OPINION, P6 ECONOMY, P2 S SUBRAMANIAN Rise in inflation ahead, expect gradual policy normalisation from Q4’21 COVID SUPPORT OPPOSITION HEAT The NDAhas failed to do its job on the economy, we now need big job-creating schemes P BHANDARI & A CHAUDHARY BACK PAGE, P14 Will build a book of `2,000 cr via ECLGS, says SBI's Khara Netanyahu in lastminute bid to scupper ‘deal’ to unseat him NEW DELHI, MONDAY, MAY 31, 2021 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL. XLVII NO. 77, 14 PAGES, `6.00 (PATNA `6.00, RAIPUR `7.00) 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 ECONOMIC TRAVAILS IN THE NEWS Monsoon delayed, likely to hit Kerala by June 3: IMD Nascent recovery disrupted; consumption needs big push Earnings corner FE BUREAU Profits soar, more turnarounds India Inc’s performance has been characterised by strong sales and heavily curtailed expenditure that has driven up operating margins. With several businesses turning around, profits have soared. Net sales (% chg y-o-y) Total expenditure 19.3 (% chg y-o-y) 1.5 -34.4 Q1 Q4 Interest Q1 Q2 Q3 FY21 Q4 Q1 -490 -464 Q1 Q4 -212 -1,068 -13.4 -60 Q4 Q2 Q3 FY21 898 (bps, chg y-o-y) 102 58 -5.3 -7.0 374 RM to sales % (% chg y-o-y) 3.9 Q2 Q3 FY21 604.8 -76 PBT (% chg y-o-y) Q1 980.5 -14.1 -33.9 Q2 Q3 FY21 (bps, chg y-o-y) -2.9 -7.8 Q2 Q3 FY21 Q4 Q1 Sample of 779 companies (excluding banks & financials) Q2 Q3 FY21 Q4 Source: Capitaline QuickPicks Banks move SC against RTI disclosure, seek direction to RBI THE SUPREME Court will consider in July petitions filed by various banks, including SBI and HDFC Bank, seeking a direction to the Reserve Bank of India (RBI) to exempt information related to their customers, trade secrets, risk ratings, any unpublished price-sensitive information from the Right to Information Act, reports Indu Bhan in New Delhi. A Bench led by Justice L Nageswara Rao posted the matter for hearing in July first week. The SC had last month revived its 2015 judgment making it necessary for RBI to disclose financial information related to private and public banks under the RTI Act. PAGE 2 5.9 -5 (2AE) Source: CSO 0 FY21 FY20 FY18 FY17 FY19 FY21 FY19 FY18 FY17 FY16 27.4 53.7 40.1 60.9 39.7 62.2 69.1 51 FY21 FY20 FY17 FY18 FY19 FY20 Manufacturing Real estate & construction FY21 Source: CEDA-CMIE Bulletin FY21 FY20 FY19 ❚ Tax-to-GDP (%) 12 11 10 9 11.2 10 10.2 9.7 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 ❚ Credit growth (Non-food credit), % chg, y-o-y 15 12.3 12 13.5 9 8.6 6 3 4.9 0 FY18 39.4 70.6 No. of people employed (mn) -7.2 FY19 FY18 FY17 (2AE) Source: CSO ❚ Employment Source: Ministry of commerce FY17 FY15 -9 FY14 -10 FY13 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 30.9 -15.5 FY16 FY16 -5 10 FY16 5.5 6.4 FY20 32.5 (2AE) FY15 5.5 5 ❚ Merchandise exports FY14 FY15 (PFCE), % chg, y-o-y 8.1 10 Source: CSO Source: RBI (2AE) Source: CSO ❚ Private consumption (GFCF), % GDP 35 34.3 34 33 32 30.7 31 30 % chg, y-o-y 14 7 0 -7 -1.8 -14 -21 -6.5 -10 FY14 FY21 FY20 FY19 FY18 FY17 FY16 FY15 FY14 -8 FY13 -5 -10 8 5.4 5 Nonimal GDP as per 2nd advance estimates, gross tax as per FY21 (RE); Source: CSO, Budget documents, CGA economy need to start firing soonerratherthanlater,butthat has been wishful thinking for quitesometime.Afront-loading of budgetary expenditure and CPSE capex appears to be the government’s short-term plan to salvage the situation. The March quarter may come on a par with or slightly better than the National StatisticalOffice’s(NSO)lastestimate — it had predicted gross value added(GVA)expansionof2.5% inQ4FY21,thoughtheGDPwas seencontractingby1.1%dueto back-endedreleaseofsubsidies. Icra and SBI Ecowrap recently predicted a slightly better Q4. The GVAand GDPhad grown at 1% and 0.4%, respectively, in Q3FY21, regaining some lost steam after two straight quarters of deep contraction. But, the current quarter, shattered by the savage second Covidwave,wouldhavethebenefitofjustaveryfavourablebase, not much else.And uncertainty looms large in the path ahead, with Covid spread not being containedexpeditiouslyandthe vaccination pace being disconcerting.Economy’slongterm growth potential is significantlyimpaired. As the charts show, the downwardslideoftheeconomy turned sharpersince FY19. THE OUTDOOR MEDIA industry has once again lost favour with marketers as various states in the country have imposed restrictions on the movement of public in view of the second wave of the Covid-19 pandemic. Atul Shrivastava, CEO, Laqshya Media Group, says since April business has declined by 60-70%. This recent setback could shave off about 20% of the industry’s (` crore) 3,910 INDIA’S ELEVATED GENERAL government debt of about 90% of gross domestic product (GDP) in the wake of the Covid-19 outbreak can potentiallyinflateinterestpayments and impair the ability of the Centreaswell as statesto boost productive spending, economists and senior executives at global rating agencies told FE. Given the damage caused by the second wave, some economists expect the FY22 fiscal deficit to exceed the 6.8% target by as much as one percentage point. Theneedof thehour,therefore, is to rekindle growth impulses fast, which will bolster revenue mop-up and enable the country to pare down its debt, they stressed. This must also be followed up with a credible road map, which should be more sacrosanct than the oft-relaxed FRBM rules,to reduce debt. Expeditious containment of the second wave and effective implementation of structural reforms,especiallyin factors of production, are key to the country’s growth objectives, some of them said. Else, given the parlous state of finances, any threat to GDP growthoutlookwillonlyweigh Sectoral contribution 2020 (%) Real estate & construction FMCG Financial services 3,180 1,560 2,160 21 2019 2020 2021E 14 13 2023E E: estimate; Source: Ficci-EY Media and Entertainment Report 2021, Pitch Madison Report 2021 revenue in 2021,he says. The onset of the pandemic dealtaheavyblowtoOOH(out- INTHEWORKS ■ Under licensing framework, Appswould need to provide legal interception ofcalls to security agencies ■ A DoT panel had recommended in 2015 for bringing app calls under regulation ■ Theywould ■ What needs to beworked out FE BUREAU New Delhi, May 30 THE GOVERNMENT IS contemplating bringing under regulationthecallservicespart of apps such as WhatsApp, Skype,Facetime andViber,etc, while leaving the messaging part to be covered under the intermediary rules which came into force from May 26. In essence, this means the messaging part of such apps is how segregation between calling and messaging services would be done will not be brought under any regulatory framework,but the companies will need to take licence from the government for providing local or national long distance (NLD) calls. What needs to be seen is how such a segregation between calling and messag- also need to pay an annual licence fee to the government ■ Trai had in 2020 recommended against regulation ofOTTs ■ The govt is likely to reject its recommendations ing services will be done. Under the licensing framework, such firms need to provide legal interception of calls to security agencies, which currently applies to telecom operators. Continued on Page 4 Doubling farmer income by FY23 tough as states delay reforms Ramesh Chand, NITIAayog GROWTH IN agricultureGVAinFY22 willlikelyexceedtheexpansionseenlast yearonhigherpricesofcropsandanticipated normal and well-distributed monsoon, according to NITI Aayog member Ramesh Chand.In an interview with Prasanta Sahu and Prabhudatta Mishra,he said:“Except in a few,little or no progress is seen at state level to bring reforms in agri policies and system of marketing.This is a big setbacktoachievingthegoalofdoubling farmers’ income by FY23.” Chand, for thefirsttime,alsosaidduetopublicsensitivity towards GM food, domestic research should focus on matching the same productivity level through nonGM technologies.■ Interview on Pg 3 Centre’s soaring debt may curb productive spending General govt debt 100 88.9# 90 80 70 (% of GDP) 69.8 70.3 90.8* 90.3* 72.2 60 50 2017-18 2018-19 2019-20 2020-21 2021-22 #Estimated; *Forecast 2022-23 Source: Moody's ...the interest payment will remain at elevated levels and crowd out more productive spending. FY22 fiscal deficit may rise to 7.8% from the targeted 6.8%. —M GOVINDA RAO, CHIEF ECONOMIC ADVISER, BRICKWORK RATINGS We do not foresee India’s debt ratio declining to its pre-pandemic (FY20) level of 73.9% in the next 5 years. —JEREMY ZOOK, DIRECTOR (SOVEREIGN RATINGS), FITCH Debt affordability will remain relatively weak with interest payments reaching 28% of general government revenue in 2021, the highest among Baa-rated peers. —WILLIAM FOSTER, V-P & SENIOR CREDIT OFFICER (SOVEREIGN RISK), MOODY’S Revenues may take a hit in Q1 FY22...(but) we should see a bounce in tax mop-up thereafter. A key risk is any delay to disinvestment plans due to second wave. —SONAL VARMA, CHIEF ECONOMIST, INDIA AND ASIA (EX-JAPAN), NOMURA down debt affordability. According to the IMF data, from a peak of 84.2% of GDP in 2003 (since liberalisation), the general government debt ratio eased to 66% by 2010, before inching up again to reach 73.9% in 2019. Continued on Page 2 Second Covid wave dents ad spend on out-of-home media OOH media industry in India WhatsApp, other apps will have to provide legal interception of calls to security agencies Continued on Page 2 HARD TIMES VENKATA SUSMITA BISWAS Mumbai, May 30 Messaging to be free,but calls may come under licensing INTEREST PAYMENTS BANIKINKAR PATTANAYAK New Delhi, May 30 OPM 6.8 6.5 0 FY15 THE COMPENSATION amount promised by the Centre is estimated to be higher than the `1.58 lakh crore projected by the Centre, and a special session of the GST Council will be convened to discuss it, three Opposition-ruled states said on Sunday, reports PTI. (At basic prices), % chg, y-o-y 8 0 FY13 TWO MONTHS INTO the fiscal FY22 and three months since the release of the second advance estimate of GDP for FY21, it is now apparent with the second Covid wave that the economy’s nascent, pigeonholed recoveryfrom the trough seen in the first quarter of last fiscal has been disrupted again. The timing and extent of the pullbackarestillbeingunfolded — today’s data for Q4FY21 will provide more hints on it. With labour wage growth lagging return on capital, consumption recovery is impeded. The policymakers seem to have erred in anticipating a broadbased investment-led recovery. Weighed down by a heavy debt burden caused by several quarters of augmented spending unmatched by non-debt receipts, the general governmenthaslimitedmedium-term options. Other engines of the GST compensation amount should be higher: States 5 5.5 ❚ GVA ❚ Investments FE BUREAU New Delhi, May 30 THE MINISTRY of labour and employment on Sunday announced additional benefits for workers through social securities schemes run by the EPFO and the ESIC amid the Covid-19 pandemic, reports PTI. % chg, y-o-y 10 FY14 Covid: Additional benefits under EPFO, ESIC ❚ GDP FY13 Govt seen frontloading Budget spending and CPSE capex, but these steps may have only limited efficacy FY13 THE ARRIVAL of southwest monsoon over Kerala is likely to be delayed by two days and it is now expected to make an onset over the state by June 3, the India Meteorological Department (IMD) said on Sunday, reports PTI. However, Skymet Weather, a private forecasting agency, said monsoon has already made an onset over Kerala. REGULATING APPS of-home) media in 2020, resulting in a 60% de-growth, accordingtotheFicci-EYMedia & Entertainment Report 2021. Theindustryearnedrevenueof `1,560 crore in 2020 and the report estimated that the industry will not return to its pre-Covidlevelsbefore2024.In 2021, marketers are expected tospendabout`2,160croreon OOH advertising. In 2019, the industrywas worth as much as `3,910 crore. Several brands in the automotive, real-estate and FMCG categories had begun to invest in OOH advertising earlier this year. “There were encouraging signs of recovery in the last month of the previousyearand the first two months of 2021, but with the situation worsening and almost the entire country going into lockdown mode, thesentimentsareatanall-time low again,” says Fabian Trevor Cowan, country head, Posterscope India.As the intensity of the second wave is much larger than the first,“brands have put most activities on hold or have postponed it till further clarity on the situation”,says Cowan. Continued on Page 2 EXIT MODE Migrant workers wait to board a train outside a railway station during a Covid-induced lockdown, in Hyderabad on Sunday COVID-19 Will be able to make & supply 10 cr Covishield doses in June: SII to govt PRESS TRUST OF INDIA New Delhi, May 30 At 1.65 lakh cases, lowest daily spike in 46 days ■ In early May, SII SERUM INSTITUTE OF India (SII) has informed the government that it will be able to manufacture and supply 9-10 crore doses of Covishield in June, official sources said on Sunday amid complaints by states about the shortage of anti-coronavirus jabs. In a recent letter to Union home minister Amit Shah, SII said its employees have been working round the clock in spite of various challenges because of the pandemic. “We are pleased to inform that in the month of June we will be able to manufacture and supply nine to 10 crore dosesofourCovishieldvaccine to the country as compared to our production capacity of 6.5 crore doses in May,” Prakash Kumar Singh, the director of government and regulatory affairs at SII,said in the letter. SinghalsothankedShahfor had said Covishield production will be ramped up to 6.5 7 crore in crore in June, PRESS TRUST OF INDIA New Delhi, May 30 July, and 10 crore each in Aug and Sept ■ India is currently using made-inIndiavaccines — Covishield manufactured by SII and Covaxin ofBharat Biotech — in its immunisation programme ■ The Russian SputnikV is the third vaccine to get approval and is currently being used in a few private hospitals his“valuableguidanceandcontinuous support” at various stages of their endeavour to makeIndia‘aatmanirbhar’(selfsufficient)inCovid-19vaccines and making it available for the people of the country. Continued on Page 2 INDIARECORDEDAsingle-day rise of 1,65,553 new Covid-19 cases, lowest in 46 days,taking the country’s infection tally to 2,78,94,800, according to Union health ministry data updated on Sunday. The daily positivity fell to 8.02%, remaining below the 10%-markforthesixthconsecutive day,while the weeklypositivityratefell to 9.36%,it said. The death toll climbed to 3,25,972 with 3,460 fatalities being recorded in a span of 24 hours, the data updated at 8 am showed.Also, 20,63,839 Covid-19testswereconducted inthecountryonSaturday,taking the total number of such exams so far to 34,31,83,748, the ministrysaid. `3L-cr scheme: Now, guaranteed loans to set up O2 plants FE BUREAU New Delhi, May 30 THEGOVERNMENTONSundaylaunchedanewversionof its `3-lakh-crore guaranteed loanprogramme,underwhich cheaper credit will be made available to hospitals for setting up on-site oxygen gener- ation plants to fight the pandemic.Italsoallowedcivilaviationcompanies,strugglingto copewith the damage caused bythepandemic,totapanearlier avatar of the Emergency Credit Line Guarantee Scheme (ECLGS) by expanding its scope. The validity of the ECLGS New Delhi has also been extended by three months through September30oruntilguarantees for the entire amount of `3 lakh crore are issued, the finance ministry said in a statement. Similarly, the last dateofdisbursementhasbeen extended up to December31. ■ Detailed report on Page 2
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