Budget speech expected to begin at 11 am

Cabinet meeting FM in progress

The much awaited Union budget is expected in a few minutes from now. The Finance Minister is expected to begin his budget speech at around 11 am.

The stock market has opened on an optimistic note with expectations running high ahead of the budget.

FM likely to lay down roadmap for GST roll-out

Report said that the minister will set deadlines for the government of implementation of the GST by April 1, 2016. 

Finance minister Arun Jaitley, in his maiden budget speech , is expected to list out the roadmap for rolling out goods and services tax (GST).

Report said that the minister will set deadlines for the government of implementation of the GST by April 1, 2016. 

This would be the major challenge for the government as it will have to get the Constitution Amendment Bill passed in Lok Sabha 

Sensex, Nifty in green ahead of Union Budget

Auto, consumer Durables, power, banking, capital goods, metal, realty, FMCG, Oil and gas indices are the gainers, while healthcare indices is only the loser.

At 10:25AM, the S&P BSE Sensex is trading at 29,450 up 230 points, while NSE Nifty is trading at 8,908 up 63 points.

The BSE Mid-cap Index and BSE Small-cap Index was trading up at 1%.

Among sectors, the BSE IT index has bucked the trend, and is now down 0.3 per cent at 11,837 dragged by MindTree, HCL Technologies and Tech Mahindra.

The Realty index continues to trade with a gain of over 2 per cent at 1,879. The Capital Goods index has climbed almost 2 per cent at 18,168. The Power, Metal and Bankex indices have also spurted over a per cent each.

On the BSE, the breadth is fairly positive in morning session - out of 2,128 stocks traded 1,344 stocks are advancing, while 692 stocks are declining.

Among Sensex-30 stocks - Tata Steel has soared around 3 per cent to Rs. 360. BHEL, HDFC and ICICI bank have jumped over 2 per cent each at Rs. 277, Rs. 1,376 and Rs. 342, respectively.

Larsen & Toubro, SBI, Gail India, Axis Bank, Tata Power and ONGC are the other significant gainers.

On the losing side, Cipla has declined 0.5 per cent at Rs. 666 and Hero MotoCorp and Infosys are also down 0.3 per cent each at Rs. 2,662 and Rs. 2,260, respectively.

Pidilite Industries appoints Bharat Puri as Managing Director

Pidilite has inducted several senior professionals to strengthen its management structure and reduce operational responsibilities of promoter family members.

Over the last seven years, Pidilite has inducted several senior professionals to strengthen its management structure and reduce operational responsibilities of promoter family members. As a continuation of this process, the Board of Directors of Pidilite Industries Limited, at its Board meeting on 27th February 2015 has approved the appointment of Bharat Puri as Managing Director, effective 10th April 2015.

M B Parekh, Chairman and Managing Director, will step down from position of Managing Director on 10th April 2015 and will become Executive Chairman. N K Parekh, Jt. Managing Director, will step down as Jt. Managing Director on 1st April 2015 and will become Non-Executive Vice Chairman. Ajay Parekh, Executive Director, and Apurva Parekh, Executive Director, will continue to play a significant role in the company and will work with Bharat on key strategic matters and also help oversee & strengthen various business divisions & functions.

Bharat Puri has been closely associated with the Company since his appointment as an Independent Director of the company in 2008. Bharat has had a very successful career with leading Indian and Global companies. In his last assignment, Bharat has been President - Global Chocolate, Gum and Candy Categories at Mondelēz International, based in Zurich and with worldwide responsibilities for these categories.

He started his career with Asian Paints in 1982 and rose to the position of General Manager - Sales & Marketing. He then moved to Cadbury in 1998 as Director of Sales and Marketing for Cadbury India. In 2002 he was appointed as Managing Director South Asia for Cadbury. After a successful stint in this role, Bharat moved to Singapore in 2006 where he was responsible for Strategy, Marketing and Sales for the Asia Pacific region. Since that time he has held senior leadership positions at the country, region and global level. Bharat completed his MBA from the Indian Institute of Management, Ahmedabad.

Commenting on his appointment, Bharat Puri said, “It is indeed an honour to lead Pidilite, an iconic home grown Indian multinational in its next phase of growth. I look forward to working with and learning from the talented and committed team at Pidilite, MB Parekh and the Board.

M B Parekh, Chairman and Managing Director of Pidilite said“I am delighted with appointment of Bharat Puri as Managing Director. There is a strong familiarity between Bharat and the Company as he has been an Independent Director of the Company since 2008. Bharat has outstanding local and global experience and a great track record. His vision and value system closely matches that of the Company. We are confident that Bharat will build on Pidilite’s strong foundations and steer it to its next phase of growth and development ".

Budget: Govt to raise public health spend to 2.5% of GDP

The health minister said that the draft policy has been circulated among all state governments and central government ministries for their comments and suggestion 

The draft National Health Policy (NHP) proposes to raise public health expenditure to 2.5% of the GDP, Health Minister JP Nadda said.
"The draft NHP proposes raising public health expenditure to 2.5 per cent of the GDP and the major source of financing for the health sector is envisaged to be general taxation," Nadda said in a written reply in Lok Sabha.

"It (NHP) proposes comprehensive primary care as an entitlement and healthcare for every family that links them to a primary care facility to be eligible for this package service," Nadda said.

To ensure the quality of medical education, a common entrance examination has been mooted on the pattern of NEET for entry into UG courses at all-India level institutes, Nadda said.

The minister added that the draft policy has been circulated among all state governments and central government ministries for their comments and suggestion 

Tentative start to Budget day

Prime Minister Narendra Modi-led government’s target of achieving a 4.1% fiscal deficit target is achievable, said Economic Survey for the year 2014-2015. 

There are not many doubts from a long term perspective but many who await a big bang budget like that of 1991 will be left disappointed. The historic mandate to this government not seen in over 30 years, creeping acquisition of power at the state level offer immense hope that unified and rapid action on reforms will take shape. Coupled with building of macro-economic tailwinds, we remain confident that bull market is here to stay.

For the day, the outlook is a positive start. With most global markets shut, the indices have enough reason to decide their own direction. Of course a lot will depend on what the budget has in store and how it is interpreted by the market.  US indices ended lower. US economy grew much slower than expected in the fourth quarter.  The Dow fell 0.45% while the S&P 500 ended flat. Nasdaq shed half a percent.

Prime Minister Narendra Modi-led government’s target of achieving a 4.1% fiscal deficit target is achievable, said Economic Survey for the year 2014-2015.  The Economic Survey 2014-15 presented by the Finance Minister Arun Jaitley to the Parliament indicates that a clear political mandate for reform and a benign external environment now is expected to propel India on to a double digit trajectory.

It states that Indian economy appears to have now gone past the economic slowdown, persistent inflation, elevated fiscal deficit, slackening domestic demand, external account imbalances and oscillating value of the rupee.

According to the Economic Survey 2014-15, the Average Wholesale Price Index (WPI) (base year 2004-05 = 100) inflation declined to 3.4% in 2014-15 (April-December) as compared to an average of 6% during 2013-14. During the first quarter of 2014-15, WPI headline inflation stood at 5.8% as mainly food and fuel prices were high. 

The Economic Survey 2014-15 says the IT and ITeS sector including Business Process Management (BPM), continues to be one of the largest employers in the country, directly employing nearly 35 lakh people. NASSCOM estimates the revenue of the IT-BPM industry at US$119 billion grew by 12 per cent in 2014-15 with export market alone making up almost $100 billion. The year witnessed hyper-growth in the technology start-up and software product landscape, India ranking as the fourth largest start-up hub in the world with over 3,100 start-ups in the country. Software products and services revenues for 2015-16 is projected to grow at 12-14 per cent.

Prime Minister Narendra Modi addressed the Lok Sabha saying we are trying to find out solutions to Problems existing for years. Corruption remains an issue of concern,  he said adding that the issue is about development and not about names of schemes.

The CNX Realty index gained 4.5% at 241.10 on hopes of sops for the housing sector. Shares of Unitech zoomed over 16% at Rs. 21.50, while HDIL soared 6% to Rs. 120, and Indiabulls Real Estate rallied 5.5 % to Rs. 83.

Railway stocks were higher. Titagarh Wagons was locked at the 10% upper circuit at Rs. 640. Texmaco Rail soared 10.5% to Rs. 150. Stone India has gained 3.5% at Rs. 82.50

Economic Survey: Inflation shows a declining trend during the year 2014-15

The decline was caused by lower food and fuel prices. During the first quarter of 2014-15, WPI headline inflation stood at 5.8% as mainly food and fuel prices were high. 

The year 2014-15 (April-December) witnessed a substantial decline in inflation.  According to the Economic Survey 2014-15, the Average Wholesale Price Index (WPI) (base year 2004-05 = 100) inflation declined to 3.4% in 2014-15 (April-December) as compared to an average of 6% during 2013-14.  The WPI inflation even breached the psychological level of 0% in November, 2014 and January, 2015.

The decline was caused by lower food and fuel prices.  During the first quarter of 2014-15, WPI headline inflation stood at 5.8% as mainly food and fuel prices were high.  In the second and third quarters of 2014-15, WPI inflation declined to 3.9% and 0.5% respectively.  WPI food inflation which remained high at 9.4% during 2013-14 moderated to 4.8% during April-December, 2014 following a sharp correction in vegetable prices and moderation in prices of cereals and eggs, meat and fish.
 
The retail inflation as measured by the Consumer Price Index (CPI) (base year 2010= 100) moderated significantly since the second quarter of 2014-15.  It declined to an all time low of 5% in Q3 of 2014-15 after having remained stubbornly sticky at around 9-10% for the last two years.
 
During the third quarter of 2014-15, the CPI food inflation declined considerably due to seasonal softening of food and vegetable prices after the late arrival of monsoon exerted some pressure on vegetable prices during June-August, 2014.  CPI inflation in the fuel and light group registered a consistent decline during 2014-15, touching 3.4% in the third quarter following the sharp decline in International Crude Oil prices.
 
The main factors causing moderation in inflation include both global factors as well as domestic measures.  Global factors, namely persistent decline in crude prices and softness in the global prices of tradables, particularly edible oils and even coal, helped moderate headline inflation.  The tight monitary policy helped contain demand pressures, creating a buffer against any external shock and keeping volatility in the value of the Rupee under check.  During the last one year the Rupee remained relatively stable vis-à-vis the currency of peer emerging countries, which too had a sobering influence on inflation.  Moderation in wage rate growth reduced demand pressures on protein based items.
 
The swift decisive steps taken by the Government also helped control the stubbornly persistent inflation—particularly food inflation.  The decline in inflation is found to be substantial in commodities where the Government had taken effective measures.  The Government took a series of measures to improve availability of food-grains and de-clog the distribution channel.  Some of the major steps taken recently in this regard include:

• Allocation of additional 5 million tonnes of rice to below and above poverty line (BPL and APL) families in the states, pending implementation of the National Food Security Act (NFSA), and allocation of 10 million tonnes of wheat under open market sales for domestic market in 2014-15.
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• Moderation in increases in the MSPs during the last and current season;
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• Advisory to the states to allow free movement of fruits and vegetables by delisting them from the Agricultural Produce Marketing Committee (APMC) Act;
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• Bringing onions and potatoes under the purview of the Essential Commodities Act 1955, thereby allowing state Governments to impose stock limits to deal with cartelization and hoarding, and making  violation of stock limits a non-bailable offence;
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• Imposing a minimum export price (MEP) of US$ 450 per MT for potatoes with effect from 26 June, 2014 and US$ 300 per MT for onions with effect from 21 August, 2014.
• 
  

Nifty revisits 8,800 levels

CNX PSU Bank, CNX Realty, CNX Metal and CNX Infra indices are the prominent gainers 



The market is now trading at the highest point of the day on the back of buoyant buying after the Economic Survey said that there is scope for big bang reforms in tomorrow's Union Budget.

At 2:14PM, the S&P BSE Sensex is trading at 29,143 up 396 points, while NSE Nifty is trading at 8,817 up 133 points.

 The broader market is also trading on a firm note. The CNX Smallcap index has advanced 1.8 per cent at 5,675, and the Midcap index has added 1.5 per cent at $ 13,040. 

All sectoral indices, barring the FMCG index, are trading on a positive note. 

The CNX FMCG index has dropped over a per cent as market participants are anticipating hike in excise duty.

 The CNX PSU Bank index has soared nearly 4 per cent. 

The CNX Realty index has jumped 3.2 per cent. The CNX Metal and the CNX Infra indices have surged 2.7 per cent each. In FMCG space, ITC is the top loser - down 2 per cent at Rs. 388. Jubilant 

Foodworks has slipped 1.2 per cent at Rs. 1,662. Dabur India, Emami and Colgate Palmolive are the notable losers.

 On the other hand, Rasoya Proteins has zoomed 12.5 per cent at Rs. 0.45. United Breweries has jumped 3.5 per cent at Rs. 990.  McLeod Russel has added 1.6 per cent at Rs. 232. 

Britannia, Tata Global and Godrej Industries have spurted over a per cent each. 

Eco Survey estimates foodgrains production for 2014-15 at 257.07 million tones

Despite deficiency of 12 % in the monsoon rainfall during the year, the loss in production has been restricted to just around 3 % over the previous year and has exceeded the average production during the last five years by 8.15 million tonnes.

The Economic Survey 2014-15 states that as per the 2nd Advance Estimates, total Foodgrains production in the country is estimated at 257.07 million tonnes during 2014-15.  This is the fourth highest quantity of annual Foodgrains production in the country. Despite deficiency of 12 % in the monsoon rainfall during the year, the loss in production has been restricted to just around 3 % over the previous year and has exceeded the average production during the last five years by 8.15 million tonnes.

As compared to last year’s production of 265.57 million tonnes, current year’s production of Foodgrains is lower by 8.5 million tonnes. This decline has occurred on account of lower production of rice, coarse cereals and pulses due to erratic rainfall conditions during the monsoon season of 2014.
 
According to the new series of national income released by the CSO, at 2011-12 prices, the share of agriculture and allied sectors in total GDP is 18% in 2013-14 which is the same as that of 2012-13 i.e., 18%.   As against a growth target of 4% for agriculture and allied sectors in the Twelfth Plan, the growth registered in the first year in 2012-13 (at 2011-12 prices) was 1.2%, 3.7% in 2013-14 and 1.1% in 2014-15. 
 
As per the fourth Advance Estimates for 2013-14, the production of rice is expected to be 106.5 million tonnes, showing an increase of 1.3% over the previous year.  The Production of wheat is likely to be 95.9 million tonnes with an increase of 2.6% over the previous year.  Similarly, pulses with a production of 19.3 million tonnes show an increase of 5.3%.  The oilseeds production of 32.9 million tonnes shows an increase of 6.4%.  Within oilseeds, the groundnut production of 9.7 million tonnes show a commendable increase of 105.8% over the previous year.
 
As per the fourth Advance Estimates for 2013-14, the overall productivity of Foodgrains has gone down by 1.3% over the previous year.  Rice productivity has shown a decline of 1.5% and wheat of 1.3% in the same year.  The yield of groundnut increased by a remarkable 75.9%, that of Tur increased by 9.2% and cotton by 9.4% in 2013-14 over the previous year.
 
Among the states, for the year 2013-14, Punjab has shown the highest productivity of rice (3952 kg/ha), wheat (5017 kg/ha) and cotton.  Gujarat has shown the maximum productivity of groundnut (2668 kg/ha) and West Bengal of Sugarcane (114273 kg/ha). 
 
The Economic Survey 2014-15 states that to improve resilience of the agricultural sector and bolster food security--including availability and affordable access, the strategy for agriculture has to focus on improving yield and productivity.

Strike a balance between ‘Make in India’ and ‘Skilling India,’ suggests Eco Survey

Economic Survey 2014-15 discusses the “Make in India” the flagship initiative and a key policy objective of the new government.

Economic Survey 2014-15 discusses the “Make in India” the flagship initiative and a key policy objective of the new government. The Survey contemplates “What should India make?Manufacturing or Services? ” As a prelude, the Survey states that, in order to bring about expansion and structural transformation, India should utilize its dominant resource of unskilled labour. 

The survey distinguishes registered manufacturing ( formal sector)from the general manufacturing which covers informal sector as well. The Economic Survey recognizes registered manufacturing as having “the potential for structural transformation.“ Registered manufacturing exhibits high productivity compared to other sectors of the economy. 

However, the Economic Survey observes that manufacturing productivity in India lags behind other nations. The Survey points out that all Indian states exhibit declining share of manufacturing in the State GDP. In addition, the Survey identifies that registered manufacturing couldn’t bridge regional disparities in India. In addition to this, registered manufacturing now in India has been identified as skill intensive which is not in line with the India’s comparative advantage in unskilled labour.

The Economic Survey identifies four factors for non development of manufacturing as an engine of economic growth – 

Distortions in Labour Market

Distortions in Capital Market

Distortions in Land Market

Specialization not in line with India’s comparative advantage in unskilled labour

Certain subsectors of services – financial services and business services, exhibit higher productivity levels than registered manufacturing. However, these sectors being highly skill intensive (excluding construction) are out of line with the skill profile of the Indian labour force. They are unlikely to generate widely shared and inclusive growth. However, the survey observes that the service sector has the potential for domestic growth convergence across regions. 

Hence, the survey redrafts the question of manufacturing versus service. It posits that the real question should be whether we want to concentrate on non-skilled labor intensive sectors or the development of skill intensive sector. The Economic Survey concludes that Indian growth should balance the nation’s comparative advantage in availability of low skilled labour with skill development required by future generations to take advantage of lost opportunities. The registered manufacturing must be expanded to take leverage of India’s abundant unskilled labour. While “Make in India” occupies prominence as an important goal, the future trajectory of Indian Development depends on both “Make in India” and “Skilling India”, the Economic Survey says. 

Bank shares soar on upbeat GDP forecast

The Bank Nifty has surged 2.3 per cent to 18,964.

Banking shares are in demand following bullish growth forecast for FY16.

The government today pegged its GDP growth forecast for FY16 in the range of 8.1-8.5 per cent in the Economy Survey 2014-15.

The Survey also added that retail inflation for FY16 is seen in the range of 5-5.5 per cent, and WPI inflation is expected to be 0.5-1 per cent below the RBI target.

The Bank Nifty so far has rallied to a high of 18,985, and is now up 2.3 per cent at 18,974.

PSU banks are major movers - Bank of India has zoomed nearly 6 per cent to Rs. 235, and Bank of Baroda has soared 4.7 per cent to Rs. 181.

Punjab National Bank and Canara Bank have rallied over 4 per cent each to Rs. 166 and Rs. 408, respectively.

ICICI Bank and SBI have surged around 3.5 per cent each to Rs. 333 and Rs. 299, respectively. Yes Bank has advanced 3.3 per cent to Rs. 809.

Federal Bank, HDFC Bank and Axis Bank have gained around 1.5 per cent each at Rs. 141, Rs. 1,054 and Rs. 560, respectively.

Meanwhile, the NSE Nifty is now up 116 points at 8,800. 

IT sector retains 'largest employer in India' tag, says Eco Survey

The Economic Survey 2014-15 says the IT and ITeS sector including Business Process Management (BPM), continues to be one of the largest employers in the country, directly employing nearly 35 lakh people. 

Information Technology (IT) and IT -enabled Services (ITeS) makes up the single largest contributor to India’s Services exports. The Economic Survey 2014-15 says the IT and ITeS sector including 

Business Process Management (BPM), continues to be one of the largest employers in the country, directly employing nearly 35 lakh people. NASSCOM estimates the revenue of the IT-BPM industry at US$119 billion grew by 12 per cent in 2014-15 with export market alone making up almost $100 billion. The year witnessed hyper-growth in the technology start-up and software product landscape, India ranking as the fourth largest start-up hub in the world with over 3,100 start-ups in the country. Software products and services revenues for 2015-16 is projected to grow at 12-14 per cent. 

Recognizing the need for greater penetration of IT Services domestically, the Survey notes that the Government’s “Make in India” mission has included IT and BPM among the 25 focus sectors. 

Talking of the Tourism Sector, the Economy Survey says the easing of the Indian tourism visa regime through the expansion of Tourist Visa on Arrival enabled by Electronic Travel Authorization (ETA) will give a fillip to foreign tourist arrivals in the country. The Survey notes that there was an increase in growth on both foreign tourist arrivals at 7.1 per cent and foreign exchange earnings at 6.6 per cent in the year 2014. However, India’s share of world tourism is a paltry 0.6 per cent of International Tourist Arrivals compared to 7.8 per cent in France and 6.4 per cent in the US. 

Referring to Transport related Services, the Economic Survey points out there is an urgent need to improve India’s ageing shipping fleet. Despite having one of the largest merchant shipping fleets among developing countries, India’s share in total world Dead Weight Tonnage is only 1.1 per cent. While taking note of improved cargo traffic at Indian ports, the survey hints at a major capacity facelift with an investment target of around Rs. 3 Lakh crores by the year 2020, with FDI permissible upto 100 per cent under automatic route for construction and maintenance of ports. 

Reviewing the Real Estate and Housing Sector, the Survey says the growth rate slowed down from 7.6 per cent in 2012-13 to 6 per cent in 2013-14 while FDI fell to US$ 703 million in the current fiscal (April – November, 2014). The widening gap between demand and supply of housing units and affordable housing finance solutions is a major policy concern. At present urban housing shortage is 18.8 million units of which over 95 percent is in EWS/LIG segments and required huge financial investment to overcome. 

Talking of the over Rs. 11 lakh crores worth of Trade and Repair Services Sector comprising 11 percent of GDP, the Survey says that migration from traditional stores to modern retail continues, though the latter still accounts for only 8 percent of the total market. Pointing out that India’s e-commerce market is expected to grow by more than 50 percent in the next five years, the Survey says the government proposes to include sufficient provisions for consumer safeguards in the ongoing amendments to the Consumer Protection Act, 1986. 

The Survey also takes note of the vibrant Indian media and entertainment industry comprising TV, Print, Films, Radio, Movie, Animation, Gaming etc and says that with 100 percent FDI permitted in the Film Sector, India is emerging as the new favourite of international studios. 

Key Highlights of Economic Survey 2014-15

India must adhere to the medium-term fiscal deficit target of 3 percent of GDP. This will provide the fiscal space to insure against future shocks and also to move closer to the fiscal performance of its emerging market peers.

Economic Outlook, Prospects and Policy Challenges

The macroeconomic fundamentals in 2014-15 have dramatically improved. Following are the Highlights:

Inflation has declined by over 6 percentage points since late 2013.

The current account deficit has declined from a peak of 6.7 percent of GDP (in Q3, 2012-13) to an estimated 1.0 percent in the coming fiscal year.

Foreign portfolio flows have stabilized the rupee, exerting downward pressure on long-term interest rates, reflected in yields on 10-year government securities, and contributed to the surge in equity prices.

In response to the favourable terms of trade shock (especially with regard to oil), macroeconomic policy has appropriately balanced government savings (two-thirds) and private consumption (one-third).

After a nearly 12-quarter phase of deceleration, real GDP has been growing at 7.2 percent on average since 2013-14, based on the new growth estimates of the Central Statistics Office. Notwithstanding the new estimates, the balance of evidence suggests that India is a recovering, but not yet a surging, economy.

From a cross-country perspective, a Rational Investor Ratings Index (RIRI) which combines indicators of macro-stability with growth, illustrates that India ranks amongst the most attractive investment destinations. It ranks well above the mean for its investment grade category (BBB), and also above the mean for the investment category above it (on the basis of the new growth estimates).
Several reforms have been undertaken and more are on the anvil.  The introduction of the GST and expanding direct benefit transfers can be game-changers.

Structural shifts in the inflationary process are underway due to lower oil prices, deceleration in agriculture prices and wages, and dramatically improved household inflation expectations. Going forward inflation is likely to remain in the 5-5.5 percent range, creating space for easing of monetary conditions.

In the short run, growth will receive a boost from the cumulative impact of reforms, lower oil prices, likely monetary policy easing facilitated by lower inflation and improved inflationary expectations, and forecasts of a normal monsoon in 2015-16. Using the new estimate for 2014-15 as the base, GDP growth at constant market prices is expected to accelerate to between 8.1 and 8.5 percent in 2015-16.

Medium-term prospects will be conditioned by the “balance sheet syndrome with Indian characteristics” that has the potential to hold back rapid increases in private sector investment. Private investment must be the engine of long-run growth.  However, there is a case for reviving targeted public investment as an engine of growth in the short run to complement and crowd-in private investment.

India can balance the short-term imperative of boosting public investment to revitalize growth with the need to maintain fiscal discipline. Expenditure control, and expenditure switching from consumption to investment, will be key.

The outlook is favourable for the current account deficit and its financing. A likely surfeit, rather than scarcity, of foreign capital will complicate exchange rate management. Reconciling the benefits of these flows with their impact on exports and the current account remains an important challenge going forward.

India faces an export challenge, reflected in the fact that the share of manufacturing and services exports in GDP has stagnated in the last five years. The external trading environment is less benign in two ways: partner country growth and their absorption of Indian exports has slowed, and mega-regional trade agreements being negotiated by the major trading nations in Asia and Europe threaten to exclude India and place its exports at a competitive disadvantage.

India is increasingly young, middle-class, and aspirational but remains stubbornly male. Several indicators suggest that gender inequality is persistent and high. In the short run, the renewed emphasis on family planning targets, backed by misaligned incentives, is undermining the health and reproductive autonomy of women.
 
Fiscal Framework

• India must adhere to the medium-term fiscal deficit target of 3 percent of GDP. This will provide the fiscal space to insure against future shocks and also to move closer to the fiscal performance of its emerging market peers.
• India must also reverse the trajectory of recent years and move toward the golden ruleof eliminating revenue deficits and ensuring that, over the cycle, borrowing is only for capital formation.
• Expenditure control combined with recovering growth and the introduction of the GST will ensure that medium term targets are comfortably met.
• In the short run, the need for accelerated fiscal consolidation is lessened by the dramatically changed macro-circumstances and the less-than-optimal nature of pro-cyclical policy. The ability to do so will be conditioned by the recommendations of the Fourteenth Finance Commission (FFC).
• Nevertheless, to ensure fiscal credibility and consistency with medium-term goals, the process of expenditure control to reduce the fiscal deficit should be initiated. At the same time, the quality of expenditure needs to be shifted from consumption, by reducing subsidies, towards investment.
• Finally, implementing the FFC recommendations will lead to states accounting for a large share of total tax revenue.  This has the important implication that, going forward, India’s public finances must be viewed at the consolidated level and not just at the level of the central government. If recent trends in state-level fiscal management continue, the fiscal position at the consolidated level will be on a sustainable path. 

 Subsidies and the JAM Number Trinity Solution

• The debate is not about whether but how best to provide support to the poor and vulnerable. The government subsidises a wide variety of goods and services with the aim of making them affordable for the poor, including: rice, wheat, pulses, sugar, railways, kerosene, LPG, naphtha, iron ore, fertiliser, electricity, water.
• The direct fiscal cost of these select subsidies is roughly Rs. 378,000 crore or 4.2 percent of 2011-12 GDP.  This is roughly how much it would cost to raise the expenditure of every household to the level of a 35^th percentile household (well above the 21.9percentTendulkar Committee poverty line).
• Are these subsidies effectively targeted at the poor? Unfortunately, subsidies can sometimes be regressive and suffer from leakages. For example, electricity subsidies by definition only help electrified households. Even in the case of kerosene, 41 percent of PDS kerosene is lost as leakage and only 46 percent of the remaining 59 percent is consumed by households that are poor.

 The JAM Number Trinity – Jan Dhan Yojana, Aadhaar, Mobile – can enable the State to transfer financial resources to the poor in a progressive manner without leakages and with minimal distorting effects.
 
The Investment Challenge

• The stock of stalled projects stands at about 7 percent of GDP, accounted for mostly by the private sector. Manufacturing and infrastructure account for most of the stalled projects.  Changed market conditions and impeded regulatory clearances are the prominent reasons for stalling in private and public sectors, respectively.
• This has weakened the balance sheets of the corporate sector and public sector banks, which in turn is constraining future private investment, completing a vicious circle.
• Despite high rates of stalling, and weak balance sheets, the stock market valuations of companies with stalled projects are quite robust,which is a puzzle.
• Combining the situation of Indian public sector banks and corporate balance sheets suggests that the expectation that the private sector will drive investment needs to be moderated. In this light, public investment may need to step in to ramp up capital formation and recreate an environment to crowd-inthe private sector.

 The Banking Challenge

• The Indian banking balance sheet is suffering from ‘double financial repression’.  On the liabilities side, high inflation lowered real rates of return on deposits.  On the assets side, statutory liquidity ratio (SLR) and priority sector lending (PSL) requirements have depressed returns to bank assets. As inflation moderates and the banking sector exits liability-side repression, it is a good time to consider addressing the asset-side counterpart.
• In a cross-country comparison, controlling for the level of development, the size of the Indian banking system, measured by credit indicators, does not seem too high either in absolute terms or relative to other sources of financing. However, going forward, capital markets and bond-financing need to be given a boost.
• Private sector banks did not partake in the biggest private-sector-fuelled growth episode in Indian historyduring 2005-2012.  This is reflected in the near-constant share of private sector banks in deposits and advances in those years.
• There is substantial variation in the performance of the public sector banks, so that they should not be perceived as a homogenous block while formulating policy. 

Putting Public Investment on Track – the Rail Route to Higher Growth.

• The Indian Railways over the years have beenon a ‘route to nowhere’characterized by underinvestment resulting in lack of capacity addition and network congestion; neglect of commercial objectives; poor service provision; and consequent financial weakness.  These have cumulated to below-potential contribution to economic growth.
• Very modest hikes in passenger tariffs and cross-subsidisation of passenger services from freight operations over the years have meant that Indian (PPP-adjusted) freight rates remain among the highest in the world, with the railways ceding significant share in freight traffic to roads (that is typically more costly and energy inefficient).
• As a result, the competitivenessof Indian industry has been undermined. Calculations reveal that China carries about thrice as much coal freight per hour vis-à-vis India. Coal is transported in India at more than twice the cost vis-à-vis China, and it takes 1.3 times longer to do so.
• Econometric evidence suggests that the railways public investment multiplier (the effect of a Rs. 1 increase in public investment in the railwayson overall output) is around 5. 
• However, in the long run, the railways must be commercially viable and public support must be linked to railwayreforms: adoption of commercial practices; tariff rationalization; and technology overhaul.

Skill India to Complement Make in India

• What should we ‘Make in India’?  Sectors that are capable of facilitating structural transformation in an emerging economy must:
• Have a high level of productivity.
• Show convergence to the technological frontier over time.
• Draw in resources from the rest of the economy to spread the fruits of growth.
• Bealigned with the economy’s comparative advantage; and Betradeable.

 Registered manufacturing, construction and several service sectors -- particularly business services -- perform well on these various characteristics.  A key concern with these sectors however is that they are rather skill-intensive and do not match the skill profile of the Indian labour force. 
 
India could bolster the Make in India’’initiative, which requires improving infrastructure and reforming labor and land laws by complementing it with the‘’Skilling India initiative.  This would enable a larger section of the population to benefit from the structural transformation that such sectors will facilitate.
 
A National Market for Agricultural Commodities

• Markets in agricultural products are regulated under the Agricultural Produce Market Committee (APMC) Act enacted by State Governments. India has not one, not 29, but thousands of agricultural markets.
• APMCs levy multiple fees of substantial magnitude, that are non-transparent, and hence a source of political power.
• The Model APMC Act, 2003 could benefit from drawing upon the ‘Karnataka Model’ that has successfully introduced an integrated single licensing system. The key here is to remove the barriers that militate against the creation of choice for farmers and against the creation of marketing infrastructure by the private sector.

 
Climate Change

• India has cut subsidies and increased taxes on fossil fuels (petrol and diesel along with a coal cess) turning a carbon subsidy regime into one of carbon taxation. The implicit carbon tax is US$ 140 for petrol and US$64 for diesel.
• In light of the recent falling global coal prices and the large health costs associated with coal, there may be room for further rationalization of coal pricing. The impact of any such changes on affordable energy for the poor must be taken into account.
• On the whole, the move to substantial carbon taxation combined with India’s ambitious solar power program suggests that India can make substantial contributions to the forthcoming Paris negotiations on climate change.

 
The Fourteenth Finance Commission

• The FFC marks a watershed in the history of Indian federalism. Unprecedented increases in tax devolution will confer more fiscal autonomy on the states. This will be enhanced by the FFC-induced imperative of having to reduce the scale of other central transfers to the states. In other words, states will now have greater autonomy both on the revenue and expenditure fronts.
• All states stand to gain from extra resources although there will be some variation between the states.
• FFC transfers are highly progressive; that is, states with lower per capita NSDP receive on average much larger transfers per capita. In contrast, plan transfers were much less progressive.
• The concern that more transfers will undermine fiscal discipline is not warranted because states as a whole have been more prudent than the centre in recent years.

Sensex soars on optimistic Eco Survey

The BSE Midcap and Smallcap indices have rallied over a per cent each at 10,742 and 11,289, respectively.

The market has rallied smartly in the early noon deals after the Economy Survey 2014-15 showed that FY16 GDP growth seems in the range of 8.1-8.5 per cent.

The Survery added that India's GDP is pegged to grow at 7.4 per cent for the current fiscal.

At 12:42 PM, the S&P BSE Sensex is trading at 28,990 up 243 points, while NSE Nifty is trading at 8,767 up 83 points.

The broader market continues to trade on a firm note, the BSE Midcap and Smallcap indices have rallied over a per cent each at 10,751 and 11,291, respectively.

All sectoral indices are trading on a positive note, except, the BSE FMCG index - down over a per cent at 8,484.

The Realty and Capital Goods indices have soared over 3 per cent each at Rs 1,821 and 17,735, respectively. The Metal index has surged nearly 3 per cent at 10,568.

The Bankex, Auto and Power indices are the other significant gainers.

On the BSE, the breadth is bullish - out of 2,632 stocks traded 1,619 stocks are advancing, while 914 stocks are declining.

There are no losers in metal space - Jindal Steel has zoomed over 6.5 per cent at Rs. 196. NMDC has soared nearly 4 per cent at Rs. 142.

Hindalco and SAIL have jumped over 3 per cent each at Rs. 154 and Rs. 69.85, respectively.

Coal India, Sesa Sterlite, Tata Steel and JSW Steel are the other significant gainers. 

Innovative approach, regional favoritism avoided in railway budget

The railway budget is committed towards a holistic, all round overhauling of the existing railway systems and processes. 

“In an innovative approach, avoiding regional favoritism, the railway minister has instead concentrated on long term core objectives of improving customer service, capacity augmentation on high pressure routes, promoting self sustainability & leveraging technology to improve efficiency, transparency and safety. 
 
Augmenting the planned expenditure towards increasing efficiency (track doubling) and opening doors for private participation to improve service delivery, station development and last mile connectivity are welcome steps. 
 
The railway minister has stressed on raising funds from long term sources like pension & insurance funds to break the vicious cycle of low investment and low efficiency. The budget outlay has been increased 40% over last year to Rs 1.11 lakh crore and the operating ratio pegged at 88%. 
 
The railway budget is committed towards a holistic, all round overhauling of the existing railway systems and processes. The mission mode approach towards modernizing core assets, exploring new revenue models and resource mobilization through innovative mechanisms points towards a sense of purpose and urgency, which instills which instills confidence in government’s development agenda”

SBI gets shareholders nod for raising funds

Earlier this month, SBI had appointed nine financial advisors to manage its equity offerings 

State Bank of India (SBI) said it has received shareholders' approval for raising Rs. 15,000 crore through a public offer, including a rights issue, to fund business and meet global capital adequacy norms.

The general meeting held on Thursday approved "to create, offer, issue and allot, such number of equity shares of Re 1 each, not exceeding Rs 15,000 crore or such amount as approved by the Government of India and RBI...," SBI said in a filing to the BSE.

It would be "subject to the condition that the government's shareholding in equity share capital of the bank does not fall below 52 per cent at any point of time, by way of public issue...," it said.

Public issue would include follow on public offer or rights issue or private placement including QIP, ADR, GDR or any other mode decided by the board, SBI further said.

Earlier this month, SBI had appointed nine financial advisors to manage its equity offerings to help it meet tighter capital adequacy requirements

Rolta India stock spurts 12%, bags Defence Ministry order

The stock has hit a high of Rs. 168 and a low of Rs. 159. 

Shares of Rolta India Ltd gained 12% and is trading at Rs. 167.

The stock has hit a high of Rs. 168 and a low of Rs. 159.

Total traded quantity on the counter stood at over 11.24 lk shares.

The company has been selected as a development agency for a more than Rs. 50,000 crore Battlefield Management System (BMS) project by the Defence Ministry. 

Thyrocare Technologies plans to raise up to $100 mn via IPO: Reports

Report said that the company is planning to raise around $85 mn to $100 mn. 

Thyrocare Technologies is planning IPO by the end of June, says report.

Report said that the company is planning to raise around $85 mn to $100 mn.

The company is expected to file for an IPO in the next three months. 

Thyrocare has hired Edelweiss, ICICI Securities and JM Financial to manage the IPO, says report.

Indices positive; Auto, Bankex gains

Some buying activity is seen in auto, banking, consumer durable, capital goods, IT and metal sectors, while fmcg sector is showing weakness on BSE. 

The Economic Survey will be in focus today and investors may prefer to stay light ahead of the budget announcement tomorrow.

At 9:30 AM, the S&P BSE Sensex is trading at 28,912 up 166 points, while NSE Nifty is trading at 8,733 up 49 points.

The BSE Mid-cap Index is trading up 0.43% at 10,662, whereas BSE Small-cap Index is trading up 0.59% at 11,230.

Some buying activity is seen in auto, banking, consumer durable, capital goods, IT and metal sectors, while fmcg sector is showing weakness on BSE.

Tata Power, L&T, Sesa Sterlite, HDFC Bank and Coal India are among the gainers, whereas GAIL, TCS, Bharti Airtel, Maruti Suzuki  and  NTPC are losing sheen on BSE.

The unwinding of positions and rollover in the F&O expiry brought in the usual volatility on Thursday. US crude oil futures are down over 5% owing to rising inventories in the United States. The Dow Jones and S&P 500 fell marginally while the Nasdaq clocked some gains. Japan's Nikkei 225 and Hong Kong's Hang Seng are flat while China's Shanghai index has inched up higher marginally.

The FM is mostly likely going to surprise global rating agencies with a fiscal deficit achievement of 3.9-4.0% versus the targeted 4.1% for the year. The Rs220bn money-raising from Coal India’s Offer-for-Sale and lower crude oil price would largely help the Government beat the target. Mr. Jaitley will mostly adhere to 3% fiscal deficit target by 2016-17.