Failure to implement reforms may hamper India investment: Moody’s

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A failure to implement reforms in India could hamper investment amid weak global growth, global ratings agency Moody’s Investors Services cautioned on Wednesday.

It said it was highly unlikely that major reforms would be enacted in the upper house of parliament where the ruling coalition is in a minority. The agency said despite overall supportive domestic conditions for the country’s companies, potential headwinds loom from a loss of reform momentum.

The Modi administration so far this year has been unable to enact legislation on key reforms, including a unified goods and services tax and the Land Acquisition Bill, it said.

The government hopes to get the GST Constitution Amendment bill approved in parliament and is keen to push the legislative business. It has reached out to the opposition parties to forge a consensus and ensure the passage of the crucial GST bill. The Narendra Modi government has identified implementation of GST as a key reform initiative. The government has unveiled a flurry of reforms after the rout in Bihar assembly elections and Modi has promised to accelerate the reforms drive.

Moody’s Investors Service says that most non-financial corporates it rates in India (Baa3 positive) will benefit from strong domestic growth and accommodative monetary policy, although weak global growth and a potential US rate hike will weigh on businesses.

“Healthy 7.5% GDP growth for India for the fiscal year ending March 2017 (FY2017) and a pick-up in manufacturing activity will be broadly supportive of business growth,” says Vikas Halan, a Moody’s Vice President and Senior Credit Officer.

“However, the corporates remain vulnerable to the volatile Indian rupee as against the US dollar and to low commodity prices, which has in turn led to a sharp decline in external trade,” said Halan while releasing the agency’s 2016 outlook presentation for Indian non-financial corporates.

The fall in commodity prices has benefited many Indian corporates given the country’s status as a net important of raw materials and its recent history of high inflation.

The resultant moderating inflation should result in lower borrowing costs for corporates and yields on corporate bonds, said Moody’s.

The ratings agency expects upstream oil and gas companies to benefit from lower fuel subsidy burdens, although low crude and domestic natural gas prices will continue to hurt profitability.

Refining and marketing companies meanwhile should benefit from healthy margins as demand growth outpaces expected capacity additions.

The agency’s negative outlook for the steel industry reflects elevated leverage and an extended period of low prices due to continuing steel imports, while the negative outlook for metals and mining companies reflects bleak global commodity prices.

In the real estate sector the agency expects demand to improve in 2016 on the back of lower interests rates, although approval delays could push back project launches for property developers.

It expects retail auto sales volumes to grow 6% in 2016 on the back of sustained growth in passenger vehicles sales and a recovery in commercial vehicle sales.

The telecom companies that the agency rates in India have reported improving revenue per user (ARPU) and EBITDA margins, however competition remains intense and the regulatory framework continues to evolve.

India 5th on doing biz in clean energy

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Considering India’s notable policy reforms in the renewable energy sector, Bloomberg New Energy Finance has ranked the country at fifth place on a list of 30 countries on ease of doing business in the renewable energy space. The ranking done by Bloomberg New Energy Finance’s annual Climatescope report indicates that clean energy’s centre of gravity is shifting from developed to developing countries. The report ranked China in the first place, followed by Chile, Brazil, South Africa and India.

The report said: “The new policy ambitions from the (Narendra) Modi government signal clean energy opportunities in the country.” The strongest parameter in favour of India was value chain, while lower-than-expected investment continues to be the weak link.

As solar energy became more cost-competitive in emerging markets in 2014, there would be a surge of investment and capacity-building in the Asian countries, especially China and India, the report noted. Last year, India added 5 gigawatt (Gw) of clean energy generation capacity.

CLEAN BREAK IN RENEWABLE SPACE
  • $343.2 billion Total clean energy investments (2009-14) in China
  • $52.5 billion Total clean energy investments (2009-14) in India
  • 262.5 Gw Installed power capacity
  • 38,360 Mw Total renewable energy capacity
  • 5,009 Mw Renewable capacity added in 2014
  • 14.6% Renewable share in total installed capacity
  • Top Indian states: Tamil Nadu, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan & Gujarat

“Major reforms in India brought by the Modi administration bring hope of quicker deployment for the country’s eager renewable energy developers,” said Climatescope.

Among the states, Tamil Nadu led the pack with the highest wind energy capacity, followed by Karnataka, Madhya Pradesh, Maharashtra, Rajasthan and Gujarat.

Madhya Pradesh scored the highest among Indian states on growth rate of clean energy investments. The state’s favourable land policy and easy clearances have resulted in attracting projects. Gujarat, which was once a haven of clean energy investments, slipped from the top slot due to policy uncertainty and litigation over tariff.

Maharashtra’s high feed-in tariff led to a surge in wind capacity.

The report noted: “Maharashtra has done relatively little to encourage private investment in solar; it has held no tenders for power contracts and offers no feed-in tariffs.”

Renewable energy in Rajasthan at 4 Gw represents a high share (32 per cent) of total power capacity of 13 Gw, compared to other states. “The overall renewable energy capacity grew 14 per cent in 2014 in the state, but it has done little policy-wise to encourage solar development through incentives and the state’s distribution utilities are among the financially shakiest in India,” said the report.

At 7.4 Gw, Tamil Nadu has more wind installed than any other state. Since 2012, however, annual new-build rates have fallen and in 2014, only 208 megawatt was commissioned. This is largely due to the poor financial health of state-owned distribution utility companies and occasional payment delays to power project owners.

The Indian government’s goal of providing round-the-clock power to 1.25 billion citizens has triggered huge interest from investors. The report noted that a strong energy minister overseeing coal, power, and new and renewable energy sectors could have a positive influence.

The Modi-led government has revised the targets for renewable energy to 175 Gw by 2022.

Source: http://www.business-standard.com/article/economy-policy/india-5th-on-doing-biz-in-clean-energy-115112300009_1.html

Govt to further simplify ITR forms, sets up committee

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The government is looking to further simplify income tax return forms to help taxpayers fill them without seeking help from experts and the revenue department has set up a committee in this regard.

The committee, according to sources, will be headed by a joint secretary level officer and would include chartered accountants and tax experts.

“The tax department is trying to further simplify the return form so that no outside help is needed by those who want to file returns on their own,” a source said.

The effort would be to come out with a simple formula for indexation to help assessees compute capital gains on sale of assets, the source added.

“The Committee would also look into the possibility of reducing the number of pages in the return form,” the source said.

The Income Tax department had in June come out with a simplified tax return form for salaried class. Filers now have to disclose the total number of savings and the current bank accounts held by them at any time during the previous year (excluding dormant accounts).

The form also has space to fill up the IFSC code of the bank and in an additional feature, tax filers have been given an option to indicate their bank accounts in which they would want their refund credited. The ITR also has sought the Aadhaar number of filers.

The tax department had come out with simplified ITR after experts raised objections to the 14 page form which was notified earlier in the year.

The earlier form sought details of bank accounts and foreign visits and following controversy, the Revenue Department announced putting them on hold.

Source: http://www.business-standard.com/article/pti-stories/govt-to-further-simplify-itr-forms-sets-up-committee-115112200147_1.html

After 50 years of diplomatic ties, India and Singapore to be strategic partners

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After almost five decades of having diplomatic ties, India and Singapore will become strategic partners for the first time on Monday.

The partnership will encompass all aspects of bilateral ties from expansion of defence cooperation, enhancement of trade and investment and strengthening of regional relationship with the Association of Southeast Asian Nations (ASEAN).

The decision to sign the Strategic Partnership Agreement with Singapore was taken in August 2014 based on a ‘5S Plank’. Since then both Prime Minister Narendra Modi and Singapore Prime Minister Lee Hsien Loong have been continuously discussing the contours of such a pact as they planned to take their relationship beyond just business and trade.

“It is crucial to have such a pact with Singapore considering its strategic location. Not only will it enhance India’s ‘Look East’ policy, but it will also give India a greater voice in the ASEAN region at large,” an official told BusinessLine.

This is also done keeping in mind the increasing presence of China in that region and the escalation of dispute in the South China Sea region, the official added.

As a result, Modi’s visit to Singapore assumes importance. The pact will be signed with both leaders having a summit-level dialogue where all issues are expected to be discussed, with a special focus on India’s overall strategy in the Indian Ocean region.

“Singapore is an integral part of our Look East Policy and it was announced from there by our former Prime Minister Narasimha Rao. Singapore remains one of our important defence exporters. Besides, they have been trying to act as a bridge between India and China and all these is linked to the entire Indian Ocean strategy that India is now working on,” highlighted Sanjaya Baru, Director for Geo-economics and Strategy, at the London-based International Institute of Strategic Studies (IISS).

Recently, at a meeting of the Fourth Joint Commission, which was co-chaired by External Affairs Minister Sushma Swaraj and her Singaporean counterpart Vivian Balakrishnan, issues such as maritime cooperation, trade ties and cyber security were discussed. While in Singapore, Modi is also expected to deliver the prestigious ‘Singapore Lecture’ at the Institute of South East Asian Studies.

Singapore has emerged as the second largest source of FDI amounting to $35.9 billion as of June 2015, which is 14 per cent of India’s total FDI inflow. India also has a Comprehensive Economic Cooperation Agreement with Singapore with bilateral trade reaching $17.1 billion in 2014-15.

Source: http://www.thehindubusinessline.com/todays-paper/tp-news/after-50-years-of-diplomatic-ties-india-and-singapore-to-be-strategic-partners/article7906529.ece

Resurgent Rajasthan sees proposals worth Rs 3.3 lakh cr

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The first day of the much-hyped Rajasthan Resurgent Summit concluded with 295 proposals worth Rs 3.3 lakh crore. These proposals, however, were received over the past year and barely left much scope for industry heavyweights and the Union government to announce any new big-ticket projects.

“These proposals are just the tip of the iceberg. A lot of work has to be done,” Chief Minister Vasundhara Raje said in her inaugural speech. “This investment will create 2.5 lakh jobs,” she added.

In the past year, Rajasthan has undertaken a raft of economic and industry reforms to create an investment-friendly image. Her government was left with a huge debt, including Rs 70,000 crore of debt from the power sector, by the previous Congress government.

THE PROPOSALS
• Rs 11,000 cr investments announced by Kumar Mangalam Birla
• Rs 10,000 cr pledged by Gautam Adani
• Rs 6,500 cr worth investments by Anil Ambani
• Rs 10,000 cr worth projects to be undertaken by chemical & fertiliser ministry
• 24 model railway stations to be developed in the state

Lauding Raje’s role, Union Finance Minister Arun Jaitley said, after leading the state in reforms, the chief minister should now lead the state in ease of doing business. The government should provide land for business. “The India of 2015 is not the India of 1971. For that matter, it is also not the India of 1991. The aspirational constituency, which supports growth wants India to reform at a much faster speed,” he said. “Everything should be corruption free. Taxation should be reasonable and the policy should not be so aggressive that it deters investors, ” he added.

Among the investments made public on Thursday, the biggest perhaps came from Kumar Mangalam Birla, chairman of the Aditya Birla Group. Birla promised investment of nearly Rs 11,000 crore, including Rs 7,000 crore for setting up two new cement plants and Rs 3,000 crore for establishing a 500 MW solar power plant in the state. Gautam Adani, head of the Adani Group, also promised to invest an additional sum of Rs 10,000 crore over four years for the expansion of thermal power plants and generation of solar power in the state.

However, then there was a word of caution by Hero Motocorp chairman Pawan Munjal. Though he lauded the government’s role in making the state investor friendly, he requested the chief minister to ensure speedy clearance of projects.

“We need speedy clearances for setting up our industries,” Munjal said, disclosing that his company is setting up a state-of-the-art Research and Development Centre on the outskirts of Jaipur.

Uday Kotak, chief executive officer of Kotak Mahindra Bank, found special mention from Raje for the bank’s financial services. Kotak said his bank’s lending ratio is more than the deposit in the state.

For instance, against a deposit of Rs 100, his bank lends Rs 250. “We plan to double our lending from Rs 5,000 crore to Rs 10,000 crore in the next three years… this will help small, medium-scale industries and farmers in the state,” Kotak said.

From the central government, the biggest announcements came from chemicals and fertiliser minister Ananth Kumar, who promised Rs 10,000-crore of projects. This includes setting up a National Institute of Pharmaceutical Education and Research in Jhalawar district in two years, upgrade of the Central Institute of Plastic Engineering and Technology in Jaipur, and setting up a plastics park and a medical devices park, a first in the country. Railways minister Suresh Prabhu said they were going to set up 24 modern railway stations in the state.

Tourism was another key sector, which received special attention from the Central government, as well as the summit’s international partners including Singapore, Japan, Italy and Australia. Singapore Home Affairs Minister K Shanmugam said Singapore Airlines has decided to operate a direct flight from Singapore. “The airlines knew that it might not be earning profit in one or two years, but it is a long-term partnership,” he said.

Finance ministry raises duty drawback rates for exports for engineering, marine, leather and textiles

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As exports fell for the 11th month in a row in October 2015, the government on Monday increased the refunds to exporters on duties on imports, particularly those relating to engineering products. This would also neutralise the impact of import duty hike in steel, used in engineering products.

Besides engineering goods, the government raised the duty drawback rates on composite products such as leather handbags, ready-made garments made of cotton wool and those made of cotton with lycra.

The Central Board of Excise and Customs raised the duty drawback rate by two percentage points for the engineering sector, which would allow higher tax refund to exporters of machinery and appliances, electrical machinery, tools and implements, among others.

“These revised rates are based on average incidence of customs and central excise duties and service tax related with the manufacture of export goods and involve substantial total drawback for exporters,” the government said in a release.

After the additional hike in the duty drawback, the rate for certain engineering products could go up to close to eight per cent, sources said.

However, the government did not take into the account the 20 per cent safeguard duty imposed on hot-rolled steel. “It is a positive that the government has made up for the hike in duty on steel. But the smaller firms will have to bear the impact of safeguard duty, as it is not factored in new duty drawback announced ” said Ajay Sahai, director-general and CEO, Federation of Indian Export Organisations.

CRUX OF THE MATTER

  • Move expected to neutralise impact of import duty hike in steel
  • Duty drawback rates raised on engineering goods, leather handbags, readymade garments made of cotton wool and cotton with lycra, shrimps
  • Two percentage points rise in duty drawback for engineering sector to allow higher tax refund to exporters of machinery and appliances, electrical machinery, tools among others
  • Former CMD N Ramanujan had worked out a JV with Titan Watches when Xerxes Desai was heading it. But the government turned it down
  • The only operational plant at Tumkur, Karnataka, has 2 million-unit capacity of quartz watches
  • The watch model, Kanchan, used to sell at a premium in the grey market at Rs 1,000, when its legal price was Rs 700

Duty drawback is a refund of certain types of customs and Central excise duties as well as service tax on imports of inputs or raw materials that are used to manufacture goods for exports.

The revised rates of duty drawback notified by the finance ministry will be effective from November 23.

In a first, the government extended the brand rate of duty drawback to wheat. It also provided a mechanism to pay provisional drawback to exporters soon after export, for certain exports made under the claim for brand rate of duty drawback.

“This was pending for a long time. In a positive development, the government also allowed exporters claiming brand rate of drawback rate to avail provisional drawback rate until the brand rate is decided,” said Sahai.

The government added the expert committee would look into exporters’ concerns arising from new schedule of rates and make further recommendations to the government in January 2016. The government will also take into account feedback from export promotion councils to this effect.

Source:

http://www.business-standard.com/article/economy-policy/finmin-raises-duty-drawback-rates-to-arrest-export-slump-115111700035_1.html

Want to partner India in smart cities: Huawei

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Chinese technology major Huawei wants to partner India in helping it build Information and Communications Technology (ICT) infrastructure for the development of smart cities, a senior company executive said at the Huawei Innovation Day Asia, co-hosted with National University of Singapore, here last week.

 

The Centre has already announced the list of 100 cities which it plans to make ‘smart’ by providing efficient physical, social, institutional and economic infrastructure. The government has defined a smart city in the Indian context as a city that provides a decent quality of life to its citizens, a clean and sustainable environment, and supports the application of smart solutions.

 

“We will be able to help India build ICT infrastructure including wireless systems and the computing platforms for the smart cities,” said Joe So, Huawei’s chief technology officer for Industry Solutions at the company’s Shenzhen head office.

 

“We can help build the inter-dependency of the Indian system,” So said, stressing on Huawei’s strength in building ICT infrastructure.

 

Noting the similarities between India and China, especially in view of the huge population in their major cities, So said India’s smart cities should also adopt ICT. So pointed out the use of ICT in Chinese cities has helped reduce crime rates significantly. The Indian smart cities could also use ICT for similar use, said So at the Huawei Innovation Day Asia.

Elaborating, So said India would not be able to have one plan for building 100 smart cities as the country’s major regions are different from one another. Each city must be planned based on its structure and people’s needs such as New Delhi being a government and agencies centre and Mumbai being a commercial hub.

Addressing the Innovation Day Asia, Singapore’s minister for trade and industry S Iswaran said, “The ICT innovation will have a profound impact on the nature of jobs, the viability of business models, and the structure of economies.” Citing the Asian Development Bank’s figures, Iswaran said the continent’s urban population grew by 44 million every year and the Asian nations had to concern themselves with their citizen’s growing expectations for more efficient government services, as well as ensure environmental sustainability.

So said he’ll be highlighting Huawei’s technologies for India, its second largest market outside China, at the Smart-Safe City conference in Bangalore on December 19.

The company also announced its vision for the next generation of the smartphone: The “superphone”, and said it will be developed by 2020.
Source:http://economictimes.indiatimes.com/articleshow/49798484.cms