by admin | May 25, 2021 | Economy, Markets, News
By Porisma P. Gogoi,
Mumbai : Bolstered by an upbeat domestic macro data and global cues, the two key Indian equity indices — BSE Sensex and NSE Nifty50 — rode the bulls to scale new highs during the week ended Friday.
According to market analysts, India’s advancement to the top 100 in the World Bank’s Ease of Doing Business global rankings, along with a strengthening rupee and healthy buying in index heavyweights, gave a boost to the upward rally of the indices for the fourth consecutive week.
On Friday, the broader Nifty50 of the National Stock Exchange (NSE) hit a new 52-week high of 10,461.70 points intra-day, and closed trading at record 10,452.50 points.
On a weekly basis, it edged higher by 129.45 points, or 1.25 per cent.
The barometer 30-scrip Sensitive Index (Sensex) of the BSE, too, saw a strong closing at 33,685.56 points — up 528.34 points, or 1.59 per cent, on a weekly basis.
The Sensex hit a new 52-week high of 33,733.71 points on intra-day basis.
“Carrying on from last week, markets continued to surge higher this week to touch new life highs,” said Deepak Jasani, Head – Retail Research, HDFC Securities.
“Sectorally, the top gainers were realty, PSU banks, bank Nifty and pharma indices. The top losers were IT, metal and FMCG indices.”
According to Vinod Nair, Head of Research at Geojit Financial Services, market witnessed strong up-move led by affirmative signs of recovery in domestic earnings and rally in index heavyweights.
“Strong core industries data, US Fed status quo on interest rate and positive global cues supported this trend. Market was enthused by September core industries data which grew by 5.2 per cent, showing signs of revival in industrial growth, easing of GST and pick-up in restocking in the economy,” said Nair.
“There were ample signs of reversal in corporate earnings growth, with better than expected results from index heavyweights, which improved the market sentiments,” he added.
On the currency front, the rupee strengthened by 50 paise to close at 64.55 against the US dollar from its last week’s close at 65.05.
Market observers pointed out that although most macro indicators gave a boost to market sentiments, some momentum was lost on account of lower-than-expected automobile sales numbers for the month of October.
“Domestic markets touched a lifetime high after India’s ranking rose 30 notches to 100 in the World Bank’s Ease of Doing Business Survey for 2018. Besides the positive sentiment driven by macro indicators and ease of doing business, global markets have also been supportive for the Indian markets,” said D.K. Aggarwal, Chairman and Managing Director of SMC Investments and Advisors.
“However, it lost nerve soon to close lower after the announcement of muted auto sales numbers. The government’s recent recapitalisation plan and ‘Bharatmala Pariyojana’ have boosted market sentiment and fuelled growth recovery hopes,” Aggarwal told IANS.
Provisional figures from the stock exchanges showed that foreign institutional investors off-loaded stocks worth Rs 8,336.86 crore during the week, while the domestic institutional investors divested in scrips worth Rs 354.42 crore.
Figures from the National Securities Depository Ltd (NSDL) revealed that foreign portfolio investors (FPIs) invested in equities worth Rs 2,773.08 crore, or $179.57 million, during October 30-November 3.
The top weekly Sensex gainers were: Bharti Airtel (up 11.60 per cent at Rs 541.35); Axis Bank (up 11.46 per cent at Rs 540); ICICI Bank (up 4.95 per cent at Rs 315.85); Lupin (up 4.84 per cent at Rs 1,049.25); and HDFC (up 4.56 per cent at Rs 1,775.35).
The losers were: Mahindra and Mahindra (down 3.95 per cent at Rs 1,331.15); Hero MotoCorp (down 2.80 per cent at Rs 3,690.80); Tata Steel (down 2.39 per cent at Rs 708.90); Infosys (down 2.20 per cent at Rs 926.65); and Bajaj Auto (down 2.02 per cent at Rs 3,223.10).
(Porisma P. Gogoi can be contacted at porisma.g@ians.in)
—IANS
by admin | May 25, 2021 | Economy, Finance, Markets, News, Politics
(Note Ban Series)
By Venkatachari Jagannathan,
Chennai : The adverse impact of demonetisation on the Indian economy would be transitory, according to global and domestic credit rating agencies.
However, the current slowdown could partially be attributed to implementation of the Goods and Services Tax (GST) introduced in July, they say.
“While the aim of demonetisation to curb the use of black money was in line with the government’s broader reform agenda, the cash crunch it caused contributed to significantly lower real GDP (gross domestic product) growth in the March quarter,” Thomas Rookmaaker, Director, Sovereigns and Supranationals Group at Fitch Ratings, told IANS.
“This negative impact on growth seems transitory, just like the effect on growth, because of GST implementation in the July quarter,” he added.
According to analysts at the rating agencies, economic growth in India would accelerate again in the second half of the year.
“Demonetisation was a major structural change that the Indian economy underwent, which led to disruption on the demand and supply side and thereby the overall economy,” Kavita Chacko, Senior Economist, CARE Ratings, told IANS.
Chacko said economic performance, as seen from the quarterly GDP growth, saw a sharp deterioration since the third quarter (October-December) in 2016-17.
“GDP growth (year-on-year) fell from seven per cent in Q3FY17 to 6.1 per cent in Q4FY17 and further declined to 5.7 per cent in Q1FY18, the slowest pace of growth in five years,” she said.
This slowdown in the economy could partly be attributed to the disruptions caused by demonetisation. GST implementations too had contributed to the economic weakness, Chacko added.
Asked whether demonetisation has achieved its objective of curbing black money, Rookmaaker answered in the negative.
“The fact that 99 per cent of the bank notes have found their way back to the RBI (Reserve Bank of India) seems to suggest that demonetisation was not very effective in rooting out black money and reducing the informal sector,” Rookmaaker said.
“Implementation of the GST may actually be more effective in formalising informal business, as it seems to help draw small firms into the tax net,” he added.
According to Rookmaaker, the bounce back is likely to happen in the second half of the year. “It is still uncertain how long the drag on growth from demonetisation and GST implementation will persist. But our baseline scenario is that growth will accelerate again in the second half of the year. This seems to be supported by a sharp and fairly broad-based recovery in industrial production in August,” Rookmaaker said.
India’s sovereign credit profile would benefit from an improvement in government finances, which currently stand out as a major weakness compared with its peers, Rookmaaker said.
Other rating agencies say that except for two sectors, there would be no long-term impact of demonetisation. “We believe there is no lasting impact in most sectors, barring real estate and the gems and jewellery sector,” Abhishek Dangra, Director in the Corporate Ratings Group, Standard & Poor’s (S&P) Global Ratings, told IANS.
He said the companies in these two sectors, which traditionally relied significantly on cash transactions, had been forced now to make structural changes owing to policy level changes that limit high value cash transactions.
“Companies in the automobiles and consumer durable sectors have a high — and an increasing degree of — financing penetration, muting the impact of demonetisation, despite initial disruption. We expect demand/supply and the commodity price environment to have a greater impact on most sectors,” Dangra added.
Saswata Guha, Director, Financial Institutions, at Fitch, said that the increase in liquidity with the banks had not been fully taken advantage of.
“I think the benefit to the banking sector in terms of heightened liquidity post-demonetisation was pretty clear. While funds are gradually finding way into the broader financial system (like asset management, insurance), the impact is still quite benign on banks from a liquidity perspective since credit growth remains pretty weak,” Guha told IANS.
(Venkatachari Jagannathan can be contacted at v.jagannathan@ians.in)
—IANS
by admin | May 25, 2021 | Opinions
By Amit Kapoor,
In an expected and welcome turn of events, the Indian economy received a Rs 9-trillion resolution to its bad loan and slow growth problem. The government unveiled its plan to pump Rs 2.11 trillion into over-leveraged state-owned banks over the next two years and another Rs 7 trillion into an ambitious roads project over the next five years.
I’ve repeatedly argued for these in this column and a timely roll-out of the plan should suffice in reviving the dampened animal spirits within the economy. However, now that issues on the domestic front have been tackled headfirst to the best of the government’s fiscal capabilities, the external sector should be explored for lucrative economic possibilities.
Fortunately for India, the global economies are showing signs of recovery for the first time after the financial crisis of 2008, rendering the world markets ripe for the taking. The IMF resonated this in its latest World Economic Outlook by raising the global growth forecast for 2017 to 3.6 per cent. This came due to growth improvements in countries like China, Russia and emerging Europe while India was awarded a downward revision in its growth.
Most importantly, India’s major trading partners like the US (2.2 per cent), China (6.8 per cent), Hong Kong (3.8 per cent) and Singapore (2.5 per cent) are showing better than expected growth rates. Under these circumstances, India could easily leverage the external upswing to boost its growth momentum.
Moreover, the external sector has already been showing some positive signs of late, with exports shooting up to $28.61 billion in the second quarter of this year as compared to $22.8 billion in the same period a year ago. As a result, the trade deficit has reduced from $9.07 billion in FY16 to $8.98 billion in FY17.
In fact, India’s exports have been falling since 2014 and have only seen a recent recovery. It may come as a surprise to many that India’s export performance had been deteriorating earlier because of dampened oil prices. Petroleum products constitute 25 per cent of the country’s export basket, making them a leading determinant of the export sector’s performance each year.
This raises a number of issues. A popularly accepted theory of trade dictates that a nation will specialise in goods that require resources that are plentiful in the economy. India is not an oil-rich nation by any means. It is a labour-rich country and even oil refining is a capital-intensive process. So, the dominance of refined petroleum products in its export list is inexplicable. This is clearly indicative of the fact that India is missing out on potentially lucrative export markets where it can be globally competitive.
Moreover, oil is also India’s leading import item. Even though the value of oil imports are almost three times that of the country’s oil exports, any change in global oil prices has to have an adverse impact on the external sector. Thus, even when oil prices dip, and India’s import bill does fall giving the government a fiscal bonanza, it negatively impacts exports and dampens the gains.
Another reason for India’s poor show in exports over the last few years was a sharp fall in discretionary spending among consumers as a result of subdued demand since the financial crisis. Consequently, India’s other leading items of export like diamonds and jewellery witnessed a sharp downturn. Now, as the global economy recovers both demand for petroleum products and discretionary products will see an uptick. But the fact of the matter remains that these should not be the products defining India’s export performance.
As mentioned, India is a labour-rich nation and is currently in desperate search for avenues to find employment for its workforce, which is expanding at an annual rate of over 11 million. Nudging the export sector to compete in manufactured goods should be a beneficial strategy in this case.
As China gradually vacates its position of being the world leader in low-cost manufacturing and graduates into higher value-added products, India should not miss out on the opportunity to become the next manufacturing destination. It has already lost considerable ground to Bangladesh in textiles and Vietnam in electronics.
Unfortunately, the government’s Foreign Trade Policy 2015-20 misses out on this issue. It calls for building adequate export infrastructure like better multi-modal transportation for improved road connectivity to ports, railheads, airports and inland waterways; faster throughput at ports; faster movement of rakes by railways; and quicker air cargo movement.
It also recommends the creation of a supportive infrastructure for exports, including more laboratories for testing and more tool rooms and plant quarantine facilities, among others.
However, these are merely supply-side issues which are important in themselves but do not have much impact in altering India’s export composition. To strengthen manufacturing competitiveness in India, there is a dire need of bold structural changes in the economy like labour reforms, for which I have argued at length in this column quite recently.
Another bold reform can be inspired from the early years of Chinese growth with the encouragement of entrepreneurship at the village-level.
There remain multiple avenues for India to adopt a trade-focused, pragmatic approach which can ensure long-term gains for the country’s trade competitiveness. If the government falters at this juncture, India could very well miss an inflexion point in the country’s export history.
(Amit Kapoor is chair, Institute for Competitiveness, India. The views expressed are personal. He can be contacted at amit.kapoor@competitiveness.in and tweets @kautiliya. Nirvan Gupta, intern, Institute for Competitiveness, India has contributed to the article)
—IANS
by admin | May 25, 2021 | Economy, News, Politics
New Delhi : Calling the Goods and Services Tax a “tsunami of tax terrorism”, Congress Vice President Rahul Gandhi on Thursday compared demonetisation and GST with a double tap bullet fired at the economy to ensure it was dead.
In a hard-hitting attack, Gandhi also called Prime Minister Narendra Modi “a person with a small heart” and said the economy was staring at disaster, a “Modi-made disaster”.
“GST, as this government has formulated it, has already unleashed a tsunami of tax terrorism and it is only going to get worse.
“Modiji and his government have fired a double tap at the heart of the economy. First notebandi… bang…, and then GST…, bang… have crippled our economy. The situation of joblessness in the country is extremely worrying. The government is creating a massive army of unemployed, which is toxic and dangerous,” Gandhi said in his speech at the 112th annual session of the PHD Chamber of Commerce followed by a question-answer session.
The Congress leader said instead of admitting they are not able to provide jobs and are pitting communities against each other in a bloody rage.
“The way the regime is working, or not working, has led to a double tap killing of the Indian economy. Commandos, in hostage situation, fire what is called a double tap. Two quick closely-placed shots are fired at the chest to ensure that their terrorist target is down,” he added.
“In a couple of weeks, we will observe the ‘death’ anniversary of the Rs 500 and Rs 1,000 currency notes. November 8 is the ‘barsi’ (death anniversary) of ‘notebandi’ — the day Modi personally wiped out overnight 86 per cent of the currency in circulation,” Gandhi said.
“It was a move taken without thought, without consultation, or concern, for its conseqences. The Prime Minister failed to grasp the basic concept of the Indian economy,” he said.
“All cash is not black, and all black is not cash. Without understanding this basic concept, the Prime Minister used his vast powers to unleash terror on the citizens of India, to make them stand in queues for two months. Many died in the process, millions lost jobs, and their livelihood,” the Congress leader added.
“To do all this, you surely need someone with a very big chest, but a very small heart. Demonetisation crippled micro, small and medium enterprises, and destroyed the unorganised sector, forcing workers to leave urban employment and go back to their villages in search of MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) work,” Gandhi said.
The Congress leader claimed investments in India were at a 15-year low.
“The growth, which was 6.6 per cent in 2014, is today 4.2 per cent by the yardstick the government is using today. Bank lending is at its lowest in 60 years. Unemployment is skyrocketing.
“Recent research showed that inequality in India is now the highest in 100 years. We are staring at a disaster. This is a man-made disaster — or in Modiji’s terminology, an MMD or Modi-Made Disaster.”
Gandhi said public trust in the government was dead.
“For some reason, the Prime Minister and the government are absolutely convinced that every single person is a thief. The government does not believe its own people,” he said.
The Congress leader said one develops trust by listening and the government does not listen. “Business thrives on trust as it creates a reliable environment,” he said.
Recalling Modi’s first speech in Parliament, Gandhi said it was marked by a lot of taglines and did not have a concrete way forward.
“What disturbed me was the condescending tone that ran through his entire speech and that tone has embedded itself in his government’s psyche and has become the bedrock of its immense arrogance,” he said.
—IANS
by admin | May 25, 2021 | Economy, News, Opinions
By Amit Kapoor & Chirag Yadav,
Political conversations across the country in the last few weeks have been heavily focussed on the country’s recent economic under-performance. Economic growth has been consistently falling over the last six quarters amidst dipping investment sentiments with no respite in sight.
Credit rating agencies have lowered India’s growth predictions and the government seems to be grasping at straws to reverse the growth trends. However, since gross domestic product (GDP) is such a concise term and quite easily understandable, in its obsession, we lose sight of the fact that there are other equally crucial elements of development within a nation.
Expansion of individual capabilities needs to be the ultimate goal of development. These capabilities, which are not always economic, encapsulate aspects such as improvement of basic human needs like shelter and basic medical care; foundations of well-being like access to basic knowledge and healthy environment; along with equitable provision of opportunities like personal freedom and choice. Economic growth is merely a narrow way of quantifying development and mostly a means to achieve the capabilities outlined above.
Therefore, there needs to be an indicator that is broader than the GDP for a better development vocabulary of the nation; a number that combines the simplicity of GDP and the complexity of reality. Also, unlike the Human Development Index (HDI), it needs to isolate the effect of economic change to better understand the relationship of social progress with economic one. With this aim in mind, the Institute for Competitiveness has expanded the use of the Social Progress Index (SPI), which is annually measured on a global level, to the level of Indian states.
Social Progress Index: States of India present a decadal progress of Indian states on social parameters despite their varied economic standings by using a combination of 54 indicators to obtain that one simplistic figure. The analysis brings out some interesting insights. The first major finding comes from the relationship between economic and social progress. It might seem intuitive that economic progress begets social advancement. As people earn more money, they obtain higher capability to purchase social goods.
However, our findings poke some holes into this intuitive logic. First, economic performance cannot fully explain social progress among states. To be precise, per capita income can explain only about 50 per cent of the SPI scores. This is seen in instances like that of Chhattisgarh, which has attained a higher SPI score than Rajasthan despite having lower per capita income levels. Second, even though the relationship between the two is positive and significant, it not exactly linear. We found that at lower levels of income, a small change in per capita income levels can lead to higher incremental changes in SPI scores compared to that at higher income levels.
The second major finding of the Index is that Indian states are better at provision of basic human needs rather than opportunities to their citizens. Therefore, creation of a society where opportunities are distributed more or less equally still remains an elusive dream. On a positive note, however, the score for opportunities has displayed the highest increase in the last decade followed by the other two pillars of SPI, basic human needs and foundations of well-being.
Finally, the third significant finding from the Index is that the greatest improvement in social progress within states has been in areas which are highly correlated with economic progress. On the contrary, areas with weak correlations to economic progress have seen a decline in performance or stagnation. This is clearly due to the disproportionate policy focus on economic parameters that we are currently noticing as well. Such a trend indicates that it is necessary for states to directly focus on social advancement alongside economic progress. A lopsided focus on economic parameters will result in the same lopsided outcomes.
The Index further carries detailed state-specific observations, which can be quite helpful for state-specific policy making. All of these findings from it underline the fallacy of obsessing over economic numbers and believing that social progress will automatically follow. On the contrary, social progress needs to be stimulated and that too not with a generic approach. An all-encompassing national policy cannot be effective since each state has a unique social deficiency. There is an urgent need among Indian states to dynamically track social parameters and act upon the ones in which they are lagging behind.
Finally, it should be pointed out that the Index is not an end in itself. It is only aimed to highlight key challenges across Indian states and to inculcate a spirit of competition among them to improve their social outcomes. The Index hopes to start a conversation around the existing social problems within Indian states, but the approach that they need to adopt is a matter of further public discussion and debate.
(Amit Kapoor is chair, Institute for Competitiveness. He can be contacted atamit.kapoor@competitiveness.in. Chirag Yadav is senior researcher at Institute for Competitiveness, India)
—IANS
