by admin | May 25, 2021 | Economy, News, Opinions
By Taponeel Mukherjee,
For India to become a $5 trillion economy, the government needs to go from being a spender to an even greater enabler of businesses than it currently is. Debates about the appropriate level of government spending abound. The tight balance between spending to boost critical sectors versus managing a fiscal deficit is a tightrope the government must walk.
Numbers such as the $526 billion infrastructure gap suggest that innovation in policy will be essential for India to truly bridge this gap, create jobs and generate growth. Our premise is that while spending by the government is important, it needs to focus much more on how to enable businesses, especially private investment in infrastructure.
According to a World Bank report, government spending as a percentage of GDP has averaged at 10.29 percent between 1960 and 2016, with the number in 2016 being 11.65 percent. There is pressure around both the fiscal deficit and revenue deficit in India. In addition, no remarkable change in tax revenues is expected soon that would provide a significant increase to government spending — therefore it will be wise to assume that spending as a percentage of GDP will not see significant change upwards any time soon.
Hence for India to create necessary infrastructure and jobs it is essential to allow private capital to invest. The government must continue to spend and efficiently allocate public finances, but to truly push up growth rates and aspire to more than double the size of the economy, it is imperative that more thought is given to measures to boost private investment.
The recent policy by the Modi government to open the coal mining sector to the private sector is a welcome step. If implemented well, this should pave the way for more competition and higher efficiency.
The most important step towards allowing private capital into infrastructure is to bifurcate the infrastructure market to identify two segments: (1) The financially viable sectors (2) The economically value-creating but not fully financially viable sectors.
If infrastructure sectors such as ports, refineries, renewable energy, power transmission, mining, toll-roads, water and irrigation can all be categorised between the “financially viable” and the “economically value-creating but not fully financially viable”, then the former needs effective and transparent regulations while the latter needs government spending in addition to effective regulations.
The above analysis needs to be based on robust cash-flow models and past project experience. The bifurcation is important because for financially viable sectors the government must push for regulations that attract capital. Tax policies to boost capital expenditure such as competitive accelerated depreciation, tax-free windows and centralised clearance windows would be the key. While for the sectors that deliver economic value but aren’t fully financially feasible, government spending in varying degrees will be required.
What is important to realise is that high quality infrastructure will be essential to provide India an opportunity to push up growth rates. It is simply not possible for government spending to bear the entire burden of the infrastructure spending.
According to a World Bank global ranking of trade- and transport-related infrastructure for 2016, the Netherlands was given 4.29 points and Singapore 4.20. India in this ranking was at 3.34 points, significantly lower at 35th rank versus the Netherlands at 4th and Singapore at 5th position.
It is interesting to note that according to the World Bank, government spending in the Netherlands was at 25.04 percent of GDP, while the same number for Singapore was at 11.28 percent. While not all government spending is on infrastructure, what the data seems to suggest is that different countries, given their economic dynamics, have used different tools to boost infrastructure. It isn’t essential for a government to spend a significant percentage of GDP to be a high-quality infrastructure country.
A $5 trillion economy is a target that is worth aspiring for. Infrastructure spending will have to form a significant component of the value-creation in the economy. The positive multiplier effect of infrastructure creation cannot be overemphasised in terms of job creation, economic growth and national prosperity. It is time for the Indian government to pay greater attention to its role as an enabler and facilitator of infrastructure.
(Taponeel Mukherjee heads Development Tracks, an infrastructure advisory firm. The views expressed are personal. He can be contacted at taponeel.mukherjee@development-tracks.com or @Taponeel on Twitter)
—IANS
by admin | May 25, 2021 | Opinions
By Amit Kapoor,
It is quite commonplace to hear that India will be an economic superpower in a few decades. However, the current reality is far from it. One cannot deny the abysmal standard of living of our citizens. Indias real Gross Domestic Product (GDP) per capita (at 2010 prices) for 2016 stands at just $1,861.5 while the other BRICS nations — China ($6,893.8), Brazil ($10,826.3), South Africa ($7,503.3) and Russia ($11,099.2) — are higher up on the scale.
Even South Asian economies like Bhutan ($2,801.3), Sri Lanka ($3,759.2) and Maldives ($8,623.9) perform well above India by this measure of standard of living. A straightforward question that arises is: What is it that India seems to misconstrue in the economic game that other players seem to get right and succeed in doing?
Spatial differences in GDP per capita across countries continue to motivate much of growth theory and development economics even today. However, being part of an increasingly knowledge-based world economy, India’s positioning in the global prosperity scenario must be seen and targeted from the national competitiveness angle.
Competitiveness, in effect, isn’t about macro-economic variables like interest rates, exchange rates, deficits or about cheap abundant labour or availability of natural resources or about state policies and management practices — although all these are relevant to any economy. Rather, competitiveness can be defined more purposefully as the productivity of a nation’s factors of production (labour, land and capital) employed during production processes. In purely economic terms, productivity denotes the value of output per unit of input used.
Talking about productivity in policymaking is no recent phenomenon and, at some point, you are bound to quote Nobel Prize-winning economist Paul Krugman who wrote back in the 1990s that “productivity isn’t everything, but in the long run it is almost everything”.
First of all, productivity must not be confused with labour force participation or, for that matter, the output that they produce. A simple example would explain this. Consider a donut-making factory having four workers on eight-hour shifts producing 400 donuts a day — or 100 per worker or 12.5 per hour. An announcement on hiring four more people to boost productivity would suggest that the new workers will produce more donuts per hour than the existing workers.
Remember that productivity is output per hour worked. So, if the new lot of workers were actually slower (producing only 10 donuts per hour) than the existing ones, then productivity will in fact fall. The four new workers will come up with 320 donuts a day and the total output of the eight workers would rise to 720 donuts a day. However, the average per worker per hour is just 11.25 donuts. The net result is an increase in labour force participation and output — but productivity, in essence, has fallen.
Furthermore, if the company wants to make the same profit as before the new hirings, it will have to hike the price of the donuts it sells. So it might end up hurting those who buy the donuts (because they are the ones paying more for them) and ultimately affect their standard of living as well. A clear implication for the short term, in this case, is that the new workers will have to be trained and skilled, and while they are being trained their productivity will be lower than the other workers. Thus, for productivity to rise in the medium to long term, these new workers will have to be skilled better than the current workers by using updated and innovative practices so that output rises in an even more greater proportion and be reflected in the high and increasing standard of living of all the citizens.
Going back to Krugman’s words, productivity then is not everything — the well-being of citizens is; which, interestingly and inherently, is dependent on productivity levels in the overall economy.
Firms, apart from being productive domestically, have to undergo the sheer pressure and challenge of being innovative and up to date in order to attain a global competitive edge as well. This is because international trade and foreign investment have the power to allow companies to specialise in industrial segments that are more productive and become global game-changers. The fact that certain firms in specific industries are able to create and sustain real as well distinct advantages for themselves reflects nothing but the productivity gains that help any economy maintain a higher standard of living for its citizens.
Productivity growth has never really topped the list of issues of policymakers in India, even though productivity growth matters more for emerging market economies than for the advanced world. Trends indicating slow growth in productivity levels across major sectors of our country — and being nowhere close to high-performing economies — do provide strong motivation to rethink our approach since it is sustained productivity growth that can raise living standards over the long run: If workers produce more per hour, there is more of output and income to share and hence more reasons to celebrate.
(Amit Kapoor is chair, Institute for Competitiveness, India and can be contacted at amit.kapoor@competitiveness.in and tweets @kautiliya. Bhawna Kakkar, researcher, Institute for Competitiveness has contributed to the article.)
—IANS
by admin | May 25, 2021 | Economy, Markets, News
By Porisma P. Gogoi,
Mumbai : Release of key domestic macro-economic data, combined with global market volatility and movement of funds, are expected to dictate the direction of the Indian equity markets during the week ahead, say market analysts.
“Apart from other developments on the domestic front, the Indian equity markets would seek direction from global markets as the results (earnings) season is almost over,” D.K. Aggarwal, Chairman and Managing Director of SMC Investments and Advisors, told IANS.
“Also, the movement of funds and crude oil prices are expected to influence the market sentiment next week,” he added.
Provisional figures from the stock exchanges showed that last week foreign institutional investors (FIIs) sold off scrips worth Rs 5,781.98 crore, while domestic institutional investors (DIIs) purchased scrips worth Rs 5,972.69 crore.
Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) off-loaded equities worth Rs 3,054.94 crore, or $468.06 million, from February 20 to 23.
“On the macro front, fiscal deficit data, core sector data for January and estimates for October-December GDP (gross domestic product) data will be announced on February 28. Automobile sales data by automakers and Nikkei Manufacturing PMI (Purchasing Manager’s Index) for February will be announced on March 1,” Arpit Jain, Assistant Vice President at Arihant Capital Markets, told IANS.
In addition, the Central Statistics Office (CSO) is expected to release the macro-economic data points of Index of Industrial Production (IIP) on February 28.
According to Vinod Nair, Head of Research, Geojit Financial Services, investors will wait for fresh triggers to get direction in the week ahead.
“As per the quarter results, the corporate earnings have started to pick up but concern on inflation and hike in interest rate may add pressure on the near-term valuation,” said Nair.
“The sustainability in the global market is another key factor which may influence domestic investors’ sentiments,” he added.
Analysts were optimistic that the upcoming week could witness a recovery of the key indices from lower levels.
“Nifty and Sensex made a strong come-back post the bad expiry series for February, closing above the 10,490 and 34,000 marks, respectively, on the first day of March derivative series on February 23,” said Dhruv Desai, Director and Chief Operating Officer of Tradebulls.
“Therefore we believe that the final week of February should see a termination of the down move and a reversal sign is in the offing which could turn the tide in favour of bulls soon,” Desai told IANS.
Last week, the key Indian equity indices bounced back from their lows to close with humble gains on value buying by investors after three weeks of consecutive losses.
On a weekly basis, the barometer 30-scrip Sensitive Index (Sensex) of the Bombay Stock Exchange (BSE) edged higher by 131.39 points or 0.39 per cent to close at 34,142.15 points.
The wider Nifty50 of the National Stock Exchange (NSE) closed trade at 10,491.05 points — up 38.75 points or 0.37 per cent from its previous week’s close.
The equity markets will remain closed on March 2 (Friday) for Holi.
(Porisma P. Gogoi can be contacted at porisma.g@ians.in )
—IANS
by admin | May 25, 2021 | News, Politics
New Delhi : Close on the heels of a massive Rs 11,300 crore PNB scam, three fresh financial frauds have come to light including the alleged involvement of a Delhi-based jeweller, who has been accused of defrauding the Oriental Bank of Commerce (OBC) to the tune of about Rs 390 crore through Letters of Credit.
The fresh exposure provided Congress President Rahul Gandhi an opportunity to attack Prime Minister Narendra Modi, saying that like Vijay Mallya and Nirav Modi, these promoters have also disappeared while the government looked the other way.
On Thursday, the Central Bureau of Investigation (CBI) registered a case against Delhi’s Karol Bagh-based diamond jewellery exporting firm Dwarka Das Seth International for an alleged bank loan fraud of Rs 389.85 crore involving the Oriental Bank of Commerce (OBC).
The agency on Wednesday filed a case against businessman Amit Singla and others on a complaint of the Bank of Maharashtra (BoM) of criminal misappropriation of a loan he had taken through forged documents.
The same day, the agency also filed a case against Inder Chand Chundawat, the then Senior Branch Manager in the Punjab National Bank’s (PNB) Barmer office in Rajasthan, for alleged abuse of his official position by depositing various government subsidies to the tune of Rs 1.57 crore in a fictitious account. The official was suspended following an internal inquiry.
Last week, the banking sector was rocked by major financial frauds — involving Rs 11,300 crore by diamantaire Nirav Modi and Rs 3,695 crore by Rotomac owner Vikram Kothari — surfaced in which the CBI has filed cases and made several arrests.
After the PNB and the Bank of Baroda, the OBC, BoM and Barmer office of the PNB rushed to the CBI with their complaints of fraud, leading to the agency filing three separate cases.
The OBC has alleged that it was defrauded by Dwarka Das Seth International and its owner Sabhya Seth. The loans turned into non-performing assets (NPAs) way back in 2014, but the bank approached the agency on August 16 last year, after the company had folded up and Seth fled the country.
The CBI has started tracing India-based directors and partners of the company.
The OBC complaint has alleged that Dwarka Das Seth International took loans by way of letters of credit and other such credit facilities for gold jewellery export/import between 2007 and 2012 but failed to pay back.
A probe by the bank found that the company had indulged in round-tripping of funds through fictitious companies abroad and had utilised funds by discounting bills based on the letters of credit of foreign banks, which were either non-existent or had negative ratings.
Similarly, BoM has approached the CBI to lodge a loan default complaint against a Delhi businessman Amit Singla. The loan had turned into an NPA in 2013 and the bank has even sold a property kept as collateral to recover its dues, sources said.
The BoM’s FIR names Singla, the proprietor of Delhi-based Ashirwad Chain Co, loan guarantor Roshan Lal Bhalotia, property valuation firm Tech Mach International and unknown officials of the bank.
It is alleged that Singla and his company took loans of Rs 9.5 crore through cash credit facility from the bank between 2010 and 2012. The accused allegedly submitted three properties in Delhi and Haryana as collaterals. The properties, at the time of taking the loan, were valued at over Rs 18 crore by Tech Mach International.
But, after the loans turned into NPAs, the actual market value of the properties were found to be only Rs 2.5 crore. One of the properties, a double-storied house owned by Roshan Lal in Rohtak, Haryana, was valued at Rs 4.85 crore while sanctioning the loan. When the bank sold it off to recover its dues, it fetched only Rs 73 lakh.
Similarly, a commercial property owned by the accused at Chandni Chowk in Delhi was valued by Tech Mach at the time of disbursal of the loans at Rs 4.95 crore, but it was actually worth Rs 31 lakh only. Tech Mach was later removed from the panel of valuers by the bank.
In the complaint, the BoM said: “The overvalued valuations were deliberately given in connivance with the borrowers and the guarantors … to fraudulently induce the bank to finance the borrower.”
The FIR also alleged that Singla had submitted inflated stock audit reports and balance sheets, apart from diverting the loans to sister concerns.
In the light of the emergence of three fresh cases of fraud, Rahul Gandhi attacked the Prime Minister.
“Under Modiji’s ‘Jan-Dhan Loot Yojana’, another scam! 390 crore, involving a Delhi-based jeweller. Same Modus operandi as Nirav Modi. Fake LOUs,” wrote Gandhi in Twitter.
“Predictably, like Mallya and Nirav, this promoter too has disappeared while the Govt looked the other way,” he added with hashtag #ModiRobsIndia.
Union Finance Minister Arun Jaitley said on Saturday the discourse needed to move on from ease of doing business to that of Indian industry’s responsibility to become ethical in the way it does business.
He said political corruption at the Centre had “reduced significantly” after the ruling NDA government ended the administration’s discretionary powers in awarding contracts and allocation of resources.
The sale of electoral bonds from next week, he added, would be a decisive step in cleaning up the system of political funding in the country.
On Friday, Modi spoke about the bank fraud for the first time at the ET Global Business Summit saying government would take “stern action” against irregularities.
—IANS
by admin | May 25, 2021 | Economy, Markets, News
By Porisma P. Gogoi,
Mumbai : After three weeks of consecutive losses, the key Indian equity indices bounced back from their lows to close this week with humble gains on value buying by investors.
Market observers said futures and options (F&O) expiry infused volatility in the domestic markets, amid global cues and a slew of domestic developments like the $1.8 billion fraud reported by the Punjab National Bank (PNB) and a weakening rupee due to the continuous outflow of foreign funds.
However, losses were trimmed as bargain-hunting by investors on the last trading day of the week lifted the benchmark indices.
On a weekly basis, the barometer 30-scrip Sensitive Index (Sensex) of the Bombay Stock Exchange (BSE) edged higher by 131.39 points or 0.39 per cent to close at 34,142.15 points.
The wider Nifty50 of the National Stock Exchange (NSE) closed trade at 10,491.05 points — up 38.75 points or 0.37 per cent from its previous week’s close.
“The week gone by saw the Nifty bouncing back from a low of 10,302 to finally end with a modest gain. This week’s gains came after three weeks of losses,” Deepak Jasani, Head, Retail Research, HDFC Securities, told IANS.
According to D.K. Aggarwal, Chairman and Managing Director of SMC Investments and Advisors, markets across the globe fluctuated wildly — highlighting the market’s fragility — as investors continued to assess the quickening pace of economic growth and the prospects of the US Federal Reserve’s tightening efforts.
“Back home, the sentiment of market participants have been dented by factors such as surging US bond yields, a multi-crore fraud in India’s second-largest public sector lender PNB and the return of long-term capital gains (LTCG) tax on equities, which put a break on the record-setting market rally,” he added.
During the eight trading sessions following the detection of a $1.8 billion fraud in one of the branches of the PNB, the bank’s shares on the BSE have plunged almost 30 per cent to Rs 113.40 per share.
Gitanjali Gems, the other listed entity involved in the fraud case, also witnessed an eight-day fall in its shares, nosediving 60.54 per cent to Rs 24.80 per share.
“The consolidation in the domestic market continued due to the NPA (non-performing assets) issue in public-sector banks, trade deficit, conflict between NSE and SGX, rise in bond yield and depreciation in rupee due to selling by FIIs (foreign institutional investors),” said Vinod Nair, Head of Research, Geojit Financial Services.
On the currency front, the rupee weakened by 51-52 paise to close at 64.73 against the US dollar from last week’s close of 64.21-22.
Provisional figures from the stock exchanges showed that FIIs sold-off scrips worth Rs 5,781.98 crore, while domestic institutional investors (DIIs) purchased scrips worth Rs 5,972.69 crore during the week.
Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors off-loaded equities worth Rs 3,054.94 crore, or $468.06 million, during February 20-23.
Sectorwise, Jasani said: “The top sectoral gainers were IT, metal and Bank Nifty indices. The top losers were auto, realty and pharma indices.”
The top weekly Sensex gainers were: Tata Consultancy Services (up 4.76 per cent at Rs 3,076.90); Yes Bank (up 3.75 per cent at Rs 323.60); Infosys (up 2.74 per cent at Rs 1,155.65); Kotak Bank (up 2.67 per cent at Rs 1,079.85); and Coal India (up 2.49 per cent at Rs 310.55).
The losers were: Bajaj Auto (down 3.70 per cent at Rs 2,988); Asian Paints (down 3.65 per cent at Rs 1,101.90); Mahindra and Mahindra (down 3.29 per cent at Rs 719.30); Tata Motors (down 2.73 per cent at Rs 360.45); and Tata Motors (DVR) (down 2.32 per cent at Rs 203.85).
(Porisma P. Gogoi can be contacted at porisma.g@ians.in)
—IANS
