Tag: Economic Survey

27Feb

Union Budget 2015-16 Economic Survey : Link public support to Railways with reforms

Suffering for a long time from underinvestment, Indian Railways need greater public investments but the support should be clearly linked to reform of the structure of the organisation. Public investment in an efficient rail network can have positive effect on both manufacturing and aggregate output, and the effects are permanent, said the Economic Survey 2014-15 tabled in Parliament on Friday. It also envisioned “corporatised Railways entities” in the long run.

Successive plans have allocated less resources to the Railways compared to the transport sector, it added. “The share of Railways in the total plan outlay is currently only 5.5 percent vis-i-vis about 11 percent for the other transport sectors and its share in overall development expenditure has remained low at below 2 percent over the past decade,” the survey said. Highlighting the difference with that of China, it added: “In per capita terms, China has invested on an average 11 times as much over the same period, even though both countries have similar populations.” Underinvestment in the Indian Railways is also indicated by congestion, strained capacity, poor services, and weak financial health, it added.

Highlighting the difference with that of China, it added: “In per capita terms, China has invested on an average 11 times as much over the same period, even though both countries have similar populations.” Underinvestment in the Indian Railways is also indicated by congestion, strained capacity, poor services, and weak financial health, it added. Stressing on the need of support from government, it said: “Greater public investments once utilised efficiently can help the Railways to overcome some of these problems. In the interim, there is scope for public support of Railways, including through assistance via the general Budget”.

It, however, added: “any public support should be clearly linked to serious reform; of the structure of the Railways; of their adoption of commercial practises; of rationalising tariff policies and through an overhaul of technology”. The document further said that in the long run, the Railways must be commercially viable and public support for it should be restricted to equity support for investment by the corporatised Railways entities, and for funding the universal service obligations that it provides.

It also said there is a need for bold, accelerated programme of investment in dedicated freight corridors (DFCs) that can parallel the Golden Quadrilateral in the road sector alongwith associated industrial corridors. “Such an initiative will transform Indian manufacturing industry with “Make in India” becoming a reality,” it added. This impetus has the potential to boost greater private investment and do so without jeopardising India’s public debt dynamics, the survey said.

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

Economic Survey_6

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.

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