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Wednesday, January 8, 2020

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


Markets Live: Sensex climbs 400 points, Nifty above 12,150; aviation stocks jump up to 5%, OMCs 4%

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It's official. Coal mining in India is no longer govt's business

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NEW DELHI: India has opened up the coal sector completely for commercial mining for all local and global firms after easing restrictions on end-use and prior experience in auctions via an ordinance on Wednesday, but the mining minister said the move will not hurt state-monopoly Coal India.The Union Cabinet on Wednesday approved promulgation of Mineral Laws (Amendment) Ordinance 2020 to amend the Coal Mines (Special Provisions) Act, 2015, as well as the Mines and Minerals (Development and Regulation) Act, 1957. The amendment to the latter was required to begin auctions of iron ore mining leases before they expire in March this year.The ordinance puts an end to captive coal block auctions in future and will have to be adopted in the upcoming Budget session once it is cleared by the President.The government proposes to kick-start commercial coal mining auction process this month with release of bid rules and consultations with stakeholders."The amendments will open up new areas of growth in the sector," coal and mines minister Pralhad Joshi said at a media briefing. He said the country imported 235 million tonnes coal worth Rs 1.75 lakh crore last year. Of this, 100 million tonnes was non-substitutable coking coal but the government hopes to stop coal imports by power plants in due course, he said.The ordinance allows any India-registered company to bid and develop coal blocks. Section 11A of the Mines and Minerals (Development and Regulation) Act provides that the central government can auction coal and lignite mining licences only to companies engaged in iron and steel, power and coal washing sectors. The companies also needed prior experience of mining in India to bid for the blocks.The minister said Coal India has been tasked to produce one billion tonnes by 2023-24 but production will still fall short of demand and there is a need to introduce private players in coal mining.Joshi also said the amendment will help attract more participation in coal block auctions.The government expects to attract investments from Indian and global corporates, besides mining majors such as Peabody, BHP Billiton and Rio Tinto.Sajjan Jindal, chairman of JSW Group, said this was a huge reform. "This will go a long way in reducing coal imports which is over $15 billion a year.In today's time when oil prices are very uncertain, this decision is path breaking in making India self-reliant," he tweeted.Joshi said the amendment to Mines and Minerals (Development and Regulation) Act will allow for seamless transfer of environment and forest clearance in operational mines. Oil minister Dharmendra Pradhan said the amendment to the Act was required to build confidence among bidders participating in the auction of 46 operational iron ore mines whose leases expire in March 2020.

World Bank skeptical about India's growth

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NEW DELHI: The World Bank on Wednesday cut India's growth for financial year 2020 to 5% from 6% estimated earlier, a day after the country's statistics office pegged growth in the current financial year at 5%, the lowest in 11 years.The multilateral lender expects the country's growth to recover only slightly to 5.8% in the next fiscal year.The bank's Global Economic Prospects report released on Wednesday cited a lingering weakness in credit from non-banking financial companies (NBFCs) as the main cause for the downgrade.This is the slowest growth forecast since the 3.1% rate recorded in financial year 2008-09 when the global financial crisis had derailed the economy.The World Bank's latest update is also in line with the Reserve Bank of India's October policy estimate in which it slashed the economy's expected growth to 5% this fiscal year.Global economic growth, is expected to rise to 2.5% in the current calendar year, underpinned by a gradual recovery in investment and trade from last year's significant weakness, although downward risks persist, the report said.Growth in advanced economies is likely to slip to 1.4% in calendar year 2020, in part due to softness in the manufacturing sector. Growth in the US is expected to ease to 1.8% due to tariff increases, while weak industrial activity will bring down the Euro region's growth to 1% this calendar year, the report said.On the other hand, growth in the emerging markets and developing economies is expected to accelerate this year to 4.1%. However, this rebound is not broad-based as the assumed improvement in performance is likely to come from a small group of large economies."With growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that boost broad-based growth, which is essential to poverty reduction," said World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu. 73164721 Regional growthIn comparison, the report forecasts Bangladesh's growth to ease to 7.2% for the fiscal year ending June 30 for the country, while Pakistan and Sri Lanka's growth rates are expected to rise to 3% and 3.3%, respectively, in FY20.It also estimates growth to rise to 5.5% for the South Asian region as a whole in calendar year 2020, on the assumption of a modest rebound in domestic demand and accommodative policy in India and Sri Lanka. The report also cites improved business confidence and support from infrastructure investments in Afghanistan, Bangladesh, and Pakistan for the expected uptick.

Zero MDR good, but govt reimbursments will help: Paytm

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Vijay Shekar Sharma revolutionised digital payments in India with Paytm. It has invested thousands of crores to keep its dominance in the digital space. But it's not profitable yet. In an interview with Saloni Shukla and Ashwin Manikandan, Sharma speaks about how he expects the industry to evolve. Edited excerpts:You've launched an all-India single QR-based acceptance solution for all retail payment instruments without any fee. Would products like these be the norm in the zero-MDR regime?Last year we signed up 15 million merchants, of which nearly 10 million are active. The pace of digitisation is gaining acceleration which means people are way more comfortable understanding mobile-based payments and they understand the difference between a card, a wallet, and UPI. We saw an incredible opportunity to bring in an all-in-one product: single QR, that can solve problems in the acceptance of wallet, UPI and RuPay cards where merchants would be able to bring in an unlimited amount of money at zero fee. This is an unprecedented opportunity and we've launched this within a week of the government brought a notification on zero MDR.In 2019, your costs for acquiring new merchants exceeded your revenue, contributing heavily to your losses. Will this be how you conduct your business in the next few years?Last year, we announced Rs 10,000 crore worth of investments for the next few years which are primarily for customer acquisition and merchant onboarding. Consumers are becoming a lot savvier. An average customer is doing more than 10 financial transactions a month which is huge. Mobile payments are becoming mainstream and we are taking it to the masses. There is an immense opportunity in providing our customer base with value-added financial services.When do you expect to make profits?I think time will tell. I call our investments as infrastructural change where a customer comes in and their habits change, becoming more active in the ecosystem. So, I think this is as a long-term project to build what we're building and it is very valuable to build what we're building. You've seen wherever our products have reached, they bring huge value to everyone involved including the consumers, the merchants, the regulators and the government.Listing plans?The short answer is that we won't list Paytm before it becomes profitable and once you're profitable what is the need to list it?How do you envisage the MDR waiver to impact the payments industry?MDR is split between three parties: the bank that issues the card, the payment network and the acquirer bank. In this system, the largest chunk of fees, over 75%, goes to the issuing bank. The business models of intermediaries are sustaining on the fraction they're getting on these transactions. But companies like us who are using a large part of it on investments to cover these costs can take care of that. Because anyway, the standalone fee that you get on payments is not ample enough to sustain many of these businesses.While I am on the side of MDR becoming zero being a good thing for the merchant, the government should reimburse people who are acquiring merchants. If you look at Paytm's merchant acquisition model, it has come at the cost of our equity. And we have invested Rs 15,000 crore in the past.What do you think is the way out for these companies?I believe zero MDR for the growth of the industry can work out very well, but for us and other payment companies it would be better if the government reimburses. Right now, only those who have the risk capital of that size can expand. We all are trying to represent through regulators to put this point forward, but now this is a law. The ultimate decision on this matter lies with the parliament. Zero percent MDR with reimbursement would be an ideal move.What is the future of Paytm Payments Bank?The payment bank model is primarily a payment-led revenue model. Zero MDR takes away the profitability. An SFB licence will allow us to access a larger set of financial services. It'll add for us a few more revenue lines such as term deposits and treasury revenue.Primary revenue business today for PPB comes from the MDR on transactions and treasury income. We do believe, however, that these two for the long term for a large bank is not sustainable. SFB is a wholesome meal where the payment bank is a fast food brand; you can have it but not for a sustained period!Five-year timeline to convert to SFB?While payment banks don't bring in too many revenue lines, it is a very good model to acquire customers and bring them into the formal economy.But a bank itself can become more sustainable, scalable and profitable once it becomes an SFB and that's why we have shown an open interest. The five-year timeline was a surprise to us when it was communicated to us. However, we'll remain committed.Has India's digital growth plateaued a bit?The volume has increased only by 35%, which is not as high as when it was growing at a factor of 1,000 a few years ago. But it is to be noted that the growth is on a higher base and much more sustainable and more assured. More industry players and stronger fundamentals. Any which way, the business of digitisation of retail and wholesale payments will allow incremental addition of financial services to reach places where they have not.What about rising competition?We have been here since 2008 and a host of companies have come and gone. Which one are you talking about? I have a simple understanding. If we have a business with an incredible amount of customer edge, we'll build on that.

Estranged family of Gati promoter want board reconstituted

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MUMBAI: The spouse and sons of Mahendra Agarwal, the promoter of listed logistics firm Gati, have approached the National Company Law Tribunal (NCLT) against him for alleged oppression and mismanagement in the company and have sought reconstitution of the board.Brothers Dhruv and Manish with their mother Neera Agarwal approached the Hyderabad bench of the NCLT seeking tribunal's intervention in the affairs of the company. They filed two separate petitions for Gati and TCI Finance, where Mahendra Agarwal is the promoter."Almost every single share in our father's control, including those in the name of private companies, is pledged to lenders," said Manish Agarwal, the younger son of Mahendra Agarwal. "So he is not an owner of the company in the true sense and it is very difficult for us as shareholders to repose our confidence in his decisions." The cases have been filed by Neera & Children Trust that holds shares of Mahendra Agarwal's wife and two sons.The plea estimated fair valuation of Gati, including all its investments, businesses and immovable assets on a conservative basis to be not less than Rs 2,000 crore. However, the petitioners said in the proposed transaction with Allcargo, Gati is valued at only approximately Rs 915 crore."How can the board of Gati approve or even consider a deal where the company is being valued at only Rs 915 crore, when they know that the fair value of the company as of November 2018 is at least Rs 2, 000 crore," Agarwals said in their plea.Shareholders of Gati on Wednesday voted in favour of a resolution for preferential allotment of shares to Allcargo. Around 87% of the voters in the EGM voted for the resolution.Similarly, in the case of TCI Finance, too, they have sought reprieve for oppression and mismanagement seeking interim reliefs injunction on the sale of properties of TCI Finance including shares of Gati.They have also sought that Mahendra Kumar Agarwal and Meera Madhusudhan Singh be removed as directors, an investigation into the affairs of the company and re-opening of its books of accounts.Neither Gati nor TCI Finance responded to an ET email seeking comments for this story. "We are seeking an order of injunction preventing TCI Finance from selling shares it owns in Gati, which is approximately 4% of Gati Limited."On December 19, the junior Agarwals had requested capital markets regulator Securities & Exchange Board of India (Sebi) to restrain an open offer from Allcargo to purchase additional shares of Gati citing various cases against Agarwal and a recent court mandate to attach his shares.In a letter to an official at the Sebi, Neera Agarwal and her sons cited a Hyderabad court order on December 5 to attach 1.6 million shares of the Gati founder Mahendra Agarwal that the latter sought to sell to Allcargo through an open offer."Once the board is reconstituted, we can reexamine whether such a deal is in the interest of shareholders. Our only motive is that we are really concerned as shareholders and are interested in maximising the value of our own shares," Manish Agarwal said.

Zero MDR good, but govt reimbursments will help payment cos: Vijay Shekhar Sharma

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Vijay Shekar Sharma revolutionised digital payments in India with Paytm. It has invested thousands of crores to keep its dominance in the digital space. But it's not profitable yet. In an interview with Saloni Shukla and Ashwin Manikandan, Sharma speaks about how he expects the industry to evolve. Edited excerpts:You've launched an all-India single QR-based acceptance solution for all retail payment instruments without any fee. Would products like these be the norm in the zero-MDR regime?Last year we signed up 15 million merchants, of which nearly 10 million are active. The pace of digitisation is gaining acceleration which means people are way more comfortable understanding mobile-based payments and they understand the difference between a card, a wallet, and UPI. We saw an incredible opportunity to bring in an all-in-one product: single QR, that can solve problems in the acceptance of wallet, UPI and RuPay cards where merchants would be able to bring in an unlimited amount of money at zero fee. This is an unprecedented opportunity and we've launched this within a week of the government brought a notification on zero MDR.In 2019, your costs for acquiring new merchants exceeded your revenue, contributing heavily to your losses. Will this be how you conduct your business in the next few years?Last year, we announced Rs 10,000 crore worth of investments for the next few years which are primarily for customer acquisition and merchant onboarding. Consumers are becoming a lot savvier. An average customer is doing more than 10 financial transactions a month which is huge. Mobile payments are becoming mainstream and we are taking it to the masses. There is an immense opportunity in providing our customer base with value-added financial services.When do you expect to make profits?I think time will tell. I call our investments as infrastructural change where a customer comes in and their habits change, becoming more active in the ecosystem. So, I think this is as a long-term project to build what we're building and it is very valuable to build what we're building. You've seen wherever our products have reached, they bring huge value to everyone involved including the consumers, the merchants, the regulators and the government.Listing plans?The short answer is that we won't list Paytm before it becomes profitable and once you're profitable what is the need to list it?How do you envisage the MDR waiver to impact the payments industry?MDR is split between three parties: the bank that issues the card, the payment network and the acquirer bank. In this system, the largest chunk of fees, over 75%, goes to the issuing bank. The business models of intermediaries are sustaining on the fraction they're getting on these transactions. But companies like us who are using a large part of it on investments to cover these costs can take care of that. Because anyway, the standalone fee that you get on payments is not ample enough to sustain many of these businesses.While I am on the side of MDR becoming zero being a good thing for the merchant, the government should reimburse people who are acquiring merchants. If you look at Paytm's merchant acquisition model, it has come at the cost of our equity. And we have invested Rs 15,000 crore in the past.What do you think is the way out for these companies?I believe zero MDR for the growth of the industry can work out very well, but for us and other payment companies it would be better if the government reimburses. Right now, only those who have the risk capital of that size can expand. We all are trying to represent through regulators to put this point forward, but now this is a law. The ultimate decision on this matter lies with the parliament. Zero percent MDR with reimbursement would be an ideal move.What is the future of Paytm Payments Bank?The payment bank model is primarily a payment-led revenue model. Zero MDR takes away the profitability. An SFB licence will allow us to access a larger set of financial services. It'll add for us a few more revenue lines such as term deposits and treasury revenue.Primary revenue business today for PPB comes from the MDR on transactions and treasury income. We do believe, however, that these two for the long term for a large bank is not sustainable. SFB is a wholesome meal where the payment bank is a fast food brand; you can have it but not for a sustained period!Five-year timeline to convert to SFB?While payment banks don't bring in too many revenue lines, it is a very good model to acquire customers and bring them into the formal economy.But a bank itself can become more sustainable, scalable and profitable once it becomes an SFB and that's why we have shown an open interest. The five-year timeline was a surprise to us when it was communicated to us. However, we'll remain committed.Has India's digital growth plateaued a bit?The volume has increased only by 35%, which is not as high as when it was growing at a factor of 1,000 a few years ago. But it is to be noted that the growth is on a higher base and much more sustainable and more assured. More industry players and stronger fundamentals. Any which way, the business of digitisation of retail and wholesale payments will allow incremental addition of financial services to reach places where they have not.What about rising competition?We have been here since 2008 and a host of companies have come and gone. Which one are you talking about? I have a simple understanding. If we have a business with an incredible amount of customer edge, we'll build on that.

Auto stocks on road to recovery; Bajaj, M&M & Escorts best bets

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Automobile stocks are unlikely to offer healthy returns for investors unless there is a V-shaped recovery in demand in 2020, said HSBC. "2019 was the weakest year for Indian autos in decades. Weak macros, tight liquidity, uncertainty around tax stimulus and regulations all impacted demand," said the brokerage's analysts Yogesh Aggarwal, Vivek Gedda and Kushan Parikh in a client note. HSBC said sales could bounce back in 2020, particularly for passenger vehicles but the 'demand pull remains mediocre at best'. The brokerage prefers Bajaj Auto, Mahindra & Mahindra and Escorts in the sector. — Our BureauBAJAJ AUTOCMP: Rs 3,060Target Price: Rs 3,600Expected Returns : 18%HSBC has maintained its buy rating on the stock on the grounds that Bajaj is a defensive company with a strong export portfolio, which is not impacted by emissions and safety regulations. "We lower our FY21e (estimated) earnings estimates by 2% as we factor in lower volumes led by weak demand," the brokerage's analysts said.M&MCMP: Rs 524Target Price: Rs 780Expected Returns : 49%HSBC has maintained its buy rating on M&M as its target price implies a 49% jump in shares. The brokerage highlighted weak demand, higher competition, and, subsequently, low growth expectations for M&M. "We lower our FY21e earnings estimates by 3% as we factor in lower volumes, led by a weak demand environment," the analysts said.ESCORTSCMP: Rs 613Target Price: Rs 830Expected Returns : 35%The brokerage has valued the stock at 15 times 12-month forward price to earnings (PE) ratio, a 15% premium to the 5-year historical average owing to strong operating performance and improvement in return on equity (ROE) expected over the medium term. "Current valuations at 10 times FY21e (estimated) earnings are attractive in our view," the analysts said.Target price is by HSBC | Expected returns based on HSBC target price

Risk aversion ebbing, credit flow has begun: Deepak Mittal

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At the corporate level, governance standards need to improve to regain investor confidence, says Deepak Mittal, CEO, ECL Finance, speaking on the sidelines of Edelweiss Credit Conclave 2020. Lending institutions also need to expand their reach, dispensing credit to deserving borrowers, he said in an interview with Saikat Das. Edited excerpts:Why is demand for credit muted?Demand for credit is linked to confidence and economic outlook. We have witnessed a slowdown in the economy and entrepreneurs are lacking confidence. As a result, demand is slow. However, green shoots are visible, and we think things will improve significantly, over the coming quarters. On supply side, systemic liquidity has improved significantly, and policy rates have also come down in 12 months, but transmission is still lagging given risk aversion coming from the events of the last year.Investors have turned risk-averse over the past one year. What needs to be done to bring back confidence?Some of the steps in terms of systemic liquidity and reduction of policy rates are already in place. We now need to work on rebuilding confidence, to get transmission going. This is something that will happen with passage of time and with collective effort of corporates, lending institutions and policy makers. At the corporate level, governance standards need to improve to regain investor confidence. Lending institutions also need to expand their reach, dispensing credit to deserving borrowers and on the policy front, we need to ensure that the initiatives which have been announced, get operationalised.Over the last 12 months, we are seeing signs of risk aversion ebbing from almost a complete freeze in Q3 FY19 to now where we are seeing credit flow has begun, albeit with high term and risk premiums. During this year we expect both the term and risk premiums to also come down. Is there any need for joint effort to kick-start lending?A collaboration between banks and NBFCs should be the ideal way to kickstart the lending cycle. NBFCs have the asset-side advantage, while banks are traditionally strong in their liability franchise. If both join hands, whether through co-lending or through active securitization, it will lead to better origination, credit appraisal and monitoring. Consumers will benefit with costs of credit coming down and the economy will benefit from expanding the credit footprint.Are global investors keen to tap the Indian credit markets?Global investors are seeing credit in India as a big opportunity, whether it is sovereign funds, pension funds, insurance companies or private banks. They are keen to invest in distressed assets and structured credit. Global investors with strong local teams are also looking at operating infrastructure and real estate assets. We are also seeing strong ECB inflows in the Indian corporate sector from international banks and fixed income funds.How do you assess the bond market sentiment?On one end, bond markets are seeing good returns because of favourable interest rate movements but there has been risk aversion, given the credit events in the last 5 quarters. With high quality new issuances and some of the resolutions moving forward, the risk aversion should reduce. Issuances like Bharat Bond ETF have clearly revived investor sentiment, which in turn, will aid in deepening the market. Although the year that has gone by has not been so encouraging, once apprehensions are allayed, issuers should come back in large numbers, to raise money.Global trends show that the bond market is one big source of long-term financing, which has been shallow in the past in India. Indian policy makers are keen on establishing debt market as a stable source for long-term financing. We do expect significant regulatory support to make that happen.What is your outlook for bonds for this calendar year?RBI's Operation Twist is helping to bring down the term premium and we expect that to continue. With risk aversion receding, we expect risk premiums to also come down, for a broader set of borrowers to benefit, from reducing interest rates.

India to tweak proposed content regulations to ease burden on some: Sources

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BENGALURU: The government plans to change the proposed rules for policing online content such that the tough monitoring measures and takedown rules apply only to big social media firms, according to a senior government official.In 2018, the Ministry of Electronics and IT (MeitY) proposed to amend the Information Technology (Intermediaries Guidelines) Rules under Section 79 of the Information Technology Act, 2000 to make social media firms more accountable for the content that they host.The IT Act currently provides a legal shield for technology intermediaries. Industry associations and cloud companies have objected to the proposed rules, which apply to all technology platforms despite it being framed to tackle the problem of 'fake' news on social media."The rules are meant only for social media content and, therefore, other ecommerce or streaming technology firms such as Amazon and Netflix must not worry about content takedown, traceability and grievance officer," the official said.IT industry lobby group Nasscom and Amazon Web Services (AWS) said last year that the rules must apply only to social media companies and not to technology intermediaries such as cloud platforms and the IT and business process management (BPM) sectors.AWS said such intermediaries will have to bear the cost of complying with provisions that do not apply to them. Facebook, YouTube and TikTok are among the companies expected to be impacted by the amendments to the guidelines.Notification of the new rules is likely to be done by January 15, MeitY said in an affidavit to the Supreme Court last year.