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Tuesday, February 11, 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


What Donald Trump is likely bringing to India later this month

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New Delhi: India and the United States are likely to conclude road maps for defence and space partnerships, as well as possibly a limited scope trade deal, during President Donald Trump's maiden state visit to the country on February 24-25.The key outcomes from the visit could include a deal for an Integrated Air Defence Weapon System (IADWS) worth $1.86 billion, according to people aware of the matter. This system is also known as the National Advanced Surface-to-Air Missile System-II or NASAMS-II. "Donald J. Trump, President of the United States, accompanied by First Lady Melania Trump, will pay a state visit to India on 24-25 February… During the visit, President Trump and the First Lady will attend official engagements in New Delhi and Gujarat, and interact with a wide cross-section of Indian society," India's external affairs ministry said in a statement, announcing President Trump's visit."The relationship has further evolved under the leadership of Prime Minister Modi and President Trump, with significant progress in all areas including trade, defence, counter-terrorism, energy, coordination on regional and global issues as well as people-to-people ties," said the ministry.The US Defence Security Cooperation Agency (DSCA) last week delivered the certification required for notifying the American Congress about the possibility of the military hardware sale to India. "The proposed sale of this equipment and support will not alter the basic military balance in the region," the Trump administration conveyed to the US Congress. The visit of India's foreign and defence ministers to Washington for the second edition of 2+2 ministerial dialogue in December 2019 had laid the foundation for President Trump's visit. The two sides signed the Industrial Security Annex (ISA) and three agreements under the Defence Technology and Trade Initiative to secure technology transfer and co-produce critical technologies. They also inked a number of agreements ranging from greater interaction between elected representatives to collaboration in space, science and technology, water and people-to-people exchange.

Arvind Kejriwal, Delhi's bulletproof monk

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New Delhi: "I love you Delhi," declared Arvind Kejriwal, as he blew a kiss and sent party workers into a frenzy. The underdog had won again! The activist-politician now resembled a superhero. For Kejriwal, seven years at the helm of a fledgling political party has been a long journey, finding himself and his politics. The beginnings were humble and unsure. His first two stints as chief minister saw him continue in his activist avatar. While his predecessor Sheila Dikshit used to seek time with the lieutenant-governor and iron out differences over transfers, Kejriwal preferred to sit on dharnas and demand files be signed. He and Cabinet colleagues would march from the CM residence in Civil Lines to the L-G's office, raising slogans against him and the BJP government at the Centre.But as he prepared for the 2020 polls, his aides saw a change in Kejriwal. From pointing a finger at the Centre for 'not helping Delhi', Kejriwal started concentrating on targeted programmes for the lowest socio-economic strata. Not a word was uttered against Prime Minister Narendra Modi. "I respect the mandate of the people," he said in a recent interview to ET, refusing to be drawn into any personal attack or comments against the Centre's policies. It seemed like a well strategy to avoid comparison. Even as he warmed up for the electoral fight, he stayed away from personal attacks. As BJP leaders attacked him and his government, he ran his entire campaign positioning himself as 'aam aadmi' and 'Dilli ka beta' who was 'insignificant' before BJP bigwigs. He thus endeared himself to the masses who saw him as one of them. A 'disruptor-activist' on dharna was now the 'superhero of good governance'.Kejriwal, nevertheless, would face several challenges in his new stint as CM. He has tried to address issues related to basic amenities in the capital. But would he show the vision and political will to tackle complicated problems such as cleaning the Yamuna or air pollution? Would he restrict himself to remaining 'Dilli ka beta' or would the mandate tempt him to take another shot at national politics? The answers would be known in a couple of years.

2600 reasons for you to go EV this year

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NEW DELHI: Electric vehicles (EVs) charging infrastructure will be available at every four kilometres in big cities within a year, following the award of 2,600 charging stations to state-run companies, said people aware of the matter. This would address the issue of anxiety over the range of EVs, they said.The govt has given in-principle nod to firms including NTPC, EESL and REIL but actual sanctions of the contracts would be made only after the public sector units sign memoranda of understanding (MoUs) for land where the charging stations are proposed, said the people. They said this would ensure the companies do not squat on the contracts.A significant chunk of orders for setting up the stations in 62 cities with million-plus population have been bagged by Rajasthan Electronics & Instruments Ltd and Energy Efficiency Services Ltd (EESL). NTPC and Power Grid Corp have also emerged as low bidders for the stations. 74089554 "We will give the final award to these companies only when they are able to produce MoU for land where the charging points are proposed to be located. We have issued 600-700 sanctions so far and expect award for all contracts in a month," said an official, who did not wish to be identified."Once these stations are set up, there will be charging stations at every four km in millionplus cities. This will help us inch closer to our target of having a charging point at every three km distance," he said.The official also said the companies have been asked to begin the award process for the contracts based on the in-principle nod from the Department of Heavy Industries.The urban local bodies of Dehradun, Guwahati and Tirupati, and municipal corporations of Navi Mumbai and Bhubaneswar, have also bagged some of the contracts under the Fame II – Faster Adoption & Manufacturing of (Hybrid &) Electric Vehicles – subsidy scheme, which targets electrification of public and shared transportation and laying of charging infrastructure for EVs.

First batch of medical supplies ready to be sent to China

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NEW DELHI: India is all set to dispatch the first consignment of medical supplies to China in its bid to address the growing shortage of medical equipment in the country, the epicentre of novel coronavirus, which has infected more than 43,000 globally and claimed over 1,000 in mainland China so far.Medical supplies such as gloves, surgical masks, disposable masks (2ply and 3ply), rubber gloves, latex gloves, boot covers, medical work caps, surgical suits and protective facial screen (disposable) will be sent to China this week, people in the know told ET."Coronavirus has fuelled medical supply shortage in China. As a friendly gesture, India will be sending these medical supplies to China," added the person.The move follows Prime Minister Narendra Modi's letter to Chinese President Xi Jinping, offering assistance.The external affairs ministry is working in tandem with the ministry of health and family welfare and the Department of Pharmaceuticals (DoP) to ensure that medical supplies are dispatched to China this week. "DoP had asked for the list of suppliers which can supply personal protective equipment like surgical gloves, two- and three-layer masks and boot covers in substantial quantities. The government is in the process of procure them," said a person in the know.74091528 The DoP secretary also held a meeting earlier with medical device manufacturers to check the availability of personal protective equipment including masks and gloves in India. It also urged domestic manufacturers to aggressively ramp up production of masks and gloves.The Prime Minister's Office and the DoP have also asked the manufacturers of medical devices to share with them the available stock and quantity that India can donate to China. They have been asked to share data for non-invasive ventilators, respiratory humidifier, infusion pumps, injection pumps and patient monitoring systems.On Monday, the health ministry held another meeting with the manufacturers to ensure timely procurement of medical supplies for sending it to China, people quoted above said."The government wanted to know the present capacity, how much it can be increased," said Rajiv Nath, forum coordinator at Association of Indian Medical Device Industry.

Tourists shy away from Indian skies

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Mumbai: Arrivals of overseas tourists in India and the country's foreign exchange earnings from them grew at the slowest pace in a decade in 2019, government data showed.Tourism industry experts and airline executives attributed the slowdown to multiple factors, including street protests over the new citizenship law and elevated levels of pollution in northern India, including Delhi. Several countries had issued travel advisories to their citizens over both issues.About 10.89 million foreign tourists visited India in 2019, an increase of 3.1% from the year before, the tourism ministry informed Parliament earlier this month, citing provisional data. The year before, arrivals grew 5.2%, while in 2017, the expansion was 14%, showed data from the tourism ministry and the Bureau of Immigration.Travel AdvisoriesForex earnings from inbound tourists rose 8.2% to Rs 2.2 lakh crore in the past year. The growth was 9.6% in 2018 and 15% in 2017, according to figures from the ministry and the Reserve Bank of India.The government hasn't made any assessment of the impact on tourism from agitations against the Citizen Amendment Act (CAA), minister of state for tourism Prahlad Singh Patel said in his reply to a query in the Lok Sabha on February 3. But travel industry experts said this was one of factors, especially towards the latter part of the year, that affected the plans of both leisure and business travellers. "We saw a significant spurt in queries (from potential travellers) and we issued more advisories cautioning corporate travellers last year than we have done in the recent past," said Neeraj Balani, the Indian managing director for SOS International, a global medical and travel security risk services company. It has clients from more than 1,000 cities in 90 countries. Without getting into specifics, Balani said global companies had cancelled meetings in India in the last few months of the year.In December, at least seven countries, including the US, UK, Israel, Canada and Singapore issued travel advisories cautioning their citizens planning to travel to India, especially to the north-eastern region which saw widespread protests against the CAA.Pollution is the other major problem that has affected tourist arrivals in Delhi, the city that attracts most number of tourists in India — the country's capital received 42% of all foreign tourists who visited India in 2018, according to government figures. ET on November 5, 2019 reported how foreign and domestic tourists were cancelling or cutting short their trips to Delhi because of the worsening air quality at the time.While some airline executives said there was a slowdown in arrivals, an executive at Cathay Pacific said there was no spike of flight ticket cancellations. Another executive at a foreign airline said inbound travel to India had never been "a significant story"."India is yet to be successful in making a big story of its inbound tourism sector. The largest chunk of foreign tourist arrivals is from Bangladesh...," he said.To be sure, foreign tourist arrivals constituted a mere 0.5% of all tourists in 2018. In 2019, Bangladeshis accounted for 21.37% of foreign tourist arrivals followed by the US, (13.80%) and the UK (9.75%).

Microfinance troubles back in focus: Blame it on greed alone!

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Last October, when local pressure groups in Assam began demanding a ban on microfinance activities in the state, it seemed like a throwback to the yesteryears for the veterans in the business.The issue of over-indebtedness came back to haunt the industry exactly a decade after the controversial Andhra Pradesh Microfinance Institutions Ordinance, which clamped down on unregulated lending by micro lenders. It all started with some borrowers defaulting, and that snowballed into mass defaults in five districts of upper Assam.The Microfinance Institutions Network (MFIN), the self regulator for the sector, found 7% borrowers in the state were over-indebted, over double the national average of 3% of 55 million customers."The national average is still small in the bigger scheme of things. But the risk of higher indebtedness is growing following the influx of new set of lenders. They are taking the easy way of going to the existing borrowers having credit history, instead of trying new pockets of business," said Bandhan Bank managing director Chandra Shekhar Ghosh, India's answer to Bangladesh's Mohammad Yunus.As many as 18 lenders took membership of MFIN post demonetisation, taking the tally of NBFC-MFI members to 56. All of the new members may not necessarily be entirely new to the game, but the fact that they have enrolled themselves now shows that with the impact of cash ban wearing out, they are trying to make the most in a business which offers unmatched returns. 74091717 A FREE LUNCHLate last year, fresh trouble related to loan defaults surfaced in a couple of districts in coastal Karnataka, about 3,000 km from the Brahmaputra and Barak valley. There, some political activists had convinced borrowers that they would gain under the Karnataka Debt Relief Act of 2018 if they didn't pay back."These externalities mar the sector time and again. We have no control over them. We may only have control over the concerns regarding the possibilities of overlending. MFIN is working on this issue with its code for responsible lending," says PN Vasudevan, managing director at Equitas Small Finance Bank.The MFIN study in Assam's five most affected districts — Dibrugarh, Golaghat, Jorhat, Sibsagar and Tinsukia — shows that among highly indebted borrowers, 24% have taken loans from more than three lenders. About 38% of highlyindebted customers have not taken a single loan from NBFC-MFI, 41% have single NBFC-MFI as lender, 19% have taken loans from two NBFC-MFIs. Only 2% have more than two NBFC-MFIs as lenders.Central bank rules say that not more than two NBFC-MFIs should lend to a specific borrower, while there is no bar on the number of banks lending to the same borrower. The central bank has prescribed the micro loan limit by NBFC-MFI to a single borrower at Rs 1.25 lakh, but does not put any ceiling on lending by banks or SFBs to the same borrower.CHANGING CONTOURSThis raises doubts. There are different sets of lenders — banks, small finance banks (SFBs), NBFC-MFIs and societies — that are targeting the same borrower groups. Even as banks engaged in microfinance typically argue that they have stricter and stronger risk evaluation processes, but history teaches us that there are chances of unregulated lending over the ?1.25-lakh limit if the rules do not consider the changing contours of microfinance.Banks have now taken the leadership in micro lending to women in joint liability groups accounting for 40% of the Rs 201,724-crore loan outstanding as on September last year. NBFC-MFIs are the second largest provider with 31% share while small finance banks and other NBFCs have 17% and 11%, respectively. Other MFIs account for merely 1% share.Besides, there are semi-formal and informal money lenders who are also giving short-term credit to these borrowers every now and then, outside the formal economy."Care has to be taken by all lenders for this sensitive client base. Else, multiple lending and high indebtedness of borrowers will follow. This is why we have been pushing for uniform guidelines for all active lenders in this market segment," says MFIN chairman Manoj Nambiar.According to ICRA Ratings, the overall exposure to Assam by banks, SFBs, NBFCs and NBFC-MFIs has grown to around Rs 12,600 crore as on September 30, 2019, while NBFCMFI has it at Rs 2,600 crore.ASSET QUALITY-GROWTH TRADEOFFICRA said that the rapid loan book growth has led to some concern on the asset quality in the region."Until recent months, the collection efficiency in the state had remained high with 30+dpd remaining below 1% till September 30, 2019. However, the ongoing protests and political tensions seem to have impacted MFI operations substantially, with the share of overdue portfolio (0+ dpd) increasing sharply from 1.5% in September 2019 to around 10% in December 2019," the rating firm said in a report released in January.Lenders typically react by slowing down loan disbursement in the pockets of trouble. Ujjivan Bank has slowed new customer acquisition in Assam, Karnataka and also in pockets of West Bengal and is serving only repeat clients with good credit history."Microfinance with its 7-crore plus (including self-help group borrowers) women clients is a good base for a lot of local activism. But we are moving to a scenario where making false promises, confusing the gullible clients and creating an issue with repayment will be treated as financial vandalism and attract punishment and censure," says Nambiar.He goes on to say that tight credit reporting discipline would ensure microfinance being available to deserving clients."MFIN has already taken the initiative in Code for Responsible Lending in microcredit which brings all lenders regulated by the RBI and also big not-for-profit entities under the same umbrella with a common minimum programme. What makes it more powerful is that when you sign, you get classified as a responsible lender and every quarter the designated credit bureau will publish your level of adherence — this will ensure complete transparency to all," Nambiar says.THE BUSINESS CODEMore than 105 lenders have so far signed the Code, with the biggest omission being Bandhan Bank."Financial literacy and generation of awareness are important for future success of microfinance, which more often than not is subject to local level disturbances that gullible borrowers often fall for. Unfortunately, as the sector grows, lenders are getting preoccupied with lending and repayment collections, while the focus on awareness generation is ignored," Ghosh says."And, when lenders offer bonuses for making loan disbursement and repayment collections, then these are not responsible lending. MFIN needs to look at this aspect," he says.To be sure, there are grey areas even after a decade of the Malegam Committee report that prescribed measures to cleanse the sector. A revisit of the business parameters looks to be the order of the day.

So, how RBI really fared in its ‘whatever it takes’ moment

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By B. PrasannaGroup Head - Global Markets, Sales, Trading and Research, ICICI BankThe RBI's latest monetary policy came as a pleasant surprise to the financial market in its use of innovative tools for nurturing the fledgling growth recovery in the economy to address the broken link of credit availability and delivery due to crises in the NBFC sector, NPA resolution in the banking sector and the ongoing restructuring exercise among the PSU banks. The use of these tools is RBI's way of directly addressing the "transmission" of rate cuts which has been effected hitherto.The first of these tools is the announcement of CRR exemption for incremental bank loans to certain segments that will lower delivery of credit costs to these sectors. Extension of the restructuring scheme on MSME loans and projects in the commercial real estate sector may release some capital for banks in the short term while allowing breathing space to such concerned sectors. We concur with RBI assessment that credit support to these sectors will have large multiplier effect on growth.Further, the announcement of a Long Term Repo Operation (LTRO) of 1 year and 3-year tenor up to a total amount of ?1 lakh crore at the policy repo rate is a path-breaking one. There was concern that "Operation Twist" may inadvertently steepen the front end of the yield curve and, thereby, hinder transmission at the short end of the bond curve. Such concern is now more than adequately addressed by the LTRO as frontend G-sec yields have fallen between 15-25 bps with collateral benefits to spread assets. We expect the spread of sovereign curve over repo to compress even more as we go along.Additionally, RBI through LTRO seems to be recalibrating its transmission strategy from liquidity neutral and market-linked pricing under "Operation Twist" to directly augmenting banking liquidity and its rate, unlike the Operation Twist or OMO, which was directed at all participants. We expect that depending upon the experience gathered in first tranche of ?1 lakh crore, RBI may consider another LTRO directly linked with incremental credit to specific sectors that might have a more pronounced nudge effect to lend with cheaper resources.Global central banks have used yield curve management tools only when conventional monetary policy space seemed limited. However in RBI's case, the recent unconventional measures (Operation Twist, LTROs, macro-prudential easing) seem to be additional tools as MPC forward guidance of "policy space available" do suggest further accommodation in the policy rate.The latest liquidity framework adopted by RBI has abandoned the stance of liquidity to be kept in marginal deficit and has shifted the main liquidity management tool from the overnight repo to the 14-day term repo/reverse repo. This measure is likely to push banks to borrow/lend from each other instead of the RBI for daily liquidity management. It is also plausible this move will gravitate weighted average call rate in the direction of the policy corridor of MSF and reverse repo depending on the system liquidity balance. Also the removal of quantitative restrictions (earlier system liquidity around 1% of NDTL) does suggest that the size of OMO bond purchases and/ or Operation Twists will no longer be constrained by liquidity consideration. This should assist in further reduction of the term premia in the sovereign curve. Overall, the latest announcements and liquidity framework show RBI's commitment towards accommodative stance. More steps like quantitative assessment of durable liquidity conditions and its publication on a fortnightly basis and periodic consultations with participants are welcome developments.RBI announced other measures like deepening of the rupee interest rate derivative market, which will encourage higher non-resident participation and enhance the role of domestic market makers in the offshore market. It will also improve transparency and achieve better regulatory oversight.In summary, there is no denying that at a time when fiscal and monetary policy space to boost the growth impulse is limited, the RBI has been able to maximise its support for growth through unconventional monetary policy measures which would improve both cost and availability of credit. Further, by keeping the policy stance as "accommodative" and forward guidance of "policy space available", RBI has elegantly maintained the benign monetary policy environment. The "whatever it takes" approach and ability to experiment with unconventional monetary tools will go a long way to nurture recovery. As RBI Governor said, "You might discount the MPC outcome but don't discount the RBI." The hidden meaning in that statement is for everyone to see.

Bandhan Bank’s weight in MSCI India index may rise by 32 bps

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Bandhan Bank's weight in the MSCI India Index is likely to go up by 32 basis points in its next rejig due to an increase in free float, which could trigger an inflow of about Rs 700 crore from overseas passive funds, Morgan Stanley said. MSCI will announce its review of indices Wednesday.Analysts tracking the Indian bank are bullish, with 14 of the 20 brokerages assigning a 'buy' rating, with an average target price of Rs 625, or 36 per cent higher than the current market price.Bandhan Bank's FII limit has been increased to 49 per cent in October. The promoter stake in the bank has declined from 82 per cent to 61 per cent in the December quarter after the non-operative financial holding company (NOFHC), Bandhan Financial Holdings, trimmed its holding through the merger with Gruh Finance.Shares of Bandhan Bank have declined more than a quarter since October 15 as its microfinance lending portfolio in the Northeast, particularly Assam, was hit due to ongoing protests in the region. The portfolio accounts for a sixth of its advances in this category of loans.The successful merger with Gruh Finance has led to addition of Rs 18,000 crore to total assets under management.The merger will deliver both revenue and cost synergies such as extending loans to about 2.7 lakh Gruh customers and other substantial synergies. Going ahead, merger synergies are seen kicking in with Gruh leveraging the bank's ability to garner low-cost liabilities and vast distribution network in eastern India, said analysts."Bandhan Bank's robust business traction and customer acquisition is poised to continue post-merger," said Kajal Gandhi, analyst, ICICI Securities. "Given robust growth and superior asset quality, we remain positive on business growth as well profitability, along with steady asset quality."

IT Services cos discover silver lining in cloud deals

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Bengaluru: IT services companies are seeing increased opportunities in chasing revenue from new software vendors — sparking a series of buyouts — as clients move away from paying large upfront licence fees for software and hosting on-premise servers. In the latest deal that affirms this strategy, Infosys said on Monday it would pay around $250 million to buy Simplus, a company specialising in consulting and implementing Salesforce software.The deal comes a week after larger rival Cognizant announced two transactions in the space, heating up the race for cloud services revenue. 74091833 In 2018, Infosys had acquired in Fluido, a firm with core competence in Salesforce software for the European market. Analysts said Infosys' latest acquisition, coupled with the Fluido buy, would help bolster its Salesforce practice."This acquisition is a strong one for Infosys. When we did a study on provider capabilities for Salesforce ecosystem, we had seen that Infosys — though being a leader — was lagging some of its competitors," said Mrinal Rai, principal analyst at consultancy ISG. "They had strong offshore capabilities, but they needed a similar onshore presence."Salesforce is one of the largest Software-as-a-Service companies, so called because they allow customers to rent software per user on the Cloud, or internet. Salesforce, which offers customer relationship management software, is growing at over 20% annually."This acquisition is key to staying relevant to the digital priorities of our clients and demonstrates our commitment to the Salesforce ecosystem," Pravin Rao, chief operating officer of Infosys, said in a statement. "The acquisition reaffirms our continuous endeavour to strengthen our strategy of scaling our Agile Digital and cloud-first digital transformation capabilities."The deal will add 50 basis points to Infosys' revenue in the next fiscal year beginning April 1, analysts at research house Emkay Global have estimated.Simplus has over 500 employees and offices in North America, Sydney, Melbourne, London, along with a delivery centre in Manila. The company had about $67 million in revenue in the fiscal year ending January 31, 2020.Infosys will pay $200 million by March, when it expects to close the deal with Simplus. In addition, there are employee incentives and retention bonuses amounting to $50 million on meeting certain performance conditions over three years.The deal follows two Salesforce partner acquisitions made by larger rival Cognizant last week. IT analysts expect more deals to follow.