OPINION, P8 M&M, P10 SURJIT BHALLA Biodiesel from Jatropha needs a policy push BANKRUPTCY PROCEEDINGS COFFEE PLUNGE Did DeMo fail if tax compliance increased and India became less cash-dependent? EDITORIAL INTERNATIONAL, P14 Banks may have to 'abort' financing to infra projects: SBI’s Khara James Quincey-led Coca-Cola to buy Costa for $5.1 billion NEW DELHI, SATURDAY, SEPTEMBER 1, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM VOL.XLIV NO. 157, 24 PAGES, `10.00 (PATNA `9.00, RAIPUR `10.00) P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E READ TO LEAD SENSEX: 38,645.07 ▼ 45.03 NIFTY: 11,680.50 ▲ 3.70 NIKKEI 225: 22,865.15 ▼ 4.35 HANG SENG: 27,888.55 ▼ 275.50 `/$: 70.99 ▼ 0.26 `/€: 82.69 ▲ 0.03 BRENT: $77.36 ▼ $0.41 GOLD: `30,226.00 ▲ `127.00 NINE-QUARTER HIGH Q1 GDP growth pegged at 8.2% Highest monthly loss in 3 yrs In August alone the rupee has yielded a negative return of 3.4%, the highest monthly loss in three years. On a year-todate basis, the rupee has given up over 10%. `/$ 2018 Jan Feb Mar Apr May Jun Jul Aug (% chg) 63.59 0.4 65.18 -2.4 65.18 0 66.66 -2.2 67.41 -1.1 68.47 -1.5 68.55 -0.1 71.00 -3.4 Source: Bloomberg `/$ movement 62.00 64.00 Inverted scale 66.48 66.00 68.00 70.00 72.00 71.00 Aug 31, ‘15 Aug 31, ‘18 Special Feature An electric car record that stood for 81 years Merc EQ Silver Arrow at 2018 Pebble Beach Concours d’Elegance. It’s an homage to W125 which, in 1937, set the record for fastest speed, broken last year by Koenigsegg Agera ■ Motobahn, P13 QuickPicks SAIL declines dividend to govt STEELAUTHORITY of India (SAIL) has declined a government call for a dividend for the last financial year, saying it did not have "any cash and bank balance" and that its debt-toincome ratio was much higher than agreed with some lenders, showed an internal document reviewed by Reuters. PAGE 6 Aadhaar enrolment targets relaxed THE UIDAI on Friday extended till November 1 banks’ deadline to carry out minimum Aadhaar enrolments and updations in identified branches, according to a communication sent to banks, reports PTI. Banks have been asked to carry out at least eight enrolments and updations daily in each stipulated branch from November 1 to avoid financial disincentives. PAGE 3 Q1 Q2 FY18 7.7 8.2 Q3 Q4 Q1 FY19 Steady increase in pvt consumption (% rise in real term, y-o-y) 20 17.6 15 10 5 0 6.9 8.6 10 GFCE GFCF 0.8 PFCE 7.6 Q1 Q2 Q3 Q4 Q1 FY18 FY19 Sectors that grew over 7% in Q1 Manufacturing (13.5%); Electricity, gas, water supply & others (7.3%); Construction (8.7%); Public administration etc. (9.9%) Source: MoSPI government some ammunition to weather the Opposition’s criticism of delivering growth lowerthan United Pro- RBI DG Kanungo flags risks Says excess government paper leads to hardening in sovereign yields, may add to inflation Danger signs States' gross fiscal deficitStates' gross borrowings to-GDP ratio in 2017-18 are budgeted to rise to at 3.1%, breaches the `5.5 lakh cr in FY19, FRBM threshold for the while the net borrowing is third consecutive year expected to rise to `4.2 lakh cr Outstanding liabilities have been registering double digit growth since FY13 FE BUREAU Mumbai, August 31 INCREASED MARKET BORROWING by states is partly responsible for the hardening in sovereign yields and may also be feeding into inflation,a top Reserve Bank of India (RBI) official said on Friday. BP Kanungo, deputy governor, RBI, said, “The increased reliance of the Centre and states on market borrowings has led to an oversup- ply of government papers in the g-sec market and contributed to the hardening of sovereignyields.This results in a spiral, whereby increased market borrowing result in increased redemption pressure, which induces further borrowingtoserviceoutstanding debt and accumulated interest.” He was speaking at an event organised bythe Ben- Gross borrowings by state government are projected to increase 28.5% y-o-y in 2018-19 galChamberofCommerceand Industry. The oversupply of state paper and the consequent hardening of the yield has a cascading effect on the interest rate in other segments of the financial market and even feeds into inflation through input cost. As a result, higher yield levels end up creating a vicious cycle,Kanungo noted. BLOOMBERG Washington, August 31 the ARC plan formulated by the Rural Electrification Corporation — requires amendments to the relevant RBI regulations. The Allahabad High Court, while refusing a specialwaiver to the power sector from the RBI’s February 12 circular on Monday,haddirectedthecommittee to come up with a report by September end. US PRESIDENT DONALD Trumpsaidhewouldpulloutof theWorldTradeOrganisationif it doesn’t treat the US better, targeting a cornerstone of the international trading system. “If they don’t shape up, I would withdraw from the WTO,”Trump said Thursday in anOvalOfficeinterview.Trump saidtheagreementestablishing the body“was the single worst trade deal evermade”. A US withdrawal from the WTO potentially would be far more significant for the global economy than even Trump’s growing trade warwith China, undermining the post-World War II system that the US helped build. Trump said last month that the US is at a big disadvantage from being treated“verybadly” by the WTO for manyyears and that the Geneva-based body needs to“change theirways”. US trade representative Robert Lighthizer has said allowing China into theWTO in 2001wasamistake.Hehaslong called for the US to take a more aggressive approach to the WTO, arguing that it was incapable of dealing with a nonmarketeconomysuchasChina. Continued on Page 2 Continued on Page 2 PMO set to review policy on Monday THE PRIME MINISTER’SOffice (PMO) will review on Monday the farm export policy floated by the commerce ministry, a sourcetoldFE.Thedraftexport policy, which has been circulated forinter-ministerial consultations, has proposed to keep the outbound shipment ofprocessedandorganicitems free of any restriction. Senior commerce ministry 42.6 officials will brief the PMO about various aspects of the export policy and its intent on which the ministry has moved the cabinet note, said the source. Delivering his Independence Day speech,Prime Minister Narendra Modi had announced that the new agriculture export policy will be unveiled soon to boost farm income. Continued on Page 2 38.2 38.5 32 33 Farm exports ($ bn) 2015-16 Net farm trade surplus ($ bn) 9.5 2016-17 7.8 Continued on Page 2 Trump threatens to pull US out of WTO AGRI EXPORTS BANIKINKAR PATTANAYAK New Delhi, August 31 Kanungo said that there is also an impact on the corporate bond market.An internal study by the RBI and Centre for Advanced Financial Research and Learning to examine the impact of state development loan (SDL) spreads on corporate bonds has found that a rise in yields on state government paper ends up pushing the spread on corporate bonds. “Unlike central government debt which crowds out bank credit, SDLs crowd out corporate borrowing in the bond market by increasing cost,” Kanungo said. “High-rated corporate bonds and those with longer maturity have a higher propensity of being crowded out by SDLs.” ● ‘SHAPE UP’ Continued on Page 2 Fiscal deficit till July 86.5% of FY19 target: P2 Core sectors up 6.6% inJuly: P2 FY18 FE BUREAU 7 FY17 Falling rupee 5.6 6.3 FY16 AIDED BY A favourable base but also a pick-up in manufacturing, construction, activities allied to agriculture and an uptick in both rural and urban consumption, India’s economic growth accelerated to 8.2% in June quarter (Q1FY19), the Central Statistics Office (CSO) said on Friday. While the low base is seen to have added close to 50 basis points to the nine-quarterhigh growth rate, it was still higher than “trend growth” evenwithoutthatbenefit,analysts reckoned. The latest economic data could give the Narendra Modi (% rise in real term, y-o-y) FY15 A UNIFORM civil code is "neither necessary nor desirable" at this stage, the Law Commission said in a consultation paper on the last day of its term on Friday, and suggested changes in laws relating to marriage, divorce, alimony and marriageable age for men and women, reports PTI. Issuing a consultation paper, the panel held freedom of religion as also to propagate it must be strongly protected in a secular democracy, but it is important to bear in mind that a number of "social evils" should not be allowed to take refuge under 'religious customs'. FE BUREAU New Delhi, August 31 gressive Alliance’s. A good show by labour-intensive sectors would also come in handy forthegovernment,struggling to present a credible picture of job creation. Although investments, for long in the doldrums, are showing some signs of recovery, a critical part of it appears to be public expenditure-driven. A capacity overhang still hampersprivate-sectorinvestments. Gross fixed capital formation,a close proxyof investments, was 31.6% of gross domestic product (GDP) in Q1FY19, not much higher than 31% in the year-ago quarter. Economic affairs secretary SC Garg said the “robust (Q1) performance has given us the confidence that the FY19 growth could be even higher than 7.5%” (the upper end of range forecast by the last Economic Survey). GDP growth rate rises 4 quarters in a row FY14 IN THE NEWS Civil code ‘neither necessary nor desirable': Panel Low base, manufacturing, agriculture help, key services like banking, telecom slow down STATE BORROWING Holy visit Tata Trusts chairman Ratan Tata offers prayers at the Lord Venkateswara temple in Tirupati on Friday ● STRESSED POWER ASSETS Panel discusses issues, RBI plays truant FE BUREAU New Delhi, August 31 THE EMPOWERED COMMITTEE on stressed power assets, which met here for the first time on Friday, deliberated on possible changesin fuelallocationpolicies,regulatoryframeworks and solutions to the vexed issue of irregular payments from discoms. It also discussed a payment security mechanism for independent power companies, which has been a long-standing demand of private powerfirms,sources said. The panel, however, could not make significant headway as no representative from the Reserve Bank of India (RBI) turned up. On the agenda was a proposal to set up an asset reconstructioncompany(ARC) to take over banks’ stressed powerassets.Implementation of the Pariwartan scheme — INDIA OPPORTUNITY Bezos, Buffett bet on a $250-billion unclaimed internet market BLOOMBERG Bengaluru, August 31 INDIA’S LONG-NEGLECTED RETAIL market is turning into one of the world’s hottest thanks to Warren Buffett, Jeff Bezos and a frenzy of billiondollar deal-making. Walmart just wrapped up a $16-billion agreement for control of the country’s leading ecommerce player, Flipkart Online Services, while Bezos’ Amazon.com negotiates deals with a large supermarket chain and an investment in a prominent retail conglomerate, according to local media.This week,Buffett’s Berkshire Hathaway Inc. agreed to acquire a stake in the company behind digital payments leaderPaytm. Why the sudden interest in India? The new optimism is fuelledbyrisingstandardsofliving, increases in smartphone usageandcheapdataplansthat are boosting internet penetration across the nation. Perhaps mostimportant,Indiaisthelast big retail market still up for grabs,withaninterneteconomy projectedtodoubleto$250billion by2020. “It’s a race for leadership,” said Anil Kumar, the Bangalore-based chief executive officer at researcher RedSeer Consulting.“There’s far more action in India compared with stable markets like China and the US.” Online sales grew ILLUSTRATION: ROHNIT PHORE 23% last year and are up 40% so far in 2018, according to RedSeer. The organised retail market is under-penetrated, leading to tie-ups between online and offline players,and driving unprecedented levels of investments,Kumar said. India’s vast retail industry has no parallel other than, perhaps,China.ButunliketheChinese market, dominated by AlibabaGroupHolding,Indiais relatively open and largely unconquered,offeringglobalplayersvast opportunityto grow. India is now the world’s fastest growing major economy, and per capita incomes have been climbing steadily. According to a Forrester Research report earlier this month, the South Asian country is the world’s fastest growing e-commerce market. Amazon and Flipkart have cornered about three-quarters oftheonlineIndianretailmarket, but other big players are getting aggressive. Continued on Page 2
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