OPINION, P8 MONEY & MARKETS, P10 5-FOLD RISE It is GST rather than DeMo that will drive tax collection growth Even if privacy is not a fundamental right, safeguard user data with sensible curbs BENCHMARK LAWSUIT SBI Q1 profit jumps to `2,006 cr, asset quality worsens EDITORIAL INTERNATIONAL, P16 Uber investor sues former CEO Kalanick for fraud NEW DELHI, SATURDAY, AUGUST 12, 2017 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM VOLUME XLIII NO. 140, 36 PAGES, `8.00 (PATNA `9.00, RAIPUR `10.00) P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E READ TO LEAD SENSEX: 31,213.59 ▼ 317.74 NIFTY: 9,710.8 ▼ 109.45 NIKKEI 225: 19,729.74 ▼ 8.97 HANG SENG: 26,883.51 ▼ 560.49 `/$: 64.14 ▼ 0.06 `/€: 75.49 ▼ 0.4 BRENT: $51.66 ▼ $0.24 GOLD: `29,002 ▲ `101 IN THE NEWS SAT lifts curbs on Parsvnath, five others THE SECURITIES APPELLATE Tribunal (SAT) on Friday lifted Sebi's trading restrictions on the shares of six suspected shell companies, including Parsvnath Developers, and asked the regulator to hear them and also probe them, reports PTI. The other five companies that got relief on Friday are Kavit Industries, Pincon Spirit, Signet Industries, SQS India BFSI and Kkalpana Industries. Sebi had on August 7 had asked bourses to restrict trading in shares of 331 suspected shell companies. 23 Bills later, LS and RS adjourn THE MONSOON SESSION of the Lok Sabha and the Rajya Sabha was adjourned sine die on Friday after the passage of 23 Bills in total, including the Banking (Amendment) Bill, reports PTI. While the Lower House passed 14 Bills, the Upper House passed nine. The Lok Sabha also saw the suspension of six Congress members for “highly unbecoming” behaviour. A highlight of the session in the Rajya Sabha was that new chairman Venkaiah Naidu took over. SC relief to Daiichi in Fortis sale case IN A BIG relief to Japanese drugmaker Daiichi Sankyo, the Supreme Court on Friday asked former Ranbaxy promoters Malvinder and Shivinder Singh to maintain the status quo with regard to their stake in Fortis Healthcare, reports Indu Bhan in New Delhi. The SC while issuing notice to 11 respondents, including the Singh brothers, also in effect blocked the two Fortis promoters from selling their stakes in the hospital chain till further orders. NUCLEAR NERVES LOW-INFLATION PHASE Structural caps pave way for economy Markets slide on Mid-year Economic Survey points to contained food prices on good farm output and low energy prices FE BUREAU New Delhi, August 11 INDIA IS POSSIBLY entering a phase of lowinflation forthe first time since 2005, aided by structural caps to price pressure in food and fuel,suggestsVolume II oftheEconomicSurveyfor201617, tabled in Parliament on Friday.While good farm production andresiliencetoerraticmonsoon would help keep a lid on food prices,the rise of shale oil and gas technology has cut costs and driven up output globally,especially from North America, undermining the influence of traditional Opec suppliers. In aveiled criticism of the Reserve Bank of India (RBI), the Real interest rate 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 FY18 GDP projections for India (% growth, y-o-y) (%) IMF 7.2 World Bank 7.2 Eco Survey February 2015 June 2017 7.1 ADB 2 7.4 *GVA forecast # lower end of the band 3-month ahead forecast Actual March 2014 6.75- 7.5# HSBC CPI inflation - RBI forecast & actual 10 9 8 7 6 5 4 3 2 1 7.3* RBI June 2017 Source: RBI and Survey Calculations survey says the central bank has overestimated inflation bymore than 100 basis points in six of the past 14 quarters (three in 2014 and three in the most recent period) with an average error of 180 basis points. Not surprisingly, the bench- mark interest rate of 6% (that, too,aftera25-basis-pointcutthis month)isabovetheneutralnominal rate by 25-75 basis points, the survey says. This is because realneutralinterestrates,usually, hover around 1.25-1.75%.That implies neutral nominal rates of 5.25-5.75%, considering the inflation target of 4%. Thesurveysaidbothexpected inflation and GDP are subdued relative to their equilibrium levels.The current retail inflation of 1.5% (in June) is runningwell below the 4% target and the econ- omy is lacking the dynamism to push this back toward the target. “Cyclical conditions, then, suggest that the policy rate should actually be below — not 50-100basispointsorsoabove— theneutralrate.Theconclusionis inescapable that the scope for monetary easing is considerable, more than that suggested by comparisonwithneutralinterest rates,” the survey says. Also, the earliertheeasing,complemented with other reforms, especially to address the twin balance sheet problems challenge, the quicker the economy can move towards its full potential. Evenifthepass-throughisinadequate,thesurveyargues,there are gains to financial stability fromtheratecuts,aslowercostof funds without a commensurate decline in lending rates will help restorebanks’profitability.Lower rates will also help resolve the twin-balance sheet problem — over-leveraged companies and bad-loan-encumbered banks. Continued on Page 4 Related reports on Page 2 FY18 growth to be at lower end of 6.75-7.5% range FE BUREAU New Delhi, August 11 THE SECOND VOLUME of the Economic Survey 2016-17 unveiledonFridayhighlighteda“deflationarybiastoactivity”sinceits initialversionwhich came out six month ago due to “several new factors”andcuttheforecastofreal GDP growth in 2017-18 to the lowerendofthe6.75-7.5%range formulated earlier. SincetheFebruaryedition,the real policy rate had been tighter than anticipated,the survey said, citingitasareasonfortherevised growthoutlook. Thereis,itnoted, sizeable slack in the economy; for instance,theaveragecapacityutil- We know from all the history that when (stock market) valuations reach such high levels there is a tendency for them to revert back to normal levels. So we should be aware that this might happen and asset valuations probably will adjust going forward. —ARVIND SUBRAMANIAN, chief economic adviser isationwasjust72.7%inthethird quarterof last fiscalyear. Even as chief economic adviserArvind Subramanian spoke of “across-the-board deceleration”,the surveyiterated the need for“considerable”monetary eas- ing in order to deleverage corporatebalancesheets. Whiletheauthors of the survey are patently critical of the Reserve Bank of India for keeping the policy rates at levels that felt higher than warranted,theyalsorebuttedthegov- Special Feature Taking note Gene editing may make pigs into organ donors for people ernment’sclaimsoftaxbuoyancy and identified new short-term risks to Centre’s fiscal outlook. These are some of the key points in the survey: Investment spending of the general government — which improved on the Oddly enough If porcine genes for the proteins that most provoke the human immune system could be eliminated in the way that PERVs have just been, then xenotransplants could soon be a reality ■ Science & Tech, P15 Nominal GDP growth in H2FY17 was 1.1 percentage point higher than in the first half, despite a drop of 39 percentage points in cash in circulation (CIC). This belies the assumption that demonetisation depressed farm commodity prices and would have dragged down nominal GDP expansion. Annual CIC & Nominal GDP growth (%) 14 12 INDUSTRIAL OUTPUT entered negative territory in June contracting by 0.1% mainly due to the decline in manufacturing and capital goods sectors, reports PTI. Besides, segments like mining, power generation, infrastructure/construction goods and consumer durables recorded poor performance. Factory output, measured in terms of Index of Industrial Production, grew 8% in June 2016, according to data released by the Central Statistics Office on Friday. PAGE 4 Cochin Shipyard surges over 20% in stellar market debut STATE-RUN COCHIN Shipyard on Friday made an impressive debut on the bourses despite a slump in the markets, reports fe Bureau in Mumbai. It listed on the BSE at `435, or just 0.69 % above its issue price of `432, but ended at `522 or 20.8% over the issue price. The stock now commands a market capitalisation of `7,095.86 crore. The Cochin Shipyard initial public offering (IPO) was subscribed by 75.98 times on August 3, the concluding day of the issue. The IPO was aimed at raising `1,468 crore. PAGE 11 Automakers across segments post significant rise in July sales MOST OF the automobile manufacturers across segments increased their wholesale dispatches in July substantially, reports fe Bureau in New Delhi. Medium and heavy commercial vehicles reported a 6.6% on-year rise in volumes to 22,730 units. The passenger vehicle segment also witnessed a double-digit growth of 8.55% y-o-y in wholesale volumes to 192,773 units while SUV sales increased by a whopping 35.5% y-o-y to 86,874 units. PAGE 6 Nominal GDP growth (RHS) 11.0 11.2 11.0 10.8 Half-yearly CIC & nominal GDP growth (%) 20 12.0 15.8 11.5 15 17.3 11.5 13.0 10 8 10.6 5 6 10.4 0 2 Industrial output in negative zone, contracts 0.1% in June 11.9 10 4 QuickPicks FE BUREAU 9.9 Growth in CIC 10.2 10.0 0 9.8 -2 9.6 4.0 -4 -6 FY16 FY17 9.4 9.2 -5 -10 -15 -20 -25 11.0 10.4 10.0 10.5 9.8 10.0 9.5 Growth in CIC Nominal GDP Growth (RHS) -22.6 FY16 H1 FY16H2 FY17H1 FY17 H2 9.0 8.5 ‘GREEN SHOOTS’ IN TELECOM Inter-ministerial panel says no policy intervention required FE BUREAU New Delhi, August 11 INASURPRISE development the government-appointed interministerial group on telecom on Fridayveered to the view that no large-scale policy intervention may be required in the sector as “green shoots”have become visible during the first quarter. Though a final meeting of the group will take place on August 17 and 18 afterwhich the report will be finalised and which will then be put up before the Telecom Commission,Friday’s stance at the meeting raised question marks aboutwhetherthe group’s earlier suggestion of providing cash-flow relief to operators by way of extending the tenure of payment for spectrum to 16 years from the current 10 will be taken up or not. As reported earlier, the IMG had anywayruled out anyreduc- LITTLE RELIEF ■ IMG earlier indicated licence, spectrum usage fees not to be lowered ■ Had signalled deferred payment time for spectrum may be longer ■ Now it remains to be seen whether the tenure is extended or not ■ Final meeting of IMG to finalise the report will be August 17 & 18 ■ Telecom Commission will take a final call on the report tion in licence and spectrum usage charge that operators pay to the government. What surprised analysts and operators alike is the reading of “green shoots” in the April-June quarter. While operators like Bharti Airtel and Idea Cellular held on to theirrevenues on a sequential basis, they saw a sharp drop in voice and data realisation even though consumption increased. For instance, Bharti sawa massive sequential decline of 9.5% in average voice realisation per customer at 21.98 paise per minute, while its data realisation dipped a sharp 51.1% on a sequential basis to 5.97 paise per MB. Similarly, for Idea the voice realisation fell by 6% to 24.4 paise perminutewhile data realisation declined a massive 53% to 5.4 paise per MB. According to a report by Kotak Institutional Equities after the earnings declaration of telecom companies, “The path to improved profitabilityforthe industry is not clear given current relentless competition.” Continued on Page 4 backofCPSEslastfiscal—islikely todeclinerelativetoGDPthisyear as farm loan waivers shrank states’fiscal space and the Centre struckabalancebetweencountercyclical policy and the need to maintain fiscal credibility; shortterm impact of farm loanwaivers is likely to be deflationary; more downside risk to fiscal outlook than envisaged in the Budget due toreducedtaxrevenuefromslower nominal GDP growth,reduced GST collections owing to lowerthan-earliertaxrates/transitional challengesandlowerspectrumreceipts due to the structural (RJio) jolt to theviabilityof telcos. N Korea tension As US President Donald Trump intensifies warnings to Pyongyang over missile threat, Asian stocks sink the most this year BLOOMBERG Mumbai/Singapore/Seoul/ London, August 11 ASIAN EQUITIES EXCLUDING Japan slid the most in eight months on Fridayas the rhetoric between US and North Korean leaders intensified. The 30-member S&P BSE Sensex fell 1.01% to 31,213.59 in Mumbai, dropping for the fifth consecutive day. The measure has erased almost all of its advance last month.All 19 sector indexes compiled by BSE fell. The India VIX index advanced for a fifth straight day and climbed as much as 10% to 15.2, trading at the highest since January. The MSCI Asia Pacific Index excluding Japan lost 1.6% to 155.61 as of 4.57 pm in Hong Kong, set for its longest losing streak since July 4, as five stocks declined for each one that advanced. Financial and technol- Continued on Page 4 Related report on Page 16 Trend in danger Asia ex-Japan stocks test uptrend on geopolitical tension MSCI AC Asia pacific excluding Japan index 523.8 550.0 525.0 500.0 475.0 448.0 450.0 425.0 400.0 August 11, 2016 Source: MSCI Inc., Bloomberg Continued on Page 4 ogy shares dropped the most. Stocks in developed Asia, China, South Korea and Indonesia fell more than 1%, while Japanese markets are closed for a holiday. Investors are paring positions on speculation that equities, recently at multi-year highs amid record-lowvolatility,may tumble further as tensions escalate. Trump stepped up his campaign of pressure on North Korea, promisingaresponsetoanystrike againstAmericaoritsallies.USequities slid the most since May. “This situation is beginning to develop into this generation’s Cuban Missile crisis moment,” Rob Carnell, chief economist for Asia at ING in Singapore, wrote in a note. The only diplomatic outcome that may now satisfy the US is if North Korea abandons its nuclear ambitions, he wrote. August 10, 2017
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