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.”

27Feb

Union Budget 2015-16 Economic Survey: FY16 GDP growth seen 8.1-8.5%, scope for big reforms

The Economic Survey for 2014-15 has projected a growth of 8.1- 8.5 percent for FY16, and said there was scope for big bang reforms. It sees growth rate for the current fiscal at 7.4 percent. The Survey said the government was committed to fiscal consolidation, and that the outlook for the domestic macroeconomic was optimistic. The Survey said a double digit growth trajectory was now a possibility, also because inflation was showing a declining trend. The Survey said outlook for external financing was currently favourable, and that the government should control its expenditure to reduce fiscal deficit.

The trend of subdued export performance was key and saving-investment dynamics will be crucial for growth, the Survey said. Among other things, the Economic Survey 2014-15 has recommended that enhanced revenue generation should be a priority of the government, going forward. In addition, the government should meet its medium term fiscal deficit target of 3 percent of GDP, the Survey said.

The Expenditure Management Panel’s recommendations should help the government reprioritize its spending, the Survey said, adding that non-Plan expenditure would have to be trimmed and food subsidies rationalised. The Survey estimates current account deficit at 1.3 percent of GDP this fiscal. They Survey saw turmoil in the Eurozone and interest rate policy in the US as key external risks.

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