US, Europe combined infra spending less than China’s

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Despite a crying need for better infrastructure, investment in it has actually fallen in 10 major economies since the financial crisis, including the US, according to a new study by the McKinsey Global Institute. Meanwhile, China is still going gangbusters on roads, bridges, sewers, and everything else that makes a country run.

“China spends more on economic infrastructure annually than North America and Western Europe combined,” according to the report published Wednesday.

Economists around the world have been arguing that now is a great time to invest in infrastructure because interest rates are super-low and the global economy could use the spending jolt. “Is anyone proud of Kennedy airport?” Harvard University economist Lawrence Summers likes to ask.

The MGI report cites 10 countries where infrastructure spending fell as a share of gross domestic product from 2008 to 2013: the US, UK, Italy, Australia, South Korea, Brazil, India, Russia, Mexico, and Saudi Arabia. The study counts 11 economies, but that’s because it lists the European Union as a separate entity.

In contrast to the widespread declines, the institute says, infrastructure spending grew as a share of GDP in Japan, Germany, France, Canada, Turkey, South Africa and China. The chart from the MGI report shows China’s strength in infrastructure spending. Its bar is the highest. There’s such a thing as too much infrastructure spending, of course. At current rates of investment, China, Japan, and Australia are likely to exceed their needs between now and 2030, the McKinsey & Co-affiliated think tank says. To fund more public infrastructure, the report favours raising user charges such as highway tolls, among other measures.

To encourage more private investment in infrastructure, MGI argues for increasing “regulatory certainty” and giving investors “the ability to charge prices that produce an acceptable risk-adjusted return.”

 

Source:  http://www.business-standard.com/article/international/us-europe-combined-infra-spending-less-than-china-s-116061600030_1.html

S&P: Renewable energy biz high-growth area in India

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Renewable energy business is a high-growth area in India, though falling asset prices and competitive bidding for new power purchase agreements may lead to volatility in returns on investments, S&P Global Ratings said today.

 

“We believe the renewable energy business is a high-growth area in India, given the governments focus on increasing capacities for renewable energy and priority dispatch,” it said in a statement.

 

However, falling asset prices and competitive bidding for new power purchase agreements (PPAs) can expose renewable energy assets to volatility of returns on investments, it said.

 

It added that such assets also face greater volatility of cash flows due to seasonality and inherent uncertainty of wind/hydro/solar patterns, resulting in resource risks.

 

The agency further said that Tata Powers business position is unlikely to materially change after the acquisition of Welspun Renewable Energy.

 

S&P Global Ratings further said that its corporate credit rating on Tata Power Ltd (B+/Stable) is not immediately affected by the company’s acquisition of Welspun Renewable Energy for an enterprise value of Rs 92.49 billion.

 

Tata Power indicated that it intends to maintain leverage at the current improved levels post-acquisition through strategic measures.

 

Source: http://www.hindustantimes.com/business-newspaper/s-p-renewable-energy-biz-high-growth-area-in-india/story-d7BXtbQVS7YW2RWnGDIjgN.html

India records 10-year low in public-private investments: World Bank

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India recorded a 10-year low in investments in public-private sector in the year 2015, adding to contraction that pulled down the global investment to below its five-year average of $124.1 billion, the World Bank has said.

In its latest annual report, the World Bank said global investment in 2015 decreased to $111.6 billion, below the five-year average of $124.1 billion from 2010 to 2014.

“This contraction resulted from lower investments in Brazil, China and India,” the World Bank said on Monday in its latest report on Private Participation in Infrastructure Database.

“India recorded a 10-year low in investments, as only six road projects — usually a rich source of PPI over the past 10 years – reached financial closure,” the World Bank said.

In South Asia, there were 43 deals for a combined total of $5.6 billion that closed in the region, representing 5 per cent of the total investment — a decline of 82 per cent from the five-year average of $30.5 billion.

“Consistent with historical trends, India generated a majority of the projects (36 out of 43); Pakistan had four; Nepal, two; and Bangladesh, one. Notably, 26 of the 36 projects in India, amounting to $2.0 billion, targeted renewable energy, while all of Pakistan’s projects, totalling $749.9 million, solely focussed on renewables,” the Bank said.

Solar energy investments climbed 72 per cent higher than the last five year average, while renewables attracted nearly two-thirds of investments with private participation, it said.

Global private infrastructure investment in 2015 mostly remained steady at $111.6 billion when compared to the previous year, it said.

Among the most notable, commitments in Brazil were only $4.5 billion in 2015 — a sharp decline from $47.2 billion the previous year, reversing a trend of growing investments, it said.

“Investment in China also fell significantly below its 5-, 10-, and 20-year averages, as the average transaction dropped to $63 million,” it said.

By number of projects, however, these three historical heavyweights took the lead, with 131 of the 300 global deals, or 44 per cent of all projects.

Still their combined investment of $11.6 billion only made up 10 per cent of the global total, compared to 54 per cent in 2014, which was also the annual average over the previous four years.

According to the World Bank, global private infrastructure investment in 2015, though on par with the previous year, was 10 per cent lower than the previous five-year average because of dwindling commitments in China, Brazil, and India.

“The data finds that investments in other emerging economies increased rapidly to $99.9 billion, representing a 92 per cent year-over-year increase,” said Clive Harris, Practice Manager, Public-Private Partnerships, World Bank Group.

Cash crunch: How customers came to owe banks more than what they were loaned

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More than a thousand borrowers have outstandings that are substantially larger than the amounts sanctioned to them by banks, data sourced from Reserve Bank of India (RBI) shows. The total outstandings of 1,131 borrowers, at Rs 1,09,909 crore, were 150% more than the amount sanctioned, as on March 2016, data accessed by FE reveal. At the end of December 2015, the outstandings were Rs 90,235 crore.

Bankers and ex-bankers that FE reached out to attributed the pile-up in outstandings to short-term requirements of borrowers that were met by banks to help them tide over a cash crunch. Overdue interest, they said, could be another cause for the high outstandings. One senior banker observed that there were occasions when the capacity of the borrower to repay the additional amount was not assessed properly. “At times, limits get exceeded without a proper assessment of the customer’s ability to service the loan,” he said.

A former executive director of a public sector bank said one reason for the actual outstanding exceeding the permitted limits was that lenders tended to sanction ad hoc non-funded letters of credit (LC) even before the limits were okayed by the consortium. “Sometimes ad hoc LCs are opened for amounts which are bigger than those agreed to by the consortium. Since consortiums take anywhere between six months and a year to sanction limits, the money is disbursed since business cannot wait,” he explained, adding that such loans serve as working capital.

A former chairman of a state-owned bank said if the customer was unable to service the loan, the interest piled up pushing up the outstanding amount. “If the interest hasn’t been paid for three or four years, the amounts can become large,” he pointed out.

An RBI document on the Central Repository of Information on Large Credits notes that if outstanding loans exceed 150% of the limit, a “warning message should be displayed to the user on generation of the instance document”.

Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services, observed the main reason for the outstandings surpassing the sanctions was “temporary accommodation and loans against receivables”.

Parekh explained that at times borrowers approached banks for funds to be able to take delivery of imports. “The customer promises to pay back the amount from receivables so bankers do accommodate such requests,” he said.
Total non-performing assets (NPAs) of the banking system stood at Rs 5.8 lakh crore at the end of March 2016 and total provisions were Rs 1.43 lakh crore.

The central bank has been trying to help banks tackle bad loans by allowing them to convert debt into equity and more recently into convertible redeemable preference shares. However, banks have not been able to find buyers for any of the assets under strategic debt restructuring scheme.

FE had earlier reported that bank loans that aren’t NPAs just yet but could turn toxic amount to over Rs 6 lakh crore or close to 9% of total advances, citing RBI data. The total troubled loans of Rs 6,24,119 crore at the end of December 2015 were 9% higher than the Rs 5, 73,381 crore at the end of June 2015.

While Rs 3,06,180 crore worth of loans were classified in the SMA-1 category where repayments are overdue between 30 and 60 days, another Rs 3,17,939 crore was in the SMA-2 category where repayments are overdue between 60 and 90 days. These Special Mention Accounts follow a fiat from the RBI in 2014 asking banks to put in place a mechanism to red-flag troubled loan accounts early in the day so that these could be dealt with speedily. If the loan is not serviced after 90 days it must be classified as an NPA.

 

Source: http://www.financialexpress.com/article/industry/banking-finance/cash-crunch-how-customers-came-to-owe-banks-more-than-what-they-were-loaned/285239/

SEBI begins proceedings to recover Rs 55,000 crore from defaulters

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The Securities and Exchange Board of India (Sebi) has initiated recovery proceedings against defaulters to collect more than Rs 55,000 crore, largely on account of its clampdown on illicit money-pooling schemes.

Ever since it was given powers in October 2013 to recover penalties and investors’ money collected fraudulently, Sebi has initiated nearly 900 recovery proceedings, of which more than 200 have been fully completed.

The amount involved in these proceedings stands at Rs 55,015 crore, including Rs 52,959 crore in the last financial year. This include a total of Rs 52,912 crore in cases related to collective investment scheme (CIS) and deemed public issues and another Rs 47 crore to recover penalties.

More than 2,500 attachment notices have been issued during the period under review, including over 600 in 2015-16.

Interestingly, an amount of Rs 250 crore has been recovered in 207 cases. Promising high returns to the investors, several firms have raked in unauthorised funds through various mechanisms. The capital was raised through realty schemes and ‘buffalo purchase’, among others. Also, funds have been garnered by issuing securities to investors without complying with public issue norms.

To recover pending dues, Sebi has attached properties, bank and demat accounts of the defaulters. Besides, the regulator has sold shares attached in recovery proceedings in various defaulters in 744 trading sessions and realised an amount of over Rs 11 crore.

Through amendments in the Securities Laws Act, the government had enhanced powers of Sebi to take action against illegal money-pooling activities. It has been empowered to recover penalties imposed by the Adjudicating Officer, amount directed to be disgorged and money ordered to be refunded to the regulator.

The recovery powers include attachment of bank as well as demat accounts, sale of assets of the defaulters and arrest and detention of the defaulter.

The Act also provides for setting up of a special court to expedite the cases filed by Sebi. The government in consultation with the high courts have set up special courts in Mumbai, Kolkata and Chennai.

Besides, constitution of a special court in Delhi is in progress. However, a designated court is already dealing with Sebi cases.

 

Source: http://www.business-standard.com/article/markets/sebi-begins-proceedings-to-recover-rs-55-000-crore-from-defaulters-116061400476_1.html

FIPB clears FDI proposals worth Rs 710 crore

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The proposals approved included Advanced Enzyme Technologies’ foreign investment worth Rs 480 crore, a Finance Ministry official said.

Foreign Investment Promotion Board (FIPB) today approved four FDI proposals entailing overseas investment of about Rs 710 crore.

The proposals approved included Advanced Enzyme Technologies’ foreign investment worth Rs 480 crore, a Finance Ministry official said.

The Board also cleared proposals of Corona Remedies, Macmillan Publishers International and Ordain Health Care Global.

The FIPB, headed by Economic Affairs Secretary Shaktikanta Das, today considered 14 investment proposals.

Three proposals, which were rejected included that of Flag Telecom Singapore Pte Ltd and Star Den Media Services Pvt Ltd.

Also, eight proposals, including that of IBM India Ltd, were deferred.

FIPB can clear FDI proposals envisaging investment of up to Rs 5,000 crore and those involving higher investment are approved by the Cabinet Committee on Economic Affairs (CCEA).

FDI in most sectors are allowed through an automatic route but in certain sectors proposals have to go through the FIPB.

Source: http://economictimes.indiatimes.com/articleshow/52690601.cms

Modi impact! Switzerland to ease tax info exchange norms on stolen data

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Switzerland today said it will relax norms for providing information to foreign nations seeking banking details about their citizens on the basis of ‘stolen data’, a move that would benefit India in its fight against the black money menace.

 

In the case of stolen data, Swiss authorities would extend assistance on tax matters to other countries provided such information was procured through normal administrative assistance channels or from public sources.

 

The proposal, which has been adopted by the Swiss Federal Council, also comes at a time when India is making efforts to bring back unaccounted money stashed by its citizens overseas. The issue of black money also figured during the discussions between Prime Minister Narendra Modi and Swiss President Johann Schneider-Amman earlier this week.

 

The Swiss government today said the practices with regard to “stolen data are to be eased”.

 

“It should become possible to respond to requests if a foreign country obtained the stolen data via normal administrative assistance channels or from public sources,” it said in a release.

 

However, administrative assistance is still not possible if a country actively acquired the stolen data outside of administrative assistance proceedings.

 

In this regard, the Federal Council today adopted the dispatch on amending Tax Administrative Assistance Act.

The Bill is expected to be discussed by the Swiss Parliament this year.

 

Known for its banking secrecy practices, Switzerland has been facing international pressure as countries step up efforts to curb illicit fund flows.

 

In 2013, the Federal Council had suggested easing administrative assistance practices in the case of stolen data but at that time, the proposal was rejected by majority of the cantons, parties and business associations.

 

Since then, international practice has established that exceptions to the exchange of information would be tolerated only on a very restricted basis, the release said.

 

“For instance, the exchange of information could be refused if it is incompatible with public policy, such as in the case of requests motivated by racist, political or religious persecution,” it added.

 

The Swiss government emphasized it intends to respond to future requests that are based on data obtained by the requesting state from another state through normal administrative assistance channels or from public sources.

 

“The consultation revealed that the cantons are virtually all rallying behind the proposal, while the numbers of advocates and opponents in the political parties and organisations appear broadly balanced.

 

“The Federal Council is adhering to the proposal in view of this outcome, as it believes that the proposal is necessary to safeguard Switzerland’s interests,” it noted.

 

Last month, Switzerland started the process for an ordinance to put in place a mechanism for automatic exchange of tax information.

 

During Modi’s visit to Switzerland earlier this week, Swiss government assured India of stepped up cooperation with regard to black money issue.

 

“Combating the menace of black money and tax evasion is also our shared priority. We discussed the need for an early and expeditious exchange of information to bring to justice the tax offenders.

 

“An early start to negotiations on the Agreement on Automatic Exchange of Information would be important in this respect,” Modi had said at a joint media interaction with Schneider-Amman.

 

Under the bilateral treaty for administrative assistance and exchange of information with Switzerland, India has sought details about numerous individuals and companies from the Alpine nation as part of its crackdown against those stashing illicit funds there.

 

Source :http://economictimes.indiatimes.com/articleshow/52691230.cms