Indian Economy : News,Discussions & Updates

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India may let foreign investors buy up to 20% in LIC IPO- source

By Aftab Ahmed and Nupur Anand
September 22, 20211:20 PM IST
View attachment 21087
An exterior view of Life Insurance Corporation of India's (LIC) headquarters is seen in Mumbai September 18, 2014.

NEW DELHI, Sept 8 (Reuters) - (This September 8 story corrected first paragraph to show plan refers to purchases in the IPO, not of the company)

The Indian government is considering allowing foreign institutional investors to buy up to 20% of state-owned Life Insurance Corporation's initial public offering, a government source said on Wednesday.

The listing of LIC is set to be India's biggest ever initial public offering, with the government aiming to raise up to 900 billion rupees ($12.2 billion) from its stake sale.

At present, even though foreign institutional investors are allowed to hold up to 74% of private insurance companies and up to 20% of state-owned banks, they are not permitted to own shares in LIC.

Enabling this would allow foreign pension funds, insurance companies and mutual funds to participate in the IPO of India's largest life insurer.

The government is keen to complete the listing this financial year to help with budgetary constraints and late last month selected 10 merchant banks out of the sixteen that had bid to kick-start the process. read more

In total, the merchant banks will earn a fee of around 100 million rupees ($1.36 million), higher than the token fee charged on some IPOs of state-owned firms in the past, but still significantly lower than fees for private listings.

For instance, food delivery startup Zomato paid $31 million in fees for listing earlier this year, according to Dealogic.

The low fee, however, has not been a deterrent, with nearly all the major banks barring Morgan Stanley queuing up.

"We can’t care less about what is the money that is being offered. It is the biggest IPO in recent times and will be probably the biggest, say for another 5 years," said a merchant banker.

India may let foreign investors buy up to 20% in LIC IPO- source
So it begins, seems India finally succumbed to the pressure.
 

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World-Beating Rally Pushes India’s Sensex to Record 60,000

By Nupur Acharya
September 24, 2021, 4:20 PM GMT+5:30
  • Global funds bought $9b stocks, set for third year of inflow
  • UBS Wealth says macro, earnings recoveries largely priced in

India’s main stock indexes surged to unprecedented levels on optimism that speedier vaccinations will improve demand for businesses in Asia’s third-largest economy, even as concerns mount over whether valuations have become too rich.

The S&P BSE Sensex rose 0.3% to close above the 60,000-level for the first time on Friday and the NSE Nifty 50 Index neared the 18,000-mark. The Sensex has more than doubled from its pandemic lows hit March 2020, to become one of the best performers among major markets during the period.

The world-beating stock rally is fueled by millions of first-time investors, willing to buy riskier assets as the central bank’s record-low policy rates reduce returns from traditional saving avenues like bank deposits. Global funds are riding the wave, having poured nearly $9 billion into Indian stocks, set for a third straight year of net inflows. That compares with outflows from countries like South Korea and Malaysia.

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“Investors have to be a little selective now,” said Gurmeet Chadha, who co-founded wealth management firm Complete Circle Consultants Pvt. With key equity gauges trading above their long-term averages and Indian stocks’ valuation reaching 1.3 times the country’s GDP, “clearly some caution is warranted,” he added.

Bulls point to an easing pandemic that could fuel even greater gains. New infections in India have held steady since about July, with the bulk of cases coming from just two states. The pace of vaccinations has picked up, with almost 45% of people in the world’s second-most-populous country having received at least one dose and 15% fully vaccinated.

Most states have lifted lockdown curbs, improving prospects for businesses’ demand and profits ahead of the key festival season starting next month. Earnings for India’s top 50 companies are estimated to rise 27% in the current financial year.

More cautious investors note that the Nifty is trading at close to 23 times its estimated 12-month earnings, well above its five-year average of about 18 times, and much higher than the MSCI Emerging Market Index’s multiple of 13.

On Friday, the Sensex failed to hold initial gains of as much as 0.8%. The broader market was mixed with 12 out of the 19 sector sub-indexes compiled by BSE Ltd. declining, led by a gauge of metal companies. For the week, the Sensex and Nifty’s gains stood at 1.8% and 1.5%, respectively.

Risks are also rising for the economy; a retreat for the Nifty 50 Index would reduce gross domestic product by 1.4% in the same quarter of the shock and by 3.8% over the following year, Ankur Shukla, an economist with Bloomberg Economics, wrote in a recent note.

UBS Group AG’s wealth management arm is downgrading Indian equities to neutral from most preferred as “the country’s fast macro and earnings recoveries are largely priced into the market’s very rich valuation,” Adrian Zuercher, head of global asset allocation, wrote in a report.

The markets may face a test as early as next month if the Reserve Bank of India is hawkish in its statements or actions following a monetary policy review. Traders are seeing hints that the authority is seeking to drain record liquidity from the banking system, another sign that the global flood of pandemic-era easy money may begin to ease.

“The market cannot continue to go one way up,” said A. Balasubramanian, CEO of Aditya Birla Sun Life AMC Ltd., which on Thursday announced pricing of its initial public offering. “Market will see some correction but longer term outlook for the equity market remains very positive.”

— With assistance by Ishika Mookerjee, and Ashutosh Joshi

Bloomberg - Are you a robot?
 
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Is India’s market-cap headed towards $5 trillion ?

By Lokeshwarri SK | Updated on September 22, 2021

New, tech-savvy investors with higher tolerance for risk can make the rapid expansion of market cap possible
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There was much celebration when the market capitalisation of Indian exchanges crosses the $3 trillion mark this May. In the four months since then, stocks have continued to surge despite lingering concerns about the pandemic and the Damocles sword of US Fed’s monetary tightening hanging over the market; current market cap is about 15 per cent higher, at $3.47 trillion.

A recent global strategy paper by Goldman Sachs however estimates that India’s market cap will increase to $5 trillion by 2024. The writers of the report have based this projections on the slew of IPOs set to hit the domestic market in the coming years. But there are couple of other changes taking place in Indian markets that makes this target achievable, albeit at a later date than that projected.

One, a large wave of new investors who are tech savvy and more prone to taking risk are overrunning the older set of more conservative investors. Two, the economy itself is undergoing transformation with most consumer-facing services and products going online, creating growth opportunities for technology firms and businesses. The three factors taken together have brought Indian markets to an inflexion point which can eventually take it towards the $5 trillion milestone.

2021, a watershed year

If 2020 was marked by a set of new investors, who traded online while working from home, entering the market, 2021 is reinforcing this trend further. While the new investors were testing the waters in 2020, they have tasted blood now, given the doubling of most stock prices since last March lows. The continuation of the rally this year seems to be luring more investors, who are game for risk.

This is reflected in the numbers given by the SEBI chief in a recent speech.

In FY20, an average of four lakh new demat accounts were opened every month. This tripled to 12 lakh/month in FY21. This number has jumped stupendously to 26 lakh new accounts every month in the current financial year.

Individual investors’ average share in daily cash market turnover has increased to 45 per cent in FY21 and FY22 from 39 per cent in FY20. Retail holding in stock markets has increased to 9.3 per cent towards the end of June quarter this calendar from 8.3 per cent towards the end of the corresponding quarter last year.

Retail investors are also taking the indirect route to investing in stocks, via mutual funds. About 51-53 lakh SIPs were added in FY20 and FY21. But FY22 has already surpassed the previous two fiscals with additions of around 59 lakh new accounts in the first five months.

In terms of trading turnover as well, 2021-22 is turning out to be outstanding. The average daily turnover in equity futures and options amounted to ₹51-lakh crore this fiscal year, compared with ₹25-lakh crore in FY21 and ₹13-lakh crore in FY20. The turnover figures are inflated because notional value of options contract is considered instead of the premium turnover, but the jump is evident in the numbers. The average monthly turnover in the cash segment has also been higher in FY22, at ₹15-lakh crore, compared with ₹13.7-lakh crore in FY21 and ₹8-lakh crore in FY20.

One gets a strong feeling that the Indian stock market, as we know it, is undergoing a change and the old order is giving way to the new.

Zomato, the inflexion point ?

The dramatic change in retail participation this fiscal year seems to have been triggered by the IPO frenzy in July and August this year, led by the Zomato IPO. The offer worth ₹9,375 crore garnered subscription worth around ₹3.5-lakh crore. There was a virtual stampede for the issue with the non-institutional investor segment witnessing over-subscription of 33 times and the QIB portion getting oversubscribed to the extent of 52 times.

With funds worth almost ₹3.4-lakh crore not utilised in the Zomato offer, investors who could not get allotment began making a beeline for other IPOs with offers such as Tatva Chintan (oversubscribed 180 times) and GR Infraprojects (oversubscribed 102 times) attracting massive amounts of funds.

The IPO rush has made a difference to the underlying nature of Indian markets. The flurry of demat accounts opened this fiscal year shows that many new investors have debuted in stock markets with the Zomato IPO. These investors have greater penchant for risk and higher tolerance towards loss-making new economy companies compared to the traditional Indian investor. The presence of these investors bodes well for the upcoming IPOs of digital companies.

Goldman Sachs’ projections

The Goldman Sachs report, ‘Indian equities: Digital transformation as private goes public’, is betting on these digital IPOs and companies to drive market cap expansion in the years ahead. The report says that around 150 private firms could list over the next 2-3 years, adding $400 billion to the market capitalisation. It expects India’s market cap to increase to $5 trillion by 2024, making it the fifth largest market.

The authors of the report argue that the Indian market is dominated by old-economy sectors with listing age of Indian companies exceeding 20 years. The inclusion of new economy stocks could take the share of these stocks to 16 per cent from 5 per cent. Since these stocks trade at far higher valuation and have potential for faster growth, the valuation of Indian markets will expand, taking the market cap towards the $5 trillion mark.

Changing contours of economy

The factors discussed above can make the predictions of Goldman Sachs report come true. However, the time frame that the writers have set out looks tough to achieve.

They are overlooking the fact that the current IPO frenzy is also due to the secondary market conditions. If there is a sharp correction in the secondary market, the appetite for IPOs will also evaporate, and the offers in the pipeline will be postponed until market conditions improve. So achieving $400 billion of market cap through IPOs in the next two years appears a tall ask.

That said, the structural shift in the quality of investors along with changing consumer behaviour brought about by the pandemic will make the new economy companies grow fast and approach the stock market for listing, increasing their market share over the years. Higher valuation multiples could become the norm for Indian equities not just due to the kind of companies listed on it but also due to the change in investor behaviour.

Is India’s market-cap headed towards $5 trillion?

I'll never understand why the BSE's market cap is considered the total size of the Indian stock market. NSE's $3.1 trillion+ market cap is ignored in such measurements. Anyway we currently have the 6th largest largest stock market.

If the projections are right by 2024 we will be the 5th largest market, overtaking UK ($3.68 trillion currently). If the political instability in Hong Kong ($6.52 trillion currently) cause an exodus of foreign money we can overtake Hong Kong too.

The 1,2 & 3 positions are taken up by the US ($51.3 trillion), China ($12.42 trillion) & Japan ($7.43 trillion). We can probably displace Japan by 2030. US & China are going nowhere.
 
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GST collections hit five-month high, Govt says shows economy recovering​

Gross Goods and Services Tax (GST) revenue collections in September — for sales in August — rose to a five-month high of Rs 1,17,010 crore, up 22.5 per cent year-on-year, according to latest data.

Although the pace of revenue growth slowed from the previous month due to a waning low base effect from last year, average monthly GST collections in the second quarter this year (Rs 1.15 lakh crore) improved by 5 per cent from the first quarter (Rs 1.10 lakh crore).
Also Read |Explained: What does rise in GST revenue collection indicate?

Also, monthly collections have continued to improve due to a pickup in economic activity, alongside increased compliance by vendors of bigger companies. This is expected to improve going ahead due to the festive season.

Significantly, a majority of key manufacturing states, including Karnataka, Maharashtra and Tamil Nadu, reported a growth of over 20 per cent compared to last year.

“This clearly indicates that the economy is recovering at a fast pace. Coupled with economic growth, anti-evasion activities, especially action against fake billers, have also been contributing to the enhanced GST collections. It is expected that the positive trend in the revenues will continue and the second half of the year will post higher revenues,” the Finance Ministry said in a statement.

GST revenue had grown 29.6 per cent YoY in August — it came in at Rs 86,449 crore in August 2020, after which it rose to Rs 95,480 crore in September 2020. In September 2020, GST revenues had grown 4 per cent over the revenue of Rs 91,916 crore in September 2019.

Yet, overall revenue buoyancy under GST is seen as a concern, especially after the legally mandated compensation to states for revenue shortfall from GST implementation comes to an end in June 2022.

The Finance Ministry had recently constituted two ministerial panels as the first step towards the first structural overhaul after its July 2017 rollout. A “review” of the current slab structure has been incorporated in the Terms of Reference (ToR) of the panels, according to an order dated September 24.

The panel’s brief incorporates an overarching mandate: an evaluation of “special rates” within the tax structure, rationalisation measures that include “a merger of tax rate slabs aimed at simplifying the rate structure”, a review of instances of inverted duty structure and an identification of potential sources of evasion.

The GST has five key tax slabs: zero, 5 per cent, 12 per cent, 18 per cent and 28 per cent along with 0.25 per cent and 3 per cent rate for precious/ semi-precious stones and gold/ silver, respectively. A compensation cess, ranging between 1 per cent to 290 per cent, is levied on demerit and luxury goods over and above the topmost rate of 28 per cent.

A merger of 5 per cent and 12 per cent slabs or 12 per cent and 18 per cent slabs has been deliberated upon earlier as well but has not been taken up formally for a decision.

Out of the total Rs 1.17 lakh crore collection in September, CGST is Rs 20,578 crore, SGST is Rs 26,767 crore, IGST is Rs 60,911 crore (including Rs 29,555 crore collected on import of goods) and cess is Rs 8,754 crore (including Rs 623 crore collected on import of goods).
The Centre has also released compensation of Rs 22,000 crore to states.

M S Mani, Senior Director, Deloitte India said: “The GST collection figures indicate that growth of the economy is leading to stable collections, which would help in achieving the fiscal deficit target of 6.8% of GDP. Most of the key manufacturing states reporting a growth of 20% plus compared to last year does indicate that an economic revival is clearly in progress across key states.”

Pratik Jain, Partner, Price Waterhouse & Co LLP, said: “Apart from the economy doing better and anti-evasion measures of the government, many large companies are nudging their vendors to be more compliant. In many cases, the payment of vendors is linked with updating of their invoices on the GST portal and timely filing of returns.”
 
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India to become the world’s Largest Digital Market​

India to become the world’s Largest Digital Market
Is it fair to compare countries on the basis of data and indexes? Normally, kinds of indexes do not take into account population, level of industrialization, history, geography and similar factors. This way, comparing India and China and USA might be very unfair. Sometimes absolute numbers are compared, and they too have their own drawbacks.
For example, see what happens if we take the Covid comparisons made on population basis. A fair relative comparison would tell you that India should have had 14 crore infections and 25 lakh deaths, if matched with that of the US. Instead, we had just 3.38 crore infections and under 5 lakh deaths.
Data and comparison debate apart, now India is poised to become one of the largest digital markets in the world. Addressing the second Global Fintech Fest-2021, Union Minister of Commerce and Industry Piyush Goyal said, “At 87 Per Cent, India has the highest FinTech adoption rate in the world against the global average of 64 per cent”.
According to a Commerce Ministry release, here are the details:-
• As of May 2021, India’s United Payments Interface (UPI) has seen participation of 224 banks & recorded 2.6 billion transactions worth over $68 Bn and the highest ever, more than 3.6 Bn transactions, in Aug’21.
• Over 2 trillion transactions were processed using the AePS (Aadhar-enabled payment system) last year.
• India’s FinTech industry came to the rescue of people at the time of pandemic, by enabling them to carry out critical activities from the safety of their homes, particularly during the lockdown & the 2nd wave of Covid.
• As Prime Minister Modi says, ‘every crisis can be converted into an opportunity’, now citizens do not have to go to the banks, the banks have come to their homes and on their mobile phones.
• India underwent a digital transformation in Mission Mode since the PM announced the Jan Dhan Yojana in his first Independence Day speech on assuming office, on 15th August 2014.
• More than 2 crore accounts were opened under the scheme, which has been considered a world record.
• JAM trinity, besides DBT, has brought in transparency, integrity and timely delivery of financial benefits and services to India’s vast population.
• JAM trinity has enabled India to leverage its technical capabilities for developing Fintech sector.
• The National Broadband Mission soon every village in India will have high speed internet and this power can be leveraged to make India a Fintech Innovation Hub.
• FinTech today has the potential to bring investments for mobile apps, e-commerce stores & several other digital infrastructures.
• Investment inflow in the Fintech sector which has gone up to $10Bn since it started in 2016 has the huge potential to “Up the Game”, it will simultaneously enhance customer experience. Your strength will be augmented by the world’s 3rd largest Startup ecosystem which is hungry for growth.
• The non-financial services sectors are also proactive in adopting FinTech solutions today.
• Indian MSMEs have also rapidly adopted FinTech solutions whether for credit, payments, accounting & tax filing.
• Government has recently launched the Open Credit Enablement Network (OCEN) & Account Aggregator (AA) framework. These enable formal credit flow to the most vulnerable segments, especially particularly small businesses, brings Ease for financial institutions to reach large segments, by lowering distribution costs and now institutions can give smaller loans, with short repayment cycles.
• India is today one of the fastest growing Fintech markets with more than 2,100 FinTechs.
• A lot of Indian Fintech markets are unicorns and India’s market is currently valued at $31 Bn, and expected to grow to $84 Bn by 2025.
So, what does it mean?
• Look deep. These numbers of transactions reflect not just the number of people engaged, but also the disposable income available to spend on those transactions.
• These data show that our middle class component is 28%. In absolute terms it is huge and it is growing fast. This might be the biggest news for the coming times.
• These numbers reflect that we have infrastructure, we have trained and educated manpower. It means that the world expects India to progress; it means that India will not only become largest Digital Market but also a largest producer of electronic digital products
• Let’s return to comparisons again. In 2014 the number of digital transactions in China was almost four times that in India. From then till now, China grew by six times. But with a scorching pace India jumped to number one position, and the immediate second China is with half of Indian transactions. This shows where the economic prophesies of 1990s and 2000s have gone wrong.
• As transactions grow more transparent and clean, it is bound to buoy up tax collections as well as encourage better and above the board business practices. As money from transactions get realised faster it also speeds up economic activity as cash is not frozen in clearance within the system.
And this India story survived twin waves of pandemic and recession.
 
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India's power consumption up 1.83% at 114.49 billion units in September​

India’s power consumption grew 1.83 percent in September to 114.49 billion units (BU), showing subdued recovery according to power ministry data.

In the entire month of September last year, the power consumption was 112.43 BU, higher than 107.51 BU in the same month in 2019.

Experts say the recovery in power demand and consumption in September 2021 remained subdued mainly because of heavy rains in the month.

They said that the power demand as well as consumption would improve in coming months and will show the impact of improved economic activities in the country as many states have eased lockdown restrictions.

They said that now the only fear is another wave of pandemic which may dampen the recovery.

The commercial and industrial power demand and consumption got affected April onwards this year due to lockdown restrictions imposed by states after the second wave of COVID-19 hit the country.

There are fears of another wave of the pandemic which may result in lockdown restrictions hitting commercial and industrial demand of power in the country, as per experts.

Peak power demand met or the highest supply in a day stood at 180.74 GW in September which is higher than 176.56 GW in the same month last year as well as 173.14 GW in the same month in 2019.

As per the revised data, in August this year, power consumption grew by over 17 per cent at 127.88 BU compared to 109.21 BU in the same month in 2020.

The second wave of COVID-19 started in the middle of April this year and affected the recovery in commercial and industrial power demand as states started imposing restrictions in the latter part of the month.

April 2021 saw year-on-year growth of nearly 38.5 per cent in power consumption.

Power consumption in the country witnessed 6.6 per cent year-on-year growth in May this year at 108.80 BU despite a low base of 102.08 BU in the same month of 2020.

As per the latest data, power consumption in June grew nearly 9 per cent to 114.48 BU, compared to 105.08 BU in the same month last year.

Power consumption in July this year grew nearly 9.4 per cent to 123.72 BU compared to 112.14BU in the same month a year ago.

Power consumption in February this year was recorded at 103.25 BU, compared to 103.81 BU a year ago.

In March this year, power consumption grew nearly 22 per cent to 120.63 BU, compared to 98.95 BU in the same month of 2020.

After a gap of six months, power consumption had recorded 4.6 per cent year-on-year growth in September 2020, and 11.6 per cent in October 2020.

In November, power consumption growth slowed to 3.12 per cent, mainly due to early onset of winters.

In December, it grew 4.5 per cent, while this was 4.4 per cent higher in January 2021.

India’s factory activity improves in September on sustained demand​

India's factory activity improved last month as a recovery in the economy from the pandemic-induced slump boosted demand and output, according to a private survey, but firms reduced headcount at the sharpest pace since May.

That recovery might continue for at least a few months, supported by ultra-easy monetary policy and continued fiscal spending.

A hike in the Reserve Bank of India's key interest rate looks to be a rare possibility until at least next fiscal year and India's government said earlier this week it would continue with its borrowing-backed spending to revive the economy.

The Manufacturing Purchasing Managers' Index, compiled by IHS Markit, rose to 53.7 in September from 52.3 in August, staying above the 50-level separating growth from contraction for the third straight month.

"Indian manufacturers lifted production to a greater extent in September as they geared up for improvements in demand and the replenishment of stocks," noted Pollyanna De Lima, economics associate director at IHS Markit.

"There was a substantial pick-up in intakes of new work, with some contribution from international markets.”


Improvements in both domestic and overseas demand saw new orders expand at a quicker pace in September and factories raised output at a significantly faster rate compared to August.


However, that failed to encourage factories to hire more workers - a much needed step to boost weak labour market conditions - and instead they reduced their workforce at the sharpest pace in four months.

"Companies continued to purchase extra inputs in September, but jobs were little changed over the month. In some instances, survey participants indicated that government guidelines surrounding shift work prevented hiring," added De Lima.

Meanwhile, after moderating in the first two months of last quarter input cost inflation hit a five-month high, partly driven by rising fuel prices, transportation costs and supply-chain disruptions.

But output prices increased at a weaker pace, indicating firms were only able to partially pass on the extra costs to customers.

Still, optimism about the year ahead improved slightly last month as a continued easing of pandemic mobility restrictions raised hopes for a further improvement in demand.
 
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India’s core sector grows 11.6% in August: Government data​

India’s Index of Eight Core Industries saw an 11.6 per cent rise to 133.5 in the month of August, according to the data released by the Ministry of Commerce & Industry.

The overall core sector growth during August last year was at -6.9 per cent, the data showed.

Coal production during the month of August increased by 20.6 per cent year-on-year, while the refinery production rose 9.1 per cent and electricity generation climbed 15.3 per cent on-year, the commerce ministry data showed.

This apart, steel production increased by 5.1 per cent in August, while cement production surged 36.3 per cent. Natural gas production rose 20.6 per cent.

Among the sectors which saw negative growth during the said period were crude oil, and fertiliser which fell 2.3 per cent and 3.1 per cent respectively.

So far, in the financial year 2021-22, the April-August growth of the core industries was 19.3 per cent against a contraction of 17.3 per cent during the same period year-ago.
 
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India's quarterly exports cross $100 billion-mark for the first time​

India reported $101.89 billion in exports in the quarter ending September, the ministry of commerce and industry said on Saturday. This is the first time that Indian exports have crossed $100 billion mark.


In September alone, the exports stood at $33.44 billion, according to government data. In August, the figure was $33.28 billion. The highest export amount in the second quarter was recorded in the month of July ($35.17 billion).

The total has now reached $101.89 billion, the data further showed.

In the first six months of the current financial year, exports from India touched $197 billion. The government has set a target of $400 billion for the financial year.
 

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Reading another set of high frequency numbers on the Indian economy​

What is the state of the Indian economy as it enters into the second half of the fiscal year 2021-22? One set of high frequency numbers on economic activity, such as the Purchasing Managers’ Index, Nomura India Business Resumption Index, etc., look good (see bit.ly/2YkH8E0).

But these numbers might not be telling us the entire story for two reasons. One, they are skewed towards the formal sector of the economy. And two, they do not take into account headwinds to growth from avenues such as external trade. This is why it makes sense to look at another set of statistics, which look at India’s external trade, capital investment, etc. Here are four charts that explain this argument.

Can exports lead the post-Covid growth story?

When the June quarter GDP numbers were released in August, there was a lot of enthusiasm about the role of exports in India’s post Covid-19 growth trajectory. There was a valid reason for this. India’s exports, at ₹7.68 lakh crore (in 2011-12 prices) in the June quarter were not just above the pre-pandemic level of ₹7.07 lakh crore of the June 2019 quarter, but also almost at par with the all-time high figure of quarterly exports (March 2019 quarter). That exports increased between the March and June quarters despite the disruption inflicted by the second wave of Covid-19, which led to a quarter-on-quarter decline in other macroeconomic aggregates, generated a lot of optimism around tailwinds from exports to overall growth.

A June analysis in these pages looked at the promise of export-driven growth in India and argued that any assessment about the net impact of foreign trade on GDP growth must include the role of imports as well (see bit.ly/3Fed6Tc).

The latest trade numbers underline this point. India’s trade deficit in September reached an all-time high of $22.9 billion, thanks to a sharp rise in imports, which jumped to a record $56.4 billion. While a rise in oil prices has played a big role in the rising deficit, it is not the only reason. Exports have stalled as well, triggering an increase in the non-oil deficit.

“The increase in oil imports was not due to price effects but rather reflects a sharp jump in import volumes, despite a more gradual domestic recovery. We believe this may have been due to lagged/bunched up oil import contracts or inventory restocking and see this as anomalous. However, the underlying trend of the widening trade and current account deficit is likely to continue, driven by higher oil and other global commodity prices, the domestic growth upcycle and an overhang on exports due to global supply bottlenecks in the near term and softer demand next year,” said a note by Sonal Varma and Aurodeep Nandi, economists at Nomura Global Markets Research. “We expect the current account to swing from a surplus of 0.9% of GDP in Q2 to a deficit of 1.8% of GDP in Q3 2021 (July-September).”

Is private investment finally picking up?
The biggest question around economic recovery is whether the investment cycle has picked up. This is especially relevant because fiscal policy, at least at the level of the union government, has clearly adopted a pro-capital expenditure rather than an income-support approach. The latter could have given a cushion to consumption demand.

Latest investment numbers from the Centre for Monitoring Indian Economy (CMIE) do not inspire confidence on the capex or investment front. The value of new investment announcements was just ₹1.1 lakh crore in the quarter ended September 30, which is not just a sharp fall from ₹2.5 lakh crore in June 2021 quarter, but also a significant slump from the ₹2.6 lakh crore for the September 2020 quarter. The value of investment projects completed was ₹0.8 lakh crore, which is only marginally higher than ₹0.7 lakh crore in the June 2021 quarter. Fall in new private investment announcements is much larger than the headline number. The number went down from ₹2 lakh crore to ₹0.9 lakh crore between the June and September quarters.

The fact that private investment and investment announcements – the latter are a good indicator of business sentiment – are not picking up underlines the lack of momentum for economic growth.

Recovery in consumer sentiment is the most crucial factor
To be sure, one could argue that the third fiscal quarter (October-December) might turn out to be different. Not only is there likely to be increased festive demand, but India’s vaccination programme has also been doing well. As of 7pm on October 4, India fully vaccinated 27% of its adult population and another 44% of the population had received the first dose. It can be argued that neither a higher trade deficit nor sluggish capex numbers will pose a challenge for growth. Indian businesses have high levels of excess capacity and trade has not been a significant driver of economic growth in the recent past.

However, positive sentiment is essential for a festive, demand-driven growth story to materialise. This is where consumer confidence comes into play. The Reserve Bank of India’s Consumer Confidence Survey (CCS) shows that there was hardly any recovery in consumer sentiment between May and July. The September round CCS figures will be released on October 8, along with the Monetary Policy Committee resolution. However, the CMIE consumer sentiment index does not show a significant improvement even in September. If RBI’s CCS findings are in sync with that, there is good reason to be circumspect about any pleasant surprises on the economic front even in the December quarter.
 
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Nilgiri

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Dec 4, 2017
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Reading another set of high frequency numbers on the Indian economy​

What is the state of the Indian economy as it enters into the second half of the fiscal year 2021-22? One set of high frequency numbers on economic activity, such as the Purchasing Managers’ Index, Nomura India Business Resumption Index, etc., look good (see bit.ly/2YkH8E0).

But these numbers might not be telling us the entire story for two reasons. One, they are skewed towards the formal sector of the economy. And two, they do not take into account headwinds to growth from avenues such as external trade. This is why it makes sense to look at another set of statistics, which look at India’s external trade, capital investment, etc. Here are four charts that explain this argument.

Can exports lead the post-Covid growth story?

When the June quarter GDP numbers were released in August, there was a lot of enthusiasm about the role of exports in India’s post Covid-19 growth trajectory. There was a valid reason for this. India’s exports, at ₹7.68 lakh crore (in 2011-12 prices) in the June quarter were not just above the pre-pandemic level of ₹7.07 lakh crore of the June 2019 quarter, but also almost at par with the all-time high figure of quarterly exports (March 2019 quarter). That exports increased between the March and June quarters despite the disruption inflicted by the second wave of Covid-19, which led to a quarter-on-quarter decline in other macroeconomic aggregates, generated a lot of optimism around tailwinds from exports to overall growth.

A June analysis in these pages looked at the promise of export-driven growth in India and argued that any assessment about the net impact of foreign trade on GDP growth must include the role of imports as well (see bit.ly/3Fed6Tc).

The latest trade numbers underline this point. India’s trade deficit in September reached an all-time high of $22.9 billion, thanks to a sharp rise in imports, which jumped to a record $56.4 billion. While a rise in oil prices has played a big role in the rising deficit, it is not the only reason. Exports have stalled as well, triggering an increase in the non-oil deficit.

“The increase in oil imports was not due to price effects but rather reflects a sharp jump in import volumes, despite a more gradual domestic recovery. We believe this may have been due to lagged/bunched up oil import contracts or inventory restocking and see this as anomalous. However, the underlying trend of the widening trade and current account deficit is likely to continue, driven by higher oil and other global commodity prices, the domestic growth upcycle and an overhang on exports due to global supply bottlenecks in the near term and softer demand next year,” said a note by Sonal Varma and Aurodeep Nandi, economists at Nomura Global Markets Research. “We expect the current account to swing from a surplus of 0.9% of GDP in Q2 to a deficit of 1.8% of GDP in Q3 2021 (July-September).”

Is private investment finally picking up?
The biggest question around economic recovery is whether the investment cycle has picked up. This is especially relevant because fiscal policy, at least at the level of the union government, has clearly adopted a pro-capital expenditure rather than an income-support approach. The latter could have given a cushion to consumption demand.

Latest investment numbers from the Centre for Monitoring Indian Economy (CMIE) do not inspire confidence on the capex or investment front. The value of new investment announcements was just ₹1.1 lakh crore in the quarter ended September 30, which is not just a sharp fall from ₹2.5 lakh crore in June 2021 quarter, but also a significant slump from the ₹2.6 lakh crore for the September 2020 quarter. The value of investment projects completed was ₹0.8 lakh crore, which is only marginally higher than ₹0.7 lakh crore in the June 2021 quarter. Fall in new private investment announcements is much larger than the headline number. The number went down from ₹2 lakh crore to ₹0.9 lakh crore between the June and September quarters.

The fact that private investment and investment announcements – the latter are a good indicator of business sentiment – are not picking up underlines the lack of momentum for economic growth.

Recovery in consumer sentiment is the most crucial factor
To be sure, one could argue that the third fiscal quarter (October-December) might turn out to be different. Not only is there likely to be increased festive demand, but India’s vaccination programme has also been doing well. As of 7pm on October 4, India fully vaccinated 27% of its adult population and another 44% of the population had received the first dose. It can be argued that neither a higher trade deficit nor sluggish capex numbers will pose a challenge for growth. Indian businesses have high levels of excess capacity and trade has not been a significant driver of economic growth in the recent past.

However, positive sentiment is essential for a festive, demand-driven growth story to materialise. This is where consumer confidence comes into play. The Reserve Bank of India’s Consumer Confidence Survey (CCS) shows that there was hardly any recovery in consumer sentiment between May and July. The September round CCS figures will be released on October 8, along with the Monetary Policy Committee resolution. However, the CMIE consumer sentiment index does not show a significant improvement even in September. If RBI’s CCS findings are in sync with that, there is good reason to be circumspect about any pleasant surprises on the economic front even in the December quarter.

The fact India improved its FDI intake to 80+ billion USD (in the covid year of all years) spoke volumes for itself.

I was expecting a stagnation there or even decline (and uptake/conversion into more FPI instead cyclically).

I was instead pleasantly surprised.

This hard-FDI increase trend (past such large headwinds even) will put good floorboards for next 5 year chunk by that alone.

Hopefully in this current political term, FDI breaches 100 billion/year mark soon.

The GCF (total investment) number is also back above 30% of GDP though that has been augmented by covid GDP denominator decrease.

India really needs to get that above 35% sustainably.

That is definitely tied into the article's mention of private investment and the role of private sector in larger credit consumption where:
- India is below 100% of GDP (compared to China which is close to 200% here) to begin with
- Level being around 50% of GDP since 2008 which is way too low

This is the issue when you don't have enough massive forex surplus activities in the economy to leverage more INR printing for to help all the INR-only activities internally borrow easily and for cheap.

It is big issue in India not being able to effectively leverage its decent market cap (3.5 trillion USD now) and there is no simple fix given inertia of 20+ years now with too much bureaucrat-centralized approach remaining in the post-1991 era.

Hopefully rest of this year and 2022 will see the laggard inertia from the covid effects (domestically and internationally) gradually erode and more of the structural persistent troubles ease.

India needs to be staunchly prudent in what its labour at large can provide to attract requisite investment quickly and efficiently. This has just not changed in the govt's head (regarding its role in this) fast enough.
 

Gautam

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Feb 16, 2019
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India’s Stock Market on Track to Overtake U.K.’s in Value

By Abhishek Vishnoi & Swetha Gopinath
October 11 2021, 9:03 PM
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A bronze bull statue stands at the entrance to the Bombay Stock Exchange building in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

(Bloomberg) -- India’s equity market is on the cusp of overtaking that of the U.K. in value to join the world’s top-five club, at least by one measure. The likely feat comes as record-low interest rates and a retail-investing boom propel stocks in the former British colony to record highs.
India’s market capitalization has surged 37% this year to $3.46 trillion, according to an index compiled by Bloomberg, representing the combined value of companies with a primary listing there. That’s closing in on the U.K., which has seen an increase of about 9% to $3.59 trillion, though the number is much larger if secondary listings and depositary receipts are included.

As the two economies converge in size, India’s higher growth potential and a vibrant technology sector that’s seen a flood of startups going public this year are giving the emerging market an edge -- especially when sentiment toward Chinese equities has soured. As for the U.K., uncertainties related to Brexit continue to weigh on the market.

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“India is seen as an attractive domestic stock market with good longer-term growth potential from an immature economy, and a stable and reformist political base is helpful in realizing this potential,” Roger Jones, head of equities at London and Capital Asset Management, wrote in emailed comments. “On the other hand, the U.K. has been out of favor since the Brexit referendum outcome.”

The S&P BSE Sensex -- the key index of the Indian bourse BSE Ltd. -- has soared more than 130% since its trough in March last year, the most among major national benchmarks tracked by Bloomberg. It has handed investors an annualized return of almost 15% in dollar terms over five years, more than double the 6% for the U.K.’s benchmark FTSE 100 Index.

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India’s share-market capitalization is expected to rise to $5 trillion by 2024, according to Goldman Sachs Group Inc. Nearly $400 billion of market value could be added from new IPOs over the next 2-3 years, analysts led by Sunil Koul wrote in a note last month.

India’s Stock Market on Track to Overtake U.K.’s in Value
 
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Gautam

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International Energy Agency invites India to become full-time member: Hardeep Singh Puri

By PTI
Last Updated: Oct 11, 2021, 08:13 PM IST
1634020276319.png

Oil Minister Hardeep Singh Puri said he held online discussions with IEA Executive Director Fatih Birol who said that India is invited to become a full-time member of he International Energy Agency.

Synopsis
"As a natural corollary to the India IEA strategic partnership, Dr Birol invited India to deepen its cooperation with IEA by becoming a full Member," Puri tweeted without saying if the full-time member was acceptable to the government or not.

International Energy Agency (IEA) has invited India, the world's third-largest energy consumer, to become its full-time member - a proposal if accepted will require New Delhi to raise strategic oil reserves to 90 days requirement. Oil Minister Hardeep Singh Puri on Monday said he held online discussions with IEA Executive Director Fatih Birol.

"As a natural corollary to the India IEA strategic partnership, Dr Birol invited India to deepen its cooperation with IEA by becoming a full member," Puri tweeted without saying if the full-time member was acceptable to the government or not.

India in March 2017 became an associate member of the Paris-based body which advises industrialised nations on energy policies. In January this year, IEA members and India agreed to enter into a strategic partnership, strengthening their collaboration across a range of vital areas including energy security and clean energy transition. On its website, IEA states that "India is becoming increasingly influential in global energy trends."

Its in-depth report on India's energy policies, which was released in January 2020, states that the country's demand for energy is set to grow rapidly in the coming decades, with electricity use set to increase particularly fast. The country's reliance on fuel imports makes further improving energy security a key priority for the Indian economy, IEA had said in the report.

IEA is made up of 30 member countries and eight associate nations. Four countries are seeking accession to full membership - Chile, Colombia, Israel and Lithuania. According to IEA, a member country must maintain "crude oil and/or product reserves equivalent to 90 days of the previous year's net imports, to which the government has immediate access (even if it does not own them directly) and could be used to address disruptions to global oil supply."

India's current strategic oil reserves equal 9.5 days of its requirement. Also, a member of IEA has to show "a demand restraint programme to reduce national oil consumption by up to 10%". India has the fastest-growing energy market in the world.

"Had a productive online conversation with Dr @ieabirol, Executive Director @IEA. Dr. Birol lauded India's major achievements under Hon'ble @narendramodi Ji to improve energy access for its citizens like PM Ujjwala Yojana & UJALA schemes," Puri tweeted referring to the government scheme to provide free cooking gas connections to poor households.


Birol later tweeted, "Pleased to meet Indian Minister @HardeepSPuri to discuss energy markets, the clean energy transition & Flag of India's ever-growing role in the global energy system. Look forward to making progress on @IEA's Strategic Partnership with Flag of India & efforts to ensure energy security & sustainability."

The IEA was founded in 1974 by industrialised countries - within the framework of the Organisation for Economic Co-operation and Development (OECD) - in response to the oil embargo.

"As a result, countries seeking to become members of the IEA must also be members of the OECD and hold 90 days of oil imports as commercial stocks," IEA said on its website. "But over the years, the IEA's mission has expanded substantially and today the agency is working with major economies around the world to enhance energy security and to help accelerate their clean energy transitions."

Starting in 2015, the IEA has been opening its doors to major emerging economies that are at the centre of the global conversation on energy.

Since then, eight countries have joined the IEA's Association programme: Brazil, China, India, Indonesia, Morocco, Singapore, South Africa and Thailand. Along with the 30 members and the countries formally seeking accession, this expanded IEA now represents 75% of global energy demand, the website said.

International Energy Agency invites India to become full-time member: Hardeep Singh Puri
 
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Gautam

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India's current strategic oil reserves equal 9.5 days of its requirement.
This statement is not entirely true. 9.5 days or 5.33 million metric tons (MMT) is the reserve that ISPRL holds. Government owned & private refiners hold enough crude oil for 64.5 days of consumption. Thus total reserve available right now in case of emergency is (9.5 + 64.5) = 74 days

In June 2018 Delhi had authorized ISPRL to expand the 2.5 MMT reserve in Padur by another 2.5 MMT taking total capacity there to 5 MMT. ISPRL was also ordered to build one new facility in Odisha that can hold 4 MMT of crude. Total capacity expansion of 6.5 MMT to be completed within 5 to 6 years. So by 2023-24 total crude reserve storage capacity with ISPRL will be (5.33 + 6.5) = 11.83 MMT.

By the nominal benchmarks used so far 11.83 MMT of crude can run the country for more than 21 days. Assuming no capacity expansion with the govt owned or private refiners we will have a total reserve lasting (21 + 64.5) = 85.5 days.

There will be capacity expansion by refiners too. Remember the new 9 MMT refinery in Rajasthan ? The Barmer Refinery as its called. Indian Oil Corp is expanding the Vadadara refinery from 13.7 MMT to 18 MMT. RIL was also planning to expand their Jamnagar facility. The govt. is planning to set up another ISPRL owned strategic crude reserve in Rajkot.

Over all 90+ days of capacity is very likely by 2023-24. So IEA's 90 day requirement can be met with no additional spending. Do we plan on joining the IEA though ? Are there any benefits to that ?
 
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