In the Interim Budget, Finance Minister P Chidambaram has tried to lift the mood of the consuming class by reducing the prices of aspirational products. He has reduced the taxes on cars, mobiles and other such products that would make a happy consumer vote for his party. But this must be a cruel joke to the half a million or so young Indians who joined the ranks of unemployed in the last two years. Many millions are underemployed and working just to earn a living. Their talent and skill wasted since jobs that justify their education are shrinking. Mr Chidambaram and the ruling United Progressive Alliance (UPA) coalition are offering sops to a shrinking consuming class whose purchasing power has diminished. Under the watch of the UPA, middle class was terrified into spending less. The poor got a few sops through a leaking system and the rich saw sharp erosion in their ability to create wealth and value. According to government-run National Sample Survey Organisation, joblessness among the young has grown in the last few years. The figures for 2013 and 2014 threaten to be worse. This rise in unemployment affects the wealthy, the middle class and the poor equally. Job creation is arguable the single most important indicator of growth for a populous market economy. In the interim budget of 2014 and the many budget announcements in previous years, Mr Chidambaram has been unable to offer any strategy of creating employment. How does he expect the consuming class to be happy with a small discount on a few products, when they are not sure whether their salaries and incomes will rise or fall? Most are saving and not spending. Reduction of excise duty will not create a burst of spending by these classes. The deep fall in sales of the automobile sector was not a result of high duties. It was a result of consumers being unable to afford cars. Their incomes were stagnant, but car prices rose. They could have borrowed, but the interest rates were prohibitive. Consequently, cautious Indian consumers, preferred to defer their purchases. Even at a macro level, this has been a sensible development for the economy. If millions of consumers had bought automobiles and real estate at unaffordable rates, India would have seen a credit bubble burst. Mr Chidambaram was ideally placed to drive growth in the economy as he has in charge of the finance ministry for most of the time in the two terms of UPA government. In the first term, he blamed the communist allies who were part of the coalition. In the second term, UPA found an easy scapegoat in the global crisis. But the real issue for the economy was the slow pace of decision making and terrible record of implementation. India’s economic problems were created by internal issues not external. The Aam Aadmi Party (AAP) on the other hand is promising to tackle governance issues. On a day when a dismal interim budget was presented, AAP’s chief Mr Arvind Kejriwal ranked governance higher than economic reforms. He welcomed private sector but criticized crony capitalism. Most industry leaders would agree that good governance ensures better economic activity. Offering price discounts to the unemployed can’t be a growth policy. There is nothing to buy in this interim budget. Pranjal Sharma is a senior business writer. He can be contacted at pranjalx@gmail.com. You can also tweet @pranjalsharma)
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The rupee recovered in late trade on Thursday (17 April), boosted by gains in the domestic sharemarket while some dealers also cited dollar selling by large state-run banks which could be on behalf of the central bank. The unit, however, dropped on the week, posting its third straight weekly fall, as investors pared positions amid the ongoing national elections. Foreign funds sold Indian shares worth 446.9 million rupees ($7.4 million) on Wednesday, provisional exchange data showed, marking the third consecutive session of outflows. "There was good buying from oil firms during the day today. In late trade there was good selling seen from state-run banks," said Vikas Babu Chittiprolu, a senior foreign exchange dealer with the state-run Andhra Bank. "There are absolutely no triggers to watch out for so the range of 60.00 to 60.60 should continue to hold next week," he added. The partially convertible rupee closed at 60.29/30 per dollar compared with 60.37/38 on Wednesday. On the week, the rupee fell 0.2 per cent, in its third straight weekly drop. Earlier in the day, the rupee fell to a session low of 60.50 as importers, particularly oil firms rushed to buy dollars in a holiday-shortened week. Shares rose 1.6 percent, to snap a three-day losing streak as lenders such as ICICI Bank <ICBK.NS> surged on value buying, earnings expectations and hopes of gains in bond portfolios after the RBI's biggest debt auction. Most emerging Asian currencies too edged up on Thursday as the dollar eased broadly after U.S. Federal Reserve Chair Janet Yellen's dovish comments on monetary policy, while trading was subdued ahead of a holiday in some markets. In the offshore non-deliverable forwards, the one-month contract was at 60.76 while the three-month was at 61.53. (Reuters)
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The move to reduce the excise duty from 12 per cent to 10 per cent to stimulate growth in the consumer durable sector doesn’t seem to have created a lot of excitement for the companies or the consumers. Last two quarters have been difficult for the consumer durables sector which has struggled due to the overall slowdown in the economy and a reduced disposable income. While companies like Panasonic, Whirlpool and LG are welcoming the government’s positive step towards improving the market conditions; skepticism about the “interim” nature of the decision continues to hamper the move. “The benefit will only kick in when actual manufacturing activity takes place and this decision is only valid for a quarter,” says Shantanu Dasgupta, Vice President - Corporate Affairs & Strategy at Whirlpool of India Limited. According to Dasgupta, most companies already have inventory lined up for the summer season. However Dasgupta believes, “it is a welcome move as there is some acknowledgment from the government that the sector has struggled to perform in some time now.” But Dasgupta does not see the excise cut to impact consumer interest. “Consumers only buy when there is disposable income, just a reduction on excise will not change their buying decision,” he adds. On the contrary, Soon Kwon Managing Director, LG India expects the excise cut to “generate a positive consumer sentiment and encourage new buyers in the consumer durable sector.” “It is a positive step to improve the market conditions and will boost the manufacturing sector as well.” However, the company is still reviewing the impact on pricing of goods. Experts believe there will be marginal or no price benefit for the consumers. “This 2 percentage point cut in excise is a welcome change even though it is likely to have diminutive impact on prices,” says Manish Sharma – Managing Director, Panasonic India. While companies are unsure about how much of this benefit can be passed on to the consumer, they believe this will give them breathing room if there are further currency fluctuations. “This will reduce the pressure from companies to take up the prices any further,” says Dasgupta. Sharma too agrees, “The depreciation of the rupee and the rise in price of raw material has put immense pressure on companies’ margins.” “This move will help stabilize and provide growth opportunities to the industry which has been witnessing a slump for some time now.” Restructuring Of Excise Duty On Mobile HandsetsSeparately, the Finance Minister also announced the restructuring of excise duties on mobile handsets. "To encourage domestic production of mobile handsets (which has declined) and reduce the dependence on imports (which have increased), I propose to restructure the excise duties for all categories of mobile handsets," Finance Minister P Chidambaram said while presenting the Interim Budget 2014-15. While, this has given a positive signal in favour of the domestic manufacturing of mobile phones; it is not expected to impact the prices in anyway. According to Indian Cellular Association National President Pankaj Mohindroo, “the clubbing of the two slabs, as existing earlier, i.e. under Rs 2, 000 MRP and above Rs 2, 000 MRP is a good rationalization because this will prevent under invoicing.” He further added that there will be a marginal increase in price of phones under Rs 2,000 (MRP). For example a phone with MRP of Rs 1000 will see a price rise of around Rs 30. Electronic component manufacturer association ELCINA said the announcement does not look promising for domestic firms. "At first glance, I think it is not going to be a disincentive to trading. One per cent credit without CENVAT credit is too less," ELCINA Secretary General Rajoo Goel said. As part of last year's budget, the government had raised the excise duty to six per cent on handsets priced above Rs 2,000.
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Many are hailing the Interim Budget announced on Monday (17 February) by P Chidambaram, as the best possible in the given circumstances. But in reality it does little for the heavy industry sector, except perhaps steel due to the impetus for the auto sector. It is important to remember it is an interim budget – valid for barely two months, no impact in the real sense. As Amol Kotwal, Associate Director, Energy and Power Systems Practice, Frost & Sullivan says, “the overall impact for the energy and power sector is neutral”. Unfortunately the points mentioned by the finance minster are achievements of previous years combined, whether it be regarding the coal supply commitments for 78,000 mw of power, addition of 29,350 megawatts of power capacity or the restructuring of ailing DISCOMS. The footnote of today’s speech should be that the coming government has got its work already charted out. In a few months the new powers that be will need to figure out how to actually end fuel security concerns, enhance coal production, revive the state electricity boards and ease investment in the sector. Renewable Energy: Sunny-side-upThe sector has suffered greatly over the last 18 month with no respite in sight and today’s speech does little to help. But a few while cautioning against a pessimist view on the initial recovery phase of renewable energy sector say the announcement of four solar Ultra Mega Power Plants (UMPP)of 500MW each and excise duty cut for capital goods industry till 30th June’2014 could pep the sector. The solar-based UMPP’s have been planned with the core objective of reducing the price of solar energy, and rapidly scaling up solar based capacity in India (in-line with the growth targets of the Jawaharlal Nehru National Solar Mission – JNNSM), says Amol Kotwal, Associate Director, Energy and Power Systems Practice, Frost & Sullivan. Coupled with recent announcement of the second phase commitments of the national mission this will build confidence say industry experts. It might help accelerate solar installations and drive demand for solar cells, modules, and other equipment. Steel, Coal And Mining: Silent Omission Or A New HopeAt the interim budget announcement surprisingly the finance minister refrained from any mention on the scams and the plunge in mining operations across India. While steel production, coal production have both taken a hit due to the CAG report and ongoing investigations P. Chidambaram chose to highlight achievements of the sector over the last 10 years. What awaits the mining and metals sector remains a big question – perhaps to be answered by the new government to be elected in a couple of months. It a sad state of affairs when an allegedly coal surplus country spends million on importing coal – and the finance minister believes the increase of less than 200 million tone of capacity in ten years is something to boast about. However, those looking for hope in the gloomy economic scenario say all is not lost. According to them the excise duty cut of 2 per cent on capital goods will have a marginally positive impact in the short term. Power plant development and generation company, Power T&D Utility (Transco’s and DISCOM’s) perspective, this move reduces the procurement cost of large capital equipment (boiler, turbine, generator, wind turbine, transformer etc.). Given the typical equipment ordering process and schedule (tender-bid submission-placing order) for large capital equipment's would take anytime between 3 to 18 months’ time frame, equipment orders (domestic sourcing) placed between now and June 2014 would benefit from a minor cost reduction, explains Amol Kotwal, Associate Director, Energy and Power Systems Practice, Frost & Sullivan. And from an equipment supplier’s perspective, the excise duty reduction would drive cost competitiveness for bids. According to SAIL Chairman CS Verma “The Interim Budget is positive for us owing to its thrust on growth which is good for the steel industry. The lowering of duties on capital goods & automobiles will help strengthening the demand for steel. This continued thrust on development of infrastructure and manufacturing will help industrial growth in the long term”.
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A few months ago, some banks in India had begun naming and shaming defaulters of educational loans on social media, leading to a huge outrage. For students caught in a Catch 22 situation of not getting admission in goverment educational institutes, and having to avail huge educational loans to join private universities, Finance Minister P Chidambaram’s announcement of a moratorium for educational loans comes as a big relief. At the same time, banks that were getting resigned to student loans becoming NPAs have got some relief. In the vote on account presented on Monday (17 February), the Finance Minister said that the government would take over the liability of outstanding interest on loans availed before March 31, 2009 and still outstanding as on December 31, 2013. The borrower would have to pay interest for after 1 Jan 2014, he said. According to Chidambaram, nearly 9 lakh student borrowers will benefit to the tune of approximately Rs 2,600 crore. Chidambaram said that a sum of Rs 2,600 crore will be transferred to the Canara Bank for this purpose. For banks, borrowers defaulting on educational loans has become a big nightmare and several banks had in recent months begun declining students. This had a spiral impact on admissions. Not surprisingly, private institutions are cheering as much as students. Dr H Chaturvedi, Director, BIMTECH, said, “This decision of the Government about moratorium on interest outstanding on education loan is certainly a big relief for students who have to face difficulties due to poor job availability and low salaries as an outcome of economic recession of post-2008.” He added, “BIMTECH believes that the easy accessibility of educational loans on an interest rate of about 5 per cent will provide the much needed push to the educational aspirations of the lakhs of youngsters in the country. “ Availability of educational loans on easy rates of interest, the industry believes will give the much needed stimulus to the private higher education sector. AS KR Sekar, Partner in consulting firm, Deloitte Haskins & Sells, said, “The public expenditure on the education sector has no doubt increased in the recent years however a lot needs to be done to bridge the ever increasing demand-supply gap of quality education in the country.” He added, “This announcement hopefully should encourage our students to fulfill their academic ambitions by utilizing educational loans and in the process enabling the country in improving its GER (Gross Enrollment Ratio) in higher education.”
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The rupee, which closed at 60.37/38 on Wednesday (16 April), opens stronger at 60.27/28 sparked by dollar selling after US Fed chair's dovish comments.On Wednesday Janet Yellen, in her second public speech as Federal Reserve Chair, stressed the need for accommodative policy citing persistently low inflation and economic slack.The rupee is likely to trade in the 60.20-60.50 band for the day, traders say.The yen wallowed at one-week lows against the dollar early on Thursday, having eased broadly overnight as a rally in global stocks dented demand for the safe-haven currency.The rupee dropped for a third straight session on Wednesday, its worst falling streak since late-January, as profit-taking in the domestic stock market by offshore investors hurt the local unit.Overseas investors sold Indian shares worth of Rs 446.9 million ($7.4 million) on Wednesday, provisional exchange data shows, marking their third consecutive session of outflows.(Reuters)
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Tehelka founder editor Tarun Tejpal was on Monday (17 February) charged by Goa police with rape, sexual harassment and outraging modesty of a woman journalist in a lift of a five-star hotel here in November last year. If proven guilty, Tejpal can be sentenced for more than seven years of imprisonment on these charges. Investigating officer Sunita Sawant has charged Tejpal under sections?354, 354-A (sexual harassment), 341 and 342 (wrongful restrain), 376 (rape), 376(2)(f) and 376 (2)(k) (takes advantage of his official position and commits rape on a woman in his custody). The 2,684-page charge sheet filed before Chief Judicial Magistrate Anuja Prabhudesai has examined 152 witnesses including the victim, staff of Tehelka magazine and the investigating officer in the case. The charge sheet mentions that there are enough statements on record to prove that Tejpal has admitted the commission of rape, sexual harassment and outraging the modesty of the victim. The investigating officer has noted that there are incriminating emails in this regard containing his apology, email letters to the victim regarding rape, sexual harassment, and outraging her modesty which were retrieved at his instance. As per the complaint, the victim was reportedly sexually assaulted by Tejpal on November 7 and the offence was repeated on November 8. Goa Police has claimed in the charge sheet that there is sufficient evidence available in the form of documents and statements on record to show that Tejpal had been evading police after commission of crime. Tejpal, 50, was arrested on November 30 last year and has since been lodged in Sada sub jail in Vasco town, about 40 kms from here. Police have said that there is sufficient evidence available in the form of documents and statements on record to prove that the events prior to the offence, which took place in the lift of the Guest House 7 of Hotel Grand Hyatt at Bambolim in Goa, were covered under CCTV surveillance. The charge sheet mentions that the CCTV footage was subsequently identified by the victim. "It is important to mention that there is no CCTV camera inside the lift," the charge sheet reads. Among the various witnesses, police have recorded statement of the hotel staff. The investigating officer has said that there is sufficient evidence available in the form of documents, statements and electronic records to prove the offence. Police have said that the computers and mobile phones from which emails and SMSes were generated by the victim and Tarun Tejpal?were properly seized under panchanama and sent for forensic examination, the reports of which have been received. The charge sheet has pointed out the statement of the victim wherein she has said that the incident happened when she and the accused had gone to drop Hollywood star Robert de Niro back to his room, during the event. The charge sheet has extensively quoted the email and SMS conversation between the accused and victim after the incident. (PTI)
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For every rupee in government kitty, as much as one-fourth will come from market borrowing in 2014-15, lower than the current fiscal ending March 31. The government's dependence on debt has come down from 27 paise in the previous Budget to 25 paise in the coming year, reflecting ease of pressure on revenue collections. As per the proposals presented today by Finance Minister P Chidambaram in the interim Budget, net borrowings of the government in 2014-15 are pegged at Rs 4.57 lakh crore against Rs 4.68 lakh crore for the 2013-14 fiscal. On the expenditure side, central plan allocation has been reduced sharply from 21 paise to 10 paise in 2014-15. However, the interest payment would go up to 20 paise as compared to 18 paise in the 2013-14. Plan assistance to states and Union Territories has been more than doubled to 16 paise in 2014-15. Defence allocation has been maintained at 10 paise. As the single largest source of revenue income, the collection from corporate tax has been maintained at 21 paise as a percentage of every rupee earned. However, income tax mobilisation will go up to 14 paise as compared to 12 paise in 2013-14, indicating that more individual tax payers could come under the tax net. On indirect tax front mobilisation, excise and customs would earn 19 paise for the government while the government expects revenue collection from service tax and others to go up to 10 paise against 9 paise in 2013-14. Despite, implementation food security laws the subsidy burden on the government has been kept intact at 12 paise for 2014-15. At the same time, other non-plan expenditure is expected to account for 11 paise of every rupee spent by the government in 2014-15, while the states' share of taxes and duties would amount to 18 paise of every rupee earned. (PTI)
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