Monthly Archives: February 2015

27Feb

Union Budget 2015-16 Economic Survey : Shield local cos from competition to boost Make in India

Shield domestic companies from foreign competition through tariffs and mandatory local sourcing besides making regulations and taxes less onerous to boost ‘Make in India’ campaign, suggested the Economic Survey. The pre-Budget survey recommended three sets of measures, including few protectionist measures, to make India a global manufacturing hub.

“The final set of responses what might be called ‘protectionist’ would focus on the tradability of manufacturing, and hence consist of actions to shield domestic manufacturing from foreign competition via tariffs and local content requirements; and provide export-related incentives.

“The effectiveness of these actions is open to debate given past experience. Moreover, they would run up against India’s external obligations under the WTO and other free trade agreements, and also undermine India’s openness credentials,” it said. These initiatives, however, may not go well with the World Trade Organisation (WTO) which is against protectionist measures.

India is a key member of the Geneva-based multilateral body. New Delhi is already being fighting a case in the WTO on issue of local content requirement in the solar sector. India has always raised its serious concerns over increasing protectionist tendencies by the developed countries especially after the global financial meltdown.

Interestingly, the commerce and industry ministry always asks the domestic industry to face the global competition and not take protection of tariff walls. It has also said that ‘Make in India’ is not about protectionism. Further the survey, which was tabled in Parliament today, also called for “providing subsidies, lowering the cost of capital” and creating special economic zones for some or all manufacturing activity in particular.

The survey “loosely” termed these sets of responses as ‘industrial policy’. Talking about non-controversial steps, it said that there is a need to improve the business environment by making regulations and taxes less onerous, building infrastructure, reforming labour laws, and enabling connectivity. “All these would reduce the cost of doing business, increase profitability, and hence encourage the private sector, both domestic and foreign, to increase investments.

Indeed, these measures would not just benefit manufacturing, they would benefit all sectors,” it said. ‘Make in India’ is the dream campaign of Prime Minister Narendra Modi, which aims at making the country as a global hub of manufacturing and creating millions of jobs. It was launched in September last year.

27Feb

Union Budget 2015-16 Economic Survey : Cos raised Rs 2.81L-cr in Apr-Dec of FY15; debt preferred

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Indian firms mopped up Rs 2.81 lakh crore from the markets during April-December period of the ongoing fiscal, with debt emerging as the most preferred route to garner funds for business needs, says the Economic Survey 2014-15. The trends remained sluggish in the primary stock market where the companies raise funds through the sale of shares via instruments like IPOs and FPOs despite a bullish equity market.

It has been private placement of corporate bonds that was used the most to meet funding requirements of businesses during April-December period of the current fiscal (2014-15). According to the Survey tabled in Parliament today, Indian firms mobilised a total of Rs 2,80,885 crore from the primary markets during April-December period of the current fiscal, higher than Rs 2,27,398 crore garnered in the year-ago period.

In the primary market, funds were raised through equity (IPOs and rights issue) as well as debt segments. Of the total funds raised, a large chunk of this amount or Rs 2,69,245 crore from private placement of corporate bonds, Rs 7,348 crore from other debt insruments and a mere Rs 4,292 crore was raked in through equity markets. Most of these funds were raised for expansion of business plans and to support working capital requirements.

“Private placements of corporate bonds account for the lion’s share,” according to the Survey. Despite a rally in the stock market, most of the funds were garnered through debt route. The BSE benchmark Sensex surged 27 per cent during the period under review.

27Feb

Union Budget 2015-16 Economic Survey: Projects worth Rs 8.8L-cr stalled but situation improving

Unfavourable market conditions and delayed investments in last few years resulted into an “alarmingly high rate” of increase in stalled projects which, as of December-end, stood at a staggering Rs 8.8 lakh crore, says the Economic Survey for 2014-15. However, the stock of stalled projects plateaued in last three quarters to stand at 7 percent of the GDP at the end of October-December quarter from 8.3 percent in last year, the Survey said. ”

Manufacturing dominates in total value of stalled projects even over infrastructure. The government’s stalled projects are predominantly in infrastructure. “Unfavourable market conditions (and not regulatory clearances) are stalling a large number of projects in the private sector and in contrast, regulatory reasons explain bulk of stalling in the public sector” it added. Manufacturing sector was stifled by a general deterioration in the macroeconomic environment, while electricity projects are victim of lack of coal.

“It is clear that private projects are held up overwhelmingly due to market conditions and non-regulatory factors whereas the government projects are stalled due to lack of required clearances,” it said. Out of the Rs 8.8 lakh crore worth of stalled projects, public and private sector accounted for Rs 1.8 lakh crore and Rs 7 lakh crore, respectively.

“Clearing the top 100 stalled projects will address 83 percent of the problem of stalled projects by value,” it added.

“At the end of the third quarter of the current financial year, for every 100 rupees of projects under implementation, 10.3 rupees worth of projects were stalled and the number of private sector stood at 16,” it said.

“In terms of share in total, electricity and services dominate for both public and private sectors, while manufacturing forms the major component of stalled projects in the private sector,” it added.

27Feb

Union Budget 2015-16 : Economic Survey makes a case for liberalising FDI in retail

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Economic Survey has made a case for liberalising FDI in retail, saying that it would help bridge investment and infrastructure deficits and improve supply chain management. The Survey stated that India remains an attractive destination for long-term retail investment despite the sector facing many challenges in past few years. It highlighted that 58.3 percent of Indian population is below 30 years.

Around 31 percent of this population living in urban areas with rising disposable income makes one of the key positives for the future of the retail sector. Citing AT Kearney’s Global Retail Development Index, the Survey said India’s retail trade ranking slipped to 20th in 2014 from 14th in 2013. It said in view of difficulties in attracting domestic capital for setting up marketing infrastructure, particularly warehousing, cold storages and laboratories, “liberalisation of FDI in retail could create the possibilities for filling in the massive investment and infrastructure deficit which results in supply-chain inefficiencies”.

India needs billions of dollars in logistics development as every year huge amount of vegetables, fruits and foodgrains go waste because of poor and inadequate storage facilities in the country. Interestingly, BJP, in its manifesto, had said that it will keep FDI out of the key sector of multi-brand retail. As per the current policy, 51 percent FDI is allowed in the multi-brand segment while 100 percent is permitted in single brand retail trading.

Both the decisions were taken by the earlier UPA government. Although, the UPA government had allowed FDI in multi’brand retail, only one investment proposal of UK based Tesco was cleared during its regime. Noting the changes taking place in the sector, the Survey said: “Migration from traditional stores to modern retail continues, though the latter accounts for only 8 percent of the total market.”

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