Govt cuts expenditure limit for March quarter as revenue collection falls

Faced with a shortfall in revenue collection, the government has initiated austerity measures by revising downwards the expenditure limit for January-Marchperiod of the ongoing financial year.
The government has asked all departments to restrict the expenses to 25 per cent of the Budget Estimate (BE) in January-March.
"Considering the fiscal position of the government in the current financial year, it has been decided to cap the expenditure in the last quarter and last month of the current financial year," an office memorandum issued recently by Budget division of the finance ministry said.
Expenditure in the March quarter is to be restricted to 25 per cent of the BE as against an earlier limit of 33 per cent, while expenditure in the last month should not exceed 10 per cent as compared to a 15 per cent limit earlier, it said.
During the first two months of the quarter, the expenditure should not exceed beyond 15 per cent from the existing criteria of 18 per cent of the BE, it said.
"In case of any expenditure through re-allocation of savings within the Grant requiring prior approval of Parliament, expenditure may be incurred only after obtaining the approval of Parliament through Supplementary Demands for Grants," it said.
Any additional expenditure may be incurred after having obtained the approval of Parliament, it added.
"Ministries and Departments are requested to observe the above guidelines strictly and regulate the expenditure accordingly in the current financial year," it said.
However, it has been clarified that items of large expenditure would continue to be governed by the guidelines issued previously.
The last revision in expenditure guidelines took place in 2017 when it was decided to restrict the expenditure to 33 per cent and 15 per cent in the last quarter and last month, respectively of the financial year.
Latest revision in expenditure cut comes at a time when there is pressure on meeting the fiscal deficit target of 3.3 per cent for the current fiscal.
The country's fiscal deficit hit 102.4 per cent of 2019-20 Budget Estimate at Rs 7.2 lakh crore at the end of October.
There is a widespread speculation that fiscal deficit target may be relaxed because of the lower-than-estimated tax collection and the subdued non-tax mop-up, especially disinvestment.
Gross direct tax collection increased by 5 per cent till November. The finance ministry has a 15 per cent growth in direct tax collection at Rs 13.80 lakh crore for the current fiscal.
With regard to indirect tax, Goods and Services Tax remains a matter of concern for various reasons.
The Central GST collection fell short of the Budget Estimate by nearly 40 per cent during April-November 2019-20, according to government data.
The actual CGST collection during April-November stood at Rs 3,28,365 crore, while the Budget Estimate is of Rs 5,26,000 crore for these months.

Urban jobless rate down to 9.3% in Q4FY19, lowest in at least four quarters

India's urban unemployment rate between January and March this year fell to 9.3 per cent, the lowest in at least four quarters, according to an unpublished government report reviewed by Reuters.
The numbers, recorded in the statistics ministry's quarterly jobs report, could provide some relief to Prime Minister Narendra Modi who has faced criticism for not being able to create enough jobs amid slowing economic growth.

The urban unemployment rate of the January-March quarter compared with 9.9 per cent in the preceding quarter. Quarterly data prior to the April-June 2018 survey period is not available and the January-March quarter's rate is the lowest since then.
The report, which is likely to be published soon, did not assess rural unemployment.
The estimates were arrived at using the so-called "current weekly status" method which gives an average picture of unemployment in a short period of seven days preceding the survey period, the document said. A person is considered as unemployed in a week if he did not work even for 1 hour during that week.
Joblessness among the youth - those aged between 15-29 years and who account for roughly over a third of India's 1.3 billion people - was also marginally lower at 22.5 per cent in the quarter ending March 2019, from 23.7 per cent in the preceding quarter.
Government has in recent years faced public ire for not releasing comprehensive jobs data regularly.
The first extensive annual report for the July 2017-June 2018 period, leaked in February and published in the Business Standard, showed unemployment rate was the highest in at least 45 years. Modi's government officially released the report in May.
That month, the statistics department also released one set of quarterly urban unemployment reports that revealed data for April to December 2018. The latest report, reviewed by Reuters, contains jobs assessment for the first quarter of this year.
The fall in the unemployment rate, by weekly status methodology basis, came as employment among regular wage employees and a section of self-employed workers increased during the period, the statistics ministry report showed.
Still, the labour force participation rate - the percentage of population making up the labour force - which had slowly edged up between April and December last year, recorded a dip to 36 per cent during the March quarter, the report showed, potentially reflecting weak economic growth in Asia's third largest economy.
India's economic growth fell to an over four-year low of 5.8 per cent in the January-March period. Subsequently, it fell further to 5 per cent in the following quarter.

Futures in commodity indices likely by FY20 end, with MCX as first mover

The much-talked-about futures trading in commodity indices is expected to materialise in the new calendar year, probably in the quarter ending March 2020. So far, only single commodity futures are permitted on Indian exchanges.
Market participants were optimistic about indices futures after the earlier regulator, the Forward Markets Commission, was merged with the Securities and Exchange Board of India in September 2015. However, they still have to wait for 2-3 quarters. Institutional and financial investors also prefer indices to hedge their risks, rather than taking positions in single commodity futures.

The first indication was given by the top management of the Multi Commodity Exchange in its interaction with analysts. Edelweiss Equity Research quoted top company management in its report on MCX saying the exchange was in the process of completing formalities and preparing a proposal for futures trading in indices, and submitting it to Sebi by September end.
Currently, there are three indices (composite, bullion, and base metal) jointly provided with Thomson Reuters and the company is taking efforts to provide data on tick-by-tick basis. The MCX has been maintaining these indices for the past five years.
MCX began providing tick-by-tick data of indices last October. “The MCX management is confident of getting approval by FY20. The pricing of the indices would be decided later after testing the market response,” sources said.
The NCDEX, another exchange eligible for launching futures in indices, is in the process of finalising a partner for indices management. NCDEX has designed a composite agri-commodities index along with few sectoral indices as per the guidelines issued by Sebi. The exchange will launch these indices in a phased manner. NCDEX plans to begin futures with an agri index.
Globally, derivatives in indices are a high volume item and compared to futures, options on indices generate higher volumes. Financial investors wanting to diversify their risks in other assets class hedge in commodity indices. For India, by the end of the current financial year, this will make a beginning.
Commodity indices find more traction when volatility increases and according to Sebi’s annual report 18-19, published a few days ago, the main indices of both MCX and NCDEX have seen an increase in volatility.
The annualised volatility for MCX COMDEX (a composite index representing Agriculture, Metals and Energy) in 2018-19 was 13.4 per cent as compared to 9.8 per cent the previous year. As regards NCDEX's NKrishi Index, representing agri commodities where the exchange has a dominating presence, the annualised volatility increased to 12.9 per cent during the year, as compared to 10.9 per cent in 2017-18.

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India's March infrastructure output grows 4.7% year-on-year: Govt

The growth of eight core sectors improved marginally to 4.7 per cent in March 2019 against 4.5 per cent in the same month last year.
For the full 2018-19 fiscal, the expansion rate of eight infrastructure sectors -- coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity -- remained flat at 4.3 per cent, official data released Tuesday showed.

Coal generation growth was flat at 9.1 pet cent in March 2019. Natural gas, refinery products, fertiliser, steel and cement sectors recorded positive growth rates.
Crude oil production, however, contracted by 6.2 per cent in March. Electricity generation declined by 1.4 per cent during the month under review.
A fall in production of crude oil and refinery products had dragged the growth of the eight core sectors to 2.1 per cent in February.
The infrastructure sector growth will also have an impact on the Index of Industrial Production (IIP) as these segments account for about 41 per cent of the total factory output.

India's trade deficit narrows to $10.89 bn in March, exports grow 11%

India's trade deficit narrowed to $10.89 billion in March from a year ago, helped by rise in exports, the trade ministry said in a statement on Monday.
Trade deficit was $13.51 billion in March 2018.
Merchandise exports rose 11.02 percent to $32.55 billion in March from a year earlier, while imports were up 1.44 percent to $43.44 billion during the same period, data showed.
Trade deficit for the 2018-19 period that ended in March was up nearly 9 percent at $176.42 billion.

March IIP below estimates at 4.4% vs 7.1% in February

Industrial output grew by 4.4 per cent in March, the slowest in five months, due to a fall in capital goods production and deceleration in mining activity, according to the official data.
Industrial growth measured by the Index of Industrial Production (IIP) in 2017-18 too decelerated to 4.3 per cent from 4.6 per cent in the previous fiscal.

The IIP grew by 4.4 per cent in March 2017, the same as in March this year, the data released by the Central Statistics Office (CSO) showed today.
The previous low at 1.8 per cent was recorded in October 2017.
Manufacturing sector, which constitutes over 77 per cent of the index, grew at 4.4 per cent in March as compared to 3.3 per cent in the same month a year ago.
The output of mining sector decelerated to 2.8 per cent during the month as compared to 10.1 per cent in March 2017.
Similarly, power generation too slowed down to 5.9 per cent as against 6.2 per cent in March 2017.
Capital goods output, however, declined by 1.8 per cent during March as compared to a growth of 9.4 per cent in the corresponding period last year.
Consumer durables output on the other hand showed an increase of 2.9 per cent as against decline of 0.6 per cent in March 2017.
The consumer non-durables segment showed an impressive growth of 10.9 per cent in March as against 7.5 per cent in corresponding month last year.
During 2017-18, the manufacturing sector recorded a growth of 4.5 per cent, marginally up from 4.4 per cent in 2016-17.
The mining sector as well as power generation reported deceleration to 2.3 per cent and 4.6 per cent from 5.3 per cent and 5.4 per cent respectively in 2016-17

Core sector growth slows to 4.1% in March, down from Feb's 5.3%

The combined output of the eight core sectors of the economy slowed down in March, with growth being pegged at 4.1 per cent, down from the 5.3 per cent seen in February and January's 6.1 per cent.
In March, growth in the sectors was largely a result of a persistent rise in cement production which grew by 13 per cent, apart from a sudden 9.1 per cent growth in coal output. The growth in cement had solidified overall growth for five straight months now as double digit rise in cement production has meant that it's become the best performing sector for nearly two quarters.

However, in March, growth in the sector has climbed down from the 23 per cent high it had reached back in February. On the other hand, the second best performing sector - coal - saw output reaching a 6-month high in March.
Apart from these, the sectors comprising crude oil, natural gas, refinery products, fertiliser, steel and electricity, make up the core sector grouping and contribute about 40 per cent to total industrial production.
In March, five sectors performed poorer as compared to a month earlier. The data issued by the Commerce and Industry ministry on Tuesday showed that cumulative growth for the core sectors stood at 4.2 per cent in 2017-18, lower than the 4.8 per cent growth in the year before.