CCI may ping Google for information on its 7.73% stake in Jio Platforms

Mumbai | New Delhi: The Competition Commission of India (CCI) is set to ask Google whether the US Internet giant’s purchase of a 7.73% stake in Jio Platforms would entail any sharing of data in a way that could stymie competition, especially in the handset industry, said people familiar with the matter, including lawyers and government officials. “The CCI is likely to ask Google to explain details of data sharing with Jio. In many countries, the regulatory bodies are doing these cross checks when a big player strikes a deal, which will be happening in this case as well,” said a person aware of the development. The competition watchdog had sought similar information from Facebook as well before giving its clearance recently to the social media company’s investment in Jio Platforms, the Reliance Industries unit that holds mobile services operator Reliance Jio and other digital businesses of the Indian group.Google moved the commission in September seeking approval for its Rs 33,737 crore investment in Jio Platforms and a commercial pact to jointly develop entry-level Android smartphones. 78611383The application is currently under review. Google, Jio and CCI didn’t respond until press time Sunday to ET’s emails seeking comment. Among the things being studied by the CCI are how much of Google’s investment in Jio Platforms would go into handset development and manufacturing, said a second person. Another person said the CCI had already reached out to various stakeholders, including device makers, to understand the market and the possible implications the deal could have on the rest of the handset industry. “Since most handset makers use Android as a platform, the CCI is trying to understand if any arrangements between Jio and Google could be exclusive, thus what it means in terms of access to Google's software for other device makers, especially at a time when the government is trying to make India a smartphone manufacturing hub and has come out with an incentive scheme. Does this (deal) mean other handset makers could suffer because of an arrangement between the two,” this person said. The CCI seeks clarifications from companies during the assessment process, a government official said. Apart from pre-filing consultations, the applicants require to provide substantial information on the deals, he added.

from Economic Times https://ift.tt/3nGFLYg

Vedanta plans Rs 2,500 crore plant for flat rolled products

MUMBAI: India’s largest aluminium maker Vedanta is expanding its portfolio of value-added products and is planning to set up an aluminium flat rolled products plant with an estimated capital expenditure of Rs 2,500 crore, a senior Vedanta official said.Flat rolled products, or FRPs, comprise foils, sheets and plates and are used in the automobile, aerospace, consumer durables sectors, among others. This capex will be part of the Rs 15,000 crore investment plan by Vedanta to take its aluminium capacity from the current 2 million to 3 million tonnes in the next 3-4 years."We are looking at producing rolled products and entering the sheets market. For this, we are currently talking to Chinese players to see if we can bring a plant here," Ajay Kapur, CEO at Vedanta Aluminium and Power, told ETin an interaction. "This project needs some capex. It also gives you high margins and therefore we are investing in R&D to move ahead in that direction," said Kapur.The company will be housing the plant in either of its two aluminium facilities in Chhattisgarh or Odisha, Kapur said. Vedanta's rival — Aditya Birla Group's flagship Hindalco — also produces FRPs through various facilities in India as well as through its wholly-owned US subsidiary Novelis, that is world's largest aluminium rolling company.

from Economic Times https://ift.tt/2kVMRMT

25% earnings upgrades likely if cos retain tax savings: Praveen

India's move to cut corporate tax rate is likely to give a boost to sentiment and earnings expectations, and help the Indian stock market post further gains over the rest of the year, said John Praveen, portfolio manager at QMA, part of US-based PGIM. With the likely improvement in sentiment and earnings expectations, Praveen is also considering increasing allocations to India in his fund’s global equity portfolios. Unlike in the US, the current tax cuts in India are unlikely to result in a big increase in stock buybacks, said Praveen in an interview with Sanam Mirchandani. Edited exerpts:Will Indian government's move to cut corporate tax rate lead to any material change in outlook for Indian equity market?Indian stocks have been under downward pressure in 2019 year to date due to a combination of domestic and global factors. Domestically, growth has been slowing down well below 6% and reached 5% in Q2 which is the slowest in more than five years. Globally, stock markets have been hit by the sharp increase in US-China trade tensions which has depressed business confidence, especially manufacturing confidence and raised growth risks.Year-to-date, the Sensex has lagged both developed markets and emerging markets, which suggests there is room for further market gains to catch up with other markets.The tax cut announcements is likely to result in upward revisions to corporate earnings expectations. Previously, expectations for FY2019-20 earnings growth were around 15%. The earnings expectations could be revised sharply higher to as much as 25% if companies retain the bulk of the tax cuts.Thus, the extent of positive earnings revisions will depend on how much the companies pass on their tax windfall to consumers. The Indian corporate tax cut is a fiscal stimulus which should complement the RBI’s monetary easing. This is in line with developments globally. With policy rates already at or near zero in many countries and negative interest rates having adverse unintended consequences for bank balances sheets, there have been calls for fiscal stimulus to boost growth, especially in Europe. The Indian tax cut announcement is a welcome move and likely to give a boost to sentiment and earnings expectations, and help the Indian stock market post further gains over the rest of the year, and catch up with the developed markets and other emerging markets.India's fiscal deficit target is likely to be breached due to the tax cut. Are you concerned about the fiscal impact?The tax cut is likely to provide a fiscal boost to investment spending and thereby to GDP growth at a time when RBI rate cuts have not been successful in preventing the Indian growth deceleration with GDP to a low of 5%. So while the tax cut is likely to increase the fiscal deficit in the short-run, it is a good policy move for the economy and markets given the depressed business and consumer sentiment in an environment of slower global growth.The finance minister has noted that that the revenue loss to the exchequer will be ?1.45 trillion in FY20. While the government had slashed its fiscal deficit to 3.3% of GDP in its July budget, the current set of tax cuts are expected to push back the fiscal deficit back to around 4%.Policymakers face the dilemma of slowing growth while keeping fiscal deficits under control. The OECD recently released its latest forecast update and they revised down India’s GDP growth estimate for FY2019 to 5.9% from 7.2% and for FY 2020 to 6.3% from 7.4%. While there is a risk that deficit targets could be breached in the near term, the risk of not implementing significant fiscal measures along with the monetary easing measures is that the economy could further decelerate to under 5%.Will the move lead to foreign investors' flows into India reviving? Would you look at increasing allocation?These are positives for the Indian market and likely to improve foreign investor sentiment towards India and result in increased inflows. With the likely improvement in sentiment and earnings expectations, we are also considering increasing the allocations to India in our global equity portfolios.In the US when tax rates were cut, companies resorted to buybacks. Is the same likely in India?There are some similarities in the situation in the US and India. However, the business environment and the state of corporates are different between the US and India. The US is a mature economy and market and India is an emerging economy where the need for business investment spending is significantly higher in the case of India whereas the US already has a high level of capital stock given it is a developed economy.Further, the private sector still has some slack with capacity utilisation around 78% compared with a historical average of around 80%. There has been pressure on corporates from activists to return capital to shareholders rather than indulge in expensive M&A or other wasteful activities. Hence, the bulk of the tax cuts in the US were used to return capital in form of buybacks and dividends.In India, business investment spending has averaged 6.2% in the past ten years and comprise just around 32% of the economy. In comparison, the business spending in China accounts for around 42% of GDP and has averaged 12% growth annually over the past 10 years.There is a dearth of infrastructure investment in India and with the economy posting solid growth despite slowing in past several quarters, companies are still likely to find several opportunities to invest to reap the benefits of faster economic growth.Indian companies are still trading at a premium to their own historical averages and not at a discount which would make them attractive for buybacks. There is no valuation case for buybacks despite the modest gains posted by Indian stocks yearto-date. There is no significant need for companies to goose up their earnings. Earnings expectations are in the double digits now and the tax cuts will push earnings even higher.A significant factor in case of Indian companies compared to US companies is the predominance of owner operated companies in India. Companies with significant family control usually opt for buybacks when their stock valuations are very cheap which is not the case is now. Unlike in the US, the current tax cuts in India are unlikely to result in an big increase in stock buy-backs.

from Economic Times https://ift.tt/2msSwuu

An analyst had raised IL&FS stink but his bosses put him down

The Ministry of Corporate Affairs (MCA) and the new board at IL&FS are investigating why questions raised by a junior analyst at a rating agency about financial irregularities at the infrastructure financier were ignored by the top management at the creditworthiness evaluator.The junior executive has allegedly told probe officials that when he brought his concerns to the notice of the senior management at the rating agency, the decision makers refused to act upon his findings, claiming the books of IL&FS and related companies were good.The crisis at IL&FS came to light in July 2018, when its roads unit faced difficulty in making repayments due on bonds. Credit rating agencies then started to cut the rating for the group parent, IL&FS, beginning August.“In March, one of the four agencies raised a red flag about the group’s elevated leverage but citing the company’s track record in the infrastructure sector, it retained the investment grade,” said a government official who didn’t wish to be named. “In another case, a junior analyst did alert his seniors about the situation in IL&FS Financial Services, but the seniors overlooked and trusted the rosy projection given by the management.”The Serious Fraud Investigation Office (SFIO), the investigation arm of the MCA, had questioned officials of rating agencies earlier this year. SFIO is investigating whether rating agencies, entrusted with the responsibility of qualifying and grading the creditworthiness of borrowers, have knowingly suppressed information.Four credit rating agencies --- Care Ratings, ICRA, India Ratings and Brickwork Ratings --- are being probed by the SFIO and the new IL&FS board on the rating action at IL&FS Financial Services Ltd (IFIN).Emails sent to ICRA, CARE Ratings, India Ratings and Brickwork Ratings remained unanswered until the publication of this report. IL&FS group chief communication officer Sharad Goel declined to comment on the matter.“Because of the credit ratings given by rating agencies, EPFO (Employees’ Provident Fund Organisation) invested huge provident fund amounts in IL&FS and their subsidiaries," said a person close to the development.According to sources, the four credit rating agencies have been found to be in violation of the provisions of Section 36 of the Companies Act, which pertains to penalties for fraudulently inducing people to invest.Sources said relying on the credit ratings, many companies invested their provident funds and pension money in IL&FS, totalling more than Rs 9,000 crore, affecting debt funds. This amount is part of the Rs 94,000 crore of unresolved debt at the embattled infrastructure financier.“The auditor and credit rating agencies are a part of the IL&FS crisis,” said an official associated with the investigations (said a government official privy to the probe details). “The probe has revealed that they have violated certain provisions of the Companies Act. The government is of the view that stringent action be taken against all those who contributed in the IL&FS crisis.”Credit rating agencies had derived comfort from the institutional parentage of IFIN without doing an independent assessment of the company as a standalone entity, sources said.Market regulator Sebi also examined the rating assigned to the nonconvertible debentures (NCDs) of IL&FS, and it pointed out procedural lapses in due diligence by credit rating agencies. These included over-reliance on management submissions in the absence of disclosures by the company to the stock exchange.The regulator observed that rating agencies maintained the rating outlook as 'Stable' in spite of writing in their press releases about multinotch downgrades in the event of significant deviation from the management’s deleveraging plan.Sebi has initiated adjudication proceedings against the three rating agencies -- ICRA, CARE Ratings and India Ratings --for their failure to exercise proper skill, care and due diligence while rating the securities of IL&FS.IL&FS is being probed by multiple agencies. The SFIO is probing the parent and its subsidiaries for violating the provision of the Companies Act. The Enforcement Directorate (ED) has registered a money laundering case against entities and former key management personnel. The Income Tax (IT) department is also probing the infrastructure financier for alleged tax-rule violations.“The board, based on the forensic and internal assessment reports, found that based on the rating given by these agencies, PFs and pension funds were invested as late as August, 2018 and in some cases there were also instance of rollovers. The board had sought explanation from these agencies to explain their case,” said another official. “The PFs invested include those by Army and companies like Mother Dairy.” One of the affected parties in this would be the companies which have invested in standalone PFs,” the official added.

from Economic Times http://bit.ly/2wpjIfe

What a Cabinet sans Jaitley means for India

A recurrent allegation against the Modi 1.0 government is that it did not deliver on economic reforms. The noise on need to ‘reform’ is only getting louder as he gets ready to run the world’s fastest-expanding major economy for the next five years – with a bigger mandate.To be sure, reform means many things to many people.For equity investors, reforms are decisions leading to higher corporate earnings essential for driving stock prices up. If investment activity is muted, they would call for government spending even if doing so is imprudent. This is a crowd that doesn’t bother about inflation. In fact, it would celebrate price rise even without productivity gains. Inflation means higher profits, more dividend and ever rising equity valuations.For bond investors, reform is government being prudent. If it borrows more, it would crowd out private investments. It hates inflation because it lowers the value of bonds. If yields spike, it is bad even for the government because it ends up paying more for its own debt. It also hurts future generations as they end up paying the debt the current generation accumulates.For the corporate world, the burden of compliance should be lesser. Industry chambers forever want lower tax rates on everything from the Audi Q7 to an Atlas bicycle. Curiously, in the name of uniform GST rate, they are demanding the same treatment for goods of essential consumption and those of conspicuous consumption. They always look for concessions for investment and ‘tax-holidays’. During ET’s first Global Business Summit, Prime Minister Modi summed up the attitude well. “If you give something to the poor, it is a subsidy that is bad. If you give something to industry, it is incentive.”For wealthy individuals, it is low or even nil taxation on their investments because they are contributing to nation building. All the investments they make should be tax exempt — be it mutual funds, private equity or start-ups. Unless you do it, the entrepreneurial eco-system wouldn’t flourish.For giant corporations, government rules must ensure that entry barriers are high. Their argument is that customer service is so important that small companies would lack economies of scale and consumers end up paying higher prices. But the opposite is true. Industries which are dominated by duopoly or oligopoly structure end up squeezing consumers in the long run and the economy loses out.For non-banking finance companies, the Reserve Bank of India is a heartless beast that fails to acknowledge their role in providing livelihood for millions of families. They provide credit to a bunch of less creditworthy borrowers risking their capital; so they should be treated kindly. They are not open to the prudential norms that guide banks but want the regulator to be their lender of first resort.If the administration panders to the demand of all, public policy would end up encouraging crony capitalism rather than creating a level playing field for long run benefits. While fans of John Maynard Keynes would be quick to point out that “in the long run we are all dead”, policy makers have to be mindful of that.The Oxford Dictionary defines reform in these words: “Make changes in (something, especially an institution or practice) in order to improve it.”Going by this definition, what did Modi 1.0 do? Three institutional changes come to mind:1) Independence of monetary policy, with the formation of a Monetary Policy Committee that decides on interest rates. The structure frees decision-making even from the Governor, who is appointed by the government.2) Legislation on bankruptcy. For decades, lenders were at the mercy of borrowers. Now, however, someone who has lent money can take away the assets. That bankers, who were earlier complaining about the lack of such policy support, are not using the mechanism willingly is a signal that the way they do business is changing.3) Goods and Services Tax. It was a Herculean task that someone as diplomatic as Arun Jaitley (who is out of the race for finance minister now) alone could achieve it. He gave up half his powers by surrendering taxation to the GST Council for a greater good.Structural changes would not reflect in improvements overnight. These take years to sink into the system and the benefits would be reaped over the years. Like it was when Prime Minister Narasimha Rao opened up the economy in 1991, with local industry complaining about competition. The fruits are there for everyone to see.A finance minister can give direction to an economy and not drive it. Meddling with banks to bring down interest rates and pushing them to lend to projects can give a feeling the government is active, but it would backfire like it did with the UPA government. Jaitley resisted the temptation.Modi-Jaitley combo rarely indulged in headline grabbing stuff that was routine with P Chidambaram as finance minister. Headlines can be numerous, but what matters is delivering on structural change. The economy may be better off with a Jaitley-like character in the North Block than Chidambaram.

from Economic Times http://bit.ly/2wslNXE

Ramdev prepares for biggest bid of his life

MUMBAI: Patanjali Ayurveda has approached state-run banks to help fund its Rs 4,350 crore acquisition of Ruchi Soya Industries, said people with knowledge of the matter.The company is looking to raise debt with a maturity of five years and above from State Bank of India, Punjab National Bank, Bank of Baroda, Union Bank and Jammu & Kashmir Bank, they said. The homegrown consumer goods company is tying up with the banks to raise more than Rs 3,700 crore while Rs 600 crore will be generated through internal accruals.“The funding is in the final stages of negotiation and the interest rates will be finalised soon,” said one of the persons. “Patanjali had earlier approached several nonbanking channels but it backtracked after these investors sought high level of disclosures.”Patanjali, SBI, PNB, Bank of Baroda, Union Bank and J&K Bank did not respond to queries. 69570254 CO INCREASED BID VALUE IN APRILPatanjali acquired Ruchi Soya in an insolvency auction held by lenders seeking to recover more than Rs 9,300 crore. Among financial creditors, SBI had the maximum exposure of Rs 1,800 crore, followed by Central Bank of India (Rs 816 crore) and PNB (Rs 743 crore).Adani Wilmar, which emerged as the highest bidder in August last year after a longdrawn battle with Patanjali, had in December 2018 written to the resolution professional regarding significant delays in the insolvency process that led to the deterioration of Ruchi Soya's assets.Patanjali, the lone bidder in contention after the exit of Adani Wilmar, had in April increased its bid value by around Rs 200 crore to Rs 4,350 crore. This excluded a capital infusion of Rs 1,700 crore into the company.With the acquisition of Ruchi Soya, Patanjali will become a key producer of soyabean oils and other products. The deal is expected to help Patanjali maintain its earlier growth momentum.

from Economic Times http://bit.ly/2Kc14PZ

Govt plans road bumps for pre-2000 vehicles

NEW DELHI: Running an older vehicle of pre-2000 make, particularly commercial ones, will soon become more taxing. Such vehicles will have to undergo frequent fitness tests and there will also be about 15-20 fold increase in the fees for both first time registration of diesel/ petrol vehicles and for renewal of their registration. These are some of the disincentives that the government has finalised in its blueprint to push the phasing out of older polluting vehicles. According to different studies, older vehicles are 25 times more polluting as compared to new ones. Sources said old commercial vehicles will be the main focus of voluntary scrapping scheme, which the government is likely to launch in the next three to four months.69572467 Government’s think tank Niti Aayog, which is taking the lead in fast-tracking the policy, has held rounds of consultations. Sources said there will be a carrot and stick policy to give incentive to those who scrap their old vehicles to buy a new one while making it difficult for owners of older vehicles. TOI has learnt that there is a proposal to waive off the registration fee for new vehicles, if the buyer shows a certificate of scrapping his old vehicle. The government will also convince the vehicle manufacturers to offer discounts for new vehicles bought against scrapping certificate.

from Economic Times http://bit.ly/30To8Jh

Flying with less fuel fine, but don’t go full throttle on plan: Experts

MUMBAI: In the past one month, over thirty flights operated by Air India, IndiGo and SpiceJet, most of them flying to Hyderabad, carried lower amount of fuel as compared to the other flights operating similar aircraft on similar routes.Currently, fuel calculation for a flight takes into account fuel needed to fly to the destination, taxiing, contingency, reserve and most importantly, the amount needed to fly from the scheduled destination to an alternate airport in case it’s not possible to land at the destination due to some emergency.But the flights mentioned above operated on a progressive, environment-friendly, fuel conservation initiative: if the destination airport has at least two independent, usable runways; if the weather is good, then with certain new practices in place, experienced pilots can be allowed to operate flights that do not carry fuel to fly from the destination airport to an alternate airport. Instead the aircraft carries an additional fuel for fifteen minutes worth of low-flying. With the initiative, IndiGo said it could save 2,100 tonnes of fuel while reducing carbon emissions by 6615 tonnes per year. Air India would save 140kgs per B777 Delhi-Hyderabad flight.But experts caution against certain ground realities. Capt M Ranganathan, an air safety expert, said India’s airport infrastructure is too poor so airlines and the regulator shouldn’t go full throttle on this initiative yet. A senior B777 examiner pointed out that since India has only a few airports that can handle wide-bodied aircraft, it’s a tight-rope walk. 69572678 “If Nagpur airport is shut down for some unforeseen reason, and if at that time a Boeing 787 flying from Delhi to Hyderabad, without carrying fuel to fly from Hyderabad to Bengaluru develops a problem with its hydraulic system about an hour into the flight, then it would be a stressful situation for the commander. But that wouldn’t be the case with such flights flying, say in the United States , or even in the Middle East where airports have many operational runways. It’s a progressive idea, nevertheless. One that is here to stay,’’ said the examiner.“My concern is whether the airlines have carried out adequate risk mitigation. Then again, pilot training for such flights cannot just be in the form of documentation. In the future, if more and more flights are allowed to fly without fuel to alternate destination, will airlines themselves ensure that all the conditions are met before such fuel-saving, moneysaving flights are released,” stated a senior A320 commander.

from Economic Times http://bit.ly/2JKWOHR

Nearly 600 passengers stranded at Heathrow after two Air India flights to Mumbai fail to take off

LONDON: The Metropolitan Police had to be called to Heathrow Airport late Wednesday after nearly 300 furious passengers were left stranded airside after their Air India flight which was already 32 hours delayed failed to take off.One of the passengers, British group HR director Heather Gupta, told TOI there was "utter chaos" when passengers cleared customs and security only to be given no gate and no details of any airplane to board. Small children and the elderly, some in wheelchairs, were among them, with passengers left furious as some had already missed weddings, cremations and important business meetings back in India.Gupta, 49, who was travelling with her two sons, Jake, 8 and Noah, 6, told TOI at 23.30 local time Wednesday: "There was one Air India rep and she has disappeared now. Passengers are going crazy. This flight was supposed to go yesterday [Tuesday] and so there is a bunch of really irate people and just one Air India lady who is absolutely clueless. It is mental and no one has any idea what is going on."A video shared with TOI shows passengers shouting at a lone member of staff from Heathrow and a group of firearms officers then arriving.A Met Police spokeswoman told TOI at midnight local time Wednesday: "Officers are on scene as a precautionary measure and to prevent any breach of the peace. There has been no disorder and no arrests." Around midnight the passengers were ushered back through immigration and taken to another hotel with no information as to when they could fly.Nearly 600 passengers travelling between London and Mumbai had been stranded in an airport hotel all day on Wednesday, leaving them exhausted and angry.A total of 293 passengers from the 13.15 Air India Flight on Tuesday, 28 May had been forced to spend the night at the hotel after their flight was grounded because of a fuel leak. They had spent all day Wednesday in the room at the hotel, provided by Air India, but said they were given no information from Air India as to when they could fly and no refund.Then the 13.15 Air India flight on Wednesday also did not take off and those passengers were sent to the same hotel room. One Air India woman spoke at them through a megaphone on Wednesday and said: "The engineers are working on the aircraft. I will update you whatever update they give me." The passengers were later told that a team of aircraft engineers were due in London on a flight from Mumbai on Wednesday - itself delayed - due to land at 19.00. This team was bringing parts to repair the 28 May aircraft so those passengers could depart at 22.00. But that never happened.The delayed 29 May flight however eventually departed at 21.30 Wednesday eight hours late.Passengers complained to TOI there was no information from Air India staff throughout the ordeal.Albashi Baig, 24, a student in London, was flying home to be in a hospital in Thane for his 60-year-old father’s cardio-surgery, taking place Wednesday night.But he was on the Tuesday flight which was grounded.Almost in tears he told TOI how had begged Air India to get him on another flight but they did not. “Noone in Air India was picking up the phone and we went to the airport and they told me to buy a new ticket costing up to £1,800 (Rs 1.5 lakh) one way. I am so upset as I wanted to be with my father to give support.”Baig said another passenger was desperate to get to his sister on a ventilator, one's father had died and he could not get to the cremation and one had missed a connecting flight to Australia where his wife had had an accident.Passengers were informed at 12.30 pm on Tuesday that the 13.14 AI130 flight was just delayed, but then at 18.30 were told to collect their luggage. Indian passengers were then caught in a long queue at UK arrivals immigration despite having not flown anywhere. “It was chaos trying to get luggage on to the hotel bus”, said Gupta, who lives in Mumbai and missed an important work meeting. "One family had 10 suitcases and one elderly woman in a wheelchair could not get on it."Gupta had flown to London last Friday to collect her children who had spent two weeks with her UK relatives. She had spent Rs 6 lakh in total on tickets for the trip since Rs 2.5 lakh had gone on Jet Airways tickets which were cancelled. “Passengers are really angry. I met one Indian whose father is in a coma in India and another who has missed a wedding," she said. "Another who is on a two-day business trip. Some passengers flying from US and Canada are worried as their 24-hour transit visas have expired."Speaking to TOI earlier in the day, Debashis Golder, regional Manager UK & Europe, Air India said: ”AI130 of 28th May is declared AOG (grounded) due to a fuel leak and expected to go today [Wednesday] by 2200 hours. "But by midnight the flight had not departed."AI130 of 29th is delayed and will go at 2000 hours," Golder had said. That flight left at 21.30. "If not atravelling and seeking refunds they will get a full refund. Our team is with passengers in the hotel and updating them regularly," he added.

from Economic Times http://bit.ly/2K9IesZ

Five ways pharmaceutical and healthcare can be ‘Modified’

The Lok Sabha election results did not affect the pharma stocks but the Modi government can impact the pharma and healthcare sectors in several ways.GDP spend on healthcare: Increasing the expenditure on healthcare can be the most impactful measure that the government can undertake. The additional funds would be required for spending on strengthening the primary healthcare infrastructure and building upon the secondary and tertiary public healthcare setup. India spends 1.15 per cent of its GDP on healthcare and the government has targeted to increase it to 2.5 per cent by 2025.Ayushman Bharat: The ambitious insurance scheme slated to provide secondary and tertiary care to the poor (constituting nearly 40 per cent of the country’s population) was Modi government’s first step towards aiming universal healthcare for India. However, economic sustainability of the scheme and provision of quality healthcare services to the poor in remote areas are challenges that must be overcome. The scheme requires sustained funding, proactive participation from the private sector and diligent execution to succeed.Institutional reforms: The pharma, medical and healthcare sectors are awaiting urgent reforms in terms of governance. For instance, there is no exclusive ministry governing these sectors. The pharma sector is regulated partly by ministry of chemicals and fertilisers and partly by the ministry of health and family welfare. The Medical Council of India needs to give way to an institution that better regulates the medical practice and education in India.Improving the regulatory oversight: Regulatory oversight on drug makers (pharma companies), drug sellers (pharmacies) and drug prescribers (doctors) needs to increase. While the US drug regulator pulls up Indian pharma companies for discrepancies in their manufacturing — India needs to strengthen its drug regulatory mechanism to ensure the quality of drugs sold locally is as good as the ones that are exported. A legally binding directive to regulate marketing practices needs to be promulgated since the voluntary Uniform Code for Pharmaceutical Marketing Practices has proved to be ineffective.Clarity on the policy front: The sectors would benefit getting clarity on the government’s stance on issues like promotion of generic drugs, extent of price control on drugs and devices, legality of fixed drug combinations, induction of Ayush doctors to meet the healthcare staff shortage and policy incentives for research and development as well as drug exports.

from Economic Times http://bit.ly/30PVWHb

Reforms is the theme for investing under Modi 2.0 : Mark Mobius

“Reforms, reforms, and reforms,” is the theme for investing under Narendra Modi-led government’s second term, says Mark Mobius, founding partner of Mobius Capital Partners, In a phone interview from Singapore with ETMarkets.com, the 81-year-old emerging markets guru said a majority for Bharatiya Janata Party (BJP) at the hustings augurs well for the economy. Reforms related to labour, infrastructure and ease of doing business were at the top of Mobius’ reforms wishlist for the government. Edited excerpts: How do you view Mr Modi’s win and what does it mean for the Indian market?It means a lot because this first thing which is really important to recognise is that we are in a situation now where everyone was predicting that Modi would in no way be able to garner the kind of mandate that he has now achieved. What that means is that we are really in an amazing situation where he has got the mandate to move ahead with his reforms programme and that to me is quite exciting. Now, would he be able to take advantage of that? We must realise that there are all kinds of bureaucratic and political barriers which prevent him from doing absolutely everything that he wants to do and if he can do 20% of what he is planning, that is very, very good. It is a good opportunity and so I am quite excited about the result. In light of the results, where does India stand in your emerging market preference list?Very high, because we are in a situation now where we can see immense growth in India. Of course, we have already seen that growth. This country is growing at a fast rate and in addition, we are in a situation where the Chinese market is not doing that well, not only because of the trade dispute with the US but also because it is very difficult for them to maintain the kind of growth that we have seen in the last 10 years. So, India is really looking very bright. Among all the emerging markets performances, India stands out. It is really jumping ahead of the others. That is very important. If you were to rank India according to preferences, where would India stand?Number one. Absolutely, number one yes. What is your reforms wish list from the new government?I would say the first one would be employment regulation because you’ve got millions -- in fact, the latest number I read is there about 100 million migrant workers moving around India looking for work. So, there needs to be a reform of the labour laws so that we can see much higher employment. I would say that is number one because the Indian workers are as good, if not better than any workers in the world because they got the language abilities. There is no reason why you can have total employment in India and if you could release that tremendous labour force power, you can see an incredible boom in the Indian economy. After the election results, which are the sectors that you would prefer to buy into in India?We like companies that can take advantage of the infrastructure building that is taking place. By the way, that is the second point I want to make about Modi’s programme. That is getting him to have a much bigger infrastructure programme. He started a lot of infrastructure projects but they have not moved ahead at the pace that they should. Here again it is quite puzzling when you consider the fact that people are looking for work and they got all these infrastructure projects which are not really moving ahead at the pace at which they should really. This is a big challenge and something that we have to look at very carefully. Infrastructure should be the next item on the list. Which are the other sectors that you like apart from infrastructure?The other sector I like is the non-bank financials companies (NBFCs) because of the greater degree of bankable population as result of identity card programme. The fact is that the government is making direct transfers to people and that these people have become much more bankable. The non-bank financials-- as long as they can garner the lowest segment of the obvious group which is growing at a pretty fast pace, would be another one. That said, they are going through liquidity crisis as we speak. What are your thoughts on that? Yes, some of the companies are going through that crisis, which is good in the sense that either there will be consolidation or at least fewer competitors, so that you have better opportunities for those companies that have been running quite efficiently and quite well. Which are the sectors you would stay away from at that point of time? Usually, the bigcap stocks is not what we are interested in. How much has Mobius Capital Partners raised already in terms of funds? How much of this is in India already?We have raised about $180 million. In India, we have about roughly 8% of the portfolio. We would like to have more but as you know, it took us a while to get permission. By the way, that is the other area that needs reforms. There has to be a greater realisation that if an investor wants to put money into the market, the process should be made easy for them. What are your thoughts on the Indian economy now that it has slowed down a bit? High frequency data such as auto sales, air traffic everything have come down significantly. The air traffic number is mainly because of Jet Airways failure. I would not worry about it. In my experience, travelling in India has changed a whole lot and the airports are packed with people. So, there is an incredible growth opportunity there.The problem is that there is a race at the bottom on pricing which is not healthy for the industry and resulted in near bankruptcies as we have seen. People got to wake up to the fact that you cannot continue to try to get market share by lowering prices. I would like to see them get market share by way of better service, more comfortable seating etc. That is where you can really shine, but the way it is done now it is not very healthy. RBI policy is due on June 6th. What are your expectations from RBI?For quite some time, I have believed that the Reserve Bank should lower rates because the gap between inflation and the interest rates in India is just too wide and they should not be so bearish with regards to that. I really feel that they have got to change and hopefully this new guy in the driver’s seat will be able to do that. A lot of economists have questioned the economic data that came out in recent times and there have been a lot of question marks raised on its validity. What are your thoughts there? You have this problem on a global basis. Everybody questions the numbers, in fact, I have a new book coming out about inflation. What we are doing is that there is no inflation. There is deflation globally, because the inflation numbers are constantly changed as the basket is constantly changed. So, you are getting very short term erroneous numbers and that is probably true for other governments statistics as well.But, you do not have to look at the government numbers for growth in the economy. You just have to look at how some companies are growing, how consumption is growing in various categories, the number of cell phones being sold, etc, etc. From these kinds of information, you can get a pretty good idea what is happening in the economy. So I would not be too critical of the government statistics because you are in a situation where a few percentage points one way or the other is not going to make a hell of a big difference. What people talk about 1.2 versus 1.3 this does not make any sense because you cannot be that precise, there is no way you can do that. What would be the theme for investing under Modi 2.0? if you were to name one theme for investing under the government’s second term, what would it be? It will be reforms, reforms, and reforms. I mean all of the changes that are taking place augur very well for changes in the Indian economy and releasing its incredible energy that you can get from what is happening. So I would say it is all about reforms. How difficult is it to find ideas in the midcap and smallcap categories, considering that a lot of smallcap companies have been pretty volatile?It is very difficult to find the right stocks. It is a constant struggle to find companies where you are getting a positive trend in the share price. Number one, where you get growing earnings, where you have a strong balance sheet etc, etc. So there are a lot of dangers to put it that way in stock markets. India is just one of the many markets I look at and you have the same problem everywhere. So, wherever you go, you got to be careful and take your time to study very carefully what is happening. What is the biggest threat to the Indian markets at this point of time? I think the biggest threat would be whether if Modi is not able to move ahead quickly on the reforms because that will give a signal to the market that things are not as good as they thought. That is one thing you have got to be very much aware of. So everybody will be looking at this very, very carefully. We keep talking about the consumption story in India but are you buying consumption stocks in India or are they too expensive to touch? They are a little expensive and it is difficult to find consumption stocks that are really cheap but we continue to look. We are looking at some things now and it is not easy because of the popularity of that sector but nevertheless we want to find something in that sector if at all possible. The opportunities in India to invest in the listed space are pretty less compared to the huge consumption theme that we have. For example, for a middle class urban consumer -- if his or her salary were to go up, he or she would spend it on a better phone which will be a Chinese smartphone or an American smartphone or buy more on Amazon, Myntra, Flipkart. Again, none of these are in the listed space. Does that impede having more options? What are your thoughts?Well I think that is a big issue that we have with consumer sector now and it is not true for India but it is also true for consumer companies around the world. They have been confronted with the internet revolution with more and more companies coming into the internet and people doing internet shopping. The problem is that in order to garner market share, these companies are continuing to lose money. They continue to sell products at low cost in order to get market share, and these companies are being funded by wealthy investors who are willing to accept these kinds of losses. We are not willing to do that unless we see a very strong argument for a turnaround in these companies. You have the traditional retailers who are really under fire because if they do not have an internet strategy, they can be really killed by these companies that are confronting them with crazy low prices.

from Economic Times http://bit.ly/2HJJaTe

Setting minimum broadband speed not possible: Rajan Mathews

NEW DELHI: Consumers may continue to clamour for faster, buffering-free experience while watching their favourite web series, but are unlikely to get any assurance on it even if they pay more.The government is unable to change the current rule for mobile broadband, delivering up to 512 Kbps speeds, because, telecom companies and experts say, setting a minimum speed isn’t possible technically, not just in India but anywhere in the world.“In a point to multi-point mobile network, no network operator, in India or globally, can guarantee a certain minimum download speed,” said Rajan Mathews, director general of the Cellular Operators Association of India, which represents all carriers including Vodafone-Idea, Bharti Airtel and Reliance Jio.The actual network speed that the consumer experiences depends on various factors such as coverage, network load, usage, location of user in the cell, application being used and the kind of device being used among other factors, Mathews explained.Third-party speed-testing agencies such as Opensignal and Ookla agree with telcos and say that guaranteed data speeds remain a persistent issue among telcos, in India and overseas.“No operator has managed to provide LTE (4G) connections to users 100% of the time, even in the most mature mobile markets. This alone means it's near-impossible to guarantee network speeds," said Opensignal chief executive Brendan Gill, attributing the findings to its data measuring 4G availability and speeds.Many other issues such as latency and quality of smartphones play a critical role in mobile user experience, especially as video streaming, online gaming, live messaging and video calling become more popular.But consumers feel telcos aren't delivering their promised Internet speeds, let alone a bare minimum level of speed.“They can do (provide a basic minimum speed), but they don’t want to. When there’s load on a system or number of subscribers are more, the speeds are low and vice versa. That should not be the case — we want constant speeds, 24x7, because we’re paying for it as per the telco’s plans,” said Arun Kumar, head of a Delhi-based consumer advocacy group.Ookla’s speed testing data showed mobile Internet speeds in India to have increased by more than 20% in 2019 from a year earlier to 10.71 Mbps, but it fell in the speed rankings — to 121 from 112 — as other countries saw a faster increase in their speeds.

from Economic Times http://bit.ly/2XcX85r

BCCI may face ED probe into its foreign payments

MUMBAI: The Reserve Bank of India (RBI) is likely to give a go-ahead to an Enforcement Directorate (ED) probe into Board of Control for Cricket in India’s (BCCI) foreign remittances of close to Rs 2,000 crore without its prior approval during 2009-15, rejecting an exemption request from the board.BCCI chief executive Rahul Johri and chief financial officer Santosh Rangnekar had met senior RBI officials last week to explain why the money related to the nowdefunct Champions League T20 (CLT20) tournament was remitted overseas without express approval from the banking regulator, RBI insiders said.“Yes, a meeting did take place where BCCI representatives sought exemption from the Reserve Bank of India under India’s foreign exchange rules, but the regulator may reject the request and send the matter to the Enforcement Directorate for investigation,” one of them told ET.ET had first reported on April 26 that BCCI may find itself in a spot over possible violation of foreign exchange rules for remitting over Rs 1,600 crore without RBI approval to two Cricket Australia (CA) and Cricket South Africa (CSA) with which it ran the CLT20 tournament.Following ET’s story, BCCI wrote to the RBI, seeking an exemption.While the central bank may have entertained an exemption request and not taken a final decision on the matter yet, insiders said the banking regulator is in no mood to budge.RBI did not respond to ET’s email seeking comment as of press time Sunday.Email queries sent to the Supreme Court-appointed Committee of Administrators (COA) of BCCI and Johri also did not elicit any response till press time Sunday.BCCI had started CLT20 in 2008 as a joint venture between itself (50%), CA (30%) and CSA (20%).During the course of the international club tournament, BCCI paid over Rs 800 crore to Cricket Australia and CSA as ‘additional participation fee’, equivalent to their share of profit, although the three boards had not signed any agreement on this. The other half was paid as compensation following termination of the tournament, BCCI records show.BCCI’s new finance department had flagged the transactions, following which the board decided to seek the RBI’s approval for them.The COA, appointed by the Supreme Court to run the BCCI’s affairs, sent a letter to the RBI earlier this month, following which, the regulator called BCCI officials for an explanation.One key issue is whether the ‘additional participation fee’ and the termination compensation, which were paid without the RBI’s approval, were capital account transactions or current account transactions.Under the Foreign Exchange Management Act (Fema), overseas remittances are categorised as capital account transactions, for which RBI permission is needed, or current account transactions, which banks are authorised to approve.According to some members of BCCI at that time, CLT20 operated as an unincorporated joint venture, with the three boards receiving profit in a pre-decided ratio.None of the current BCCI functionaries was on the board when the CLT20 was scrapped and its accounts settled in 2015.

from Economic Times http://bit.ly/2WvkZ2S

Anil Ambani said to have found a new buyer for Big FM

MUMBAI: Anil Ambani has found a buyer for Reliance Broadcast Network (RBN), which operates the Big FM radio channels, with Jagran Prakashan set to purchase the company valuing it at close to Rs 1,200 crore, people with direct knowledge of the matter said. An announcement is expected as early as Monday, said one of the people.The offer from the publisher of Hindi newspaper Dainik Jagran comes after an earlier deal with the Zee Group fell through due to a delay in getting government approvals. The sale will come handy for Ambani who is looking to raise Rs 12,000 crore by selling non-core businesses to reduce debt. Recently, Reliance Capital, the investment arm of his Reliance Group, signed an agreement with Nippon Life to sell its stake in Reliance Mutual Fund for around Rs 6,000 crore.Mahendra Mohan Gupta’s Jagran Prakashan had in December 2014 acquired Music Broadcast Ltd (MBL), which owns FM channel Radio City, in an all-cash deal. It will acquire RBN through MBL. 69511286 “RBN and MBL have reached an agreement … MBL will first pick up 24% in RBN, which does not require any permission,” said one of the people.Anil Ambani’s Reliance Group and Jagran Prakashan didn’t respond to emails seeking comment till press time Sunday.Big FM has 59 FM stations, while MBL has 39 stations under the Radio City brand. RBN will transfer the control of 45 stations to MBL once the approvals are in, and the remaining 14 once their lock-in period expires in 2020, a second person said. “The deal will make Radio City India’s largest private FM company.”As per government guidelines, a radio company cannot sell majority stake in a new licence for three years. The lock-in period for Big FM’s 45 stations expired on March 31 last year, whereas for the remaining 14, it will be effective till March 2020. MBL is also in the process of acquiring Friends FM in Kolkata; the deal is awaiting the government’s approval.Jagran Prakashan’s offer values RBN cheaper than Zee’s Rs 1,872 crore deal, which also covered the TV channels — Big Magic and Big Ganga — operated by the Reliance Group company. An RBN executive said the new valuation also accounted for the period remaining under the FM licences, which has come down with time.“The Zee deal was signed in 2016, at that time value of the radio business was higher. But overall, value has not eroded,” he said.EY India is the financial adviser to the transaction for RBN.ET had reported about on-again, off-again talks between RBN and Zee. The 2016 deal between Zee and RBN was structured in two parts. While the two television channels were acquired by Zee for Rs 300 crore, Zee Media Corp, which housed the news channels of the group, was to initially take a 49% stake in the FM radio business. Zee also had the option to buy the remaining 51% after the three-year lock-in period ended for the licences. But, the two sides dropped the deal for the FM channels.RBN’S JOURNEYAnil Ambani’s tryst with the media and entertainment business started in 2005, when his group acquired a controlling stake in Adlabs Films, the entertainment and multiplex company promoted by Manmohan Shetty and Vasanji Mamania.A year later, his group bought out Shetty’s stake also to take full control of the company and launched its radio business, Big FM. Later, the radio and TV businesses were demerged into a separate company, which was listed on bourses as Reliance MediaWorld in 2009.Subsequently, the company added television business to its portfolio and changed the name to Reliance Broadcast Networks.In October 2013, RBN got board approval to delist and by fiscal 2016, it started looking for a buyer.

from Economic Times http://bit.ly/2KevQYP

India will be the No. 1 place in the world for FDI: Prem Watsa

Prem Watsa, often called the Canadian Warren Buffet, has always been a Narendra Modi fan. The 68-year-old media-shy billionaire is excited about Namo 2.0, calling India the number one investment destination in the world. Fairfax Financial Holdings entered India in 2014 and to date has invested about $5 billion in public and private companies — Thomas Cook, Catholic Syrian Bank, IIFL, Fairchem, Bangalore International Airport Ltd and National Collateral Management System, among others.Some of his investments, such as IIFL and Fairchem, have fallen about 25%, but Wasta believes India is a sleeping giant that would yield robust returns. In an exclusive telephonic interview with Sneha Shah, Watsa claims his firm would double its investments in the country in the next five years. Edited excerptsYour thoughts on the Narendra Modi-led government winning a second term…I see this as a massive transformation in India because of economic freedom. It does not matter which class you come from. It doesn’t make a difference what your caste is, whether you are high-class or low-class, or what your religion is, because there is economic opportunity for all. Caste, religion, all will be broken in the next five years as every Indian, as Mr Modi says, will get an inclusive opportunity at economic growth. That is the most exciting thing that I think of India. From an investor’s standpoint, India will be the number one place in the world for foreign direct investment. Money will flow into India, believe me, in the next five years. I am very, very optimistic about India’s growth prospects.How big is the Indian opportunity for global investors?I see money coming in from all over the world — the US, Canada and Japan — because India is a big democracy. More than 600 million people voted in this election. People understand democracy, the rule of law. And you have had it for five years. You will have more of it. There will be more privatisation, more business-friendly policies. And fundamentally, as I travel all around the world and talk to more people, I have realised that is what creates jobs. So, you have economic freedom and that’s what will help India.Which sectors do you see this money flowing into?We have been investing in financial services sector a lot. We like insurance, we like banks. We have invested in Catholic Syrian Bank, a Kerala-based bank, and it is going to expand outside of Kerala. Financial services grow at 2-3 times the economic growth of a country. I see India’s economic growth in the next five years to rise from 7-8% to 10%, perhaps even more than that over time, because that is the potential of India. We have invested in the Bangalore International Airport. We have the grain storage company NCMS (National Collateral Management Services). There is IIFL, a non-bank financial institution. We have diversified investments such as through Thomas Cook in India, investment in Quess Corp. So together we have in India approximately 5 billion dollars of investments and 3,00,000 people working with us.I think over the years, we will be putting a lot more money into India. I consider for us — and many people will follow —India is the number one emerging market. For investors all over the world, the opportunity in India will be really significant as Mr Modi rolls out his plans for the next five years.Does India stand to gain from the US-China trade war?Given all of that, it makes India more business friendly and money will flow into India. And I am sure Mr Modi is planning to do that. There is probably some of that taking place (money flowing into India as the trade war escalates). I believe the US and China at the end of the day will get their differences solved and so I think China is too big a nut to solve and I think it’s one for the US and one for China. I think they will figure it out and I don’t know when as it might take a little, give a little and get the deal done.President Trump just tweeted this morning that with India, the historic partnership between India and the US is very valuable to the United States. So, the Indian diaspora would want to send all of the profits to India, and this will direct more money into India and it is as simple as that. And the economy is much smaller than that of China as it is just $3 trillion. And there is no reason why the Indian economy won’t do as well and perhaps do even better than the Chinese economy in the next five years.What is your take on measures such as demonetisation and GST?Whenever you are implementing something like demonetisation and GST, it will never be perfect. It can never be perfect. For something like GST, most people thought it could not be implemented but it has been implemented. It is one tax rate for all the states. That is phenomenal to be able to get that because they had to go through the Lok Sabha, they had to get it through the upper house i.e. Rajya Sabha and they have been able to do it and get that through. They first got the support from everyone and now they will tweak it too to ensure it works well. Apart from a simple tax regime, it also reduces corruption. And demonetisation also had a similar intent. The bigger point there was that, listen, we are not going to tolerate corruption and now you have had the after-effects of that where more and more people are now using digital payments in India. So it is a trade-off between cash and corruption. So, all of these actions are very good for India.

from Economic Times http://bit.ly/2JEfIjD

Hopes of big reforms may take D-Street bulls to new highs

The stock market is expected to cross new milestones in the months ahead on hopes of strong steps to revive the economy following PM Narendra Modi’s emphatic return to power.The majority of participants in an ET poll of 31 money managers, heads of research and market strategists said the Nifty could gain 5-10 per cent in the runup to the Union Budget in July.About 50 per cent of the respondents see the Nifty at 12,500, while another 25 per cent predict the index reaching 13,000 by the time the full Budget for the fiscal year 2019-20 is presented. However, 14 per cent see an upside only till 12,000 while 11 per cent see the Nifty falling to 11,500.Going by the response of the poll participants, the index is unlikely to clock huge gains after the Budget. About 38 per cent foresee the Nifty at 13,000 by December 31, while 23 per cent see it at 13,500. Just 7 per cent participants predict the benchmark hitting 14,000. As many as 20 per cent say the index would hover around current levels by the year-end — between 11,500 and 12,000 — and about 13 per cent see it at 12,300. 69511362 The market is deriving strength from the bigger-than-expected mandate to the National Democratic Alliance (NDA).The rupee may trade in the range of 66-75 to the dollar with the weakness largely due to global factors such as the worsening US-China trade relationship. Bond yields could soften and interest rates may fall. “The (NDA) government being re-elected with a thumping majority ensures continuity. This is a positive for business and consumer confidence. Investors who have been concerned about the elections and sitting on the sidelines will now start allocating money,” said Vetri Subramaniam, head of equity at UTI Asset Management.Bajaj Finance, HDFC Bank, ICICI Bank, State Bank of India and Ultra-Tech Cement are the top picks for 2019.Keeping fiscal deficit in check is the key expectation of money managers and analysts from the Modi government in its second term. Also on the wish list are job creation, resolution of nonperforming assets, revival of public sector banks and a push to economic growth.Fund managers said the stable political scenario would help improve sentiment toward mid and small caps which have been left out of the market rally since March. The BSE Midcap index is down 3 per cent for 2019 while the Smallcap index is flat on a year-to-date basis.“The rally has been mostly in the Sensex and Nifty so far. I would assume the current rally will get extended to the rest of the market and we will see larger participation from mid-sized companies, which will improve overall market depth,” said A Balasubramanian, chief executive officer at Aditya Birla Sun Life Mutual Fund.“Genuine, long-term investors who have not been allocating so much towards India would probably start investing here now. There is no uncertainty for the next five years from political and reforms point of view,” he said.Buoyant foreign portfolio investors have already stepped up buying, scooping up shares worth Rs 1,400 crore on Thursday, when the election results were announced.They followed it up with purchases of Rs 2,000 crore more on Friday (as per provisional data). Since March, FPIs have bought Rs 54,000 crore of Indian shares. Mutual funds have sold Rs 5,300 crore of stocks since March (as per data till Thursday).Besides the Budget, the market will closely watch the monsoon, Reserve Bank of India’s monetary policy, measures to improve liquidity, crude oil prices and reforms on ease of doing business.The Sensex and Nifty gained 4 per cent last week to post their biggest weekly gain in 2019. The benchmark indices were also the best performers among Asian markets.The recent fall in crude oil prices notwithstanding, the commodity remains a risk for the market, according to 18 per cent of the respondents. The trade tiff between the US and China will also keep the market on its toes, with this factor being a top concern for another 18 per cent of participants. Closer home, the liquidity crisis plaguing non-banking finance companies was the top concern for 15 per cent of the market experts polled while another 15 per cent termed the slowdown in consumption a big worry.Also, valuations are expensive at 20 times one-year forward earnings.“The challenge is that valuations are not cheap, and we are significantly more expensive as compared with May 2014. GDP growth estimates for the coming year are trending lower and the economy is feeling the pain of NBFC and credit dislocation,” said Subramaniam of UTI Asset Management.TOP PICKSMoney managers and analysts believe financial stocks will take the lead going forward. The persisting low-inflation environment should leave space for a 50-basis-point-plus policy rate cut that should spur rate-sensitive sectors, said CLSA.About 26 per cent of the respondents see banking as the top-performing sector, followed by infrastructure (15 per cent), capital goods (11 per cent), cement (10 per cent) and construction (9 per cent).

from Economic Times http://bit.ly/2Mck7wh

Data may remain at centre of NDA govt’s tech policy

Policy-making for the technology sector is expected to gather pace with the return of the National Democratic Alliance government, experts said. The focus will be on the personal data protection bill, regulation of technology platforms and support for local internet and hardware companies as part of the government’s Digital India initiative, they said.Technology giants Facebook, Google, Twitter and ByteDance are expected to take a hit from the personal data protection bill, which regulates the processing of individuals’ personal data. They are also likely to be impacted by the proposed amendment to the Information Technology Act’s intermediary guidelines, which weakens the legal protection given to technology companies against content hosted on their platforms.“It’s going to be a predictable five years on where the technology policy is moving,” said Nikhil Narendran, partner at Trilegal. “The government wants more companies to be incorporated in India, so it can have more regulatory control. It also has a tax, content and data localisation angle to it. They will act with brute force on it.”The debate around technology policy has been highly charged over the last two years, as the government drafted laws to control internet content, store critical data within the country and to compulsorily incorporate foreign firms locally. “The good thing is predictability. What we would like to see is better policy-making processes, with constant inputs from stakeholders, and not having different ministries and regulators take different approaches to the same issue,” said Anirudh Rastogi, managing partner at Ikigai Law.Although the personal data protection bill may be introduced in Parliament soon, no government action is expected on regulation of online content and platform governance, Rastogi said.While Facebook and Google have opposed the government’s move on local incorporation and data storage, Indian firms, including Reliance Jio and Paytm, have supported it.According to Tejas Karia, partner Shardul Amarchand Mangaldas & Co, one of the top priorities would be streamlining the information flow from the technology companies to the law enforcement agencies for prevention and investigation of crimes involving technology platforms. The government has repeatedly asked WhatsApp to help law enforcers trace messages to senders despite its in-built encryption. WhatsApp has declined the request. “As the same government has come to power, there is likely to be an impetus to create a level playing field for Indian businesses in the data-driven economy. The government will push forward on national security from a technology point of view,” said Gowree Gokhale, partner at Nishith Desai Associates. “It is clear that the focus on digital infrastructure building will continue.” “There is pressure by the US on China, which may push many US, Korean and Taiwanese companies to set up electronic manufacturing units in India,” said Rajesh Ram Mishra, president of the India Electronics and Semiconductor Association.

from Economic Times http://bit.ly/2YSIsca

When you know what govt will do next, you know where to bet

By DK AggarwalThe wait is over. The Modi-led NDA government’s return to power at the Centre signals that India needs a strong leader who can deliver political stability and economic development; local in roots, global in vision.Good politics is all about good economics: one needs to closely watch Modinomics and Modi-fications. We hope RBI will be more accommodative in June.In the first term, Modinomics focused on some key deliverables – AMRUT, HRIDAY, Bharatmala Pariyojana, UDAY, UJJWALA YOJANA, Smart City, Ease of Doing Business (EODB), GST implementation, introduction of bankruptcy code and Make in India, to name a few. And, India marched on the path of digital transactions at a faster pace.With renewed vigour, now the immediate task in the hands of the Modi government will be to focus on governance and the growth slowdown in the economy, which slipped to 6.6 per cent in the third quarter of 2018-19, so that it does not become more pronounced. The government should focus more on financial inclusion, spending on infrastructure development, fiscal consolidation, smoothening and simplifying earlier reforms such as GST, RERA and BFSI reforms, improving direct and indirect tax collections to provide relief to the farm sector, reviving industrial growth, increasing credit growth, and most importantly, Job creation.After the recent bankruptcies in the airline and telecom sectors, the government’s focus should be to uplift these sectors along with others such as NBFC and automobile. Consumption demand has been slowing continuously and the government should focus on boosting demand by creating jobs. For this, the government has to double its efforts under the ‘Make in India’ programme. Only by pursuing policies that can ensure genuine product development and manufacturing within the country can the government make the ‘Make in India’ programme a grand success and address joblessness, which continues to be a thorn in the flesh of the economy.India’s GDP needs to grow faster than even 7 per cent. Going forward, macroeconomic stability will guide India on a high growth trajectory. The government has to bring petro-products within the ambit of GST and that would be the one of most effective measures to put the economy back on track.With the return of the Modi government for next five years, the focus of the stock market would be on the growth cycle. From here on, investors should look at companies that are expected to be in the limelight over the next three to four years based on expected policy changes. The full-fledged Budget, due in July is likely to give a new direction to the economy and pave the way for foreign fund inflows to continue. 69493939 Chairman & Managing Director,SMC Investments and Advisors Limited

from Economic Times http://bit.ly/2EtpAZi

Experts got the election wrong. Here’s the reality they missed

Although no data is available, it’s fair to say a big majority of economic experts got the election wrong. Some of them got it spectacularly wrong. When you go wrong, and especially if you are an expert, you should try to learn some useful stuff from your errors of judgement/analyses.Therefore, here’s my decidedly modest contribution to that process of learning. My non-expert, journalistic submission is that experts got elections wrong because they ignored ‘me’croeconomics.Experts do rigorous analysis of macroeconomics and microeconomics. ‘Me’croeconomics is field study of the immediate economic environment of people. Economics as it affects ‘me’.Pundits were right that economic slowdown and stalled private investment at a macro level and consumption slowdown at a micro level coincided with Narendra Modi’s reelection campaign. But some of these economic numbers reflect the ‘me’croeconomics of India’s top 15% people by income and purchasing power.What experts didn’t quite see — or they saw and didn’t appreciate enough — was that ‘me’croeconomics of millions of ordinary voters across many states had been altered by one or some or all of Modi’s many welfare schemes. In some cases, the alteration was real — funds for building a house — and, in many cases, there was firm hope that change is coming. The latter, because the message of Modi as a deliverer was firmly anchored.The Indian Express reported on Friday that Modi’s welfare schemes “resonated” in 115 poor districts that returned 60% of NDA seats in these elections (bit.do/eTfEv). That’s ‘me’croeconomics in electoral action.The big pre-election discussion among experts on jobs — in which the political economic question was how much would joblessness hurt Modi electorally — could have done with a healthy dose of ‘me’croeconomic reality check.The Torn Book of JobsFirst, though, an interesting piece of data from conventional economic analyses. As explained by Aunindyo Chakravarty in ndtv.com (bit.do/eTfF5), the relationship between job growth and national electoral verdicts has worked in almost the opposite way than assumed by many experts. He points to Reserve Bank of India-KLEMS (‘Kapital’, Labour, Energy, Material, Services) employment data (‘Measuring Productivity at the Industry Level’, bit.do/eTfGE) to demonstrate two points all pundits should consider: Far more jobs were created when Atal Bihari Vajpayee was prime minister than in the first tenure of Manmohan Singh. Yet, Vajpayee lost and Singh won. In Singh’s second term, the pace of job creation picked up considerably. Indeed, UPA-2’s job creation record was better than every government’s since 1980. But Singh’s second government suffered a humiliating defeat.So, even assuming job creation was really slow under Modi’s first term, this data should have been a warning for experts when they pegged down his reelection prospects.There’s another piece of conventional economic data that should have also been a warning to experts. India’s employment elasticity — a measure of how jobs grow as the economy grows — has been falling for a long time. Between 1990 and 2007, the elasticity halved, from 0.3% to 0.15%. So, as India’s economy grew post-reforms, the pace of job creation fell. And if jobs were such an electorally critical issue, surely many poll verdicts would have been influenced — but they weren’t.‘Me’croeconomy helps understand this better. Just short of 50% of India’s workforce is self-employed. The vast majority of them are at the lower end of the socioeconomic pyramid — farmers and those in related activities, shopkeepers, carpenters, plumbers, electricians, small vendors, etc. Many switch between self-employment and occasional employment.When Modi mentioned pakoda-sellers and was critiqued by pundits for wishing away the problem of job creation, the latter were right to the extent that larger formal wage employment is desirable. But the PM was bang on in identifying the relevant ‘me’croeconomic fact.Self-employment and barefoot entrepreneurship have been individual realities for millions in India for a long, long time. Modi’s invocation of pakoda-sellers was a message intended to connect at two levels.Politically, the message was that there’s dignity in self-employment and barefoot entrepreneurship. In terms of policy, the message was that Modi’s many welfare schemes were specifically targeting self-employed Indians whose incomes were uncertain and low.Dancing to a New MudraThe MUDRA (Micro Units Development and Refinance Agency) scheme, which gave loans up to Rs 10 lakh for non-farm small entrepreneurs, may have attracted questions. But its impact is part of the same ‘me’croeconomy that experts missed. Modi’s connect with the millions of ordinary voters was in part mediated through his sharp understanding of the ‘me’cro part of India’s economy.Now, post-verdict, experts are again advising the PM — rightly — to pay attention to faltering macro and micro numbers. But you won’t get Modi’s economics if you don’t pay equal attention to the ‘me’cro.

from Economic Times http://bit.ly/2JBMphB

India plans to lure companies fleeing China

NEW DELHI: India has prepared a strategy to gain market access in China for its farm and pharmaceutical exports and attract foreign companies looking to shift out their manufacturing bases from there in the wake of the trade war between the US and China.The commerce department’s strategy paper, aimed at reducing India’s trade deficit with its neighbour, proposes a detailed sector-wise strategy for import substitution in electronics, telecom, electrical equipment and pharmaceuticals, which form the bulk of the country’s purchases from China. India’s trade deficit with China stood at a record $63.04 billion in FY18.The strategy paper, prepared by the department, was submitted to commerce and industry minister Suresh Prabhu.After taking charge as minister in September 2017, Prabhu has personally guided strategies to reduce the trade deficit with China. The core of the idea was increasing exports to China and reducing imports by substituting inbound shipments with local manufacturing.Citing the views of the telecom industry, the department said China has a host of discriminatory and restrictive practices that bar Indian companies from participating in their procurement process. The industry has suggested steps such as local manufacturing of products like printed circuit boards and camera modules and the creation of a research and development fund for the sector.In the case of solar power, the department said India needs to “ringfence government procurement” through competitive bids and set up plans in public-private partnership mode here. 69491143 For auto components, the paper said introduction of standards and common testing facilities to match EU and US standards will strengthen local production. It suggested excluding artificial fibre textiles from the proposed Regional Comprehensive Economic Partnership free-trade agreement and simpler goods and services tax norms for the sector.“India, with its vast working population, and large consumer market is an attractive destination for companies moving their manufacturing bases out of China, and also for Chinese manufacturers for collaborating for setting up production bases in India,” it said.The companies likely to relocate to India are from sectors like electronics, consumer appliances, consumer electronics, textiles, healthcare equipment and heavy industry.TARIFF, NON-TARIFF BARRIERSThe paper favours extending support to exporters by pursuing tariff reduction in the Asia-Pacific Trade Agreement (an accord among seven Asian countries) and the proposed RCEP. It talks of export incentives to adequately substitute the existing Merchandise Exports from India Scheme and the need to pursue greater market access for agriculture and dairy products and pharmaceuticals.As per the department, Indian pharmaceutical firms face regulatory hurdles and prolonged and unpredictable timelines for drug registration.They are asked to submit detailed clinical trial data and reveal the drug formulation process at the time of registration.On this, the ministry would look at establishing an interface between the Food and Drug Administrations of India and China for conduct of regular training programmes on regulatory standards and processes of filling dossiers in China and relaxing the product registration time to one year from 3-5 years.It would also look at pursuing export orders where market access has been obtained from China for commodities including rice, sugar and sesame seeds.

from Economic Times http://bit.ly/2WpCFwU