INDIAN ECONOMY: OVERVIEW, GROWTH & DEVELOPMENT
PMO ‘unaware’ of implications of sovereign debt is a specious argument
As both the finance ministry and former finance secretary Subhash Chandra Garg stay mum on what led to his exit from the North Block, sources inform that the Prime Minister’s Office (PMO) had not been ‘properly’ briefed about consequences of the external borrowing in dollar-denominated bonds. Earlier this month, Finance Minister Nirmala Sitharaman had announced in her Budget speech that the government would borrow in foreign currency to finance the budget deficit.
Three different officials confirmed that Garg did not ‘properly’ apprise PMO of the consequences of borrowing in external currency. These officials contended that Garg did not inform them that the issue had not been consulted with stakeholders before it was made part of the Budget speech. Or, the fact that it had inter-generational implications. Their contention does not seem to hold water. Sitharaman’s budget speech had a fifty-word paragraph on external borrowing. It is a convention that PMO vets the speech and budget papers before they are tabled in front of cabinet colleagues and subsequently Lok Sabha. Notably, sovereign debt in the foreign currency was originally Garg’s idea. Officials in finance ministry say he had moved a similar proposal while working as a joint secretary in UPA’s tenure, which had been rejected.
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Mahalaxmi Express held up since 3am, 700 passengers onboard
The Mumbai-Kolhapur Mahalaxmi Express has been held up since early Saturday morning due to heavy rains. Around 700 passengers are onboard, DRM Central Railways said. The train has been stranded since 3am between Badlapur and Vangani in Maharashtra that is 100 km away from Mumbai.
Chief Public Relations Officer of Central Railways Sunil Udasi said that the Railway Protection Force and city police have reached the site where the train is stranded. Biscuits and water is being distributed among the stranded passengers.
A National Disaster Response Force (NDRF) team has been deployed to rescue the passengers. The team has reached the spot with several boats. Along with that, a Navy helicopter is helping the rescue operation.
“We request passengers of Mahalaxmi Express not to get down from the train. The train is in a safe place. Staff, RPF and City Police are on the train to look after you. Please wait for advice from NDRF and other disaster management authorities,” an official appealed to the stranded passengers.
Maharashtra’s Directorate General of Information and Public Relations (DGIPR) Brijesh Singh said that three boats have reached the spot. He said that the Chief Secretary is overseeing the situation himself.
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Nissan Motor to fire over 1,700 workers in India
Nissan Motor’s announcement on Thursday regarding slashing over 12,500 jobs globally over the next few years till FY 2020 will affect India too. It will be reducing the headcount in the country by over 1,700. This development comes in the wake of sluggish sales, rising costs, the scandal surrounding ousted Chairman Carlos Ghosn as well as steeply eroding profits. Japan’s No. 2 car maker, which had seen its profits plummet to a decadal low, announced a further 98.5 per cent plunge in profit to 1.6 billion yen ($14.80 million) in the first quarter of the current fiscal.
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India’s Venezuelan oil imports in June highest
India’s oil imports from Venezuela surged to about 475,200 barrels per day (bpd) in June, more than double the previous month and highest in 21 months, data from shipping and industry sources showed. Washington imposed sanctions on Venezuela’s state oil company PDVSA in January to put pressure on socialist President Nicolas Maduro. These sanctions have driven away many customers of Venezuelan oil, leaving supplies for some refiners.
Private refiners Reliance Industries and Nayara Energy, part owned by Russian oil major Rosneft, are the only Indian buyers of Venezuelan oil. These companies had a term deal to buy oil from PDVSA, which predated the sanctions.
Apart from PDVSA, Indian refiners also buy crude from Rosneft that receive oil in return for a reduction in Venezuela’s debt. Russia has loaned Venezuela almost $16 billion since 2006, which is being repaid in oil shipments.
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Govt planning to privatise 20-25 airports in 2nd phase
After deciding to privatise six major airports in February this year, the Central government is planning to privatise 20-25 more in the next phase with an expectation that there will be a significant participation by foreign airports, said AAI Chairman Guruprasad Mohapatra on Friday.
Adani Group had won the bids to operate, manage and develop the six airports Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, and Guwahati which the Airports Authority of India had put up for privatisation in the first round.
“We have privatised six airports… We are now planning to privatise 20-25 airports in next phase,” said Mohapatra at a press briefing here.
He said the AAI will decide the names of these airports with annual passenger traffic over 1.5 million soon and recommend them to the Ministry of Civil Aviation.
“They will take a final call,” he said.
In the latest bureaucratic shuffle, Mohapatra was transferred to the Department for Promotion of Industry and Internal Trade, which comes under the Ministry of Commerce.
On Friday, Mohapatra said he would take charge as DPIIT secretary on August 1.
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Lok Sabha passes companies amendment bill 2019
Finance Minister Nirmala Sitharaman Friday said the government has de-registered 4 lakh shell companies as the Lok Sabha approved a bill seeking to tighten CSR norms and ensuring stricter action for non- compliance of the company law regulations.
Piloting the Companies Amendment Bill 2019, the minister said companies not spending the mandatory 2 per cent profit on Corporate Social Responsibility (CSR) activities for a total period of four years will be required to deposit the amount in a special account.
The amendments in the Companies Act, she added, were aimed at improving ease of doing business and also reducing the compliance burden on the companies, especially the smaller ones.
The Bill was later passed by the Lower House unanimously after Congress leader Adhir Ranjan Chowdhury withdrew statutory resolution opposing it.
Responding to the concerns of members on shell companies, Sithsaraman said the word “shell companies” has not been defined in the rule book, but it is loosely referred to inactive companies or those which do not maintain a registered office.
“Four lakh companies have been identified and de-registered,” she said, adding non-maintenance of registered office will be a ground for de-registration of companies.
A key change in the Bill pertains to CSR spending, wherein companies would have to mandatorily keep unspent money into a special account.
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CBDT gives 2 months extension to I-T dept
The CBDT on Friday said that it has extended the taxman’s deadline by another two months till September to complete the final assessment of about 87,000 entities across the country who made suspicious deposits post-demonetisation.
The CBDT said the extension of time is being granted after considering “various difficulties (being faced by assessing officers) related to completion of assessments in Operation Clean Money (OCM) cases” by July end.
“The timeline for completion of assessment in such OCM cases is hereby extended and it should be completed by September 30,” the CBDT order accessed by PTI said.
It had launched the ‘Operation Clean Money’ to check black money post-demonetisation.
The assessing officers (AOs) of the Income Tax Department had earlier this month petitioned the Central Board of Direct Taxes (CBDT) to extend the deadline, saying it was “humanly impossible” to finish the task by July as it requires a lot of “paperwork and manpower”.
“The number of OCM cases is huge in most of the charges. Other routine official work is to be performed by the AO, including completion of normal scrutiny cases,” the regional offices had told the CBDT.
“Moreover, separate targets have been set for each AO for survey, recovery survey collection, appeal, audit and grievance redressal among others,” they said.
It was after this that the CBDT, which frames policy for the I-T Department, extended the deadline on Friday.
The board had also framed a special operating procedure (SOP) for the assessment of these cases stating that while the taxman initially sent notices (under Section 142(1) that pertains to inquiry before assessment) in three lakh cases, 87,000 out of these have “not filed their return of income” for assessment year 2017-18.
It had asked the assessing officers to use the ‘best judgement assessment’ procedure as stipulated under Section 144 of the I-T Act to finalise these 87,000 cases.
The section essentially reads: “If any person fails to comply with all the terms of notice issued under Section 142(1), the assessing officer after taking into account all relevant material which the AO has gathered shall after giving the assessee an opportunity of being heard, make the assessment of total income or loss to the best of his judgement…”
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Commercial segment emerges winner
Despite the turbulence in the residential real estate market in many Indian cities, the investment climate, particularly for institutional investments, has remained robust over the past three years, a report states.
Reforms such as the Real Estate (Regulation and Development) Act, the Benami Transactions (Prohibition) Amended Act, India’s Housing for All Mission, and easier FDI rules have all helped investor confidence.
The period 2015-2018 observed the highest amount of traction in real estate investment in the country with the momentum continuing in 2019 as well, a FICCI and Vestian report, ‘Real Estate Investment in India: A Brief Analysis’ said. “While investments worth $25.7 billion were recorded during the period 2015-2018, accounted for by 345 deals; the year 2019 saw approximately an investment of $2.7 billion till the month of June. Thus, altogether, the period 2015 to the first half of 2019 (H1 2019) recorded real estate investment of $28.4 billion in the country,” the report stated.
Given the slowdown in the residential sector, it is not a surprise that the commercial segment (office and retail projects) emerged a winner in terms of investor interest. The segment accounted for the bulk of the real estate investment in the country since 2016. During 2015-2019, commercial accounted for 50 per cent of the total investment value. “Among notable deals transacted in commercial assets, a slew of deals were signed between US-based firm Blackstone and Indiabulls in 2018. In March, Blackstone bought a 50 per cent stake in Indiabulls’ flagship office properties in central Mumbai-One Indiabulls Centre and Indiabulls Finance Centre-for $730 million. Later, it entered into definitive agreement with Indiabulls to buy up to 50 per cent stake in two commercial properties in Gurugram,” the report stated.
Rising sectors appear to be warehousing and logistics. “Factors such as GST, ‘Make in India’ initiative and the growth of e-commerce have led to rising interest in the sector. Among major deals in the sector, mention can be made of LOGOS India investing nearly $100 million in Casagrand Distripark in Chennai and Embassy Industrial Parks investing around $50 million into DRA Projects in Bengaluru,” the report highlighted.
Other interesting takeaways from the study: foreign funds (funds without an India-dedicated corpus) accounted for a lion’s share of 59 per cent of the total real estate investment value during the period 2015-2019 with $16.7 billion worth of investments. India-dedicated corpus, in contrast, totalled investments worth $10.9 billion, about 38 per cent of the total investment.