India to use London’s financial prowess for raising infra resources

Contrary to apprehensions that PM Narendra Modi would have lost sheen  after defeat of his party BJP in politically Bihar elections, he looked on top of the situation in UK. His important UK quotes from investors’ perspective are:

On Fast tracking FDI proposals:  India has decided to set up a Fast Track Mechanism for clearing investment proposals from UK since it is among the top FDI source nations.   

On Fund raising : India will make good use of London as a financial centre for raising funds for meeting its infrastructure requirements. India will raise Railway Rupee Bonds in London for funding Indian Railways.   

On commitment to open up : We will open new doors in the services sector. We will collaborate more – here and in India - in defence equipment and technology. We will work together on renewable and nuclear energy. 

For India, a target of 175 GW of additional capacity in renewable energy by 2022 and reduction in emission intensity of 33-35 % by 2030 are just two of the steps of a comprehensive strategy. 

Pic: PIB

Modi- Cameron talks to focus on India,UK forging ties in Defence

PM Modi is beginning his 3-day UK visit from November 12. UK is the 3rd largest source of foreign investment in India. In turn, India too  is the 3rd largest source of FDI (in terms of the number of projects) in UK.

This is what PM Modi said about his Britain visit: “Another area of importance for bilateral cooperation is defence. We have traditionally been cooperating extensively on defence and security issues and this visit will build on strong ties. Defence manufacturing will be a prime focus in my talks”. He will meet PM David Cameron among others. 

UK remains a preferred choice for Indian students. 

Pic: Courtesy Facebook page of David Cameron

Modi can be anything but lame duck as Opposition wants him to be

                  PM Modi chairing a review meeting for various infrastructure sectors

   With a crushing defeat in hand from bitterly fought Bihar elections , Prime Minister Narendra Modi would be in UK for three days beginning November 12. His pre-planned programme includes some flashy events that so far had gone pretty well in all his foreign tours. But this time around, he would be on a foreign soil when his popularity at home has taken a beating, if not plunge.

The good thing is that the  setback to the Prime Minister’s BJP has come about when his government at the Centre has three and half years more to go. So, even though he has lost some early wickets , he has enough time to build his innings and win the match. He has to either win or lose, there are no draws in political innings.

But the trouble is that the wicket is not playing easy. He has dearth of talent in his Council of Ministers , which he is expected to shuffle sooner than later, and his opponents have tasted the blood and would go for a kill to ensure that Modi becomes a lame duck PM.

Well, Modi can be anything but a lame duck. He has survived such adversities as Gujarat Chief Minister. Then, what is that one can expect from him in the coming weeks:

As he has done it just on the eve of his departure for UK, as many as 15 sectors including defence, civil aviation, manufacturing, e-commerce, construction and broadcasting have been liberalised for foreign investors. Caps have been relaxed and more automatic windows have been opened for the entry.

The PM Modi is also reviewing progress of rather tardy implementation of the infrastructure projects, which are now considered key to reviving the economic growth. Even as the government gets some consolation that India has been acknowledged as the bright spot by the likes of the IMF and the World Bank and it has upgraded its ranking in the ease of doing business, a host of sectors remain in stress.

Importantly, these sectors include the crucial agriculture which is a source of employment for over half the Indian population of 1.3 billion. The rural demand is  subdued while the industries like telecom, real estate, steel, power, roads, construction are in heavy debt with promoters finding it difficult to service the loan. To expect the private sectors to revive growth and investment in these sectors would be naive. Either the government brings in resources or funds come from abroad. These are the only alternatives which Modi and his FM Arun Jaitley know it too well.

The trouble is the government has resource constraints while the foreign investment is drying, especially in the capital market through the foreign institutional investors. As per the latest RBI data, India attracted total foreign investment of USD 73.56 billion in 2014-15, riding on the Modi wave. Of this , USD 40.93 billion were in the form of portfolio investment while the rest were FDI.  The situation is just the reverse this year. In the first half of the fiscal year (April-September), India’s total foreign investment is just about USD 8.29 billion resulting from negative USD 8.78 billion in the capital market  and positive FDI of USD  17.07 billion.

 In the comparable half year (fiscal) in 2014-15, the FDI was USD 15.79 billion and portfolio USD  22.20 billion. So, a huge fall in portfolio has to be made up. That is what is required also to bring about a current account and the consequent foreign exchange  stability, which cannot depend only on falling crude oil.

 In any case, there are both political and economic compulsions for PM Modi to stay focussed on his economic agenda, for he cannot afford any more Bihar.

   

Bihar polls out of way, PM Modi, FM Jaitley back to economic agenda

  

So, finally elections in eastern Indian state of Bihar, one of the most bitter polls , are over with exit pollsters giving victory to a coalition of national and regional parties ranged against PM Narendra Modi’s BJP.  While the counting of ballots will take place on Sunday, it looked as though Prime Minister and his ministers returned back to some serious economic agenda at the Centre.

The Union Cabinet approved a USD 65 billion (Rs 4.3 lakh crore ) package for the broke state owned power utilities . This rescue package will clean the balance sheets of these utilities with the respective states taking the load of the debt with the help from the Centre. The idea is to completely restore health of these utilities by 2019 and ensure that India gets 24X7 power supply, of course with market related user charges.

In yet another major reform in the power sector, which has been the trouble spot for the government owned banks with high exposure to the electricity firms, the government is working on a plan to allow the generating firms to   divert coal supply from state monopoly Coal India  to  efficient units.  This would help power generating companies  saving  of Rs 20,000 crore (about USD three billion ).

Finance Minister Arun Jaitley, who was also actively involved in Bihar polls, got back to work with top financial sector regulators including Governor of the Reserve Bank of India Raghuram Rajan, who has been giving his piece of mind to the fringe elements of the ruling party.

The meeting of the Financial Stability and Development Council (FSDC) under chairmanship of the Finance Minister  reviewed the state of Indian economy, noting high volatility in the financial markets is one of the most prominent risks confronting the Emerging Market Economies (EMEs). Though  India appears to be much better placed  on the back of improvement in its macro-economic fundamentals and large forex reserves, there was a need to in full preparedness for managing any external sector vulnerabilities.. 

The issue of rising bank NPAs and stress in the corporate sector balance sheet stress along with their impact on the bond market was also discussed.  

Whatever is outcome of Bihar polls, the economic decision making is going to get some speed in the coming days and weeks.

Pic: PIB

Discoms reforms on way- loan recast with higher user charges; to be big positive for investors

Just as one of the most bitter fought elections are about to conclude in the eastern and politically important state of Bihar, the Central government of Prime Minister Narendra Modi is all set to unveil a set of reforms which if implemented can really electrify the investor confidence.

Going by what Finance Minister Arun Jaitley has said  : the  Modi Government is going ahead with taking up reforms in the debt –ridden or almost bankrupt state-owned power utilities which provide the last mile connectivity in the electricity supply chain.

The Union Cabinet is expected to approve a recast of huge debt of these utilities , amounting to over USD 65-70 billion with a rider that they will have to raise the user charges and different political parties ruling in different states would not indulge in  “bad economics”.  As long as the electioneering does not end in Bihar, this kind of reforms where the user charges might have to be revised would have damaged the prospects of the PM Modi’s BJP.  His prestige is at stake in Bihar elections.

We have a situation in India where there is no shortage of generation, but the discoms are not able to lift the power and sell as they are broke. In the process, they have adversely impacted the balance sheets of the banks by adding to their stressed assets. The power sector is the most troublesome area for the banks' assets. 

FM Jaitley said: “ In the next couple of days, we are likely to announce some major policy decisions in that regard to take the sector out of stress.The big problem area for us is the power sector. I think that is an infrastructure issue which we are going to be addressing literally in the next couple of days, if not in the next couple of hours itself. We have almost finalised an approach in that direction. 

Pic courtesy: Jaitley's FB page 

India plays music to cement cultural, economic ties with Africa

   Prime Minister  Narendra Modi and the African Leaders watching the cultural performances, at the inaugural ceremony of the 3rd India Africa Forum Summit 2015, in New Delhi on October 29, 2015. 

 Point by point analysis of PM Modi speech at India-Africa Forum Summit,Oct 29 ,2015 New Delhi , as regards economic cooperation.  

PM Modi : Two-thirds of India and two-thirds of Africa is under the age of 35 years. And, if the future belongs to the youth, then this century is ours to shape and build.

PC analysis: He has a point. The key is China , which has been very aggressive on Africa business opportunities, is ageing, giving India advantage.

PM Modi : Four hundred thousand new businesses were registered in Africa in 2013; and, mobile telephone now reaches 95% of the population in many places. We will work to reduce digital divide within Africa and between Africa and rest of the world.   

PC analysis: Bharti Airtel made inroads into Africa, but is struggling as experience does not seem to be as rewarding as expected

PM Modi: Africa is now joining the global mainstream of innovation. The mobile banking of M-Pesa, the healthcare innovation of MedAfrica, or the agriculture innovation of AgriManagr and Kilimo Salama, are using mobile and digital technology to transform lives in Africa. 

PC analysis: Surely, these are areas, India must engage with Africa, especially in healthcare as India has already made big strides as a major supplier of affordable pharmaceutical products

PM Modi:Today, Africa and India are two bright spots of hope and opportunities in the global economy. In less than a decade, our trade has more than doubled to over 70 billion dollars. India is now a major source of business investments in Africa. Today, 34 African countries enjoy duty free access to the Indian market. 

PC analysis: True , but it is not as if troubles in China, Europe and Japan are of benefit to us both. The entire world gets affected if major economies like China , US or EU slow down. So, this bright sport and sweet spot things should not be stretched.    

PM Modi : When we meet at Nairobi Ministerial of the WTO in December, we must ensure that the Doha Development Agenda of 2001 is not closed without achieving these fundamental objectives. 
We should also achieve a permanent solution on public stockholding for food security and special safeguard mechanism in agriculture for the developing countries.   

PC analysis: Traditionally India and Africa have worked together in WTO Ministerial Meetings, excepting that some of them become vulnerable to pressures from the developed world when it comes crunch. 

Pic courtesy: PIB

India doing all it takes to woo Africa , promising growth engine

Prime Ministeri Narendra Modi receiving the African leaders during special dinner hosted by him, on the sidelines of the 3rd India Africa Forum Summit, in New Delhi on October 28, 2015.

Pic: Courtesy PIB

What improved India’s World Bank ranking in ease of doing business

1.     No capital requirement:  In May 2015 the government adopted amendments to the Companies Act that eliminated the minimum capital requirement.  Now Indian entrepreneurs no longer need to deposit Rs one lakh (USD 1,629 )-equivalent to 111 per cent  of income per capita—in order to start a local limited liability company. The amendments also ended the requirement to obtain a certificate to commence business operations, saving business founders an unnecessary step and five days.

2.     Removal of Inspector Raj in Delhi, Mumbai electricity connections

Another focus is to make the process for getting a new electricity connection simpler and faster. Toward that end the utility in Delhi eliminated an internal wiring inspection by the Electrical Inspectorate—and now instead of two inspections for the same purpose,there is only one. The utility also combined the external connection works and the final switching on of electricity in one procedure.

The utility in Mumbai reduced the procedures and time for connecting to electricity by improving internal work processes and coordination. It combined several steps into one procedure—the inspection and installation of the meter, the external connection works and the final connection. Now companies can get connected to the grid, and get on with their business, 14 days sooner than before. 

Pic courtesy: GOI

India will remain popular with investors , either way – Modi Bihar win or lose

                                       Will he sweep polls in Bihar?

Whatever BJP may say, PM Narendra Modi’s image as some one who can pull it through, is very much at stake in Bihar elections, considered crucial for India’s political economy. A victory for the BJP will embolden the  Modi Government at the Centre to go whole hog for the economic reforms, popular or unpopular. There would be a new confidence of sorts on the faces of his Cabinet colleagues, chiefly Finance Minister Arun Jaitley, IT and Telecom Minister Ravi Shankar Prasad. In fact, he does not have too many high profile ministers. External Affairs Minister Sushma Swaraj will keep her composure –either way, win or lose.

But what if BJP loses in the eastern state of Bihar  and Nitish Kumar returns as Chief Minister with the help of Lalu Prasad who would have then revived several notches and carry much more authenticity at the national level. Several other Chief Ministers like Mamata Banerjee from West Bengal, Akhilesh Yadav from Uttar Pradesh, Navin Patnaik from Odisha may then be cosying up more to each other in the hope of sewing a national alternative to Narendra Modi.

Will it then make the Modi Government weak at the Centre and how will the domestic industry and global investors take it?

Well, my guess is the Indian economy at this point of time is enjoying certain circumstantial advantages, cheap oil and other minerals being the main contributors. The country is net importer.  Industrial growth may not happen at the pace required, but with raw material prices dropping, the margins would eventually improve for the companies, especially those who do not carry huge debt on them. The services sector comprising tourism, hotels, trade and transport would keep moving the economy between 7-8 per cent on the growth trajectory.  

Onion prices would drop with fresh crop arrival and the pulses prices would get stable at some level, possibly and the people would then find Rs 100-120 a kg as new normal. Prices of vegetables like potato, tomato, etc would also get a new normal of Rs 40 to Rs 50 a kg.

When it comes to global investors, investment would continue to come in areas like telecom, automobile while the pace of the same in sectors like infrastructure such as roads, ports and renewable energy would depend on the kind of morale the Modi Government is able to retain even if it loses politically crucial Bihar.

As for the stock markets,  the experience tells us the movement is largely in sync with global cues with China and the US being movers and shakers, but still India would continue to remain on the radar of fund managers for the same reasons listed above.

Some of the touted reforms like Goods and Services Tax may get delayed, but my sense is GST is over-hyped. India achieved plus 8-9 per cent without GST.

But what will really scare the investors is this non sense of beef, communal frenzy around such issues, which must stop. Hopefully, after Bihar polls, it should subside.

So, India will remain popular with investors , either way –win or lose BJP in Bihar ! 

Pic: PMO                

Time Indian ruling parties knew their onions, tomatoes if they do not want to be in lentil soup!            

If there is one thing the western economies, mainly the European Union and the US are looking for, it is inflation. Say it to an Indian and she would describe you a nut case. But that is what European Central Bank President Mario Draghi meant when he reviewed the monetary policy and, kind of, promised more stimulus to the European economies.

In India too, Prime Minister Narendra Modi’s government , has brought down the headline inflation , both in the retail and wholesale markets. But the trouble is , these are only the headline numbers – people do not seem to be convinced. When you show them the Consumer Price Index (CPI) data of 4.41 per cent for September,2015 against 5.63 per cent in the same month last year and even more pronounced drop in Wholesale Price Index of minus 4.54 per cent, there is a kind of disbelief on their faces.

They , instead show you increases in prices of  pulses , the main source of proteins for a majority of Indians, ranging between 100 and 140 per cent .  Leaving percentage aside, some of popular lentils like Tur, are selling at Rs 200 a kilogram (well above three dollar), triggering an outcry among the influential middle class Indians who are the opinion leaders. 

The government , in a way, was caught off-guard as those in-charge remained somewhat complacent until, the pulses price became an election issue in the crucial state elections in Bihar where the Prime Minister’s BJP is pitted against a formidable combination being spear-headed by well-rated Chief Minister Nitish Kumar.

Having woken up , rather late, the Food and Consumer Affairs Department , being helped now by  Finance Minister Arun Jaitley, is doing fire fighting of sorts with an oversight of the PMO.  Wish, it had come a few months earlier.  

In the Indian political-economy, the costly mistake often repeated by the ruling parties is complacency with regard to food prices and food management of essential items like onion, tomato, seasonal vegetables and cereals. No amount of blaming the rain gods helps when sky-rocketing food prices hit the ‘common man’, the term very popular in India.

While it is early days for predicting the outcome of Bihar elections,  pulses would have weighed on voters,  along with the ever- teasing onion.

It is time the Indian ruling parties knew their onions, tomatoes if they do not want to be in lentil soup!    

Pic: Department of Food, GOI        

          

Chinese come calling on PM Modi seeking opportunities in India as slowdown bites them in their homeland

A delegation of SANY Group and Chinese businessmen call on  Prime Minister, Narendra Modi, in New Delhi on October 15, 2015.

Pic: PIB