Economics & Investment Highlights (6)

Business Economics & Services Team (BEST)

                                Economics & Investment Highlights (6)

1.       1.US Domination Back?

After the meltdown many had written off the US economy and predicted that it cannot return to its predominant position as the number one economy in the world. That belief was reinforced by the fact that China has piped the US as the number one economy in the world. Now, those who held that the US economy will be fading out sooner or later are proving to be wrong. World over currencies are swearing on the US dollar and are converting their assets into the greenback. This had led to steady erosion of values of the local currencies. In India also, the situation is not different. The rupee breached the Rs 63 mark against dollar and feared that with the current account deficit is widening, the rupee will further slide.

2.     2.   Cabinet nod for GST Bill

Cabinet has finally given nod to the long awaited goods and services tax (GST) bill. A constitutional amendment is needed to give effect to the provisions of the bill, which is supposed to bring about a new tax regime. There was stiff resistance from the states since the bill seeks to take away some of the powers to levy and collect taxes by the state governments. The Center before giving nod to the bill prepared by the finance ministry and discussed threadbare in the cabinet has given some major concessions to the states. The bill is likely to be introduced in the Parliament today.

3.      3.  The government is contemplating separate unit for  Transfer Price Cases

Quite likely a dedicated court for hearing and settling cases relating to transfer pricing will be set up to expedite disposal of such cases in a fast track manner. Of late there has been many cases being heard and decided by different layers of judiciary cases relating to this segment. The decision of the government is seemingly governed by two factors. One, to create a pool of judges well versed in the subject: two, for ensuring speedy disposal of the cases of that nature, which will send right signals to the foreign investors.

4.      4. Insurance Bill caught up skirmish

The government effort to pass the much awaited insurance bill has caught up with stiff resistance from the opposition in the upper house of parliament –Rajya Sabha. It seems that the government has to resort to some compromise on its stand to being the sulking opposition.   

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Economics & Investment Highlights (4)

Business Economics & Services Team (Best)

                     Economics & Investment Highlights (4)

1.      1.  Trade deficit Widens

Trade deficit of India has widened to a 16 month record level riding on the back of increased import of gold. Exports for the month of November 2014  grew by 7.2%  after 8.5% contraction in October 2014 mainly due to increased exports of  textiles, garments,  gems and jewelry etc. At the same time, imports were up 26.8% in November 2014 to US $ 42.8 billion , leaving a trade deficit of US$ 16.9 billion. This increased trade deficit will widen the current account deficit of the third quarter of the current fiscal year. At the same time, one has to fact in the steady slide of the oil prices, which the experts predict may continue for some more time, offsetting the increased trade deficit.

2.    2.    New arbitration Clause to inserted in Indian trade treaties

Concerned by increasing number of arbitration cases that the individuals and companies are resorting to, the Government of India is likely to incorporate a provision to the effect that it will not allow foreign companies to drag India to arbitration on issues settled by a judicial authority. A draft cabinet note has been circulated by the finance ministry for changing the draft guidelines for the bilateral investment treaties.

3.     3.   Inflation falls to zero level in November 2014

Triggered by dramatic fall in the whole sale prices of food and fuel, the whole sale inflation has flattened to zero level, according to the government sources. Many feel that it is the ideal time for the RBI governor to revisit the demand of the industry to cut the interest rate to jump starts the economy, when he reviews the monetary policy in the first week of February 2015. But many feel that the RBI governor will have to take cognizance of many factors including inflationary expectation, oil prices at that time, current account deficit and most importantly, fiscal deficit.

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India's Economic & Investment Updates (3)

Business Economics & Services Team (BEST)

                                              India's   Economic & Investment Updates (3)
1. Industrial output dips
India's industrial output slides y 4.2% year on year in October 2014 mainly triggered by contraction in the manufacturing sector output by 7.6%. However, mining  has shown remarkable growth  at 5.2% as against a decline in the same period in the previous year (-2.9%). The electricity generation has impressively picked up during this time and grown by 13.3 % as against 1.3 % for the previous year . The most significant fall was for capital goods sector (-2.3%). The consumer durables contraction (35.2%) was also significant ofr the same period. Importantly, the retail price inflation has come down by 0.8 %.

2. Supreme Court Dismisses Bayer Plea Against generic Drug

The Supreme Court of India dismissed the Bayer appeal on the compulsory license issued on Nexaver-a drug for treating   kidney and cancer.and upheld the  Bombay High Court decision to give compulsory license to a Hyderabad based pharma company - Natco Pharma-to ahead with its plan, ending the litigation

3.RBI Governor For Boosting the Domestic Demand
The RBI Governor has underscored that the make in India plan should be focused mainly on boosting the domestic demand and not necessarily on increasing the domestic demand. The RBI Governor seems to be concerned about the inadequate aggregate demand, which must have pulled down the manufacturing growth.

4. Lok Sabha Passes Coal mine Auction Bill
The lower house has passed the bill for fresh auction of 204 coal blocks cancelled by the Supreme Court,paving the way for early solution of the problem. The bill is expected to be introduced in the Upper House -Rajya Sabha in the coming days.  

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India Economic & Investment Updates(2)

Business Economics & Services Team (BEST)
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Herewith major economic & Investment updates. Those who are interested in having a detailed report, position paper, or policy framework have to contact us in the e-mails or telephone number listed  above. Please also note that this service will be free of cost till 31st December 2014 and after that we propose to make it available only to members. For membership details, please contact us through the e-mails or telephone.
 1. More states join the Uber Ban
The San Francisco based taxi aggregator, Uber, which is at the center  of controversy on account of the rape committed by one of its drivers, is facing retaliatory steps   from more states. Karnataka and Andhra Pradesh  state governments have joined the Delhi government in banning the taxi service from plying. Maharahtra government seems to be still undecided on this issue. It may be noted that these states have maximum number of women workers in the IT industry, who have to work at night. Though there are company vehicles to ply them, some on week ends or off days, travel in hired transport.

2. GST May be a Reality Soon.
The much awaited Goods and Services Tax (GST), which is designed to eliminate the cascading effect of the indirect taxes may become a reality soon. The Center and sate governments are meeting regularly to thrash out the differences. A possible breakthrough is expected very soon since the Modi administration is very keen to implement the tax regime at the earliest. But policy watchers are of the opinion that the policy implementation my become a political issue since ruling BJP objected to the implementation of the composite tax, when they were in opposition. 
3. Modi Administration Downplays CII's select leak of Industry's concern

Long back, the then Finance Minister Mr. R Venkataraman, who later became  the President of India called Indian industry as Oliver Twist: More You Give More They Want. Many in the government feel that the CII's ploy (recently they held a close door meeting to gauge the industry response to Modi Administration's economic policy and diligently leaked the highlights to the press) is nothing short of a black mail by industrialists, who want everything in a platter. For countering the blackmail, the government machinery is working overboard in collating the information about the non-perming assets created by individuals industrialists and tax evasions they commit. While CII is making a veiled attack on the government, the other apex industrial bodies  like FICCI and Assocham seem to be distancing themselves from the opinion. It is also heard that a section of  the CII remembers are dissociating themselves from the view expressed by CII.
 4, Putin Offers Helping  Hand  to Modi
Vladmir Putin, the Russian strongman, who is currently on a visit to India, seems to be wooing  the Narendra Modi administration to join hands with his country for  strengthening India's defense sector. The economic sanctions hit Russian economy to keep India on the right side has tempted the latter with direct trade in diamonds and offered technical and financial  support for the ICT and energy sectors. Modi seems to have pitched for Russian assistance, both technical and financial -for his flag ship event-Make in India.   
5. Major  Shakeout in Indian Insurance Sector Expected.
In the event of passage of the Insurance Bill by both Houses of Parliament,   a major shakeout is widely expected in the cash strapped insurance sector. Barring the state-run insurance companies and a very few private companies, almost all the players are running in loss. They may seek assistance from foreign players to make their working more operational. Newer products complying with IRDA guidelines are needed to stay in the competition. 
6. PSU Banks to raise Resources from Capital Market

According to government sources, the public sector banks in the country needs Rs 2.4 lakh crore to infuse its capital to comply with the Basel 111 capital adequacy  norms. The cabinet has already approved 10 PSU banks to go for stock sales. The overriding condition is that these banks should retain 52 percent of the government's share after the stock sales. The largest of the PSU bank -State bank of India-is expected to mobilize Rs 25,000 crore of the total approved limit of Rs 33,000 crore to meet the capital requirement.

7. Electronics Development Fund Formed
To give a boost to the electronics production in the country, the government has  given  approval to form the Electronics Development Fund. The fund to be operated by SIDBI or similar organizations will fund electronics and information technology entrepreneurship ventures. The fund will be available to both the government and private sector run companies.  

 

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