriate action on easing that burden to revive growth.What is your view on the rupee? Do you see it weakening further?The destiny of the rupee is to depreciate. One, our inflation is higher than our peer group. Second, our productivity enhancement is lower than our peer group. So by virtue of those two, over a period, the rupee has to depreciate. The market is not linear; so if rupee doesn't depreciate in a period of time, in next period the rupee has to compensate. The rupee will continue to depreciate in medium term. However, the RBI has a very matured policy of managing volatility and letting market decide direction.In this uncertain market scenario, should investors play safe and focus on defensives?From a valuation point of view, market is reasonably cheap in small and mid-caps, fairly valued in large caps and expensive in super-large caps. However, the confidence on earnings growth is not coming through because of variety of issues. We recommend investors who can afford risk to buy into a diversified portfolio of small and mid-cap (stocks) rather than a sector-specific portfolio. Try to invest in companies which are run by good managers where you don't expect corporate misgovernance. Second, try to invest in companies which have manageable debt burden. They should not be excessively leveraged. Third, try to invest in companies which have operating leverage. If the companies have operating leverage, when the upturn comes in the economy, they will have the maximum benefit. More importantly, this is the time where you should be greedy about valuations. Whole host of companies are available at below historical average valuation. So, one should be greedy on valuation. Don't invest on a lump sum basis. Invest on six to 18 months STP (systematic transfer plan) basis.

India market for wearable devices more than doubles in Q2

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Bengaluru: The market for wearable devices more than doubled in the second quarter of 2019, reaching an all-time high of 3 million shipments, research firm International Data Corporation said. India is the world's third-largest market for wearable devices, after the US and China.IDC attributed the growth to ear-worn wearables, which include wireless earphones that track health and fitness or enable smart assistants. "The market for ear-worn devices has seen exponential growth in the last few quarters and this will continue in the coming quarters as well, primarily because traditional audio vendors are moving towards the wireless devices as it provides the ease of operation and comfort of carrying a device, while participating in a fitness activity or taking a call on the go," said Anisha Dumbre, Market Analyst, IDC India.Shipments of wristbands rose over 19% in the period, though they fell 24% sequentially as brands corrected inventory after large shipments in the first quarter. "The average selling price of this category declined 9.7% from the previous quarter to USD 26 as brands have launched more affordable options in the market to onboard new segment of users," the report said.

Demand for teaching jobs witnesses impressive jump: Job site data

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BENGALURU: Growth in searches for teaching jobs has jumped 40 per cent in 2018-19, a job site said. The impressive increase could be attributed to the development of digital media which has opened avenues to new roles such as online tutors and e-educators, the site Indeed said in a statement. The data revealed a 41 per cent increase in job searches for teaching jobs from July 2016 to July 2019. Growth in searches for teacher jobs has been the highest in 2018-19 witnessing a 40 per cent increase. There was an increase of 14 per cent in job-seeker interest for these roles during 2017-18, while three years ago (2016-17) there was a dip of 11 per cent in job seeker interest towards teaching roles."The advancement of technology and e-learning has led to the rise of online tutor and e-educator jobs", it said. The new-age profession does come with its perks. While the average annual salary for a teacher in India is Rs 2,19,804 and goes up to Rs 5,88,000 per annum; the average annual salary of an online tutor in the country is Rs 4,80,000 and goes up to Rs 9,25,000 per annum, Indeed said. Salary estimates are based on salaries submitted anonymously to Indeed by employees, users, and collected from past and present job advertisements on Indeed in the past 36 months, it added.