Gap up opening for Nifty, Sensex

The outlook is a spurt at start. Indices will look to scale to new highs and attention will be on Nifty attempting to hit the 9,000 mark. 

The big budget event is now out of the way. It may not have been big bang on reforms but it finance minister has delivered a practical budget that addresses many crucial areas topping the government agenda. Foreign investors would be pleased with deferment of GAAR by 2 years, merging of FIIs and FDI limits, resolution of domicile issue, removal of MAT etc. There are several incentives to boost domestic savings and direct it towards financial instruments for productive use. More notably, there are steps to release money blocked in gold.  Those who missed participating on Saturday, especially FIIs will get into action today.

The outlook is a spurt at start. Indices will look to scale to new highs and attention will be on Nifty attempting to hit the 9,000 mark.  Just last year, in Feb-end, the Nifty was below the 6,300 levels and a year later it has galloped over 40%.  Fuel price hike will also have an impact on OMCs. Infrastructure Output figures and Fiscal Deficit numbers will also be eyed today.

Global indices are lackluster with US indices closing lower on Friday. Dow fell half a percent while S&P ended flat. Nasdaq too dropped half a percent.  Asian indices are mixed with Japan’s Nikkei flat while Hong Kong’s Hang Seng gaining 0.4%. China’s Shanghai is also slightly lower.

On the domestic front, the FM has indeed boosted corporate and individual sentiment with his resolve to move towards a 25% tax level in next four years and the additional deductions for individual tax payers for health cover premium payments, pension contribution and transport allowance.

No budget can please everybody or leave no room for criticism. If one has to list disappointments, there are a few, such as failure to provide a convincing solution to capital needs of public sector banks or direct boost to private sector for new capex.

Finance Minister Arun Jaitley in his Budget Speech in Lok Sabha said that the Indian Economy has turned around dramatically in the last nine months with the real GDP growth expected to accelerate to 7.4% making India the fastest growing large economy in the world.CPI inflation is expected to remain at close to 5% by the end of the year which will allow further easing of monetary policy. Jaitley said a Monetary Policy Framework Agreement has been concluded with the RBI to keep inflation below 6%.

FM proposed rationalization of various tax exemptions and incentives to reduce tax disputes and improve tax administration. He said, with a view to encourage savings and to promote health care among individual tax payers, it is proposed to increase the limit of reduction of health insurance premium from Rs 15,000 to Rs 25,000 and for senior citizen this limit is increase from Rs 20,000 to Rs 30,000.

The Budget also announced a slew of measures to stamp out black money. The Finance Minister proposed to defer the applicability of the General Anti Avoidance Rule (GAAR) by two years. Investments made up to 31.03.2017 shall not be subjected to GAAR.

Finance Minister also announced Rs 69,500 crore plan to sell stakes in government companies. Out of the total budgeted proceeds, Rs 41,000 crore is estimated to come from minority stake sale in PSUs, and the remaining Rs 28,500 crore is projected to come from strategic sale in both profit and loss-making companies, says report. The revised estimates pegged the disinvestment receipts from minority stake sale in PSUs at Rs 26,353 crore.

Petrol prices were hiked by Rs 3.18 per litre while diesel by Rs 3.09 per litre. This was the second increase in two weeks. In Delhi, diesel will cost Rs 3.09 more at Rs 49.71 a litre from Sunday, while the price of petrol will increased Rs 3.18 per litre to Rs 60.49.

The Prime Minister, Narendra Modi, called upon the Indian IT Industry to focus on meeting the global challenge of cyber-security. Stating that the entire world is concerned about this issue, the Prime Minister said Indian IT professionals could do a lot for cyber-safety of digital assets across the world.

Shares of cigarettes manufacturing companies have dealt a severe blow following a steep hike in excise proposed in the Budget. According to the Union Budget 2015-16 proposals, the Finance minister has proposed to hike excise duty on cigarettes to 25 per cent for under 65 mm category, and 15 per cent for other categories.

The proposed merger of FMC with Sebi to create a unified markets regulator has sounded a death knell for the illicit 'dabba trading', estimated to have a turnover of up to Rs one lakh crore a day, says a report. 

Government may allow commercial mining of coal after auction: Finance Minister

In a major policy development government will allow commercial mining of coal by private companies after allocating mines to public sector companies and auction to specific end users. Allowing private companies into commercial mining will help raise coal output as state monopoly Coal India, which produces about 80 percent of the nation's coal has missed all its output targets in last four years. Finance Minister Arun Jaitley said that 'First you give it to the state and central PSUs. Thereafter, you make a pool of all actual users and have an auction. 'Then the extra resource, while preserving the character of Coal India, without disturbing it, you then start exploring the possibility of commercial mining.' However, the minister has not given a timeline for allowing commercial mining by private firms. The government had last month promulgated an Ordinance for auctioning the 204 coal blocks whose allocation was cancelled by the Supreme Court in September. The auction and allocation of coal blocks through a transparent methodology would ensure that coal exploration will begin and the actual users will get the fuel rather than importing and putting a burden on current account. However, describing the government's move to reallocate the blocks by e-auction as 'not at all a welcome decision,” the Centre of Indian Trade Unions (CITU) has said it condemns any move to nullify the Coal Nationalisation Act.

Govt to roll out industry friendly bulk drug policy in two weeks

The Government will be rolling out a new industry friendly pharma policy for bulk drugs in 10-15 days, which could help the sector in growing manifold over the next 5-7 year. Given the Prime Minister Modi’s fanaticism to shape up the sector so as to meet its sufficient for future growth both in terms of production and exports, the policy will be released by himself in next two week’s time at the most. Further, the committee and task force set up by the government for this purpose have finalized their recommendations which have been sent to Prime Minister’s Office (PMO) for final approval. The new policy is expected to eliminate all the existing irritants and prevailing ills that have overtaken the pharma sector in the last few years. It would have multiple concessions for all stakeholders of the pharmaceuticals sector so that it is put on the growth trajectory, matching its potential as the government realizes that it has done little for the sector and that whatever growth it has clocked, the credit entirely went to the private sector. With this policy, the pharma sector which is of Rs 1.8 lakh crore in size at present is likely to grow by 4-5 times in next 5-7 years with both its domestic production and exports rising phenomenally.

India's economic growth to pick up to 5.6 percent: Fitch Ratings

Global ratings agency Fitch Ratings in its latest release has said that India's economic growth is expected to pick up to 5.6 percent in the current fiscal on account of structural reforms being rolled-out by the government.

The agency expects real GDP growth to pick up to 5.6 percent in FY15 and 6.5 percent in FY16 from 4.7 percent in FY14 and has stated that high foreign reserves provide a strong buffer to the Indian economy. Fitch has further stated that the Indian economy had lost much of its dynamism in recent years due to weak investment, however, a gradual pick-up is expected now. In its report it has highlighted that India's current account deficit (CAD) was a concern for investors until mid of 2013, but it has narrowed now due to policy rates hikes and measures including curbs on gold imports through duty hikes.

Though, cautioning  about factors such as pace of fiscal consolidation and structural reforms, investment and inflation environment as well as banking sector's asset quality, it has said that they form downside risks to the economy. India's fiscal deficit touched 82.6 per cent of the Budget estimates for 2014-15 to cross Rs 4.38 lakh crore at the end of September.

Recently, the domestic ratings agency India Ratings, a part of Fitch Ratings had revised down its economic growth estimate for fiscal year 2014-15 marginally to 5.6 per cent citing poor industrial performance, and warned that the government will slip on the fiscal deficit front.

India’s trade deficit surge 26% on Y-o-Y basis in October

India's trade deficit in October surged by 26.1% to $13.36 billion, however it narrowed from $14.25 billion in the previous month, thanks to decline in oil import. On one hand, India’s imports fell to $39.45 billion from $ 43.15 billion in September, but on the other, on a year-on-year basis, it increased 3.16%. Oil and gold are the key contributors to India's import bill. Oil imports fell to $ 12.36 billion as against $14.50 billion, on a month-on-month basis, the same also slipped by 19% lower on Year on Year (Y-o-Y) basis. Non-oil imports declined to $27.08 billion as against $ 28.65 billion, m-o-m basis. However, in a bit of concern, gold imports surged to $4.18 billion from 4 3.75 billion in October. On a year-on-year basis, gold imports jumped to $ 4.17 billion from$ 1.09 billion mainly because of the festivals like Diwali and Dhanteras, which are considered as most auspicious occasions in India to buy the yellow metal. In another spot of concern, exports in October hit lowest level since March 2014 as they fell to $26.09 billion from $28.90 billion last month. On a year-on-year basis, the fall has been to the tune of 5.04%. Cumulatively, during April-October period of the current fiscal, the country's exports were up by mere 4.72% to $189.79 billion, while imports rose by 1.86 per cent to $273.55 billion, leaving behind a trade deficit at $83.75 billion as against $87.31 billion in the same period last fiscal. The government had in the previous year clamped down on gold imports stipulating that nominated agencies could import gold on the condition that 20% of the consignment would be exported. The scheme, commonly referred to as the 80:20 scheme, was relaxed in May this year when RBI allowed star and premier export houses to import the commodity. However, with the sharp uptick in the shipments of yellow metal, reports now suggest that RBI is in talks with the Government for a decision to curb gold imports.

Centre asks state governments to consider increasing GST threshold limit

The goods and services tax (GST) bill that seemed reaching a conclusion finally may get delayed further, as the Centre is against keeping the threshold limit at Rs 10 lakh for levying GST and wants the committee on dual control to take a final view on the matter after detailed discussions. Earlier, an empowered committee of state FMs after its meeting has insisted that threshold turnover for levying GST be retained at Rs 10 lakh and petroleum be kept out of the purview of the new tax regime. However, the Centre in its recent communication to the state Finance Ministers has suggested that the meeting of the Committee on Dual Control, Threshold and Exemptions be convened at the earliest for 'detailed discussion and analysis'. It has argued that keeping the threshold limit at Rs 10 lakh would mean that any dealer with a daily turnover of Rs 2,800 would come under the GST net. Meanwhile, the law ministry has cleared the GST bill brought to it for legal consultation and now the finance ministry will take the proposed constitutional amendment to the Cabinet in the coming week for its approval before it is tabled in the winter session of Parliament. The GST Constitutional Amendment Bill, which was introduced in the Lok Sabha in 2011 had lapsed and the government needs to bring a fresh bill. The proposed GST regime will have dual tax structure where one will be the central component levied by the Centre, called the central GST, and the other to be levied by the states, called the state GST. It will subsume indirect taxes like excise duty and service tax at the central level and VAT on the states front.

Recent fall in inflation does not mean decline is permanent: RBI Dy Governor HR Khan

Pouring cold water on hopes of rate cut in upcoming monetary policy, Reserve Bank of India (RBI)’s deputy governor, HR Khan  highlighted that recent decline in inflation did not mean the decline was permanent. He also emphasized that though decline in crude oil prices and other commodities were beneficial to Indian economy, but policy makers just could not jump their guns until they were convinced the trend was firmly established. Moreover, Khan also attributed to geo-political issues and tepid global recovery as reasons enough for RBI’s cautious approach and underscored that India’s Apex Bank just could-not be an outlier, particularly, in terms of inflation from among the BRIC countries. Further, the deputy governor also added that Inflation had long way to go and that structural issue like input costs, wage burden, food prices, protein-driven inflation, and rural areas were witnessing wider inflation pressures. In two encouraging developments which fuelled the hopes that lower interest rates cycle could begin in December, India’s Consumer Price Inflation (CPI) eased at an all time low level since the launch of the new series of Consumer Price Index in 2012, at 6.46% in September as compared to 7.80% in August, helped by the lower prices of food and fuel. Meanwhile, easing at 33-month low, India's main inflation gauge, based on monthly WPI had stood at 2.78% for the month of September as compared to 3.74% in the previous month and 7.05% during the corresponding month of the previous year. So far, Governor Raghuram Rajan has kept the benchmark repo rate at 8% after three increases since taking over in September 2013.

Moody's retain negative outlook on Indian banks on high corporate leverage

In yet another worrying development for banking sector, international rating agency, Moody’s while retaining its negative outlook for the Indian banking sector, has underscored that high leverage in the corporate sector could prevent any meaningful recovery in asset quality of the banking system over the next 12-18 months, regardless of moderate rebound in economic growth. The rating agency since November 2011 has maintained a negative outlook for the banking system.

Notably, the report of Moody just comes a day after another global ratings agency Standard & Poor’s (S&P’s), in its Country Risk Assessment report on the Indian banking sector, underscored that country’s plan to grant new banking licenses to companies could heighten the risk for banking sector as the aggressive market share gaining tactics, like underwriting standards or undercutting prices by new entrants may adversely impact the banking sector's stability.

Further, Moody’s specified that negative outlook on the Indian banking system pertains mainly to the public-sector banks, which represent more than 70% of total banking-system assets, since these banks have experienced higher growth rates in non-performing and restructured loans, as well as greater weakening in profits, than their private sector peers. 

The agency has estimated that India's corporate sector had an average debt-to-equity ratio of more than 3 times, and would need a stronger economic recovery than currently projected by the credit agency to bring down the leverage.

Moody’s in its report, highlighted that continuing poor asset quality, wherein the NPAs levels were set to touch 4.5% of the system, would require continued provisioning and strengthened capital buffer and highlighted that after provisioning, profitability of public sector banks would generate insufficient internal capital for loan growth. It added that poor asset quality and low capitalization remained to be the primary concerns for Indian public sector banks, which were not expected to improve much in the coming 18 months.

Budget make or break for govt; Sensex at 30K unlikely: MS

Ruchir Sharma, Head Of Emerging Markets and Global Macro, Morgan Stanley Investment Management dismisses all the hoopla about Prime Minister Narendra Modi’s maiden visit to the United States. While the first year of the Modi government should not be judged too soon, Sharma says it is the Budget next year that will be the make or break for the government. “All the investment talks in US will be just that. Talks and slogans. But from a domestic policy perspective, the second year beginning with the Budget will be critical for the government,” he says. On the road ahead, Sharma expects the rupee to depreciate to as low as Rs 70 against the dollar in the next 2-3 years. This, he says, will be beneficial for the economy. “If we want to grow by 6 percent, exports will be critical especially at a time when the global economy is weak. Hence, we need a competitive rupee for manufacturing advantage,” he further adds. Sharma also believes that the Sensex hitting a year-end high of 30000 is unlikely as the global economic environment is not conducive for the market rally.

GDP growth of 8% achievable in 2-3 years following path of fiscal prudence: Chidambaram

GDP growth of 8% achievable in 2-3 years following path of fiscal prudence: Chidambaram

Sep 24,2014   10:30 Hrs IST

Former Finance Minister P Chidambaram said that India could achieve 8% growth in the next 2-3 years if it followed the path of fiscal prudence, which could be financed by domestic savings and some foreign direct investment. However, he underscored that growth beyond 8% would bring its own set of problems as it is bound to become inflationary, which will exacerbate fiscal deficit. It would lead to additional borrowing, which in turn would enlarge twin deficits, i.e. fiscal deficit and Current Account Deficit (CAD). Further, Chidambaram emphasized that if the government continued to remain on the path of fiscal prudence, promotes savings and investments, and be more diligent in implementing projects, it would be possible to get back to 8% growth. The Indian economy grew by 4.9% in 2013-14 fiscal. However, in the April-June quarter, the growth picked up to 5.7%. Notably, the country clocked an enviable 9% growth during pre- global financial crisis in 2008. Also, he highlighted that the key to control inflation was to contain fiscal deficit, which the government aims to bring down to 4.1% in the current fiscal from 4.5% in 2013-14. The minister pressed upon the need for financial sector reforms to achieve 8% growth. It added that FSLRC (Financial Sector Legislative Reforms Commission) had made far reaching recommendations, some are legislative, some are non-legislative in nature and the Non-legislative recommendations should be carried out over a period of next 2-3 years. The minister also lauded the Modi government's decision to do away with the Planning Commission and suggested to put in place a small body of not more than 100 people in its place, who could do prospective planning, and lay out the future roadmap.

RBI should hike interest rates to bring down inflation: IMF

RBI should hike interest rates to bring down inflation: IMF

Sep 19,2014   10:22 Hrs IST

Little ahead of the Reserve Bank of India (RBI)'s monetary policy review on September 30, the International Monetary Fund (IMF) has suggested the central bank should increase its guard to fight against stubbornly high inflation by hiking its key policy rates so that inflation remains lower on sustainable basis. In a note released ahead of the G20 meeting of Finance Ministers and central bank governors at Cairns in Australia, IMF underscored that India needs to take more steps to reduce the large fiscal deficit and fight against stubbornly high inflation, which would warrant a hike in interest rates and a simpler monetary framework with clear objectives and operational autonomy for the central bank. Notably, right after the release of five year low August WPI data, Reserve Bank of India’s governor, Raghuram Rajan clearly had ruled out the chances of rate cut at the month-end monetary policy announcement, citing that Inflation in Asia's third-largest economy, India, was still high and hence there was no point in slashing interest rates since this would further build on to inflationary pressures. He then had underscored that Reserve Bank of India would bring down interest rates as and when it is “feasible”. Helped by slower annual rises in prices of fuel and clothes, retail inflation edged down marginally to 7.8% in August from 7.96% a month earlier. Meanwhile, extending its easing trend, India's main inflation gauge, based on monthly WPI, softened more than expected at 3.74% for the month of August, as compared to 5.19% (Provisional) for the previous month of July. Street widely was expecting a number above 4% for the month under review. Further, the international agency which also called for higher public spending on infrastructure to ease supply bottlenecks and support economic development, asserted that removing supply bottlenecks would lead to more sustainable growth. Separately, IMF, though acknowledging government’s stand on fiscal consolidation, flagged concerns over its quality and durability. The government has proposed to bring down the fiscal deficit to 4.1% of GDP in current year from 4.5% last fiscal and also has put up in place a fiscal consolidation roadmap as per which the fiscal deficit has to be brought down to 3% of the GDP by 2016-17.

Govt may extend excise duty concessions to auto sector beyond December

Govt may extend excise duty concessions to auto sector beyond December Sep 12,2014   10:16 Hrs IST In a move which would provide further relief to the auto-makers, the government is mulling at the proposal for extending excise duty concessions to the automobile sector beyond December. Further, towards this development, the Heavy Industry Ministry is likely to send a proposal to Finance Ministry regarding extension of excise duty concession till March 31, 2015. The extension of duty concession would enable continuation of excise duty on small cars, scooters, motorcycles and commercial vehicles at the current level of 8% from 12% previously and would enable factory gate duty on SUVs at the reduced rate of 24% as against 30%. Meanwhile, the duty on large cars will continue at 24% compared with 27% earlier, while the duty on mid-sized cars will stand at 20% from 24%. The government to help the industry tide over sluggish sales had cut excise duty on cars, SUVs and two-wheelers as well as consumer durables in the Interim Budget in February. While, in the cheer for automobile and consumer durable sectors, the government in June this year extended the excise duty concessions which were earlier valid till June 30 by six months to December 31. However, it then also announced that capital goods and consumer durables will continue to attract a lower duty of 10% as against the pre-budget rate of 12%. Most carmakers had passed on the benefit of excise duty reduction to customers by cutting prices on account of sluggish sales of the industry, which were already impacted by soaring prices of fuel. Automobile sales in India fell for the second consecutive year in 2013-14 and were 4.65% lower at 1786,899 units. In 2012-13, car sales fell 6.69%, the first drop in a decade. In a separate development, Heavy Industries Ministry is contemplating over a policy of mandatory recalls, which will do away with the current system of voluntary recalls by auto companies.

Sep 12,2014   10:16 Hrs IST

In a move which would provide further relief to the auto-makers, the government is mulling at the proposal for extending excise duty concessions to the automobile sector beyond December. Further, towards this development, the Heavy Industry Ministry is likely to send a proposal to Finance Ministry regarding extension of excise duty concession till March 31, 2015. The extension of duty concession would enable continuation of excise duty on small cars, scooters, motorcycles and commercial vehicles at the current level of 8% from 12% previously and would enable factory gate duty on SUVs at the reduced rate of 24% as against 30%. Meanwhile, the duty on large cars will continue at 24% compared with 27% earlier, while the duty on mid-sized cars will stand at 20% from 24%. The government to help the industry tide over sluggish sales had cut excise duty on cars, SUVs and two-wheelers as well as consumer durables in the Interim Budget in February. While, in the cheer for automobile and consumer durable sectors, the government in June this year extended the excise duty concessions which were earlier valid till June 30 by six months to December 31. However, it then also announced that capital goods and consumer durables will continue to attract a lower duty of 10% as against the pre-budget rate of 12%. Most carmakers had passed on the benefit of excise duty reduction to customers by cutting prices on account of sluggish sales of the industry, which were already impacted by soaring prices of fuel. Automobile sales in India fell for the second consecutive year in 2013-14 and were 4.65% lower at 1786,899 units. In 2012-13, car sales fell 6.69%, the first drop in a decade. In a separate development, Heavy Industries Ministry is contemplating over a policy of mandatory recalls, which will do away with the current system of voluntary recalls by auto companies.

Sensex Turns Lower After Hitting Record High; IT Stocks Gain

The BSE Sensex and the broader Nifty hit a record high for a third straight day, but the bluechip indices turned sharply lower on profit booking. The Sensex fell as much as 232 points, while the Nifty was slumped over 70 points after a positive start.

Sesa Sterlite, Tata Power and Hindalco traded with over 3 per cent losses.

The Sensex hit an all-time high of 25,711, while the Nifty hit a high of 7,683 before turning lower. As of 10 a.m., the Sensex traded 159 points lower at 25,421, while the Nifty traded 56 points lower at 7,599.

DIPP proposes 100% FDI in defence sector

In a bid to send a strong signal to global community, the Narendra Modi government, within two days of taking charge, has begun work on allowing up to 100% foreign investment in defense production. The proposal to raise FDI cap in defense from 26% to 100% is aimed at boosting manufacturing activities, which at the moment is the top priority of the new government for which Department of Industrial Policy & Promotion (DIPP) is working overtime. The department has proposed three different caps for FDI in defence- 49%, 75% and 100% -in order to incentivize technology transfer. It has proposed allowing 49% FDI in case of no technology transfer and 74% where there is a technology transfer and no cap policy only for cases which bring in state-of-the-art technology. Further, in the first and the most significant move by the government to revive manufacturing sector, the draft note stating the same has been circulated for ministerial comments. Permitting FDI in the sector will hugely help in reducing import bill for defence equipment and will help in boosting manufacturing and creating jobs. Presently, only 26% FDI is allowed in defence manufacturing, though the government can approve for more on a case-to-case basis. Back in May 2010, DIPP had rolled out a discussion paper suggesting increase in FDI cap for the defence sector, however it limited foreign participation to 26% in this capital-intensive and sensitive sector.

RBI tweaks M&A norms for NBFCs

The Reserve Bank of India (RBI) has tightened merger rules for non-banking finance companies, requiring them to obtain the RBI’s written permission to acquire or merge with any similar entity, in order to ensure their fit and proper management. Previously, only deposit-taking non-bank finance companies required approval for a takeover or merger. But, this directive, to be known as 'Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014, would be applicable to every non-banking financial company, i.e. deposit taking or a non-deposit taking NBFC. According to the RBI, any merger or amalgamation of an NBFC with another entity or an entity with an NBFC that would give the acquirer or another entity control of the NBFC will need its written approval, before the permissions of court or tribunal for mergers or amalgamations with other companies or NBFCs. However, RBI clarified that its prior approval would not be required in case where NBFC is acquiring less than 10% of another entity. Further, it also brought to the notice of the prospective acquirers of NBFCs that acquisition of shares/ takeover of an NBFC without its prior approval shall result in adverse regulatory action by the Reserve Bank, including, cancellation of Certificate of Registration of the concerned NBFC.

Foreign investment inflows to double to $60 billion in FY14 on Modi wave: Assocham

Banking on huge expectations from the incoming Modi Government, Indian economy could see doubling up of foreign investment inflows- including FDI and FIIs- to above $60 billion in the current financial year than $29 billion in the fiscal 2013-14, according to projection of ASSOCHAM study. The study, further pointed to a scenario of easing of prices and lowering of interest rates, the two major challenges that the Indian economy had been facing for some years now. However, it highlighted the new challenges that the emerging situation could bring for Reserve Bank of India (RBI) to deal with i.e., the problem of plenty on its impact on the Rupee rate inflation from the increased amount of cash into the system. Assocham underscored the need of new Finance Minister and RBI being on the same page in dealing with this scenario which would see Rupee appreciation and a further improvement on the current account balance and the ‘problem of plenty’ forcing RBI to sterilize the inflows by injecting cash into the system. It suggested dealing with this kind of situation by first removing import restrictions and customs duty on imports of gold since these were taken in extra-ordinary situation, which is now  a matter of past. A measure which would also bring some relief to gems and jewellery trade and industry and a first investor friendly step that can be taken in first Budget of the Modi Government. Additionally, ASSOCHAM noted that if Modi Government was successful in implementing some reform-friendly measures along with taming inflation and earning goodwill of the people, the FDI will do a fast catch-up with the FIIs. Typically, since the FDIs are long-term commitments, there would be a lag, the paper noted. The paper projected the FII investment to remain more than the FDI inflows in the current fiscal. According to expectation, while FII investment in both debt and equity could exceed $35 billion, the FDI money could be above $ 25 billion.

Assocham recommends action plan to new government to boost economic growth

Industry body Assocham has outlined an action plan suggesting measures for new government to boost the economic growth.  The action plan is aimed at achieving economic growth of 9 to 10 percent over the medium term and sustaining the high-growth path. Assocham’s action plan highlighted that the new government must introduce single-window clearance for pending projects, relax FDI limits across key sectors, privatise sick PSUs, divest its holding in top 10-15 PSUs to generate over Rs 1 lakh crore of capital. Further, the industry body has also pitched for GST implementation, liberalisation of ECB norms, incentives for investments, restoration of the SEZ policy to its original form and easing of processes for companies planning to set up manufacturing units. Emphasizing the need to create an environment for increasing investments, Assocham President Rana Kapoor said that new government should introduce suitable policy framework to improve the business sentiments in the country. Further, a long term approach to fiscal consolidation along with clear policies is urgently needed for addressing structural bottlenecks and high inflation. Rana Kapoor further added that in order to expedite the implementation of big infrastructure projects, new government must accelerate land acquisition and environment clearances process for mega projects by setting up a joint task force comprising central ministries like environment, finance, administrative along with the states ministries. New government must take measures soon to replace existing state and central levies with a uniform tax as implementation of Goods and Services Tax (GST) can boost India's economy by up to two percentage points. Currently, Indian economy is struggling with slowdown and the factors like low investments, slow execution of infrastructure projects and prevailing high interest rates in order to combat elevated inflation have been adversely impacting the domestic economy. Indian economy’s growth slowed down to 4.6% during the first three quarter of FY14 and is likely to remain at sub-5% level in FY14.

PE investment increases 2.5 times in realty in first quarter of 2014

Amid the gloom in the realty sector, Private Equity (PE) investors are still pinning their hopes on the sector and in the first quarter of 2014, have invested Rs 2,800 crore which is 2.5 times higher than the amount invested in the same period last year, according to a report by real estate advisory firm Cushman & Wakefield. Notably, the total private equity funding is the highest quarterly investment since the second quarter of 2009. Out of the total, Bangalore received the maximum of nearly 70% of which important deals were of Rs 1,150-crore by Blackstone, Standard Chartered and Embassy India in Bangalore’s Vrindavan Tech Village, and Rs 250-crore by Peninsula Brookfield in Mantri Developers. In its earlier report Cushman & Wakefield had recorded that, there has been a 43% increase in Q1 2014 new residential unit launches from the previous quarter. The total estimated unit launches were recorded at 55,500 units across major eight cities of India with Bengaluru recording the largest number of units launched, an increase of 22% from previous quarter.

Rejected banking licence applicants can buy strategic stake in banks: RBI Dy Governor

In a fresh development, banking regulator, Reserve Bank of India (RBI) has underscored that any entity which failed to make the cut for banking licence could buy a strategic stake in a bank and this would not amount to back-door entry into banking system. As per RBI’s deputy governor, R Gandhi, any entity that wishes to acquire more than 5% stake in a bank is required to apply to the RBI, which in turn will examine such applications on merit basis. Interestingly, this development comes right after non-banking finance company L&T Finance Holdings, which was one of the 25 applicants for new bank licenses and could not make the cut, was reportedly said to be in talks with YES Bank to buy out the promoters’ stake of about 23%. The NBFC reportedly has also approached the RBI informally. Besides, RBI’s deputy governor also unveiled the guidelines on differentiated bank licences, as well as on ‘on-tap’ licences, which could be expected by the end of this year and would be departure from the current practice of granting universal bank licences alone. Differentiated bank licences, one of the key recommendations of the Nachiket Mor committee on financial inclusion, refers to licences given to banks specialising in key functions, i.e. either lending or borrowing, while “on-tap licensing” means any entity which is planning to start a bank which could apply to the RBI at any point as against the current system where they apply when the window opens. After issuing two in-principle bank licences last month to infrastructure financier IDFC and micro lender Bandhan, RBI Governor Raghuram Rajan averred it was possible some of the applicants for licences were more suited to operate differentiated banks, not universal banks.

Finance Ministry allays fears of US stimulus withdrawal on FDI

In an attempt to allay fears that FDI inflow would be reversed with the withdrawal of the Quantitative Easing (QE) measures in the USA, a Finance Ministry report has highlighted that India still remains an attractive destination on its own and was the third most preferred nation for FDI since 2010. The report by the finance ministry further pointed that notable liberalizations in FDI policy and several sectors, a globally competitive workforce, a rapid GDP growth rate and rapidly growing market were the growth drivers for FDI in the country. It added that India’s attractiveness on its own merits was announced by the astonishing growth rate of 9.3% in the year just next to 2009, the year of the global meltdown. The US Fed had been buying bonds worth $80 billion a month to stimulate the American economy after the 2009 global financial crisis. It has now started reducing the amount in a phased manner prompting concerns that the move will curtail investments into countries like India. Though, global capital markets and international currencies in several countries, including India, witnessed knee-jerk reactions after news of QE being trimmed by the US Federal Reserve first surfaced last year, after that some sense of stability has been regained. FDI into India, estimated as the sum total of equity inflows, reinvested earnings and other capital, was $46.55 billion in 2011-12 and $34.29 billion in the following fiscal. In 2013-14, the inflows stood at $28.8 billion for the period of April-January.