Deceptively quick, India’s economy seen staying course as global pacesetter

Having completed three years in office last week, Prime Minister Narendra Modi could view the gross domestic product figures with some satisfaction after the doubts raised by his shock decision last November to scrap high-value banknotes in a move to flush out all the money Indians hide from the taxman.

India is set to hang onto its status as the world’s fastest growing major economy thanks to stronger consumer demand, if data due out later on Wednesday matches economists expectations for a 7.1 percent year-on-year expansion in the March quarter.

Having completed three years in office last week, Prime Minister Narendra Modi could view the gross domestic product figures with some satisfaction after the doubts raised by his shock decision last November to scrap high-value banknotes in a move to flush out all the money Indians hide from the taxman.

That move pounded consumer demand. But the setback to an economy where most people are paid and buy what they need with cash appears to have been mercifully shortlived.

“The initial impact of demonetisation was not as strong as was feared,” said Shilan Shah, an economist at Capital Economics in Singapore. “Consumer spending just got delayed, it didn’t get abandoned.”

The injection of new banknotes as well as robust demand generated by the traditional wedding season and people buying fridges and air conditioners to cope with a blistering heatwave have since led a rebound in consumer spending, which fuels more than half of India’s economic growth.

The median forecast from 35 economists polled by Reuters put annual GDP growth for the January-March quarter at just tad faster than 7.0 percent posted in the previous quarter, but still ahead of the 6.9 percent expansion clocked by China during the same period.

Forecasts ranged from 6.5 to 7.8 percent.

The federal statistics office will release the figures at 1200 GMT.

A stronger growth outturn will support the Reserve Bank of India’s (RBI) forecast of a V-shaped recovery from the cash clampdown. Analysts expect the RBI to keep interest rates on hold at its upcoming monetary policy review next month.

GOOD OMENS, LINGERING DOUBTS

India doesn’t publish national figures on retail sales, but high-frequency indicators such as car sales, retail lending and goods imports show consumer spending has roared back to life.

Analysts still worry over India’s uneven growth and ground realities, notably subdued private sector investment and a state banking sector laden with bad debt.

But monsoon rains arrived early in the country’s south this week, raising prospects of bountiful harvests that will boost farm incomes. And with government pay hikes also in the works, the outlook for a sustained recovery looks good.

The expected introduction of a nationwide goods and services tax in July, replacing multiple state taxes, should also spur growth by making India an easier place to do business.

A stronger global economy has boosted demand for exports of Indian goods also. And the combination of buoyant external and domestic demand should underpin a recovery in the industrial sector and lift low capacity utilisation at Indian factories.

Economists are reluctant, however, to take India’s GDP figures at face value after a change in methodology two years back that transformed a sluggish economy into a world-beater overnight.

Shah reckons economic growth could be overstated by as much as 150 basis points. By his estimate, real economic growth is nearer 6 percent.

The latest GDP data could add fuel to the debate as it will rely on newly rebased indices for wholesale prices and industrial production, which analysts say will increase chances of the headline growth figure surprising on the upside.

Why you need to link your Aadhaar and mobile numbers to ‘stay active’

Telecom operators such as Airtel and Idea have started sending SMSes to existing subscribers asking them to link their Aadhaar and mobile numbers.

Two months after the government made Aadhaar mandatory for getting a new SIM card, telecom operators such as Airtel and Idea have started sending SMSes to existing subscribers asking them to link their Aadhaar and mobile numbers.

In March, the Department of Telecom (DoT) had directed mobile service providers to finish the e-KYC re-verification of existing subscribers  - prepaid and postpaid – by February 6, 2018.

There is no clarity yet on whether unverified numbers will be discontinued after that date, but Airtel has now put out ads at its stores reading: “Link your Aadhaar card to you number now to stay active!”

The March notice came after the Supreme Court said that all phone numbers in India need to have verified users.

In February, DoT met with UIDAI, the Telecom Regulatory Authority of India (TRAI) and Prime Minister’s Office to discuss way forward for the implementation.

According to the DoT note, telecom operators would have to intimate customers through advertisements and SMSes.

SMSes are also being circulated telling subscribers to visit a company store with their Aadhaar card and phone number details, after which fingerprint verification will be carried out and the entire process will be completed in 24 hours.

Other operators are also expected to follow suit.

The step comes amid efforts from the government to make Aadhaar the sole proof of identification, even as a legal battle continues over whether the 12-digit identification number is voluntary or mandatory.

Private banks under ICAI scanner for misreporting bad loans

The apex body of chartered accountants, The Institute of Chartered Accountants of India (ICAI) sought information from the Reserve Bank of India (RBI) regarding divergence in bad loan estimates by the top private sector banks, reports livemint.com.

The apex body of chartered accountants, the Institute of Chartered Accountants of India (ICAI), sought information from the Reserve Bank of India (RBI) regarding divergence in bad loan estimates by the top private sector banks, reports livemint.com.

The report said that the 2015-16 financial statements of Axis Bank and Yes Bank’s will be taken up for review by ICAI’s Financial Reporting Review Board (FRRB). FRRB may also undertake a review of ICICI Bank’s financial statement.

RBI has carried out an inspection of banks’ book and found significant divergence in the asset quality classification in their financial reports.

If the divergence exceeds 15 percent then banks have to make a disclosure in their financial statements, RBI told banks last month.

Yes Bank in its 2016-17 annual report classified bad loans of Rs 748.9 crore, whereas RBI pegged the number higher by Rs 4,176 crore, a variation of 558 percent. Similarly, Axis Bank’s bad loan were higher by Rs 9,478 crore and ICICI Bank by Rs 5,105 crore from the disclosure made in the annual report.

RBI typically conducts inspection audits after a bank has released its annual results and a statutory audit has taken place. Experts were quoted as saying that while it is not odd for the RBI to point out divergences, this is the first time that the regulator has asked lenders to make this public.

PM Modi welcomes surveys on his govt’s performance

Prime Minister Narendra Modi considers media surveys and polls a healthy exercise.

Prime Minister Narendra Modi welcomed the analyses being done in various media fora about his three-year-old government’s performance, saying “constructive criticism strengthens the democracy.”

He said some appreciated his government’s work, some supported it while others highlighted drawbacks.

He appreciated this exercise conducted over the last month in the run-up to his government’s three year anniversary on May 26. He said that he believes that in a democracy the government should be answerable.

“For a lively democracy, such exercises are immensely important,” the prime minister said in his monthly radio programme ‘Mann Ki Baat’.

He noted that the surveys have assessed his government’s performance on all fronts and said it was a “great exercise”.

“Three years back, you (people) had given me the responsibility of the ‘pradhan sevak’ (prime servant). There have been several surveys and opinion polls. I consider this entire exercise healthy,” Modi said.

“I thank those who have given critical and important feedback…. I greatly value such exercises… It provides an opportunity to correct the weaknesses and the drawbacks that may be there,” Modi said.

GST estimated to create 3 lakh new jobs by 2019

While the government has not released any official statement on the jobs that will be created by GST, human resource consultants believe that between 2,00,000 to 3,00,000 jobs will be created in the next two to three years.

The Goods and Services Tax (GST) regime is expected to create almost 300,000 new jobs in the industry in the areas of compliance, data management as well as logistics. GST as a new tax structure will be implemented in the country from July 1.

While the government has not released any official statement on the jobs that will be created by GST, human resource consultants believe that between 200,000 to 300,000 jobs will be created in the next two to three years.

Lohit Bhatia- Business Head, IKYA Human Capital said, “On an immediate basis, our understanding is that GST will contribute to a direct employment of lakhs of youth in IT and finance side; to create systems to enable over 8,00,000 companies for GST rollout and invoicing.”

He added that the savings on logistics by fast-moving consumer durables, fast-moving consumer goods, logistics companies and e-commerce companies will result in greater investment by them towards employment generation.

GST is a mammoth tax reform that has been cleared by the GST Council that had representatives from every state. This include subsuming several local taxes, service tax and value-added tax under one holistic rate of taxation.

On one hand, while several jobs are being lost in sectors like IT and telecom, consultants expect that many more will be created due to GST. A large mass recruitment company said that a big chunk of the demand has started coming from public sector entities who do not have the requisite manpower to deal with the technology upgradation and movement to a new system.

It is anticipated that the need to make cash-based payments will be eliminated and a complete system for digital payments will be enabled. This will require individuals who are well versed in payment technologies and machinery to be hired by organisations.

Bhatia also said that the necessity of GST to require invoicing at each stage by the supply chain and business to avail the cenvat or inputs tax credits will mean a further flip to digital and formal economy. He said that this would lead to higher declaration of income, turnovers, and profits leading to increased taxation and employment by these companies.

Institutes, which offer niche courses in banking technology and payments, are expected to see a surge in demands from recruiters as also traditional technology strong institutions like Indian Institutes of Technology, Indian Institutes of Information Technology and National Institutes of Technology.

Over and above, smaller companies which had about 3-4 members in their tax and compliance teams are also expected to expand their team sizes giving opportunities to new graduates and chartered accountants.

Sad over recent IT layoffs, says Narayana Murthy

Infosys had announced that it could hand out pink slips to hundreds of mid and senior-level employees as it carries out bi-annual performance review amid a challenging business environment.

Founder Chairman of Infosys N R Narayana Murthy today expressed sadness over the IT companies laying off their employees as part of their cost cutting strategy.

“…It is sad…,” Murthy told in an email reply to a PTI query about recent IT layoffs.

Murthy, however, did not elaborate on the matter.

Infosys had announced that it could hand out pink slips to hundreds of mid and senior-level employees as it carries out bi-annual performance review amid a challenging business environment.

The development comes at a time when its peers Wipro and Cognizant are taking similar measures to control costs.

The US-based Cognizant had rolled out a voluntary separation programme for directors, associate VPs and senior VPs, offering them 6-9 months of salary.

Wipro, too, is learnt to have asked about 600 employees to leave as part of its annual “performance appraisal” even as speculations were that the number could go as high as 2,000.

According to executive search firm Head Hunters India, the job cuts in IT sector will be between 1.75 lakh and 2 lakh annually for next three years due to under-preparedness in adapting to newer technologies.

A report submitted by McKinsey & Company at the Nasscom India Leadership Forum said, nearly half of the workforce in the IT services firms will be “irrelevant” over the next 3-4 years.

IT companies have been one of the largest recruiters in the country. However, they have warned that increasing automation of processes would lead to reduction in hiring in coming years.

While the outsourcing model has placed India on the global map, increasing scrutiny and rising protectionist sentiment are also posing challenges for the USD 140 billion Indian IT industry.

Companies are now working towards reducing their dependence on work visas and instead hiring more locals to ensure continuity of work for clients, even though it impacts their margins.

Govt mulls incentives for exporters as GST will do away with exemptions

Exporters fear that the tax refund policy after GST’s rollout will increase their capital cost, locking up large amounts of funds till actual trade takes place

The government may offer incentives to exporters to offset potential losses after goods and services tax (GST) kicks in from July, which will do away with a string of exemptions that traders currently enjoy.

“The Directorate General of Foreign Trade (DGFT) is considering allocation of resources or ways to incentivise exporters (after implementation of GST from July 1) in some manner.

Exporters had sought DGFT’s intervention as they fear that the proposed policy for tax refunds after GST’s rollout will increase their capital cost, locking up large amounts of funds till actual trade takes place.

Under the advance authorization scheme of the Foreign Trade Policy (2015-20), exporters get duty free import of inputs required for export production.

With the implementation of GST, these exemptions would cease to exist and the exporters will have to pay Integrated GST (IGST) at the time of importing raw material and intermediate products.

According to the GST Council’s proposal, exporters would get 90 percent of the tax refund within six to ten days. In addition, an interest of about 6 percent will be given to the exporters for any delay by the government.

The remaining 10 percent of the refund will be paid after the revenue department completes the scrutiny of exports.

Earlier this month, a team of commerce ministry officials including the Commerce Secretary Rita Teotia had taken up this matter with revenue department.

The department, however, is not in favour of any exemptions once GST is rolled out, the official said.

Exporters have been demanding exemption from payment of taxes under the GST as processing of refunds generally takes few months, which will eventually block their working capital.

The revenue department also did not approve DGFT’s proposal to create an e-wallet facility for virtual payment of taxes, under which a firm can pay taxes after a year or at a time when goods are exported, or whichever is earlier.

The official further said that DGFT now has to carefully look at certain aspects before finalising the incentives for exporters, especially the small and medium enterprises.

“We will have to see which exporter has a longer manufacturing cycle, or who is using more money. In many cases, raw material could be procured locally. We will have to see which categories of exporters are compulsorily importing raw material for exports, which is not available in India and offer incentives accordingly,” the official said.

Big hikes for 4 top Infy execs amid efforts to address shareholders concerns

Presidents Rajesh Murthy, Sandeep Dadlani and Mohit Joshi, and deputy chief operating officer Ravi Kumar S each received more than Rs 14 crore in 2016-17, according to a report in The Economic Times.

Months after promoters’ concerns over high compensation to top Infosys executives triggered a public row with the company’s Board, it has emerged that four senior managers received a 50 percent salary increase in the year gone by.

Presidents Rajesh Murthy, Sandeep Dadlani and Mohit Joshi, and deputy chief operating officer Ravi Kumar S each received more than Rs 14 crore in 2016-17, according to a report in The Economic Times.

The hikes can be attributed to the company’s policy of executive compensation based on variable pay and stock incentives. Infosys considers it a tool to make the company more productive.

The report also stated that minus stock incentives, the company’s top executives, including Chief Operating Officer Pravin Rao, saw their fiscal 2017 remuneration fall by 12-25 percent .

Meanwhile, the company is taking fresh measures to ensure that shareholders’ concerns are heard and addressed.

Infosys has adopted a new charter for its board committee that handles its relationship with various stakeholders, according to a report in The Times of India.

While the panel has been in place a while, it now has a fresh mandate to review and redress grievances from debenture holders, shareholders, employees, vendors and customers.

It is also empowered to redress whistleblower and internal complaints and will provide feedback on how the company deals with grievances.

The committee, which will meet four times a year, comprises four independent directors. It is chaired by Jeffrey S Lehman, while John Etchemendy, Ravi Venkatesan and DN Prahalad are the other members of the board.

Law firm Cyril Amarchand Mangaldas was earlier tasked with a similar job, and is currently in the process of creating a new governance code.

In February, questions over high payouts to current and former employees triggered a row between the board and the company’s founders. The saga played out over a fortnight before an uneasy truce was called.

Five of the seven original founders —Murthy, Nandan Nilekani, SD Shibulal, Kris Gopalakrishnan and K Dinesh—are categorised as promoters of the company. Together, they own a 12.75 percent stake in the company.

At the heart of the concerns were high payouts to top-level personnel, including Chief Executive Officer Vishal Sikka.

The founders also raised question marks over the severance packages given to former Chief Financial Officer Rajiv Bansal and General Counsel David Kennedy.

The issue resurfaced again in April with former CEO NR Narayana Murthy questioning the 35 percent salary hike to Chief Operating Officer UB Pravin Rao.

 

India does not impose partnerships on others: Arun Jaitley

Jaitley compared India’s investment in African nations with China and added that India is amongst the most important emerging investors in Africa today.

Making a pitch for stronger ties with African countries, Union Finance minister Arun Jaitley today said India does not believe in imposing partnerships on other nations and leaves it on partners to take a call on alliance.

Jaitley compared India’s investment in African nations with China and added that India is amongst the most important emerging investors in Africa today.

Speaking at the opening session of the 52nd African Development Bank Group (AfDB) Annual Meetings, here, Jaitley exuded confidence that India-Africa together can shape the future of the world.

“India-Africa cooperation is not an one-off event. This has been central to our strategical policy, and over the last several years, the present government (at the Centre) has provided a fresh impetus to this efforts,” said Jaitley at the session themed “Africa India Cooperation”.

“Our partnership model is unique. Being an emerging economy itself, we understand that a prescriptive model of partnership does not work. Therefore, the cornerstone of our policy is voluntary partnership,” he said.

“It is demand driven and devoid of any conditionality. We do not impose, and leave it on our partners to decide what is best for them. We believe that this is the most effective way to build partnership,” said Jaitley.

“India’s share of announced investments in the greenfield projects in Africa grew from 3.3 per cent during 2003-08 to 6.1 per cent in 2009-15. During the same time, China’s share shrunk from 4.9 per cent to 3.3 per cent,” said the minister.

“In 2014, BRICS nations, including India and other emerging economies accounted for nearly one half of Africa’s total exports to the world. In 2015, Africa was second fastest growing region in the world after Asia. I believe that India and Africa together can shape the future of the world,” he added.

The session was attended by several dignitaries, including Economic Affairs Secretary Shashikanta Das and President of African Development Bank, Akinwumi Adesina, among others.

Talking to reporters ahead of the session, Adesina admitted that African nations are experiencing slow down at present due to falling commodity prices.

“African economy was growing at 5 per cent in the last decade. But, due to the decline in commodity prices, growth has slowed down. Last year, African economy grew at 2.2 per cent. Our projections suggests that it will grow at 3.4 per cent this year,” said Adesina.

He also said African nations are looking forward for stronger ties with India to become self sufficient in terms of food production.

“We want to make agriculture a sustainable business. Thanks to political will, India became self sufficient in food production in just 3 years. Thus, we draw inspiration from India and adopt Indian practises,” he added.

Wipro looks to trim workforce by 10% in FY18, asks managers to find poor performers

The managers said the HR had asked them to identify the bottom 10 percent during appraisals which concluded in April.

Wipro, India’s third-largest IT services company, is looking to reduce its workforce by 10 percent this year. Wipro currently employees close to 1.8 lakh people.

Internally, the project is code-named B10 (Bottom 10 percent). The managers said the human resource department had asked them to identify the bottom 10 percent during appraisals which concluded in April. The company last year introduced a quarterly appraisal system.

When asked about this, Wipro denied the development, but refused to give the actual percentage of employees it was likely to fire due to performance-related issues.

“These rumours have no basis,” the company said in an e-mail response.

Appraisals closed at the end of April but managers claim that the decision to weed out 10 percent was taken prior to that. Managers have been told to give a low rating of 2 out of 5 to the employees identified as the bottom 10 percent.

They said the company is focusing on people in the middle management and those in a salary band upwards of Rs 10 lakh per annum. In many cases, managers were given a list of names they had to seek resignations from. Some of the managers claim that they tried to resist, but had to back off when the HR department read the riot act.

It’s not just employees in India that are affected: Several engineers onsite have been recalled and asked to resign.

It may be recalled in 2015, former CEO TK Kurien had said at an analyst meeting in Frankfurt that Wipro was looking to reduce headcount by around 47,000 over three years as many processes would be automated. In an interview to NDTV at Davos, Kurien had cautioned that the middle management was most vulnerable, as the traditional offering of application, maintenance and development work would shrink to less than one-third of total revenues in five years’ time. Wipro had roped in McKinsey in 2015 to help automate processes across industry verticals so that costs to clients could be reduced.

Like Cognizant, Wipro, too, is not formally sacking staff or putting people on notice for non-performance. The company is asking people to resign voluntarily and accept two months’ salary, the managers said. Several employees who have been asked to resign are refusing to do so as they believe the company needs to pay a severance package if it wants them to go.

Many of those who have been identified as poor performers claim that they are only being given two months of basic pay, which is very low considering the number of years they have spent in the company.

In fact, many employees have also shared their past performance appraisals with this correspondent to show that they were rated highly till last year, and now have been put in the underperformers’ list.

When asked why the company was asking employees to resign rather than asking them to go if performance was an issue, the company’s response was: “Wipro undertakes a rigorous performance appraisal process on a regular basis to align its workforce with business objectives, strategic priorities of the organization and requirements of our clients. This systematic and comprehensive performance evaluation process triggers a series of actions such as mentoring, retraining and upskilling. Regular feedback and multiple opportunities are provided for improving performance. The performance appraisal may also lead to separation of some employees from the company and these numbers vary from year to year.”

Wipro had kicked off an ambitious project to automate some of the basic processes, which are typically addressed by L0 and L1 category of employees (0 to 2 years experience). The company had roped in McKinsey in 2015 for this purpose.

A team of 50 people was identified who would lead the company’s ambitious foray into a digital services space, where automation would be a key factor. However, the company has not managed to achieve its automation target and now it needs to cut costs, said one senior manager who was part of the team overseeing this project.