QBiz: World Bank Projects 7% GDP Growth; Service Tax May Be Hiked
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1. World Bank Projects GDP Growth at 7% in FY17, Despite Demonetisation
The World Bank has projected India’s economy to grow at seven percent in the current financial year, even after taking the impact of demonetisation into account.
Though the projection was 0.6 percentage points lower than its earlier estimate of 7.6 percent, these are only a shade below the Advance Estimates put out by the Central Statistical Office (CSO). The CSO estimated the growth to be at 7.1 percent without considering the effect of demonetisation and will factor in the impact in its revised Advance Estimates to be put out by February-end.
The World Bank also highlighted the weak private investments for “slightly” pulling down economic growth, besides demonetisation.
(Source: Business Standard)
2. AES, Adani, Tata Power-ICICI in Race for Rajasthan Power Project
The Rajasthan government’s plan to sell the 1,000 megawatt (MW) Chhabra project is gaining traction with at least three suitors, including US-based electricity producer AES Corp, shortlisted for the plant valued at around Rs 14,000 crore.
AES India, an arm of the AES Corp, has placed a joint bid with Macquarie Group Ltd. The other two bidders are Tata Power Co Ltd-ICICI Venture Funds Management Co Ltd and Adani Power.
All three have cleared the request for proposal (RFP) stage – the process of expressing their interest in acquiring the plant.
The sale process is a part of the electricity reforms initiated by the Vasundhara Raje-led Rajasthan government.
(Source: Livemint)
3. Only Rs 69,000 Crore In Old Currency May Be Left Behind, Suggests RBI Data
Data released by the Reserve Bank of India on Tuesday shows that the value of notes in circulation at the end of December was at roughly half the level that was reported ahead of the government’s demonetisation decision.
The data, which can also be used to calculate the amount of old currency deposited in banks so far, suggests that less than Rs 1 lakh crore in banned currency notes may have remained in the system after the deadline to deposit old notes expired. To be sure, the RBI has cautioned against using such estimates and says that final figures will be released after accounting entries are reconciled with physical cash balances.
According to RBI’s monthly bulletin for January, the value of notes in circulation stood at Rs 9.14 lakh crore as on 30 December. This is 52 percent of the Rs 17.54 lakh crore in notes in circulation as on 28 October.
(Source: Bloomberg Quint)
4. Note Ban Gains ‘Highly Uncertain’, Says Fitch
Benefits of demonetisation are “highly uncertain” and the potential positives are unlikely to be strong or last long enough to make a significant difference to government finances or medium-term growth prospects, global ratings agency Fitch said on Tuesday.
Taking into account the short-term disruptions, it also revised down the GDP growth estimate for the current fiscal to 6.9 percent from the earlier 7.4 percent.
“The note ban move has some potential benefits, but the positive effects are unlikely to be strong or last long enough to make a significant difference to government finances or medium-term growth prospects… benefits of demonetisation are highly uncertain,” the ratings agency said in a note.
(Source: The Financial Express)
5. Centre Mulls Hike in Service Tax Rate If GST Rollout Is Delayed
The Centre could consider increasing the service tax rate in the coming Budget as a fallback option in case the rollout of the Goods and Services Tax (GST) is delayed beyond 1 April.
“There is some thinking of an increase in the service tax rate in case the GST is not implemented from April. A higher rate will help improve revenue and also bring it closer to the proposed standard rate under GST,” a source said.
The official, however, said there is no concrete proposal on such a move at present.
Most services are likely to be taxed at a higher rate of 18 percent under GST against the current rate of 15 percent.
(Source: The Hindu Business Line)
6. Paytm Wallets to be Transferred to Paytm Payments Bank
One97 Communications Ltd, which owns the Paytm app, has warned customers against falling for rumours that they won’t be able to use the Paytm wallet after 15 January.
In a blog post, the company said that Paytm Wallet users will soon enjoy additional benefits through Paytm Payments Bank Account.
As per the RBI guidelines, the Paytm Wallet will soon be transferred to the newly-incorporated Paytm Payments Bank. Under this, users will be able to avail benefits like a bank account, chequebook and a debit card. Users will also earn interest on the money available in their account.
(Source: The Financial Express)
7. No Effect of Note Ban on Rabi Sowing, Price of Crops: NITI Aayog
The acute cash crunch in rural areas due to demonetisation and the resultant drop in prices of fruits and vegetables in November and December could lower farmers’ income in 2016-17 by just 0.26 percent, said a paper by NITI Aayog member and eminent agriculture economist Ramesh Chand.
The paper, released on Tuesday, also said if the shortage in fertilisers due to cash crunch persisted till the end of the rabi sowing season, India’s crop output could slide by 1.05 percent, while agriculture output could shrink by 0.75 percent.
With cash becoming scarcer, farmers scaled down fertiliser use. Their sales, mapped by the ministry of agriculture, had fallen by 7.47 percent, compared to 2014-15 and seven percent, compared to 2015-16.
(Source: Business Standard)
8. Demonetisation Led To Surprise Loan Repayments, Says IndusInd Bank
IndusInd Bank’s earnings for the quarter that ended on 31 December beat most analyst estimates. Along with beating expected earnings, the bank also defied expectations of a deterioration in asset quality due to the government’s demonetisation decision.
Some analysts feared that the bank’s heavy exposure to commercial vehicles would lead to a slowdown in loan growth and an increase in delinquencies, as the sector is particularly dependent on cash. The government’s decision to withdraw notes of Rs 500 and Rs 1,000 on 8 November had led to a serious cash crunch, which persists even today.
The bank, however, was surprised to note that asset quality in its retail business actually improved after 8 November.
(Source: Bloomberg Quint)
9. Government to Fund up to 60% R&D Cost for E-Vehicles
The government has, for the first time, decided to fund up to 60 percent of the research and development (R&D) cost for developing indigenous low-cost electric technology that will help power two-wheelers, three-wheelers and commercial vehicles operating in public spaces, a move aimed at reducing pollution.
The government, which considers electric mobility as an alternative to cut pollution and boost its ‘Make in India’ initiative, expects low-cost electric technology to help replace petrol and diesel-run vehicles, which are currently used as public transport.
“The intent is to make the hybrid and electric vehicle market in India self-sustaining by increasing domestic capacities for product and technology development. We are inviting proposals in five areas, which will be undertaken as consortia projects involving multiple companies and academic institutions.
(Source: The Economic Times)
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