India to surpass Germany as 4th largest economy by 2022, but hard work ahead: IMF

India will surpass Germany as the world’s fourth-largest economy by 2022 and push UK out of the top five in 2017, according to an analysis of growth projections by the International Monetary Fund

India will surpass Germany as the world’s fourth-largest economy by 2022 and push the UK out of the fifth rank in 2017, according to an analysis of growth projections by the International Monetary Fund, said Mint in a report.

However, according to the IMF analysis, India has to address a lot of issues in order to make the climb. These include implementing the Goods and Services Tax (GST), dealing with the biggest bunch of stressed assets among all major economies across the globe, increasing productivity and employment opportunities, encouraging corporate investment and overcoming a shortfall of infrastructure.

The report said that India’s economy is still recovering from the effects of the note ban imposed by the government in November when the government decided to demonetise currency notes of Rs 500 and Rs 1000 denominations.

Despite agreeing that GST will be beneficial for the Indian economy in the long run, most economists are concerned about the health of the country’s banking system and its public finances. Both these factors are significant points of concern since most global credit rating agencies already rate Indian debt instruments just above ‘junk’ status.

The report also said that according to government data, bad loans, restructured debt and advances to companies that cannot service their debt have risen to 16.6 percent of total loans. This has prompted banks to address their asset quality and has forced them to focus on recovery of these loans, which has, in turn, left their loan growth in the doldrums.

Also, in addition to slowing investment, India’s labour productivity has been continuously weakening, thereby limiting growth and employment opportunities, the report said. According to the International Labour Organisation, India’s output per worker is projected at USD 3,962, a mere fraction of Germany’s USD 83,385.

However, even considering all these factors, one cannot ignore the IMF forecast, which pegs India growing at 9.9 percent in nominal terms. Going by that, India is slated to overtake Germany by 2022 and to push the UK out of its fifth rank by the end of 2017.

Kotak Mahindra Bank to buy out British partner Old Mutual for Rs 1,292 crore

Private sector lender Kotak Mahindra Bank ?(KMB) on Friday announced that it is buying out British partner Old Mutual’s entire 26 percent stake in its life insurance arm for Rs 1,292.7 crore.

Private sector lender Kotak Mahindra Bank (KMB) on Friday announced that it is buying out British partner Old Mutual’s entire 26 percent stake in its life insurance arm for Rs 1,292.7 crore.

“In line with its philosophy to deepen and expand in Indian financial services, KMB has entered into an agreement to purchase the entire 26 per cent equity stake held by Old Mutual in Kotak Mahindra Old Mutual Life Insurance for a consideration of Rs 1,292.7 crore,” the bank said in a statement.

The buyout is subject to regulatory and other approvals, and will result in the Kotak Mahindra Group holding 100 per cent equity in Kotak Life, it said.

The life insurance joint venture was formed in 2001 with Kotak owning 74 per cent and the rest being with the British partner.

Over the time, there has been a liberalisation in foreign holding caps in the insurance sector to 49 per cent and many foreign entities have increased their holdings.

KMB’s president for asset management, insurance and international business Gaurang Shah said the two partners have had a “fruitful relationship” over the past 16 years.

“India is in an exciting phase of its economic journey and the financial services sector, especially the insurance sector, is poised for significant growth. Kotak Life will continue to leverage this opportunity,” Shah said.

The announcement comes within a month of the bank announcing a plan to raise up to Rs 5,000 crore through a share sale, amid a string speculations that it may be in the market looking for acquisition opportunities in the banking space.

KMB’s executive vice chairman and managing director Uday Kotak had confirmed their interest in inorganic growth opportunities and said that they will also look to deploy the capital in the stressed assets management space.

The KMB board had approved a proposal to raise equity capital by issuing up to 6.2 crore shares of Rs 5 each, through a rights issue, public issue, private placement, including a qualified institutional placement, or any other permissible mode.

The capital raising will also help bring down the promoter family’s holding in the bank to 31.1 percent. It has been mandated to get it down to 30 percent.

Announcing its earnings for FY 2016-17, Uday Kotak had said that the bank is working on multiple options and hopes to work out something “sooner rather than later.

Strong global growth driving equity markets; cautious on US market valuations: Shane Oliver

Strong overall economic growth is driving share markets higher and around that there are other developments such as Donald Trump, French Election, Brexit and issues about South Korea are causing bouts of volatility, Oliver said.

The bull market argument still remains intact for equities, which is underpinned by improving global growth, Shane Oliver, the chief economist at AMP Capital Investors said in an interview with CNBC-TV18.

The growth has come after years of easy monetary policy, zero interest rates, money printing, fiscal austerity which has come to an end and memories of the global financial crisis back in 2008 seems to be fading now, he said.

Strong overall economic growth is driving share markets higher and around that there are other developments such as Donald Trump, French Election, Brexit and issues about South Korea are causing bouts of volatility.

Speaking on the proposal US President Donald Trump released on Wednesday said that it is not the final word and the proposal would have to still get negotiated between congressional republicans and the president to work out a final solution.

There are a lot of Republican senates which are not on board regarding the plan and there has been a lot of lobbying from US retail organisations saying that the proposal might be bad, he said.

Strong earnings growth might push Dow higher towards fresh record highs maybe towards 30,000, suggest Oliver. This is the fourth quarter in a row when US earnings were increased, up 12 percent on a YoY basis, translating into a record high for company’s profits.

Earnings are shifting higher across the world. Dow Jones is leading global shares higher and the valuations have turned slightly unattractive when compared to Eurozone shares, Japanese shares or emerging market shares, said Oliver.

 

PAN will be invalidated only from July 1 if not linked with Aadhaar: Govt to SC

The government on Wednesday clarified to the Supreme Court that the permanent account number (PAN) will not be invalidated retrospectively if it isn’t linked with the Aadhaar.

PAN will be invalidated from July 1, 2017 and not from when one had applied for it, Mukul Rohatgi, government’s top law officer attorney said, according to a report in the Livemint.

Earlier this month, the government had made Aadhaar number compulsory for filing income tax returns and also to apply for a new PAN.

According to the new Finance Act, 2017, the PAN number can be

considered void if it is not linked with the Aadhaar.

The court was hearing three petitions on the government’s decision to make Aadhaar mandatory for PAN and also for filing returns.

“Aadhaar linkage is only for an individual assessee and not for companies, firms etc. The consequences of non-compliance are draconian,” said senior advocate Arvind Datar.

Datar also said that Aadhaar is more a right of the citizen and not a duty. Hence, it cannot be made mandatory for any government scheme.

In the last one month, the government has made Aadhaar mandatory for multiple schemes and facilities including filing tax returns and getting a new phone connection.

The court will continue to hear the case on Thursday.

DoT may set up task force to implement right of way rules in states

‘Right of way’ rules pertain to regulatory clearances needed by a telecom and infrastructure service provider to lay out infrastructure like telecom towers and optic fibre cables.

The Department of Telecommunications may set up a task force to facilitate and oversee implementation of ‘right of way’ for erecting towers and laying optic fibre cable in states, according to an official familiar with the development.

‘Right of way’ rules pertain to regulatory clearances needed by a telecom and infrastructure service provider to lay out infrastructure like telecom towers and optic fibre cables.

The task force will be entrusted with the task of visiting every state and ensuring that the government there brings into force the right of way rules.

“Industry associations and DoT have brainstormed over the solutions needed to remove the bottlenecks in implementation of the rules. DoT agrees with the idea of setting up a task force that will go to every state to talk to officials there and thrash out the problems in implementing the policy,” the official said.

The right of way rules were notified on November 15, 2016 but most states are yet to implement them. The rules called for every state to appoint a nodal officer for facilitating securing of clearances from various authorities.

A project for installing towers in Delhi may need clearances from one or more of the 5 municipalities, Delhi Development Authority, Delhi Metro Rail Corp, the Delhi Pollution Control Committee, Airport Authority of India and others.

The right of way rules call for establishing an automated process for submission of an application. As per the rules, the appropriate authority has to approve or reject within 60 days of a service provider submitting an application to lay the infrastructure. Permission is deemed granted if there is no decision on it within 60 days.

While most states are yet to appoint a nodal officer, Rajasthan has included right of way in its policy while Haryana has in-principle agreed on it, the official said.

Right of way is a major stumbling block for telecom companies in laying out their infrastructure as securing clearances from various local bodies and authorities is a long and cumbersome process.  This is the last thing a company, struggling with irate customers suffering from call drops, wants.

Imported smartphones may get costlier by 5-10% as govt plans to levy customs duty

The move is aimed at giving teeth to local manufacturing and encourage companies like Apple to make phones in the country. However, this may lead to rise in prices of imported smartphones by 5-10 percent.

In an effort to make manufacturing the engine of growth and employment, India is pushing for Make in India products. The government is now contemplating to levy customs duty on imported mobile phones after the roll-out of Goods and Services Tax (GST), reports The Economic Times.

The move is aimed at giving teeth to local manufacturing and encourage companies like Apple to make phones in the country. However, this may lead to rise in prices of imported smartphones by 5-10 percent.

Domestic handset makers are already enjoying few exemptions like no countervailing duty on imported electronic components but they will not remain in the picture once GST is implemented.

Government is arguing that no customs duty will not help the Make in India case hence, the imposition of import duty is essential.

The ministry of electronics and information technology is ensuring that charging customs duty will not flout the Information Technology Agreement (ITA), an international pact which mandates signatory countries to allow duty-free imports of certain electronics products. It is also seeking legal opinion from the attorney-general.

An official from the ministry said that not all phones are covered under ITA and the government concurs the same. Also, to analyse the issue an inter-ministerial committee, comprising representatives from the finance, commerce, and telecom and IT ministries, has been set up.

After many discussions for collaboration with Apple, India gave a go ahead to the i-Phone maker to assemble phones in India in February. This makes India the third country globally to produce Apple phones.

Now you can now use your EPF corpus to buy a home

Funds in EPFO can be used to buy units in non-governmental as well as governmental housing projects.

The Employee Provident Fund Organisation (EPFO) has introduced a group housing scheme which allows subscribers to withdraw 90 percent of the total money put in the retirement body fund for realty investments.

The funds in EPFO can be used to construct units in non-governmental housing projects too. The current scheme only allows investment into government or notified housing projects.

Under the new scheme – on lines of the government’s ‘Housing for All’ initiative – customers can also avail loans at subsidised rates under the Pradhan Mantri Awas Yojana (PMAY).

The body will initially target 5-10 projects in urban areas and 2-3 in semi-urban areas.

As per the new scheme, a minimum of 10 subscribers can form a society or a group and together buy housing units from public or private builders.

However, members need to have at least three years of service experience to join the scheme.

The retirement body will then sanction 90 percent of the provident fund principal and interest or the acquisition cost of the property, whichever is lower. The members also have option of paying equal monthly installment (EMI) of the loan – wholly or partly.

In case, a member ceases to exist or where amount to pay EMIs is not sufficient, EPFO will not be held responsible.

“If the withdrawal or finance granted exceeds the amount actually spent for the purpose for which it was sanctioned, the excess amount shall be refunded by the member to the fund in one lump sum within thirty days of the finalisation of the purchase or the completion of the construction of, or necessary additions or alterations to a dwelling house or flat,” the EPFO said in a notification.

Modi government plans policy overhaul to push electric vehicles

The scheme is in the final stages of drafting and proposes to bring private vehicles under its umbrella in the last lap of its implementation. The model is only meant for non-air-conditioned vehicles.

In an Elon Musk-like move, the Narendra Modi-led government plans switch introduce a programme meant to switch two- and three-wheelers and buses to battery power by 2030. The plan relies upon keeping off subsidies and depending on a battery leasing strategy. The scheme is likely to be rolled out in a couple of months and offers limited tax breaks for auto companies, The Economic Times reported Tuesday.

The proposed strategy, which encompasses selling vehicles without batteries, is in contrast to vehicle policies in the West and in countries like Japan and China. Prices may come down by 70 percent as part of the scheme which relies upon battery leasing. When leased batteries run out of charge, motorists can swap them at recharge stations, the report stated.

While Indian auto companies have shown interest toward the move which will be led by IIT Madras professor Ashok Jhunjhunwala, global companies favour other forms of hybrid technology, according to a senior government official mentioned in the report.

The scheme is in the final stages of drafting and proposes to bring private vehicles under its umbrella in the last lap of its implementation. The model is only meant for non-air-conditioned vehicles. According to the report, NITI Aayog is drawing up the fine print of the plan in which the road transport, power, petroleum and heavy industries are involved.

The Centre is expecting a cost benefit by switching to electrics. Let say, after paying up for battery and vehicle, a sedan which runs on internal combustion engine costs Rs 7 per km to run. In contrast, an equivalent electric vehicle will cost only Rs 1 per km to run.

Real Estate Regulation Act: How it will change the paradigm

RERA has been announced with the aim of increasing transparency and standardization in the real estate industry and its various stakeholders including buyers, developers, brokers and investors.

The Real Estate (Regulation and Development) Act (RERA), 2016 is less than a fortnight away from the deadline for state governments to notify their version of rules and bring in legislation for the same. Regulations which appear disruptive in the short term lead to sustainable expansion of the market over the long term. This has been demonstrated in the way SEBI has regulated capital markets over the past few decades. Regulators play a key role of removing unscrupulous players, promoting fair and healthy competition and instill confidence in buyers – all of which ensured the growth of that industry.

RERA has been announced with the aim of increasing transparency and standardization in the real estate industry and its various stakeholders including buyers, developers, brokers and investors. Measures such as sales based on carpet area, launching post all approvals, and ensuring project completion by the escrow mechanism will result in institutionalization of the real estate industry. The increased regulation will lead to consolidation and discipline in the sector with regards to on-time project delivery and financial prudence. The consolidation will also present opportunities of acquiring distressed assets to the organized developers with strong balance sheets. RERA also takes forward the government’s digital India vision by making it mandatory to put all project related details on the authority’s website, giving the customer more comfort.

The regulation will also lead to fewer new launches initially as a section of the industry adjusts to it. However established brands who were already in conformity would not be impacted and will benefit from healthier competition. As the trust deficit in the sector reduces, projects of reputed developers will experience increased demand. Thus a developer who manages an efficient development cycle and builds trust with the customer, will create a solid differentiator in the market place.

From the perspective of the home buyers, the RERA regime will instill more confidence in the mind of homebuyers with respect to three key elements: Firstly product, which includes specifications of apartment, building and overall project; secondly price i.e. total amount payable, timing of payment, and penalty for both buyer and developer due to delay; and lastly, completion time for delivery of apartment and project. From the perspective of real estate developers, meticulous and complete planning with regards to the product design, approvals and resources before launch of any project will become mandatory and a key success driver under the regulation.

There will be a strong requirement on developer’s part to tie up the required finances before they start sales of units, and this is where institutional capital will play a key role. The amount of housing required in India is so huge that formal funding of the industry will grow many folds in next few years. Private Equity players, NBFCs and banks will have higher confidence to provide capital to developers since all the necessary permits will be in place and completion of a project in committed time period will become a norm rather than exception. This should result in lower cost of equity as well as debt for real estate developers. The implementation of RERA would require thorough reassessment of risk viz. business, regulatory, market and operational amongst the developer fraternity. Therefore RERA signifies the dawn of a new era for the Indian real estate sector.

Tata Steel board approves raising Rs 9,000 cr via debt securities

“The Board of Directors…based on the review and pursuant to the existing shareholders approval, approved issue of debt securities of up to Rs 9,000 crore in the form either of Non-Convertible Debentures on private placement basis or Foreign Currency or Rupee Denominated Bonds or a combination thereof in one or more tranches,” the company said in a filing.

Tata Steel board has given its approval for issuing debt securities worth up to Rs 9,000 crore to meet working capital requirements and general corporate purposes.

“The Board of Directors…based on the review and pursuant to the existing shareholders approval, approved issue of debt securities of up to Rs 9,000 crore in the form either of Non-Convertible Debentures on private placement basis or Foreign Currency or Rupee Denominated Bonds or a combination thereof in one or more tranches,” the company said in a filing.

The funds will primarily be deployed towards re-financing the existing debt, capex and working capital requirements and general corporate purposes.

The development assumes significance as there are media reports saying Tata Steel is planning a one-time settlement of USD 663 million to its UK pensioners under a new scheme called the Regulated Appointment Arrangement.

“The Board of Directors also authorised the Finance Committee of the Board to determine and approve the timing and terms of such issue of securities,” the filing said.

“This disclosure is made in compliance with Regulation 30 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015,” it added.