India beats China on GDP growth in 2015; may grow 7-7.5% in 2016

Hailed as “the bright spot” in a gloomier global economy, India outpaced China as the world’s fastest growing economy in 2015 and is expected to clock 7-7.5 percent growth in the New Year provided the reform momentum continues and the business environment improves.

Finance Minister Arun Jaitley says that subdued global economy and moderate private sector investment will continue to pose challenges, while his top priorities for the New Year include rolling out the long-delayed GST, rationalising direct taxes, ensuring further ease of doing business and putting more money for social and physical infrastructure.

While the need for further remains continue to be underlined by the experts as well as the policymakers as a key requirement for India to maintain its growth momentum, World Bank’s Chief Economist Kaushik Basu is confident that India can continue to top the charts with fastest growth among all major economies.

Expecting India to grow at 7-7.5 percent in 2016, Basu said, “India will still be the leader among major economies. Not only in 2015 but we expect India to lead that chart in 2016 as well.”

It will still remain off the targeted growth rate of 8-10 percent in the foreseeable future unless the reforms momentum shifts to a much faster gear.

Going forward, Jaitley will have a tough time in sticking to the fiscal roadmap (3.5 percent of GDP in 2016-17) while taking care of additional outgo towards seventh Pay Commission award and One Rank One Pension (OROP) for retired defence personnel.

For the current financial year ending in March, the latest estimates peg the GDP growth rate at 7 to 7.5 percent, which will be significantly lower than 8.1 to 8.5 percent predicted by the government in February 2015.

Although the year began with lot of promise, growth rate could not pick up as much as expected, mainly because of faltering global economy, decline in exports, deficient rains, and inability of the government to push big-ticket reforms like Goods and Services Tax (GST) and land acquisition law.

India’s economic growth still accelerated to 7.4 percent in the July-September quarter, overtaking China as the world’s fastest growing major economy, on pick up in manufacturing, mining and services sectors.

Multilateral lending agency IMF termed India as a ‘bright spot’ in otherwise slowing global economy.

RBI ‘not a cheerleader’, but it still cheers markets in 2015

He always ruled out being a ‘cheerleader for the markets’, but it was the multiple rate cuts by RBI Governor Raghuram Rajan and his ceaseless efforts to keep inflation under check that turned out to be the biggest cheers for the Indian financial markets in 2015.

It was one of his most famous oneliners — “I am Raghuram Rajan and I do what I do” — that eventually summed up the year 2015 for the central bank and the same is expected to hold true in the New Year as well when RBI cracks its whip on banks to clean up their balancesheets and also compete with the financial markets when it comes to being source for funds.

Raghuram Rajan’s term ends on September 3, 2016 and whether the outspoken Governor gets an extension, like his most of his predecessors, or not is something that will be keenly watched in the New Year.

It would be interesting in the context of the public postures he has taken on many issues ranging from ‘Making in India’ to his reference to Hitler and on intolerance, which have been interpreted in various quarters as being against the current regime.
At the same time, there have been words doing the rounds that Rajan is personally liked by the Prime Minister and there have been rumours about he being in race for some larger roles including the next head of International Monetary Fund, where he has served in the past as the Chief Economist.

Looking back at 2015, the year will also be remembered for cutting short the wider powers of the central bank, including the Governor’s own prerogative to set the rates or moving the public debt management out of the Mint Road.

During the year, RBI became an inflation-targeting central bank, while Rajan also kick-started the era of differentiated banking by giving out in-principle approvals to 11 payments banks and 10 small finance banks.

While the aspirants of small finance banks are populated largely by microfinance institutions, the payments bank licencees are storeyed names from the corporate world such as Ambanis, Birlas, Mahindras as also the telecom biggies like Airtel and Vodafone.

With certainty around achievement of the near-term inflation objective of 6 percent increasing, Rajan made a dramatic shift in his policy stance early in the year towards being accommodative and announced a surprise rate cut on January 15.

He followed it up with three similar moves during the year, cutting rates by a cumulative 1.25 percent in 2015. All his rate cuts were welcomed by the stock markets with huge rallies, while inflation remaining under check gave the government much-required legroom in its policy moves.

The 6-percent headline inflation target for January 2016 is part of the ‘glide path’ suggested by the deputy governor Urijit Patel-led Committee, and for RBI the tougher task of yanking it down to 4 percent in next two years starts now.

India likely to grow at 7-7.5% in 2016: Kaushik Basu

The Indian economy is expected to grow at 7 to 7.5 percent in 2016, World Bank chief economist Kaushik Basu said.

“Roughly it is in a ballpark of the kind of figure. We (World Bank) have given over 7 percent or somewhere between 7 and 7.5 percent which no matter whether the top-end of it or bottom end of it. India will still be the leader among major economies. Not only in 2015 but we expect India to lead that chart in 2016 as well,” Basu told reporters on the sidelines of a programme here.

Until October, the World Bank retained India’s growth forecast at 7.5 percent for 2015-16 and expected it to be 7.8 percent in 2016-17 and 7.9 percent in 2017-18.

He said the World Bank would review the growth projections of countries on January 7 or 8.

“Every six months the World Bank takes stock of the whole global situation and puts out forecast. We review regularly and we are going to do on 7th or 8th of January. I don’t know which way it will go(for India),” he said when asked whether there is any revision of growth predictions for India.

On the impact of the rate hike by the US Fed on investment scenario in the country, the former chief economic advisor said though there could be some outflow of investments, the impact is minimal. On the exports front, Basu said India needs to focus more on manufacturing-based exports as wages are rising situation in China is on the rising path.

“I think India has great potential in exports and in particular in the manufacturing sector. In manufacturing historically India has done well. The opportunity in the manufacturing sector is very high especially since wages are rising in China. But it is true that that over last 12 months if you look at the trend in exports we have not done well,” he said.

He, however, said the ease of doing business is improving when compared to last year and the trend may contribute for higher exports in the long run.

HDFC Life gets nod to up foreign partner stake, may list in FY17

The foreign investment promotion board (FIPB), on Tuesday, cleared Standard Life’s proposal to raise its stake in its insurance joint venture (JV) with HDFC  to 35 percent.

The British insurer will acquire additional 9 percent stake from HDFC for Rs 1,700 crore. This will precede realization of the company’s long-term aim of listing on the Dalal Street.

Speaking to CNBC-TV18, Keki Mistry, CEO & Vice-Chairman of HDFC said that shareholding between the companies is yet to be discussed. However, Mistry is sure that once the company gets all necessary approvals, it will roll out its plan to get listed.

Mistry is hoping for insurance JV isting to happen in later half of 2016-17.

RBI’s fin inclusion report: Focus on MSMEs, agri sector

RBI on Monday released Mohanty Panel Report on medium-term path for financial inclusion. Financial inclusion (inclusive financing) is delivering financial services at affordable costs to sections of disadvantaged and low-income segments of society.

The key components of this inclusion policy is to improve credit system for the underprivileged and it focuses on poor agricultural households to ensure perceptible shift of credit demand from informal to formal sector.

Salient recommendations of the report are as follows:

• Banks have to make special efforts to step up account opening for females, and the Government may consider a deposit scheme for the girl child – Sukanya Shiksha – as a welfare measure.

• Given the predominance of individual account holdings (94 per cent of total credit accounts), a unique biometric identifier such as Aadhaar should be linked to each individual credit account and the information shared with credit information companies to enhance the stability of the credit system and improve access.

• To improve ‘last mile’ service delivery and to translate financial access into enhanced convenience and usage, a low-cost solution should be developed by utilisation of the mobile banking facility for maximum possible G2P payments.

• To phase out the agricultural interest subvention scheme which has distorted the agricultural credit system and ploughing the subsidy amount into an affordable technology aided universal crop insurance scheme for marginal and small farmers for all crops with a monetary ceiling of Rs.200,000 at a nominal premium to end agrarian distress.

• A scheme of ‘Gold KCC’ (kisan credit card) with higher flexibility for borrowers with prompt repayment records, which could be dovetailed with a government-sponsored personal insurance, and digitisation of KCC to track expenditure pattern.

• Encourage multiple guarantee agencies to provide credit guarantees in niche areas for micro and small enterprises (MSEs), and explore possibilities for counter guarantee and re-insurance.

• Introduction of a system of unique identification for all MSME borrowers and sharing of such information with credit bureaus.

• Establishing a system of professional credit intermediaries/advisors for MSMEs to help both the sector banks in credit assessment.

• To further step up financing of the MSE Sector a framework for movable collateral registry may be introduced.

• Commercial banks may be enabled to open specialised interest-free windows with simple products like demand deposits, agency and participation certificates on the liability side and cost-plus financing and deferred payment, deferred delivery contracts on the asset side.

• An eco-system comprising multiple models should be encouraged with will foster partnerships amongst national full-service banks, regional banks of various types, NBFCs, semi-formal financial institutions, as well as the newly-licensed payments banks and small finance banks.

• Banks’ business model to integrate Business Correspondents (BCs) with appropriate monitoring by designated link branches and greater mix of fixed location BC outlets to win the confidence of the common person.

• Introduction of a system of online registration of BCs, their training and monitoring their activity including delinquency, and entrusting more complex financial products such as credit to trained BCs with good track record.

• A geographical information system (GIS) to map all banking access points.

• To step up the self help group (SHG)-bank linkage programme (SBLP) initiated by NABARD with the help of concerned stakeholders including government agencies as a livelihood model.

• Corporates should be encouraged to nurture SHGs as part of their Corporate Social Responsibility (CSR) initiatives.

• Provision of credit history of all SHG members by linking with individual Aadhaar numbers to check over-indebtedness

• To restore tax-exempt status for securitisation vehicles for efficient risk transfer.

• More ATMs in rural and semi-urban centres, interoperability of micro ATMs and use of application-based mobiles as point- of- sale (PoS) for creating more touch points for customers.

• National Payments Corporation of India (NPCI) to develop a multi-lingual mobile application for customers who use non-smart phones, especially for users of national unified USSD platform (NUUP).

• Permit a small-value cash-out with adequate KYC along for non-bank prepaid payment instruments (PPIs) to incentivise usage.

• To allow PPI interoperability for non-banks.

• Levying a surcharge on credit card transactions by merchant establishments should not be allowed.

• Banks to complete the task of linking of deposit accounts with Aadhaar in a time bound manner so as to create the necessary eco-system for social cash transfer.

• Financial Literacy Centre (FLC) network to be strengthened to deliver basic financial literacy at the ground level. Banks to identify lead literacy officers to be trained by the Reserve Bank in its College of Agricultural Banking (CAB) who in turn could train the people manning the FLCs.

• The Reserve Bank to commission periodic dipstick surveys across states to ascertain the extent of financial literacy.

• All regulated entities should be required to put in place a technology-based platform for SMS acknowledgement and disposal of customer complaints.

• To strengthen the Information Monitoring System for District Consultative Committees (DCC) and State Level Bankers Committee (SLBC) deliberations.

• The responsibility of the SLBC/lead bank scheme to be rotated among to instil a spirit of competition.

• SLBCs to focus more on inter-institutional issues, livelihood models, social cash transfer, gender inclusion, Aadhaar seeding, universal account opening, and less on credit deposit ratio which is a by-product.

• As a part of second generation reforms, the government can replace the current agricultural input subsidies on fertilisers, power and irrigation by a direct income transfer scheme.

KKR Jupiter to part finance JBF’s new plant: KKR India CEO

KKR Jupiter investors Pte. Ltd, will be investing USD 150-160 million in JBF to aid in completion of the company’s new plant, said Sanjay Nayar, CEO & Country Head, KKR India.

As part of an investment agreement signed in July this year, JBF Industries  will consider issuing 1.63 crore preferential shares at Rs 300 per share to KKR Jupiter Investors Pte Ltd., Singapore, at its board meeting on Dec 28.

“JBF is a classic case of a company, otherwise doing quite well, which has lot of capital work in progress in a new plant and fails to arrange the last mile financing”, Nayar said adding that KKR came in to help JBF complete the project and ensure they have enough liquidity.

The deal, valued at approximately Rs 489 crore, will lead to a 25 percent stake of KKR Jupiter in JBF Industries, a leading manufacturer of polyester value-chain products.

In July this year, global investment firm KKR, had signed an agreement with the JBF Group, including its international subsidiaries, for an investment of USD 150 million under its KKR Special Situations Fund II.

The balance of the deal value of approximately Rs 470 crore will be invested in JBF Global Pte, a wholly owned Subsidiary of JBF Industries controlling all overseas operations, for a 16.9 percent stake.

Analysts tracking the company’s stock view this deal as beneficial in terms of value for JBF. However, they consider the reduction in promoter holding in the company to 43.1 percent post dilution, from 53.9 percent as of September 2015, as a negative.

JBF industries currently has a consolidated market cap of Rs 1600 crore.

On the recent developments on the bankruptcy code, Nayar said he sees it as a good policy reform that will help develop a strong credit market.

BoB forex case: FinMin appoints EY for forensic audit

Two months after the Bank of Baroda  (BoB) foreign exhange scam came to light, CNBC-TV18 has learnt that the Ministry of Finance has appointed EY the forensic auditor to probe the case. The auditor, sources, say, will submit a report on findings to the ministry within two months.

The auditor has sought information regarding forex transactions from all the banks involved in the case.

So far 9 banks have been named by investigative agencies- BoB, HDFC Bank  , ING Vysya Bank, ICICI Bank  , Kotak Mahindra Bank  , IndusInd Bank  , Dhanlaxmi Bank  , YES Bank , DCB Bank  .

Sources say Rs 6,100 crore has been allegedly laundered in this forex scam.

Over Rs 16,000 cr undisclosed income detected in 20 months

A government crackdown on black money has led to detection of undisclosed income of over Rs 16,000 crore since March 2014, while assets worth Rs 1,200 crore have been seized, Revenue Secretary Hasmukh Adhia said today.

“In 2014-15 and 2015-16 (up to November), the Income Tax Department by its enforcement actions has detected undisclosed income worth more than Rs 16,000 crore and seized assets worth Rs 1,200 crore,” he said.

“Prosecution has been filed in 774 cases (up to September 2015).” The measures included a one-time 90-day window to come clean on undisclosed wealth, which led to declarations worth over Rs 4,160 crore, and the government is expecting Rs 2,500 crore as tax and penalties by month-end, he told PTI here.

“The present government is very serious on the issue of black money. Various pronouncements of Prime Minister Narendra Modi and Finance Minister Arun Jaitley have made it very clear that this government does not want to spare any effort to bring people with black money to book,” Hasmukh Adhia said.

To deal with illegal wealth stashed abroad, the government legislated the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 which provides for stringent penalty and jail term.

A one-time compliance window was provided to illegal foreign wealth holders to pay a tax and penalty of 60 percent and escape the new law’s penal provisions. In all, 635 declarations worth Rs 4,160 crore of illegal wealth were made in the three-month compliance window. “The last date for paying income tax for those people who made disclosures under the Black Money Act is December 31, 2015. We are hopeful of getting approximately Rs 2,500 crore as tax in the current year,” he said.

Articulating steps taken by the government to curb black money, he said the requirement of mandatory furnishing of PAN for money transactions above certain limits is a way of making people report their income legitimately. In addition, the government will initiate enforcement action in a big way in those cases where it gets definite information.

“Our attempt to get more information from governments of other countries about the resident tax payers is likely to get more traction in 2016,” he said.

Also, international cooperation on tax matters is gaining momentum now, with a multilateral agreement on automatic exchange of information taking final shape. Under the Foreign Account Tax Compliance Act (FATCA), signed with the US, India has already started getting information.

Indian Railways chugs along despite hiccups

The Railways had to grapple with shortfall in revenue targets and “unbearable burden” of Pay Commission recommendations in 2015 and hopes to address the twin issues next year.

Though earnings were up by 6.67 percent up to December 10 as compared to last year, there was a decline in meeting the target. Railways’ earnings till December 10 were Rs 1,11,834.32 crore as against the target of Rs 1,22,639.16 crore, a decline of 8.8 percent.

“In 2015, one of the challenges we have been facing is not getting enough cargo. So revenues are down. Because steel, cement, iron ore demand is very bad. Import and export are down. These are sources for cargo. So targets are falling short,” Railway Minister Suresh Prabhu told PTI.

He said this when asked about his regrets in 2015 on things he could not do or could have done better. He also said Seventh Pay Commission recommendations are equally a major challenge as Railways has to shell out additional Rs 32,000 crore annually.

“Secondly, Pay Commission recommendation is another big challenge. The Rs 32,000 crore additional burden for Pay Commission on Railways is unbearable. These are major challenges,” he said and added “these were two challenges of 2015 I hope we will be able to address it in 2016. On Pay Commission, we will have to talk to the Finance Ministry.”

Asked whether the recent slum demolition incident involving death of a child at Shakurbasti in Delhi is a setback as it would not be easy to evacuate encroachers from railway land, Prabhu said, “Public property is used for public good. So we have to find out ways. There has to be a public debate. We do not want to construct bungalows there.”

However, he emphasised on adopting human approach in dealing with removal of encroachers. “We have to find out best possible ways and at the same time I have instructed all my officers to do it in a humane way. I was not aware when demolitions took place, otherwise I would have told them not to do it at this particular time. But we will handle it in a humane way.”

Asked why he did not raise fares despite adverse financial condition, Prabhu quoted Abraham Lincoln saying, “We have tried to do everything in the interest of Railways. So what we have done is for the Railways, by the Railways and of the Railways.”

However, he said there were many good things that happened in Railways in 2015. “In 2015, we have done many things. First of all, getting huge resources for Railway which was always a problem. Getting finances for Railways is a great achievement,” he said.

Govt taking steps to boost MSMEs, exports: Commerce Min

The government is taking necessary measures to support small and medium industries keeping in view a sluggish global situation that has led to fall in country’s exports, Commerce and Industry Minister Nirmala Sitharaman said.

“It cannot be denied that the global situation has been depressed and things are not improving. The government is doing what it can to change the situation for the small and medium players,” the minister said at the inauguration of ‘India Diamond Trading Centre’ here.

She said the merchandise exports is likely to fall further and the ministry is making all efforts to help small and medium players.

The gems and jewellery sector constitutes 13 percent of the merchandise exports, she added.

India’s exports remained in negative territory for the 12th straight month in a row after it registered a drop of 24.43 percent in November to USD 20.01 billion as against USD 26.48 billion in the year-ago period.

The minister said, the gems and jewellery sector needs a lot of attention as it provides jobs to millions and the government will take steps to remove the hurdles that are impediment to the growth.

“We will ensure that the gems and jewellery sector remains vibrant. We will take up some of the concerns of the industry with finance ministry, especially the taxation issue,” she added.

Sitharaman further said, the industry has grown since 2004-05, to become an important sector, exporting USD 40 billion goods in 2014-15, due to its entrepreneurship, drive and hard determination to be internationally competitive.

Speaking about the Diamond Trading Centre, the minister said, “Last December 2014, Prime Minister Narendra Modi in the presence of Russian President Vladimir Putin at the World Diamond conference, jointly organised by the GJEPC, said he would announce a special notified zone (SNZ) and within one year we are here to inaugurate the diamond trading centre.

And this is much before the scheduled visit of the Prime Minister to Russia. Commenting on the launch of the country’s first SNZ at Bharat Diamond Bourse (BDB) here, GJEPC Chairman Praveenshankar Pandya said, “The creation of SNZs and regular availability of direct supply of rough diamonds in the country itself and within easy access, will not only save time and effort of travel by diamond manufacturers, who move to different centres to procure rough diamonds, it will also minimise middlemen commissions and eventually costs.”

The wide array of rough diamonds on offer to Indian buyers will be unprecedented; as will be the number of companies, including medium and small enterprises, who will have the never-before opportunity to procure rough directly from mining companies, he added.

Speaking about the future plans, he said, “Once the operations of the SNZ are fine-tuned, similar SNZs will be set up by GJEPC in association with various state governments.

“The Gujarat government has already proposed to set up a gem bourse with such SNZ set up inside it. The concept can also be extended to coloured gemstones segment in Jaipur where the council has proposed to set up a gem bourse,” he added.

Speaking on the occasion, Rio Tinto Diamonds Managing Director, Jean-Marc Lieberherr, said the company’s first diamond project in Madhya Pradesh is in final stages and is expected to become operational in 2017.