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Saturday, January 30, 2016

Railways signs MoU with AP, Kerala for rail projects

The Indian Railways has said that it has signed MoUs with Kerala and Andhra Pradesh Governments for formation of joint venture companies to ensure faster implementation of rail projects in the respective states. As per reports, the JV companies will have 51 per cent stake of the respective state governments and 49 per cent stake of the railways. Commenting on the issue, Railway Minister Suresh Prabhu told the media, "It is always necessary to have partnership with state governments and we have declared it in our Rail Budget." "We will have this with 17 states. We have decided to work together. It is a unique idea to enter into JVs with state governments for project implementation," he added. As per the plan, project specific SPV (special purpose vehicle) will be formed to execute a project under the JV arrangement. Earlier, Odisha and Maharashtra had signed similar agreements with the railways to execute projects in their respective states.

30,000 Megawatt thermal power added in last 20 months: Goyal

The Minister of State (IC) for power, Piyush Goyal on Thursday said that 30,000 megawatt more capacity of thermal power has been added during last 20 months of present government. Addressing an interactive session organized by Indian Chamber of Commerce in Kolkata, Goyal Said, power being the most important ingredient of infrastructure for nation’s development, the government is laying utmost emphasis on this sector. The Minister informed that his ministry has achieved 60 per cent working capacity of power plants and has a target of 90 per cent working capacity which will be achieved in near future. Asserting that India’s Coal production has increased substantially by 9.6 per cent which has resulted in remarkable reduction in our coal imports, the Minister said, his ministry is now emphasizing on creating more marketing facilities for coal. Goyal said that more than 5 crore 36 lakh LED bulbs have been given out at government subsidized rates due to which the rate per bulb has come down from Rs.310 to Rs.64 and within a short time it will come down further to make it affordable for common man. He added that this has resulted in 1600 MW reduction in power consumption and said that by this year March, 10 crore of LED bulbs will be given out. This will result in a huge reduction in power consumption and drastic cut in pollution. Regarding transmission, the Minister said, during the present government 22,000 circuit Kms of transmission line has been drawn which is a record. During last 18 months, 71 per cent of additional transmission capacity has been created and by 2019 it will reach 200 per cent.

Govt asks CIL to liquidate unsold pithead stock

The Indian Government has said that it is pushing Coal India to liquidate about 40 million tonnes of unsold coal piling up at pitheads of mines. Commenting on the issue, Union Power and Coal Minister Piyush Goyal told the media, "Coal India is unable to sell more coal. Evacuation of coal is a problem as we are unable to stock further. I have talked to Coal India chairman and discussed how to liquidate the coal stock." "I have said get this coal out so that production does not fall," he added. The Minister indicated that he would not mind if price of pithead coal was reduced to liquidate the stock, but added that he does not want to intervene in the pricing decision of CIL. The minister said he was able to reduce stress in the power sector by resolving issues facing thermal power plants with 30,000 MW capacity. As per reports, the Government is working on structural and fundamental changes in the economy.

RBI may slash policy rate by 25 bps on Feb 2: BofA-ML

The Reserve Bank of India is approaching the end of its rate-cutting cycle and is expected to go for a final 25-bps repo rate cut at its policy review meet on February 2. According to the global financial services major, a rate reduction is likely as inflation may be in line with RBI's January 2016 under-6 per cent target. "We continue to expect a final 25 bps RBI repo rate cut on February 2. That said, RBI is approaching the end of its rate-cutting cycle," Bank of America Merrill Lynch said in a research note. BofA-ML sees "compelling reasons" for a rate cut on Tuesday. First, inflation print could be in the comfort zone of RBI in the near term, reported PTI. Second, growth remains weak and a rate cut would provide an additional impetus to the fledgling recovery. BofA-ML's assessment is policy easing should back up the rupee as well by attracting inflows. The other supporting factor, it argued, is fiscal deficit, which is "well under control". On inflation outlook, BofA-ML said CPI is likely to bounce back to around 5-6 per cent in 2016-17. The global brokerage firm noted that RBI achieving 5 per cent 2016-17 target will depend on how weather phenomenon El Nino plays out, the 7th Pay Commission impact and oil price movements. BofA-ML's lead indicators are projecting 5 per cent GDP for the December quarter as per the old series. In the new GDP series, "we are tracking 7-7.5 per cent, without any improvement over September's 7.4 per cent", the report added. "Even if Arun Jaitley retains the 2016-17 fiscal deficit at 3.9 per cent of GDP, like FY16, instead of cutting it to the pre-committed 3.5 per cent, it will be well below the 4.8 per cent average since 2000," the report added.

Boost to Indian economy from falling oil prices 'fading': DBS

The benefits to the Indian economy from fall in crude oil prices will be "limited" this year and domestic reforms and developments will gain focus, a report said. "Low crude prices have been of great help to a net oil importer like India. Brent prices (INR terms) are down 70 per cent from mid-2014 levels," global financial services major DBS noted in the report, titled 'India: Fading boost from low oil price'. "While the economy benefited significantly from the first leg of the oil price down move, the incremental boost to the economy will be limited this year," it said, adding that "as the tide runs out, underlying fundamentals and policy decisions will be back in focus". The report said the government's pro-growth policy and the RBI's role in providing macro-stability has provided a favourable backdrop for the economy over the past two years. "The drop in global crude prices was an unexpected windfall and helped to magnify improvements in the macroeconomic variables," it added as per the PTI report. Noting that the incremental impact of falling oil prices is fading, the report said that while the fall has halved the oil import bill, exports have also fared poorly, down 18 per cent year-on-year so far this fiscal year. "The higher weight of commodities in India's export basket has hurt earnings in recent months. On the demand side, shipments to oil-producing economies have taken a hit," DBS said. As per the report, a favourable external environment had magnified the post-election optimism in domestic financial markets since mid-2014. "However, as the boost from these factors wanes, local developments will gain in importance," it said. While expecting a GDP growth of 7.4 per cent for the current fiscal and 7.8 per cent for the next year, DBS said the recovery has been uneven, with the "private sector still to participate in the growth upturn". "Reforms have been under way, with executive decisions proving to be less of a challenge than legislative ones," the report said. "It is imperative that progress continues, if India is to fare better than its peers in face of falling risk-appe

RBI governor makes case for relook at new GDP methodology

Raising doubts over the new GDP growth rate methodology, RBI Governor Raghuram Rajan said there is a need for better computation of numbers so as to avoid overlaps and capture the net gains to the economy. "There are problems with the way we count GDP which is why we need to be careful sometimes just talking about growth," Rajan told the students of the RBI-promoted Indira Gandhi Institute of Development Research. In his convocation address, citing the example of two mothers who babysit each other's kids, he said there is a rise in economic activity as each pays the other, but the net effect on the economy is questionable. "We have to be a little careful about how we count GDP because sometimes we get growth because of people moving into different areas. It is important that when they move into newer areas, they are doing something which is adding value. We do lose some, we gain some and what is the net, let us be careful about how we count that," he said. The academic-turned-central banker further said that there are many suggestions from various quarters on the ways to calculate GDP in a better way and we should take those seriously, reported PTI. Some analysts have questioned the new GDP computation methodology, which has been in effect for a year. The critics point to the divergence in the mood between GDP data and other indicators like factory output to question the veracity of the new series. Also, the new GDP methodology has seen for the first time the economy growing at lower in nominal terms than in real terms at the factor-cost effective 2005. In the second quarter of the current fiscal, the real GDP clipped at 7.4 per cent, while the nominal GDP grew much lower at 6 per cent. Rajan also spoke about the need to focus on employment creation and took a middle line to say that policies need to be geared up to face the onslaught of technological innovations, reported PTI. "We have to make sure that our policies are geared up such that we will create the appropriate playing field to find new jobs. We should not create a distorted playing field where at the end of the day the wrong kinds of jobs emerge," he said. Interestingly, at the same time he hailed taxi-hailing services like Uber, calling their emergence as the "beginning of a revolution" because of the way multiple technologies come together for offering a single service. Once driver-less cars become a reality, the same technology can be used to deliver more efficiencies in the system and can be replicated in buses too, Rajan said, conceding that this may lead to drivers becoming redundant. Historically, jobs have been lost because of emergence of newer technologies, but newer ones have been created as well in the process. Rajan, however, also hinted at the need for policies to incentivise jobs creation and rued that we have policies directed towards capital subsidies alone. "We subsidise capital in so many ways; apart from direct tax benefits for investment, we also give interest subventions for loans in many situations. We may not do similar things for labour. Clearly, trying to incentivise the employment of labour and especially employment that will add skills to labour is extremely important," Rajan said as per the PTI report. The Governor also hailed the government's Start-up India initiative saying provisions like immunity from inspections for three years will be very helpful.

Budget 2016: Govt likely to scale down disinvestment targets

With complete dimming of prospects of disinvestment target being met in the current financial year and the markets expected to stay in subdued mood even in the next fiscal, the government is likely to drastically scale down targets for realization of resources from PSUs’ stake sale in the Budget for 2016-17, ASSOCHAM said on Thursday. “It is given that with just about a month to go for the Budget presentation and the window of opportunity having been missed earlier in the year, there is no hope that the over-optimistic target of Rs Rs 69,500 for the current financial year could be reached. Hopefully, the Finance Ministry will desist from setting an un-realistic disinvestment yet again for the FY 2016-17,” the ASSOCHAM Paper on Budget expectations pointed out. It said the disinvestment targets, ironically, have always been off the mark with either the government doing a mere academic budget making exercise or getting it completely wrong. “ It is nobody’s case that we can always be on the top of the market moods and the projections can go wrong at times, but it is difficult to understand how year after year, these targets have gone completely haywire under successive governments” , the paper said. ASSOCHAM Secretary General D S Rawat said, “With the odds stacked against the equity market in 2016 and the world economic prospects looking even grimmer, there is less hope of a recovery in the financial markets. Thus, it is expected that next Budget would be much more realistic in getting the Revenue Budget right”. The paper noted that but for a windfall from a steep reduction in the crude oil prices, the Finance Ministry would have found a huge shortfall in the Revenue Budget in 2015-16. “Bulk of the windfall has been retained by the government. While it is debatable whether it has been the right or wrong strategy, the oil prices cut has certainly helped the Finance Ministry to come closer to the fiscal deficit target for the year”. The government has so far raised only Rs. 12700 crore through PSU disinvestments in the current fiscal and may raise another Rs 2000-3000 crore in the remaining months of this fiscal. The government has missed its disinvestment target for fourth consecutive financial years. In 2013-14, the government has raised Rs. 15819 crore against the target of Rs. 40000 crore. In 2014-15 it raised Rs. 24277 crore against the target of Rs. 36925 crore. As per ASSOCHAM study, Government may face a shortfall of at least Rs. 55000 crore with regard to disinvestment target. The government would meet the shortfall through higher taxable and non taxable routes. In fact, the disinvestment target for FY 2015-16 had been increased by 88 percent over the last financial year to Rs. 69500 crore with the objective of generating non-debt resources to both boost public investment and contain fiscal deficit. Of this, Rs. 41000 crore was to come from minority stake sale in PSUs and another Rs. 28500 crore from strategic stake sale. For the past six years running, receipts have lagged targets with such regularity that underperformance now appears to be routine and accepted. With regards to the dividend, the government is taking steps to push profit making PSUs to either increase their capital expenditure or pay higher dividends and suggested them not sit on cash pile. By way of dividend from the profit making public sector enterprise, the government had budgeted to collect Rs 36,174 crore which is higher than last year's realisation of Rs 28,423 crore. Through this initiative the Government has already received a dividend of Rs 65,896 crore from RBI, which is higher than this year's budget projection of Rs 64,477 crore.

FM can let fiscal deficit target slip: Experts

An economic poll has said that Finance Minister Arun Jaitley can get away with letting his borrowing targets slip when he presents his annual budget next month. As per reports, half the 30 economists surveyed also said the most pressing priority for Jaitley's third budget was to invest in infrastructure - endorsing the pro-growth course he set a year ago. A poll conducted before last year's budget also highlighted growth as the top priority, while a slim majority saw the Government meeting high hopes for economic reforms. Commenting on the issue, Deloitte economist Rishi Shah told the media, "We'll take a longer route to consolidation; otherwise the economy would be negatively affected." According to the poll, the consensus view was for the 2016/17 fiscal deficit to be raised to 3.7 per cent of gross domestic product (GDP) from a previous goal of 3.5 per cent. Gross borrowing is predicted at 6.49 trillion rupees (USD 95.2 billion).

Firstsource Q3 net profit rises 16.6 pct to Rs 67.04 cr

Firstsource Solutions announced that it has posted a 16.6 per cent growth in its consolidated net profit at Rs 67.04 crore for the quarter ended December 2015 as against a net profit at Rs 57.51 crore for the quarter ended December 2014. The revenues of the company grew by 8.9 per cent to Rs 817.8 crore during the period under review as compared to Rs 751 crore in the corresponding period last year. Commenting on this, Firstsource chairman Sanjiv Goenka said, "Our third quarter results are consistent with expectations. We have been able to effectively meet operational as well as financial targets. Building on our growth momentum, we expect to see more demand across our key verticals.” He added, "We will continue to invest to expand our solutions portfolio and provide long-term value to our clients and stakeholders.”