QBiz: GDP Dip Blamed on Note Ban; GST, NPA May Ease Centre’s Debt

The Quint’s roundup of the top business stories of the day.

Finance Minister Arun Jaitley. (Photo: PTI)

1. Indian Economy Finally Bares Its Demonetisation Scars

Finally, the impact of demonetisation is visible in the gross domestic product (GDP) numbers. Gross value-added (GVA) growth at constant prices fell to a mere 5.6 percent in the fourth quarter of fiscal year 2017 (FY17), clearly showing the scars of demonetisation on the economy. That’s not all. The headline growth number conceals more than it reveals. If we leave out the “public administration, defence and other services” component of GVA, comprising mainly government expenditure, then growth slumps to an even lower 4.1 percent in the fourth quarter.

Numbers show that GVA in the construction sector contracted from a year ago in the fourth quarter of FY17. This is very significant, as the construction sector is one of the biggest sources of jobs for the masses. The terrible state of the banks is reflected in the poor contribution of the “financial, real estate and professional services” component of GVA.

Source: Livemint

2. India at a New Normal After Three Years of Modi Government: Arun Jaitley

Reducing the mountain of bad loans that has crimped public sector banks’ ability to lend, and reviving private investment will be the top priorities of the Prime Minister Narendra Modi-led National Democratic Alliance (NDA) government in the remaining two years of its term, finance minister Arun Jaitley said on Thursday.

Action will start in the next few days on bad loan resolution under an ordinance put in place in May to amend the Banking Regulation Act, Jaitley said at a media briefing to mark three years of Modi government. The ordinance empowered the Reserve Bank of India (RBI) to intervene directly to clean up bad loans.

Source: Livemint

3. GST Council Will Give Final Shape to New Tax Framework on Saturday

Federal tax body, the goods and service tax (GST) Council, is set to give finishing touches on Saturday to the new indirect tax framework meant to create a single national market from 1 July and adopt strong anti-profiteering measures to prevent artificial inflation of retail prices by businesses and traders.

A concept note on how to prevent inflation during the transition period, as witnessed in countries like Australia and Malaysia when they adopted GST, will be discussed along with a proposal to make the directorate general of safeguards under the revenue department, the anti-profiteering watchdog, a person informed about the development said on conditions of anonymity.

Source: Livemint

Also Read: GST Will Add to India’s Growth: Jaitley in Defence of GDP Drop

4. India's Factory Growth Slows to Three-Month Low in May as New Orders Soften

Indian factory growth cooled in May as new orders expanded at a more modest pace, but manufacturers were able to raise prices slightly, according to a private survey. The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, fell to 51.6 in May from April’s 52.5, marking its fifth month above the 50 level that separates growth from contraction.

Output expanded at the softest pace since February but remained moderate. The new orders sub-index, which reflects both domestic and foreign demand, fell to 52.6 from 53.8 in April. Export orders contracted for the first time in four months, albeit marginally.

Source: Livemint

5. Centre's Debt Burden May Ease If GST, NPA Resolution Implemented: Moody's

Credit rating agency Moody’s Investors Service on Thursday said if the wide-ranging reforms proposed by India such as the Goods and Services Tax (GST), the fiscal framework following the Fiscal Responsibility and Budget Management Act (FRBM) Committee recommendations and non-performing assets (NPA) resolution measures are successfully implemented, it would gradually ease the government’s high debt burden, which represents a key constraint on the sovereign’s credit profile.

Moody’s on Wednesday projected India’s economy to accelerate to grow at 7.5 percent in 2017-18 and 7.7 percent in 2018-19 as the government has been able to limit the negative impact of last year’s demonetisation on the economy.

Source: Livemint

6. Tata Sons Chairman N Chandrasekaran Planning Merger of Smaller Tata Companies

Tata Sons chairman N Chandrasekaran is planning to consolidate group firms to weed out duplication and increase efficiency, two Tata group executives said. With at least 100 companies in its fold, the $103-billion Tata group has diversified into multiple businesses that range from chemicals and fertilisers to auto components and therapeutics over the last 110 years.

Some of these are underperforming, some are not contributing to profits and in some cases, two or more businesses are doing similar things. These are the ones that Chandrasekaran is expected to take a hard look at, said the first of the two executives.

Source: Livemint

7. Corporate Deleveraging To Remain Slow In FY18

Even as "moderate" recovery is expected in corporate profitability, deleveraging will remain slow in the current financial year, said a report by India Ratings & Research. Corporates with large refinancing requirements are likely to face severe challenges in refinancing their borrowings during the fiscal, India Ratings said. This is because the balance sheets of mid-sized public sector banks are stretched due to high levels of non-performing assets (NPAs).

The rating agency observed that a potential rise in global protectionism remains one of the most likely risks that could delay recovery in corporate earnings and consequently credit profiles of companies.

Source: PTI

8. Government Prods SBI to Bring in Strategic Investors for Arcil

The government has directed State Bank of India (SBI) to find strategic investors for Asset Reconstruction Company (India) Ltd, or Arcil, noting its importance in the resolution of stressed assets, said two senior officials with the country’s largest lender. They spoke on the condition of anonymity because the discussions are private.

SBI is the largest shareholder in Arcil with a 19.95 percent stake, while IDBI Bank, ICICI Bank Ltd and Punjab National Bank together own 42.45 percent. IDFC Bank, Karnataka Bank, Karur Vysya Bank and South Indian Bank, among others, also have stakes in Arcil.

Source: Livemint

9. Tata Cleantech Gets

Rs 200 Crore From Tata Capital, World Bank's IFC

Tata Cleantech Capital Ltd (TCCL), a joint venture of Tata Capital Ltd and World Bank arm International Finance Corp. (IFC), has raised Rs 200 crore (about $31 million) from its promoters to grow its loan book, a senior company executive said.

Tata Cleantech is a non-banking finance company (NBFC) that funds renewable energy projects across assets such as solar, wind, small hydro and biomass, as well as other green businesses such as energy efficiency and water treatment.

TCCL, which received its infrastructure finance company licence from the Reserve Bank of India in October 2015, has funded more than 80 renewable energy projects with a total capacity of 3,500 megwatts (MW).

Source: Livemint