Budget disappointing; but fiscal, taxation measures welcome: EAC member

The Union Budgetwas "disappointing" as it lacked a vision, though measures like relaxing the fiscal deficit target and simplifying income tax are positives, the PM's economic advisory council member Ashima Goyal has said.
Goyal, who is a part-time member of the Economic Advisory Council to the Prime Minister (EAC-PM), also said that it was a "surprise" not to have a mention of the word 'slowdown' in the nearly three-hour long speech by Finance Minister Nirmala Sitharaman.
The budget document is a "balancing act" between fiscal stimulus to drive growth and the need to be responsible on spending, she said at the Indira Gandhi Institute for Development Research here over the weekend.
"Overall it (Budget) was disappointing because they didn't bring out the vision as a first real budget of a new government. It had to give a vision," the eminent economist said.
India's GDP growth is expected to slip to a decadal low of 5 per cent this fiscal, pressured by domestic factors like drop in consumption, as well as global issues.
"Surprising thing is that coming at a time when everybody is disturbed about a slowdown, the word slowdown is not used at all in almost three-hour long speech. There was no discussion on how the Budget is going to attack slowdown," Goyal said.
She further said Sitharaman was in a "catch-22" situation from the word go in the Budget making process, wherein any action would have left someone unhappy.
However, the finance minister has achieved a "balancing act" through her moves, Goyal said.
She elaborated that by adopting the 'exit clause' under the Fiscal Responsibility and Budget Management (FRBM) Act, the government gave a stimulus to growth and yet affirmed commitment to rules against fiscal profligacy.
To drive the point further, she said a 0.5 percentage point relaxation in fiscal deficit target offered under the exit clause makes lot of resources available, considering that the overall size of the economy is nearly USD 3 trillion.
Goyal also welcomed the government's resolve not to adopt policies similar to the response following the 2008 financial crisis.
She said in 2008-09, the fiscal deficit had gone up by 4 percentage points and the interest rates were also taken to record lows to stimulate growth.
There is also an attempt by the government to direct expenditure more towards capital expenditure, which suggests that the quality of the fiscal deficit is better now.
The Budget also has other positives like the ones on taxation, where there is greater focus on trust and simplification, she said, welcoming the debated moves on exemptions.
The government's moves on frontloading expenditure to early part of the fiscal year will also help, she said.
The measures on helping smaller non-bank lenders will prop up the economy as liquidity is still an issue for lot of players in the system, she noted.
The government has been "opportunistic" on the transparency front, she said, adding that credibility has been added by stating the off-budget borrowings through entities like the Food Corporation of India.
On banks' reluctance to pass on RBI's rate cuts, she cited pressure from both the elevated small savings interest rates and also the dependence of a large population on interest income.
"We are not willing as an economy to move to a lower interest rate, lower inflation economy," she said.
On the resource mobilisation front, she acknowledged that people are getting "cynical" with the privatisation targets after a massive under-performance on this front in FY20, but seemed to suggest that work already undertaken, like in the case of Air India, will reap revenues.
Meanwhile, she also flagged implementation issues on the budgetary targets, suggesting that the revenue increase targets are very high.
Goyal also pitched for a relook at the the subsidy model, highlighting food subsidies to illustrate that the consumption habits have changed.

RBI may cut rates by 40 bps in FY21 as Budget did little for growth: Fitch

With Union Budgetdoing little to support growth in the near term, the Reserve Bank of India (RBI) is likely to cut benchmark interest rates by 40 basis points before the end of 2020-21 fiscal, Fitch Solutions said Friday.
The RBI held its benchmark repurchase (repo) and reverse repo during its February 6 monetary policy meeting at 5.15 per cent and 4.90 per cent respectively.
"High current inflation is likely causing the RBI to take a slight pause to its easing cycle, given their mandate to keep inflation below 6 per cent," Fitch Solutions said in a commentary on RBI's February 6 decision.
A likely easing in inflationary pressures in the forthcoming months will reopen the window for the RBI to once again prioritise growth and ease its interest rates.
"We believe that the RBI will resume easing as the FY2020/21 (AprilMarch) Union Budget will do little to support growth over the near term," it said. "We at Fitch Solutions maintain our forecast for the RBI's repo and reverse repo rate to fall by 40bps to 4.75 per cent and 4.50 per cent, respectively, by the end of FY2020/21 (April-March)."
It said the ongoing episode of high inflation, mainly driven by food prices, will see the central bank take a slight pause on its easing cycle, given its mandate to keep inflation between 2.0-6.0 per cent.
"Given our view that high food inflation will gradually fade over the coming months on the back of easing food supply conditions following the winter harvest over Q1 of 2020, this will reopen the window for the RBI to resume its easing cycle to support growth," it added.
Fitch Solutions said it believes that the onus of supporting the economy has now fallen on the RBI after the 2020-21 Union Budget provided little support to growth over the near term, a view that contrasts with that of RBI.
The RBI maintained its accommodative stance at its February monetary policy meeting. The Monetary Policy Committee (MPC) noted that the economy continues to be weak and the output gap remains negative.
While some high-frequency indicators such as tractor and three-wheeler sales, domestic air passenger traffic, and railway freight traffic point towards a recovery in economic activity, the MPC noted a need to continue monitoring incoming data to gauge the sustainability of the recovery.
It highlighted its expectations for supportive rural and infrastructure spending in the 2020/21 Budget and the corporate tax cuts in September 2019 to boost growth over the medium term.
However, the RBI revised down its real GDP growth projection for the first half of FY2020-21 to 5.5-6.0 per cent (from 5.9-6.3% during the December 2019 statement) and projects growth of 6.2 per cent in the third quarter of FY2020/21.
With inflation surging to over 7 per cent in December 2019 on the back of a spike in onion prices, RBI revised its H1FY2020/21 inflation projection up to 5.0-5.4% (from 3.8-4.0% in the December 2019 statement).
"A weak economic growth outlook will spur further monetary easing from the RBI," Fitch Solutions said. "We forecast real GDP growth to slow to 5.1 per cent in FY2019/20, from a revised 6.1 per cent (down from 6.8 per cent previously) in FY2018/19."

Stating that there may be a slight recovery over the second half of the fiscal year, it said a gradual feed through of income from the winter crop should support a recovery in consumption, with high existing food prices due to a previously poor summer crop harvest providing some support to farmer incomes.
"Monetary policy transmission, while showing signs of improvement, remains weak and this will likely necessitate further easing for loan growth to register a meaningful pick-up," it said.
"We believe that the weak economic outlook would bode poorly for debt repayment which, considering the existing high non-performing loans, particularly in the public sector banks which we estimate to have a net non-performing loan ratio above 5 per cent, will make interest rates downward sticky.

Budget positive for market, will wait to see Monday reaction: FM Sitharaman

After delivering the longest-ever Budgetspeech, Finance Minister Nirmala Sitharaman told the media she was confident of the divestment process gaining pace in the next six months, that revenue collection was improving, and the government planned to remove all tax exemptions in the long term. Edited excerpts:
On new income-tax regime
We wanted to be sure that (more) money is in the hands of the people. We have adopted the same principle by which we announced the corporate rate tax cut in September 2019. We wanted to bring the rates down eventually and remove complications in terms of compliance. Too many exemptions make life difficult for tax administrators and people keep taking experts’ advice to plan the taxes. We wanted to achieve two goals: Simplify and reduce income tax. Ideally, no exemptions would have been the best (under the new regime), but we have decided to keep those which are indispensable. In the long term, we would remove all exemptions so that the entire income-tax structure is simple.
On new income-tax regime
We wanted to be sure that (more) money is in the hands of the people. We have adopted the same principle by which we announced the corporate rate tax cut in September 2019. We wanted to bring the rates down eventually and remove complications in terms of compliance. Too many exemptions make life difficult for tax administrators and people keep taking experts’ advice to plan the taxes. We wanted to achieve two goals: Simplify and reduce income tax. Ideally, no exemptions would have been the best (under the new regime), but we have decided to keep those which are indispensable. In the long term, we would remove all exemptions so that the entire income-tax structure is simple.
On disinvestment
I had set the target in July. Between July and January, finance ministry officials put in immense effort, and you will see successful disinvestment taking place in the next few months. Since our accounts have to close on March 31, I could not let the market speculate. Between July and now, a lot of legwork has been done and the benefits will accrue in the next financial year. So, you can hold me for setting the target that I could not fulfil, but for the next six months, I can stand up and tell you we have done enough groundwork.
On fiscal deficit
We had announced (the fiscal deficit target of) 3.3 per cent of GDP during the FY20 Budget estimate. On the one hand, because of the challenging need to put more money in the hands of the people to improve consumption demand and spur public investments, expenditure went up. On the other hand, due to disaster-related incidents, compliance and goods and services tax collection came down and revenue generation could not be pressed further.
The income foregone due to a corporate tax cut accentuated the problem in revenue generation. With both opposite sides so strongly laid out, it was only obvious that without violating the FRBM (Fiscal Responsibility and Budget Management) Act, I had to seek that escape clause and therefore sought a forbearance of 0.5 percentage points to evoke it. Going ahead, since GST collection has been robust in the past three months (over Rs 1 trillion) and the fact that more companies will come up and take the benefits of the corporate tax regime, there will be improvement in revenue collection. Also, there are clear signs of improvement in disinvestment.
On stock market reaction
I would wait for a full working day in the stock market. Today being Saturday, I am not sure if every aspect of the stock market was fully open. We would wait for Monday. I would think that the Budget will have a positive impact on stock market, particularly considering the reforms we have proposed to deepen the bond market. This is the first time ever that such a progressive and forward-looking step has been taken in the country. I would reserve my comments till Monday.
On idea behind a tax charter
It’s our commitment to ensure that taxpayers are respected. There are only three countries in the world which have enshrined the rights of taxpayers: Canada, the United States of America, and Australia. This will prove clearly that the government’s intent is not to harass anybody and we believe in it. It’s an article of faith for us to respect wealth creators.After delivering the longest-ever Budgetspeech, Finance Minister Nirmala Sitharaman told the media she was confident of the divestment process gaining pace in the next six months, that revenue collection was improving, and the government planned to remove all tax exemptions in the long term. Edited excerpts:
On new income-tax regime
We wanted to be sure that (more) money is in the hands of the people. We have adopted the same principle by which we announced the corporate rate tax cut in September 2019. We wanted to bring the rates down eventually and remove complications in terms of compliance. Too many exemptions make life difficult for tax administrators and people keep taking experts’ advice to plan the taxes. We wanted to achieve two goals: Simplify and reduce income tax. Ideally, no exemptions would have been the best (under the new regime), but we have decided to keep those which are indispensable. In the long term, we would remove all exemptions so that the entire income-tax structure is simple.
On new income-tax regime
We wanted to be sure that (more) money is in the hands of the people. We have adopted the same principle by which we announced the corporate rate tax cut in September 2019. We wanted to bring the rates down eventually and remove complications in terms of compliance. Too many exemptions make life difficult for tax administrators and people keep taking experts’ advice to plan the taxes. We wanted to achieve two goals: Simplify and reduce income tax. Ideally, no exemptions would have been the best (under the new regime), but we have decided to keep those which are indispensable. In the long term, we would remove all exemptions so that the entire income-tax structure is simple.
On disinvestment
I had set the target in July. Between July and January, finance ministry officials put in immense effort, and you will see successful disinvestment taking place in the next few months. Since our accounts have to close on March 31, I could not let the market speculate. Between July and now, a lot of legwork has been done and the benefits will accrue in the next financial year. So, you can hold me for setting the target that I could not fulfil, but for the next six months, I can stand up and tell you we have done enough groundwork.
On fiscal deficit
We had announced (the fiscal deficit target of) 3.3 per cent of GDP during the FY20 Budget estimate. On the one hand, because of the challenging need to put more money in the hands of the people to improve consumption demand and spur public investments, expenditure went up. On the other hand, due to disaster-related incidents, compliance and goods and services tax collection came down and revenue generation could not be pressed further.
The income foregone due to a corporate tax cut accentuated the problem in revenue generation. With both opposite sides so strongly laid out, it was only obvious that without violating the FRBM (Fiscal Responsibility and Budget Management) Act, I had to seek that escape clause and therefore sought a forbearance of 0.5 percentage points to evoke it. Going ahead, since GST collection has been robust in the past three months (over Rs 1 trillion) and the fact that more companies will come up and take the benefits of the corporate tax regime, there will be improvement in revenue collection. Also, there are clear signs of improvement in disinvestment.
On stock market reaction
I would wait for a full working day in the stock market. Today being Saturday, I am not sure if every aspect of the stock market was fully open. We would wait for Monday. I would think that the Budget will have a positive impact on stock market, particularly considering the reforms we have proposed to deepen the bond market. This is the first time ever that such a progressive and forward-looking step has been taken in the country. I would reserve my comments till Monday.
On idea behind a tax charter
It’s our commitment to ensure that taxpayers are respected. There are only three countries in the world which have enshrined the rights of taxpayers: Canada, the United States of America, and Australia. This will prove clearly that the government’s intent is not to harass anybody and we believe in it. It’s an article of faith for us to respect wealth creators.

2 tax regimes after Budget: Which one to choose if you claim exemptions

Two tax regimes will now exist simultaneously after the Budget2021 gave taxpayers a choice. There is the old one, which comes with higher tax rates (at several levels of income) but also offers a host of exemptions and deductions. And there is the new regime introduced by the finance minister, where the rates will be lower for many people, but taxpayers will not be able to avail of any deductions or exemptions.
chart
Experts say the tax regime has now become very taxpayer-specific. Each taxpayer will have to study his/her specific situation at the start of the financial year and then decide whether to opt for the new or the old regime.
For many, it may be beneficial to stick to the old regime. “Our analysis shows that people who were maximising all the tax benefits that are on offer will benefit by staying in the old regime. Such people should not opt for the new regime,” says Archit Gupta, founder and chief executive officer, ClearTax.
A host of exemptions and deductions are available to taxpayers. Salaried employees can avail of house rent allowance (HRA) and leave travel allowance (LTA). Those who have taken a home loan can avail of a deduction of up to Rs 2 lakh on the interest portion of their EMI, and also on the principal portion (under Section 80C).
chart
A deduction of up to Rs 1.5 lakh is available under Section 80C. The deduction on health insurance premium paid every year available under Section 80D can rise as high as Rs 75,000 — up to Rs 25,000 on the premium you pay for your nuclear family, and up to Rs 50,000 on your parents if they are senior citizens.
Another deduction of up to Rs 50,000 is available on the National Pension System (NPS) under Section 80CCD (1B). Several more such benefits are available.
One factor that will complicate calculations further regarding which regime to opt for is the absence of ceiling on some deductions. “The deduction on education loan under Section 80E is one where there is no upper limit,” says Gupta.
The taxpayer can claim deduction on any amount of interest income that he/she repays in a financial year. For those who have taken a big education loan, say, to fund a child’s foreign education, it may make sense to stick to the old regime.
While the new tax regime is simpler, the decision whether to opt for it is not. “Check which exemptions and deductions you are eligible for. Then do the calculations on whether your tax liability will be lower in the new regime or the old one,” says Naveen Wadhwa, DGM, Taxmann.com.
He offers a few ballpark figures. “If your income is less than Rs 8.5 lakh and you only claim Section 80C deduction, then don’t go for the new regime. On the other hand, if your income is more than Rs 8.5 lakh, and you have only been claiming Section 80C deduction, it may make sense to opt for the new regime,” he says.

Budget LIVE updates: Cabinet meeting underway, FM's Budget speech at 11 am

Budget2020 LIVE updates: Finance Minister Nirmala Sitharaman will present her second Union Budget in Parliament at 11 am today. The Budget speech will be keenly watched on both sides of the aisle in Parliament, and also by investors, both domestic and foreign, besides various interest groups like farmers and the anxious middle class.
Budget 2020 comes at a time when India is staring at an estimated 5 per cent annual rate of expansion, the slowest pace since 2009.
The economy has lately been impacted by slowing trade, rising protectionism, and concerns over a high level of unemployment. The recent sluggishness in the economy has led to expectations that the Budget would contain further stimulus measures to boost growth through new policy initiatives and continued reforms to achieve accelerated growth and employment generation.
On Friday, the government tabled the Economic Survey 2019-20, which projected the country's GDP growth for 2020-21 at 6-6.5 per cent.
Stay tuned for Budget 2020 live updates.
CATCH ALL THE LIVE UPDATES
Auto Refresh
10:10 AM
Nirmala Sitharaman and MoS Finance Anurag Thakur arrive at Parliament
ANI
✔
@ANI
#WATCH Delhi: Finance Minister Nirmala Sitharaman and MoS Finance Anurag Thakur arrive at the Parliament, to attend Cabinet meeting; Presentation of Union Budget 2020-21 at 11 am
Embedded video
125
10:09 AM - Feb 1, 2020
Twitter Ads info and privacy
32 people are talking about this
10:10 AM
Never seen a liquidity crisis this bad, says Hiranandani Group CMD
"I've never seen a liquidity crisis as bad as it is today. No matter how good the budget is if the oil in the mechanism of the economy is not working, the economy can't move. If the oil comes back and we get boost of budget then we will see recovery," N Hiranandani, CMD, Hiranandani Group told news agency ANI.
10:10 AM
Nirmala Sitharaman and MoS Finance Anurag Thakur arrive at Parliament
ANI
✔
@ANI
#WATCH Delhi: Finance Minister Nirmala Sitharaman and MoS Finance Anurag Thakur arrive at the Parliament, to attend Cabinet meeting; Presentation of Union Budget 2020-21 at 11 am
Embedded video
123
10:09 AM - Feb 1, 2020
Twitter Ads info and privacy
32 people are talking about this
10:04 AM
Economic Survey: 'Counter-cyclical fiscal policy' to boost demand justified
The Economic Survey for 2019-20, presented to Parliament on Friday, laid out an agenda for wealth creation in India and sought to ground pro-wealth and pro-business economic policies in India’s economic experience and philosophical traditions. In the Survey’s preface, Chief Economic Advisor K V Subramanian revealed the Survey’s motivation: Prime Minister Narendra Modi’s speech on Independence Day 2019, which highlighted the contributions of wealth creators and that “only when wealth is created will wealth be distributed”. Subramanian argues that liberalisation is a return to India’s “roots” as a market economy, and thus advocates various wealth-boosting reforms in the Survey.

From the macro-economic point of view, the Survey argues that since “the government, with a strong mandate, has the capacity to deliver expeditiously on reforms”, the upside risks to the economy dominate the downside risks. Given the base effect, it thus pegs growth in India’s gross domestic product or GDP in 2020-21 as being in the range of 6 to 6.5 per cent. The Survey admits that meeting the $5 trillion target set by the prime minister will be challenging, given the growth slowdown.
Read on...
10:03 AM
State of the economy under Modi-1 was actually worse than what we believed so far, says Chidambaram
Congress leader P Chidambaram on Friday said the state of the economy during Prime Minister Narendra Modi's first tenure was worse than what was believed as growth rates for 2017-18 and 2018-19 have been revised downwards. He asked if the ministers will explain it. "GDP growth rates for 2017-18 and 2018-19 have been revised DOWNWARDS. The state of the economy under MODI-1 was actually worse than what we believed so far.

P. Chidambaram
✔
@PChidambaram_IN
GDP growth rates for 2017-18 and 2018-19 have been revised DOWNWARDS. The state of the economy under MODI-1 was actually worse than what we believed so far.
3,122
6:14 PM - Jan 31, 2020
Twitter Ads info and privacy
912 people are talking about this

P. Chidambaram
✔
@PChidambaram_IN
· 16h
GDP growth rates for 2017-18 and 2018-19 have been revised DOWNWARDS. The state of the economy under MODI-1 was actually worse than what we believed so far.

P. Chidambaram
✔
@PChidambaram_IN
Will the articulate and voluble Ministers please speak on the state of the economy and explain the downward revision in the last two years and the drastic slide in the current fiscal year?
841
6:14 PM - Jan 31, 2020
Twitter Ads info and privacy
288 people are talking about this
09:59 AM
IIP growth turned positive but remained low at 1.8 per cent in November 2019 after contracting by (-) 4 per cent in October 2019. CPI-based inflation increased to a 65-month high of 7.4 per cent in December 2019, its fifth sequential rise, mainly due to persistently rising vegetable prices.
09:59 AM
Amid slowdown, Budget 2020 to be Sitharaman's balancing act
In Union Budget 2020, Sitharaman will have to do a balancing between efforts to boost growth and the need for fiscal restraint. Economists expect a slight policy tilt towards prioritising growth. Real GDP growth is estimated to fall to an 11-year low of 5 per cent in FY20 from 6.1 per cent in FY19. Estimated nominal growth at 7.5 per cent in FY20 is the lowest since 1975-76 (FY76) as per the FY12-based GDP series.
09:58 AM
Why markets remain open on Budget days
According to notifications by exchanges, trading will take place from 9.15 am to 3.30 pm on the Budget day. Pre-opening will be between 9.00 and 9.08 am. The decision was made after traders requested exchanges to keep trading hours so that quick buys based on Budget initiatives could be made.

Notably, the last time the market was open for trading on a Saturday was when former finance minister, the late Arun Jaitley presented the Budget on February 28, 2015.
09:57 AM
Cabinet meets at 10.15 am ahead of Budget presentation
The Union Cabinet meeting will be held at 10.15 am. Sitharaman will present the Budget in Parliament at 11 am today. The duration of the Budget speech usually ranges from 90 to 120 minutes.
09:53 AM
FM calls on President Kovind at Rashtrapati Bhavan
President of India
✔
@rashtrapatibhvn
As per tradition, Finance Minister @nsitharaman calls on President Kovind at Rashtrapati Bhavan before presenting the Union Budget.
View image on TwitterView image on Twitter
1,804
9:44 AM - Feb 1, 2020
Twitter Ads info and privacy
287 people are talking about this
09:50 AM
Nirmala Sitharaman meets President Kovind before Budget 2020 presentation
Finance Minister Nirmala Sitharaman calls on President Ram Nath Kovind before presenting the Union Budget 2020-21.

Budget session 2020 LIVE: Economic survey may forecast GDP at 6%-6.5%

Economic Survey. Photo: Shutterstock
The BudgetSession of Parliament will start today with the government releasing the Economic Survey for 2019-20, a day before Finance Minister Nirmala Sitharaman presents the Union Budget.
The Economic Survey, a detailed report card on the economic performance in the past year, comes at a time when India is staring at an estimated 5 per cent annual rate of expansion - the slowest pace since 2009. Chief Economic Advisor Krishnamurthy Subramanian will be presenting the survey.
President Ram Nath Kovind will inaugurate the Budget session by speaking to a joint sitting of both Houses of Parliament at 11 am, outlining the government's policies this year.
ALSO READ: Budget 2020: Six major concerns that FM Sitharaman should address on Feb 1
CATCH ALL THE LIVE UPDATES
Auto Refresh
09:52 AM
Economic survey likely to forecast 2020/21 growth at 6%-6.5%: Report
India's economic survey is seen projecting growth of 6% to 6.5% in the next year starting April 1, boosted by a series of fiscal measures to revive demand that the government is likely to announce in the budget, a source said on Friday.

India faces its worst economic slowdown in a decade. Growth slipped to 4.5% in the July-September quarter, imperilling job prospects for millions of young people entering the workforce each year.

The government has estimated gross domestic product expansion at 5% for the financial year ending on March 31, which would be the slowest pace since the global financial crisis of 2008/09.
09:11 AM
The Economy Survey continues to be a two-volume report since five years ago, since Arvind Subramanian was the chief economic advisor (CEA).

This time, incumbent CEA Krishnamurthy Subramanian will lead the writing of the first volume, which will continue to be idea-centric and forward-looking. First volume will also likely include a chapter focusing on the regulatory framework for credit rating agencies (CRAs), which are jointly regulated by the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) at present.
09:11 AM
The Budget session of Parliament will be held from February 1 till April 3
The Budget session of Parliament will be held from February 1 till April 3. During this period, the Budget will be presented before the Parliament for deliberation, voting and approval; the departmentally related standing committees consider the Demands for Grants of ministries/departments and report on the same to the Houses of Parliament.
08:08 AM
CEA Krishnamurthy Subramanian will be presenting the Economic Survey
The Chief Economic Advisor is the principal author of the Economic Survey and incumbent CEA Krishnamurthy Subramanian will be presenting the Survey.
08:07 AM
Economic Survey 2020 to be released today
The government will release the Economic Survey for 2019-20 on Friday, a day before Finance Minister Nirmala Sitharaman presents the Union Budget 2020-21
08:07 AM
What is Economic Survey?
The The Economic Survey analyses the trends in agricultural and industrial production, infrastructure, employment, money supply, prices, imports, exports, foreign exchange reserves and other relevant economic factors that have a bearing on the Budget. It is presented in the Parliament ahead of the Budget for the ensuing year.

Read our full coverage on Budget 2020
READ MORE ONECONOMIC SURVEYCHIEF ECONOMIC ADVISORCEA KRISHNAMURTHY SUBRAMANIANNIRMALA SITHARAMANBUDGET PRESENTATIONBUDGET 2020

LATEST NEWS
IN THIS SECTION
ALL
Arvind Krishna, IBM CEO
New IBM CEO Arvind Krishna described as 'brilliant, right person to lead'
Abidali Neemuchwala
Abidali Neemuchwala quits as Wipro CEO and MD, cites 'family commitments'
Arvind Krishna, IBM CEO
Arvind Krishna named IBM CEO as company fights for cloud business spot
FMCG, Marico, Parachute
Marico reports 5% increase in profit before tax to Rs 358 crore for Dec qtr
colgate palmolive, colgate headquarter
Colgate-Palmolive reports 5.1% decline in profit before tax to Rs 267.4 cr
More >
MOST POPULAR
READ
SHARE
COMMENTED
EV push, registration charge hike to dent 2-wheeler segment most: analysts

Budget 2020: Oil ministry calls for inclusion of natural gas under GST

Ahead of the Union Budget, the Oil Ministry has made a renewed pitch for inclusion of natural gas in the ambit of GST to promote the use of the environment-friendly fuel by reducing multiplicity of taxes and improving business climate.
When the Goods and Services Tax (GST) was introduced on July 1, 2017, amalgamating 17 central and state levies, five commodities namely crude oil, natural gas, petrol, diesel, and aviation turbine fuel (ATF) were kept out of its purview given the revenue dependence of state governments on this sector.

"Currently natural gas is taxed under the VAT regime with VAT ranging from 3 per cent to 20 per cent across states," the ministry said in a booklet it brought out to promote the use of the fuel in automobiles, household kitchens, and industries.
If brought under GST, natural gas will attract a uniform rate of tax at the consumption point anywhere in the country after doing away with current rates of excise duty and VAT.
This, it said, would "result in an increase in state domestic product and socio-economic development owing to increased economic activities" which will lead to improved employment opportunities.
Also, it would lead to improved investor confidence and attract more investment in natural gas infrastructure in the country, the booklet said, adding that a positive impact on environment and health due to reduction in carbon emissions across major cities was another advantage.
"As gas is not under the ambit of GST, there is no input tax credit available. Further, the downstream industries are not able to claim the benefit of the tax credit of VAT paid on purchases of natural gas which is available for alternate fuels/feedstocks," the booklet said.
Oil Minister Dharmendra Pradhan too has been making a vehement pitch for the inclusion of gas in the GST.
"We believe natural gas as also aviation turbine fuel (ATF) can be included in the GST regime," he had said on Monday.
Including ATF and natural gas will not just help companies set off tax that they paid on input but will also bring about uniformity in taxation on the fuels in the country, he had said. "Including natural gas in GST is said to be one of the biggest drivers of not just consumption but will also incentivize producers to spend more on finding and producing more gas as well as incentivize importers to bring in more LNG."
Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget for 2020-21 fiscal on February 1.
ATF makes up for almost a third of the cost of an airline and rates vary from state to state depending on local VAT.
A uniform GST would also push the usage of environment-friendly natural gas, whose share in the energy basket the government wants to increase to 15 per cent by 2030 from current 6.2 per cent.
Pradhan said the GST Council, the highest decision-making body of the new indirect tax regime, should take a decision in favour of these two fuels at the earliest.
The Council is headed by Union Finance Minister and comprises representatives of all states and union territories.
Under the existing structure, both natural gas and ATF attract the Centre's excise duty and a state's value-added tax (VAT). Both these and all other levies will get subsumed under GST if they are brought under its ambit.
The decision on their inclusion depends on the financial position of states as revenues from these five petroleum products constitute a substantial chunk of state government finances.
Barring a few, most of the states are incurring revenue shortfall as GST subsumed a dozen of their taxes, introducing the single levy, in a bid to simplify taxation system and remove the cascading effect of 'tax on tax' in the country.
According to the industry, keeping ATF and natural gas out of the GST net is increasing the cost of these products as tax on inputs is not being credited against the sale of these products, which ultimately, adds to the cost of production.
The Aviation Ministry has time and again sought inclusion of ATF under GST as any surge in international oil rates gets reflected in domestic jet fuel prices, leading to costlier air tickets.
Natural gas is widely used as industrial input by a variety of industries - from power to steel - and it coming under GST would help eliminate the cascading impact of taxes, bringing down prices of CNG and piped natural gas.

India's top 63 billionaires have more wealth than 2018-19 Budget outlay

India’s billionaires hold a combined total wealth that is more than the Union Budgetoutlay.
The gap between the top 1 per cent and the bottom 50 per cent of the population just keeps expanding, global non-profit organisation Oxfam said in its latest annual report on income inequality.
“The combined total wealth of 63 Indian billionaires is higher than the total Union Budget of India for the fiscal year 2018-19 which was at Rs 24.42 trillion,” Oxfam said in its report released on Monday.
“The wealth of billionaires rose from $325.5 billion (Rs 22.73 trillion) in 2017 to $408 billion (Rs 28.97 trillion) in 2019,” the report said. In fact, that amount is even higher than the 2019-20 Budget size of Rs 27.86 trillion, something the report did not mention.
The world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 per cent of the planet’s population, the report also showed.
“Our broken economies are lining the pockets of billionaires and big business at the expense of ordinary men and women. No wonder people are starting to question whether billionaires should even exist,” said Oxfam India CEO Amitabh Behar
An analysis of India’s billionaires showed that 15 of them come from the consumer goods industry and more than 10 from the pharmaceuticals sector in 2019 – a rarity among developing countries.
In fact, not just in India, but global inequality is deeply entrenched. The number of billionaires has doubled in the last decade, despite their combined wealth having declined just in the last year.
“The gap between the rich and poor can't be resolved without deliberate inequality-busting policies, and too few governments are committed to these,” Behar said.
“Women and girls are among those who benefit the least from today’s economic system. They spend billions of hours cooking, cleaning and caring for children and the elderly. Unpaid care work is the ‘hidden engine’ that keeps the wheels of our economies, businesses and societies moving. It is driven by women who often have little time to get an education, earn a decent living or have a say in how our societies are run. They are, therefore, trapped at the bottom of the economy,” added Behar.
Women do more than three-quarters of all unpaid care work. They often have to work reduced hours or drop out of the workforce because of their care workload.
Across the globe, 42 per cent of women cannot get jobs because they are responsible for all the caregiving, compared to just six per cent of men.
The report stated that India’s top 10 per cent of the population holds 74.3 per cent of the total national wealth.
The contrast is even sharper for the top 1 per cent. India’s top 1 per cent of population holds 42.5 per cent of national wealth while the bottom 50 per cent, the majority of the population, owns merely 2.8 per cent of the national wealth.
“In other words, the top 1 per cent hold more than 4 times the wealth held by 953 million people, or the bottom 70 per cent of the population. The bottom 90 per cent holds 25.7 per cent of the nation’s wealth. Wealth of the top nine billionaires is equivalent to the wealth of the bottom 50 per cent of the population,” the report said.
The report also touched upon gender inequality. Women make up two-thirds of the paid ‘care workforce’. Jobs such as nursery workers, domestic workers and care assistants are often poorly paid, provide scant benefits, impose irregular hours, and can take a physical and emotional toll, it said.
The pressure on carers, both unpaid and paid, is set to grow in the coming decade as the global population grows and ages.
Climate change could worsen the looming global care crisis – by 2025, up to 2.4 billion people will live in areas without enough water, and women and girls will have to walk even longer distances to fetch it.
About 80 per cent of indigenous people live in Asia and the Pacific, a region vulnerable to climate change.
The report shows that governments are massively under-taxing the wealthiest individuals and corporations. They are failing to collect revenues that could help lift the responsibility of care from women and tackle poverty and inequality.
At the same time, governments are underfunding vital public services and infrastructure that could help reduce women and girls’ workload. For example, investments in water and sanitation, electricity, childcare and healthcare could free up women’s time and improve their quality of life.
FINDINGS
• The top 1% of Indians hold more than 4 times the amount of wealth held by the bottom 70% of the population
• It would take a female domestic worker 22,277 years to earn the salary a top CEO of a tech company makes in one year
• Women and girls put in 3.26 billion hours of unpaid care work each and every day — a contribution of at least Rs 19 trillion a year to the Indian economy
• Direct public investments in the care economy (2 per cent of GDP) would potentially create 11 million jobs. This would make up for the 11 million jobs lost in 2018

Govt drafting fisheries policy with Rs 45,000 cr budget for next five years

The government is drafting first national fisheries policy with a budgetof Rs 45,000 crore for next five years to promote marine fishery, acquaculture and mariculture, official sources said.
The only existing policy is on marine fisheries from which the production stands at 4.3 million tonnes annually, but there is no policy on inland fisheries that produces the rest 23 million tonnes.

The newly carved out Fisheries Ministry is working on an overarching policy that would cover all aspects of the fishery sector, the sources said.
"The fishery sector never had a policy. Now, a new policy is being made. It will focus on promoting marine, acquaculture and mariculture besides addressing the traceability issues. It will cover both catch and capture fishing," an official source told PTI.
The draft policy will soon be placed before the Cabinet for approval. A budget of Rs 45,000 crore would be required for next five years for implementing the policy, the source added.
Basically, a policy is a statement of intent of the government. To execute a policy, certain legislation and regulations either in the form of Act or executive order are required. And schemes are framed to give monetary support. The schemes stay for only 5-10 years, but a policy lasts for longer period.
At present, two fishery schemes are being implemented. One is Fishery Infrastructure Development Fund, which is a five year scheme. The other one is fishery development scheme funded partially by the World Bank. It is for eight years.
The third scheme 'Pradhan Mantri Matsya Sampada Yojana' which was announced in July 2019 Budget is yet to get the cabinet approval. It aims to boost fish and aquatic products through appropriate policy, marketing and infrastructure support.

Budget 2020: Govt unlikely to announce capital infusion for PSU banks

The government is unlikely to announce capital infusion for the public sector banks (PSBs) in the upcoming Budgetand will rather encourage them to expedite recovery of bad loans and raise funds from the market.
Besides, sources said, banks may also look for divesting or selling their non-core business as part of fund raising exercise during 2020-21.
Finance Minister Nirmala Sitharaman is expected to present the second budget of the Modi 2.0 government on February 1.
According to sources, banks have robust pipeline of recovery from the resolution of both NCLT and non-NCLT cases during this calender year and also headroom for raising capital from the market.
The provision coverage ratio of public sector banks is at a 7-year high of 76.6 per cent.
In some of the non-performing assets, banks have done provisions up to 100 per cent, sources said, adding that recovery from those account will straightaway form part of the bottomline.
Share price of some of the banks are firming up which provide them opportunity to dilute government holding, sources said.
Country's largest lender State Bank of India (SBI) has already initiated the process of diluting its stake in its subsidiaries SBI Cards and Payment Services Ltd and UTI Mutual Fund.
It is looking to sell 5 million shares representing 1.01 per cent stake in the National Stock Exchange (NSE).
Similar exercise is being undertaken by other state-owned lenders as well in an effort to raise capital.
In addition, the government has already front loaded Rs 68,855 crore, out of Rs 70,000 crore earmarked for capital infusion for the current fiscal, to take care of the mega-merger plan announced in August, 2019.
Among all four anchor banks -- Punjab National Bank was given Rs 16,091 crore, Union Bank of India Rs 11,768 crore, Canara Bank Rs 6,571 crore and Indian Bank Rs 2,534 crore.
Merging entities like Allahabad Bank was provided Rs 2,153 crore, United Bank of India 1,666 crore and Andhra Bank Rs 200 crore.
Besides, Bank of Baroda got a capital infusion of Rs 7,000 crore, Indian Overseas Bank Rs 4,360 crore, UCO Bank Rs 2142 crore, Punjab & Sind Bank 787 crore and Central Bank of India Rs 3,353 crore.
LIC-controlled IDBI Bank too received additional capital of Rs 4,557 crore through the first supplementary demands for grants approved by Parliament last month.
With the deadline of March 31 to complete other regulatory requirements, the merged entity will come into existence beginning next fiscal.
Alternative Mechanism of Government of India gave in principle approval for merger of United Bank of India and Oriental Bank of Commerce with Punjab National Bank, making the proposed entity the second largest public sector bank (PSB).
Syndicate Bank will be merged with Canara Bank, while Allahabad Bank will be amalgamated with Indian Bank.
Similarly, Andhra Bank and Corporation Bank will be consolidated with Union Bank of India.
The government remains committed to maintain financial health of public sector banks and it will provide capital in case if the need arises in the future, sources added.

Budget should look to push rural demand, not reduce I-T rate: Economists

The government in its Union Budget2020 should focus on boosting rural demand to perk up the economy instead of cutting the personal income tax rate, said economists at a panel discussion on Saturday.
At the annual convention of the Federation of Indian Chambers of Commerce & Industry (Ficci), Shekhar Shah, director general at the National Council of Applied Economic Research (NCAER), said had there been no Budget constraints, both personal income tax and rural demand could have been given a push. However, in the real world, an income tax cut would not have as much impact on demand as focus on rural demand.

Ajit Ranade, chief economist at Aditya Birla Group, said, “I don’t think a cut in the personal income tax is a good thing to do at this juncture.”
In India, he said, people start paying income tax when they have 400 per cent of per capita income, while in advanced countries they do it once they have 25 per cent of per capita income.
In fact, to propel demand, one should concentrate on indirect taxes and bring down the goods and services tax (GST) rates to a uniform 12 per cent as the Vijay Kelkar panel had recommended, he said.
D K Joshi, chief economist at CRISIL, said tax collections are so poor that the government’s ability to spend more will be curtailed if the personal income tax rates are cut.
The panelists spoke in different tunes on whether India should have joined the Regional Comprehensive Economic Partnership (RCEP).
Sachchidanand Shukla, chief economist at Mahindra Group, said India should avoid the RCEP in terms of timing. He wondered whether the country has the ability to compete with the proposed RCEP members.
Joshi said India should join the RCEP. Ranade spoke in favour of the deal, saying India has in its armour anti-dumping and safeguard duties which could be imposed if there is abuse of the treaty. So many options will go if India does not join the RCEP, he said.
Shah said the country must join the RCEP and must join it now even if there is pain.
On interest rates, Ranade said monetary policy is not working effectively, the real interest rates are still very high. He urged to explore the idea of interest subvention in various sectors through fiscal means.
Joshi said the monetary policy has lost its effectiveness at this point of time but this cannot be the reason not to use it.
To a question on why experts, including the Reserve Bank of India, could not anticipate the extent of economic slowdown and kept revising economic growth projections, Shah said in the previous years the economy was growing by 8 per cent, then 7 per cent and then 6 per cent and nobody expected it dropping to 4.5 per cent.
Then, he said, there was this reputation of the fastest-growing large economy for India which made everyone, including economists, complacent.

A slew of measures to ease the pain of payment delays faced by MSMEs

The 2019-20 Budget had proposed a new payment platform for India’s micro, small and medium enterprises (MSMEs) — defined as enterprises whose investments are under Rs 10 crore in the cases of manufacturing units and under Rs 5 crore in the case of service units — to enable filing of bills and online tracking of payments from government agencies, a major source of their cash flow. But to make the new platform effective, some problems with the existing online systems must be addressed.
In 2015-16, India had 63.4 million MSMEs employing 111 million persons, according to National Sample Survey data cited in the MSME Annual Report 2018-19. MSMEs constitute 45 per cent of India’s manufacturing output and 49 per cent of its exports, while employing 30 per cent of its workforce. Delayed payments often push them into a debt trap, sickness and failure, shows our analysis of National Sample Survey data.

Pending payments in MSMEs rose from 8.61 per cent in 2010-11 to 9.5 per cent in 2015-16, according to our analysis of the data used in the 67th and 73rd rounds of the National Sample Survey of “unincorporated non-agricultural enterprises”. It is the second-most severe problem faced by MSMEs, the first being a fall in demand.
However, the existing platforms (MSME Samadhaan and Trade Receivables Discounting System (TReDS)) for MSEs (micro and small enterprises) are riddled with problems that result in delayed payments.
Government payments to suppliers and contractors being a major source of cash flow for MSMEs, removing payment delays would enable MSMEs to make appropriate investment decisions, while improving their access to finance and marketing.
Attempts to streamline payments
All the 36 states/Union Territories in India have constituted Micro and Small Enterprise Facilitation Council (MSEFC) for the settlement of disputes on getting references/filling on delayed payments, as mandated under the the MSMEs Development Act 2006. The buyer is liable to pay a monthly compound interest to the supplier at three times the bank rate notified by the Reserve Bank of India (RBI) if the payment is not made within 45 days of the day of acceptance of the goods/service or the deemed day of acceptance.
All specified companies that delay payments are required to file a half-yearly return to the Ministry of Corporate Affairs (MCA) stating the details of the dues and giving reasons for the delay, as per an MSME ministry notification issued in November 2018. In January 2019, the MCA also directed all specified companies to file a form, MSME-I, containing the details of all micro or small enterprise suppliers.
But, as per the notification, these regulatory provisions do not apply to medium enterprises which constitute 0.01 per cent of the MSME category.
Small relief
To empower micro and small enterprises to directly register cases relating to delayed payments by government bodies, the MSME ministry launched a delayed payment portal, MSME Samadhaan, October 30, 2017.
So far, 27,693 applications involving dues worth Rs 7,212.23 crore have been filed by micro and small enterprises (MSEs), according MSME Samadhaan portal. However, of these, only 1,532 applications have been disposed of by micro and small enterprises facilitation council (MSEFC) while 4,474 applications were rejected. Further, 2,241 cases were mutually settled with buyers while 7,447 cases are currently under consideration by MSEFC.
As we mentioned earlier, medium enterprises are not eligible to submit applications at Samadhaan. And only MSEs having Udyog Aadhaar Number (UAN), a unique identity number obtained after registration for Udyog Aadhaar Memorandum (UAM), are eligible to apply at the portal.
MSMEs’ registration for UAM started in September 2015. But only around 7.7 million MSEs have registered so far. Given that there are 63.3 million MSMEs, this indicates that only around 12 per cent MSMEs are eligible to apply to Samadhaan.
The RBI also introduced an online platform, TReDS, in March 2014 to facilitate discounting of bills and invoices of MSME suppliers. This is a financial arrangement wherein a seller recovers an amount of the sales bill from a financial intermediary, after paying a discount/fee, before it is due.
Receivables Exchange of India Ltd (RXIL), the first TReDS platform, was incorporated on February 26, 2016. The ‘Strategy for New India @75’, prepared by NITI Aayog, clearly states that the Department of Public Enterprises should ensure the registration of all public sector units on TReDS portal.
This system involves three parties—MSME suppliers, corporate buyers and financiers. The financier discounts the invoice after the corporate buyer accepts the invoice and bills uploaded by the MSME supplier.
However, this is a somewhat lengthy process because it involves many stages and interactions between the three parties. Further, the discounting and financing charges are borne by the MSME suppliers, reducing their earnings. This discourages many MSMEs from using the TReDS portal and forces them to approach informal financers for invoice discounting that allows immediate payment.
Further, as per the November 2, 2018, notification by the MSMEs ministry, only companies registered under the Companies Act 2013 and reporting a turnover of over Rs 500 crore (and all Central Public Sector Enterprises), can board the TReDS platform. This ends up excluding many MSMEs.
chartWay ahead
Both central and state governments have announced well-publicised schemes to promote the growth of MSMEs — for example, PMEGP which provides government subsidy for meeting the project cost partially, MUDRA Yojana which aims to develop micro enterprises by providing various kinds of support including refinance and MSME59, an initiative for processing loan applications of MSMEs and sanctioning them in under 59 minutes, MSME Samadhaan which aims to address the issue of delayed payment from government agencies, TReDS portals which provide factoring services in case of delayed payment, etc.
However, these schemes have overlapping objectives— to address MSMEs’ financial problems — and this leads to confusion among beneficiaries as well as implementing agencies. This also increases administrative costs as each scheme requires its own staff and setup to deal with beneficiaries. Therefore, there is a need to simplify these schemes and policies.
Research at the Institute for Studies in Industrial Development suggests a single-window solution would address the problem of delayed payments from both government and market players by encompassing online payment, invoice discounting and delayed payment redressal (Figure 1).
Both buyer and seller could register at the online payment platform. After a business transaction and uploading of invoices by the seller, MSMEs may opt for invoice discounting if payment from the buyer cannot be realised immediately or within the agreed time period.
Further, if there is any delay in payment as per statutory guidelines, the issue should automatically move to Samadhaan for redressal with an alert to both the buyer and the supplier. Many entrepreneurs remain unaware of the MSME online platforms, so there is also a need for awareness campaigns.
This system would work best if all MSMEs are eligible for registration and its process is speedy and simple.

FinMin to kick-start the exercise to prepare Budget for 2020-21 from Oct 14

The finance ministry will kick-start the exercise to prepare annual Budget for 2020-21 from October 14 which, among other thing, will have to address critical issues pertaining to slowdown in growth and subdued revenue collection.
It will be the second Budget of both the Modi 2.0 government and Finance Minister Nirmala Sitharaman.

"The pre-Budget/RE (Revised Estimate) meetings will begin on the October 14, 2019. All financial advisers should ensure that the necessary details related to these meetings contained in the RE module of the UBIS (Union Budget Information System)," according to a Budget Circular (2020-21) of the budget division of the finance ministry's Department of Economic Affairs.
The Budget Estimates for 2020-21 will be provisionally finalised after the expenditure secretary completes discussions with other secretaries and financial advisers.
Pre-Budget meetings will begin from October 14 and continue till the first week of November, it said.
"Some of the new inclusions in the Circular relate to instructions regarding filling up of scheduled caste sub plan and tribal sub plan, gender, child budget statements, etc.," it said.
The Budget 2019-20 is likely to be presented on February 1.
Prime Minister Narendra Modi-led government scrapped a colonial-era tradition of presenting the Budget at the end of February. Then Finance Minister Arun Jaitley had for the first time presented the annual accounts on February 1, 2017.
With the preponement of the Budget, ministries are now allocated their budgeted funds from the start of the financial year beginning April.
This gives government departments more leeway to spend as well as allow companies time to adapt to business and taxation plans.
Previously, when the Budget was presented at the end of February, the three-stage Parliament approval process used to get completed some time in mid-May, weeks ahead of onset of monsoon rains.
This meant government departments would start spending on projects only from August-end or September, after the monsoon season ended.

Asian Paints to Infosys: 70 stocks that surged up to 40% since Budget 2019

Proposals under Union Budget 2019 to impose a surcharge on foreign portfolio investors (FPIs) and a 20 per cent tax on share buybacks, trade-tariff salvos between the United States and China, and a collapsing domestic economy that hit a six-year low in the June quarter brought stock markets to their knees.
At the bourses, indices have cracked since the presentation of the Budget. The S&P BSE Sensex and the Nifty50 have slipped 8 per cent, each, while the S&P BSE 500 has lost 9 per cent during the period under review.
Despite this, about 70 stocks, including Hathway Cable and Datacom, HDFC Asset Management Company, Asian Paints, Torrent Pharmaceuticals, Infosys, Dr Lal Path Labs, and ICICI Prudential Life Insurance, on the S&P BSE 500 have outperformed the benchmarks by rallying up to 41 per cent.
ALSO READ: Analysts bullish on mid-cap IT stocks as valuations turn attractive
Among the outperformers, most of the pharmaceutical firms, paint companies, and information technology companies have defied the fall in the market.
Consider this: In the past three months, Godfrey Phillips, Zydus Wellness, Reliance Nippon Life Asset Management, HDFC AMC, Sun Pharma Advanced Research Company and Hathway Cable and Datacom have surged between 20 – 41 per cent.
Moreover, about 14 stocks, including HDFC Life Insurance Company, Dabur, NIIT Technologies, Infosys, Torrent Pharma, Asian Paints, and Berger Paints, have rallied up to 16 per cent.
That apart, Foreign Institutional Investors (FIIs) have increased their stake in insurance firms by up to 351 per cent, ACE Equity data shows. READ MORE HERE
Each of these sectors, analysts say, have global reasons to shine.
“Paint companies, pharmaceuticals, and IT firms are the select few sectors that are performing well in an overall weak market due to favourable global factors… A weak rupee worked for all the IT firms, and low oil prices have contributed towards gains in the paint companies,” says G.Chokkalingam, founder and managing editor, Equinomics Research. He adds that prices for pharmaceuticals firms have bottomed-out, helping them log gains.
In the past three months, the S&P BSE IT index has gained 6 per cent, followed by marginal gains of 0.4 per cent in the S&P BSE Healthcare. The S&P BSE Consumer durables index, however, plummeted 11 per cent during the same period.
Fundamentally, pharmaceutical companies reported a healthy June 2019 quarter. “The expectations were largely exceeded on EBITDA (earnings before interest, tax, depreciation and amortisation) margins and most of the companies reported revenues in-line with the expectations,” analysts at Centrum Broking wrote in a quarter-review note. Earning leaders in the Q1FY20 quarter were Abbott, Biocon, Lupin, Sun Pharma, Aurobindo and Dr Reddy Labs, while draggers were Aarti, Sanofi, FDC and Cipla, they said.

ALSO READ: Top FPIs see modest rise in investment value amid sustained volatility
Furthermore, Hindustan Unilever, Dabur, and Nestle – which rose 3, 10, and 7 per cent in the past three months – recorded volume growth of 5 per cent, 9.6 per cent, and 11.4 per cent, respectively despite the slowdown in the consumption space.
Asian Paints and Berger Paints, too, clocked double-digit growth of 16 per cent and 12 per cent, respectively.
TIME TO PICK VALUE STOCKS?
Going ahead, analysts caution investors, to pick value stocks in the consumption, construction, sanitary, hardware, and IT sectors.
“Investors should continue to buy selective mid-cap stocks like Torrent Pharma, Alembic Pharma, HDFC Life, etc that have outperformed the frontline indices” says Gaurang Shah, head of research at Geojit BNP Paribas.
He adds that the possibility of the government announcing relief measures for the real estate sector opens the avenue for investors to add paint, sanitary, pipe (hardware) companies to their portfolio.
ALSO READ: Centre may soon come out with measures to boost real estate sector
Over the past two weeks, Finance Minister Nirmala Sitharaman has announced a slew of measures to arrest the slowdown in the economy. READ MORE HERE
Chokkalingam of Equinomics Research corroborates and says that stocks have “corrected beyond the value they deserve”, and investors must pick stocks for long-term that are better in terms of governance, management, and leverage position.
Company Price as on Sep 3 (in Rs) Change (%)
Hathway Cable & Datacom 32.20 40.9
Sun Pharma Advanced Research Company 157.70 32.9
HDFC Asset Management Company 2649.75 31.7
Reliance Nippon Life Asset Management 282.35 27.5
Zydus Wellness 1659.85 21.3
Godfrey Phillips India 1003.00 20.5
Asian Paints 1576.50 15.9
Berger Paints India 362.65 13.2
Can Fin Homes 404.30 12.9
Apollo Hospitals Enterprise 1494.00 12.7
Sun Pharmaceutical Industries 439.45 12.1
Torrent Pharmaceuticals 1714.45 11.1
Eveready Industries (India) 77.90 11.0
Infosys 814.30 11.0
Dr. Lal Pathlabs 1186.10 10.3
Gujarat State Petronet 214.15 10.3
NIIT Technologies 1473.65 10.2
Pidilite Industries 1347.80 9.8
Dabur India 442.45 9.8
HDFC Life Insurance Co 536.55 9.7
Indraprastha Gas 328.65 8.7
Colgate-Palmolive (India) 1248.75 8.4
Ajanta Pharma 1018.20 7.9
Swan Energy 112.75 7.5
ICICI Prudential Life Insurance Company 423.45 7.5
CreditAccess Grameen 554.30 7.3
SBI Life Insurance Company 811.80 7.2
Nestle India 12684.30 6.8
Alkem Laboratories 1839.85 6.6
HCL Technologies 1108.55 6.5
Sanofi India 6089.25 6.5
ICICI Lombard General Insurance Co 1190.95 6.0
Abbott India 9428.80 5.8
Bata India 1539.10 5.7
TV Today Network 297.00 5.6
Gujarat Gas 172.25 5.6
Avenue Supermarts 1506.50 5.1
Tamil Nadu Newsprint & Papers 187.00 4.8
Phoenix Mills 683.00 4.7
Petronet LNG 264.10 4.6
Glaxosmithkline Pharmaceuticals 1239.60 4.5
Quess Corp 468.65 4.0
Hexaware Technologies 387.15 3.8
Spicejet 128.05 3.7
JB Chemicals & Pharmaceuticals 378.15 3.6
Marico 386.65 3.4
Kansai Nerolac Paints 456.65 3.1
Galaxy Surfactants 1298.05 2.8
Hindustan Unilever 1842.70 2.8
Fine Organic Industries 1423.55 2.4
Navin Fluorine International 722.25 2.3
MRF 57709.90 2.2
Adani Transmission 234.60 2.2
Glaxosmithkline Consumer Healthcare 7968.40 2.1
Natco Pharma 542.80 2.0
Multi Commodity Exchange Of India 878.60 1.7
Zee Entertainment Enterprises 361.00 1.3
Ipca Laboratories 960.85 1.2
Divis Laboratories 1639.60 1.2
Piramal Enterprises 1969.00 1.1
Prestige Estate Projects 290.20 0.9
Trent 451.95 0.8
JK Cement 1000.45 0.6
Tata Global Beverages 271.20 0.6
Max Financial Services 417.25 0.5
Tech Mahindra 704.30 0.5
Tata Consultancy Services 2252.25 0.4
Minda Industries 315.20 0.3
Mahanagar Gas 829.60 0.2
Whirlpool Of India 1602.40 0.1
Source: ACE Equity

Changes in I-T rules kick in today; to help govt track taxpayers' income

The government will get more access to taxpayers’ income information from Sunday when a slew of Budget announcements such as a new levy on cash withdrawal and interchangeability of Aadhaar number and PAN comes into effect. Most of these changes, such as widening the scope of deduction at source, will help the government track income of assessees. An amnesty scheme to clear pending service tax and service duty, from before the introduction of the goods and services tax (GST), will also open for four months.
The Budget presented on July 1 introduced a levy of 2 per cent at source on cash withdrawals of Rs 1 crore and more. The new Section 194N has been introduced in the Income-Tax Act.

Also, 180 million, or half of all PAN cards, may be rendered invalid, so their owners will need to link their PAN to Aadhaar, or cite their Aadhaar number for purposes where PAN was required earlier. The Budget has made PAN and Aadhaar interchangeable, but both have to be linked by September 1. If one files I-T returns only with Aadhaar, without citing PAN, a new PAN will be generated.
As an anti-evasion measure, the Budget fine print revealed, the onus of PAN and Aadhaar authenticity was on the person receiving the documents for transactions.
Individuals or Hindu Undivided Families paying Rs 50,000 for renovation of homes or other services in a year will have to deduct 5 per cent tax. But they will not need to obtain a tax deduction account number.
There will also be a 5 per cent tax deducted at source on the net income proportion of life insurance maturity proceeds. Net income is the total sum received after deducting the total premium paid.
Till now, this was exempted from tax if the annual premium did not exceed 10 per cent of the sum assured.
The government has also expanded the scope of reporting requirement of financial transactions by removing the minimum threshold of Rs 50,000. From September 1, banks and financial institutions could be asked to report even small transactions to the tax department to verify tax returns.

Analysts expect FPI selling to reverse; see a market rally on Monday

The rollback of surcharge proposed in the Budget on foreign portfolio investors and measures to prop-up the economy, especially the auto sector have been welcomed by experts, who now expect the markets to react positively to the development on Monday.
In a post-market hours press briefing today evening, Finance Minister Nirmala Sitharaman withdrew the enhanced surcharge on long and short-term capital gains. That apart, public sector banks will be infused with Rs 70,000 crore capital. Read more here

Analysts have given a thumbs-up to the measures announced and expect the selling by foreign FPIs to halt. In this backdrop, they expect the markets to to rally on Monday. Here’s how they have interpreted the announcements:
Vijay Chandok, MD & CEO, ICICI Securities
We welcome the new announcements made by the finance minister and are confident that the slew of measures revealed by her would act as a major stimulus for the economy and provide an all-round sentiment boost.
These steps are as much on ease of doing business as they are on rationalizing of taxes and injecting liquidity into the system. The measures are expected to aid both - consumption and investments as borrowing cost will come down.
With withdrawal of surcharge on key investor categories like FPIs, inflows into the market is expected to improve. Some key job creating sectors like auto and real estate, who have been under pressure lately, have been given a good boost, which is a welcome step.
Ashishkumar Chauhan, MD & CEO, BSE
Long term measures which will improve ease of doing business and ease of living include giving GST refund in 30 days to MSME and randomized- faceless - e assessments for IT. These are some of the deep reforms which require a lot of thinking as well as preparing and IT prowess. Overall, the take home is that the government is listening, has listened, has identified solutions and have taken some quick and bold wide ranging decisions.
CSR spend and criminal proceeding on that was a surprise to many when it was announced. Taking it back, is a welcome move. It will allow corporations to think and employ their CSR funds in an effective way without the fear. This step has certainly given a boost to the morale of corporate India
V K Vijayakumar, chief investment strategist, Geojit Financial Services
Withdrawal of the surcharge on FPIs is a shot in the arm for the sagging market. One can now expect reversal of the FPI selling. The market is likely to look up from now on. However, sustained rally in the market will happen only when we have visibility on good earnings growth and reversal of the slowdown in the economy. This requires more reforms. The FM has announced that she will come back with more reforms soon. So, there is hope.
Ravindra Sudhalkar, ED & CEO, Reliance Home Finance
Today’s announcements from the Finance Minister to revive the economy is a welcome move, especially provisions where Rs 70,000 crore will be immediately be released, and an additional liquidity of Rs 5 lakh crore being made available to the banking sector will definitely help in reviving the real estate sector and in turn the housing finance sector.
Additional liquidity support to the housing finance companies (HFCs) increased to Rs 30,000 crore from current Rs 20,000 crore by NHB is encouraging. As well as banks deciding to pass on rate cuts to customers is another significant move and hopefully the NBFC sector which has been reeling under pressures due to lack of liquidity will see much better times going forward
Anuj Puri, chairman, ANAROCK Property Consultants
The government is taking a heads-on approach to addressing issues, supporting the key drivers of the economy and giving each of the sectors - including real estate – a massive shot in the arm in these stressful times.
The announcement to offer more credit support for purchase of homes, vehicles and consumption goods is an extremely welcome move which does not come a moment too soon. This move gives a major liquidity support of an additional Rs 20,000 crore to HFCs and this will significantly improve the momentum of lending to cash-strapped developers by the NHB. Many developers will now be able to complete their projects stuck or delayed which were languishing due to lack of funds – thereby benefiting their buyers directly.

Bank stocks fall up to 40% since Budget. Is it a good time to buy?

The overall economic slowdown and the surcharge-related concerns for foreign portfolio investors (FPIs) amid weak global cues cast its shadow on the market sentiment, especially the banking stocks that have taken a hard knock since the presentation of the Union Budget on July 5. Given the developments, analysts say the road ahead for these stocks remains challenging till there is a pick-up in the economic sentiment and clarity on government policy.

“There are legacy issues with banks, especially the ones in the public sector domain. One cannot paint the entire sector with the same brush. The non-performing loan issue is now getting addressed, which is expected to peak out in the current financial year 2019 – 20 (FY20). This should lessen the amount needed for provisioning and aid overall profitability” says G Chokkalingam, founder and managing director at Equinomics Research.

As regards June 2019 quarter earnings, weakness in core performance and lower investment gains for SBI and BoB, asset quality pressure for YES Bank, Axis Bank and higher than expected provisions for ICICI Bank led to aggregate earnings being 21 per cent below expectations, say analysts.

Private Bank's loan growth moderated to around 16 per cent – an eight quarter low and was driven by softness in auto and unsecured retail loans. For large private banks, net interest margins (NIMs) were largely in-line but for mid-sized banks higher pressure was visible. With reduction in policy rates, ample liquidity and nudge by government to lend, analysts expect pricing power to weaken and could pressurize NIMs going ahead.

“Q1FY20 witnessed the steepest de-growth in Q1 capital expenditure since the National Democratic Alliance (NDA) came to power in 2014, which adversely impacted liquidity in the banking system. Also, election related uncertainty amongst consumers must have definitely had an impact. However, liquidity has bounced back to surplus in Q2 most likely driven by expansion in government spending and reversal in growth of currency in circulation,” wrote Vinod Karki of ICICI Securities in a co-authored report with Ravin Kurwa.

Since the presentation of the Budget, while the Nifty50 index has slipped around 7.5 per cent, the Nifty Bank index has lost over 10 per cent, ACE Equity data show. The Nifty Private Bank index and the Nifty PSU Bank indices, too, have slipped over 9 percent and 21 per cent respectively during this period.

So, are bank stocks a good buy at the current levels?

Chokkalingam of Equinomics Research suggests investors remain selective and buy where there is earnings visibility. Government stimulus can help, but should not prove to be a short-term measure.

“The government should address the economic slowdown issue and not merely the sentiment issue. The former will automatically help improve sentiment, albeit over time. PSU banks can outperform their private counterparts over the next few months in case the market sentiment improves and the non-performing asset (NPA) issue peaks out in FY20,” he says.

Most PSU banks have underperformed the markets since the presentation of the Union Budget with Indian Bank, Oriental Bank of Commerce (OBC), Allahabad Bank, Bank of Baroda (BoB), State Bank of India (SBI), Canara Bank and Punjab National Bank (PNB) slipping 17 per cent to 30 per cent. RBL Bank tops the losers list with a fall of 40 per cent. IDFC First Bank and Kotak Mahindra Bank were the only two counters that gave a positive return during this period.

A K Prabhakar, head of research at IDBI Capital is bullish on Axis Bank, ICICI Bank and HDFC Bank and suggests investors can use the fall to buy these stocks from a medium-to-long term perspective.

“The fall in private banks is more to do with the surcharge issue proposed in the Budget. FPIs hold a sizeable chunk in private banks and if the government addresses their concerns, these stocks can easily outperform the market,” he says.

Govt looks to exempt foreign portfolio investors from higher taxes: Report

The Centre is likely to exempt foreign portfolio investors from an increase in taxes that was part of the Union Budget approved by Parliament but heavily criticised, a government official said on Thursday.
The Budget provided for increased personal income taxes on those with annual income of more than Rs 2 crore ($283,045).
The official, who declined to be named, said the government will either issue a notification or an executive order, which could be later submitted to parliament for approval, to exempt the foreign portfolio investors, mainly registered as trusts, from the increase in surcharge on super rich taxpayers.

Every number in Budget is authentic, speculation wrong: Sitharaman

The government will control its finances without compromising on public expenditure, said Finance Minister Nirmala Sitharaman on Wednesday as she defended numbers in her Budget speech about India's economy.
"I will assure the House there is no need for any speculation on figures given in Budget and every number is authentic," she said in Parliament, referring to analysts pointing out the difference in data in the Budget on July 5 and the Economic Survey published a day before.

She said the Survey has projected a nominal GDP growth of 11 per cent in 2019-20, but her ministry has taken into account 12 per cent nominal GDP growth to ensure compatibility with the projections made in the interim Budget in February.
Sitharaman said the fiscal deficit in the regular budget was pegged at 3.3 per cent of the GDP as against 3.4 per cent in the interim budget presented in the House in February.
"The government is committed to the path of fiscal consolidation without compromising on the public expenditure placed by the various sectors," she said during a Lok Sabha discussion on the Budget.
Several opposition parties led by Congress walked out of the Lok Sabha to protest the Budget increasing cess on petrol and diesel, saying the step hurt people.
Sitharaman did not comment on the cess. Petrol price went up by a minimum of Rs 2.40 per litre and diesel by a minimum of Rs 2.36 per litre after the Budget.

Railway union says will launch protest after Budget proposes privatisation

Stating that the Union Budget has revealed the intention of the government to go ahead "aggressively" towards corporatisation and privatisation of railways, the National Federation of Indian Railwaymen (NFIR) has said its affiliates are going to launch massive protests across the country against the move.
Union Finance Minister, Nirmala Sitharaman in her Budget speech on Friday proposed that railways should use Public Private Partnership (PPP) model for faster development, rolling stock manufacturing and the delivery of freight.

"The Budget reveals the government's intentions to aggressively proceed towards corporatisation and privatisation.
"In order to convey the strong protest of the rail workforce. NFIR directs all its affiliates to arrange massive protest demonstrations and rallies wearing protest badges from 10th to 13th July all over Indian Railway," said a letter from NFIR general secretary M Raghavaiah to general secretaries of all railway unions.
Railways will need Rs 50 trillion between 2018 to 2030 to complete the sanctioned projects, Sitharaman said while presenting the Budget.