OPINION, P6 COMPANIES, P17 EDITORIAL Allowing PE ownership of mutual funds can be game-changing TARGET: `3,000 CR IN NEXT 12 MONTHS EU’S PARTIAL EMBARGO The economy is above pre-pandemic level, but that’s only a small consolation SANDEEP PAREKH INTERNATIONAL, P8 Mensa Brands claims `1,500-cr net revenue in first year of operations Putin needs help from China and India on oil Europe doesn’t want NEW DELHI, WEDNESDAY, JUNE 1, 2022 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL XLVIII NO. 78, 48 PAGES, `10.00 (PATNA & 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 SENSEX: 55,566.41 ▼ 359.33 NIFTY: 16,584.55 ▼ 76.85 NIKKEI 225: 27,279.80 ▼ 89.63 HANG SENG: 21,415.20 ▲ 291.27 `/$: 77.64 ▼ 0.09 `/€: 83.25 ▲ 0.24 BRENT: $123.69 ▲ $2.02 GOLD: `50,861 ▼ `129 IN THE NEWS Brent hits $125 as EU agrees to ban most Russian oil OIL PRICES EXTENDED a bull run on Tuesday after the EU agreed to a partial and phased ban on Russian oil and China decided to lift some Covid restrictions and the US summer driving season kicked off, reports Reuters. Brent crude for July, which expires on Tuesday, rose $2.13, or 1.8%, to $123.80 a barrel by 11:05 am ET (1505 GMT), after earlier rising to $124.64 — its highest since March 9. The more active August contract hit a high of $120.80. U.S. West Texas Intermediate (WTI) crude was trading at $117.99 a barrel, up $2.92 in a fourth consecutive session of gains, up 3.6% from Friday's close, and touched its highest since March 9. Both benchmarks were set to end May higher for a sixth straight month. Both benchmarks were set to end May higher for a sixth straight month. Private consumption just 1.4% above pre-pandemic level LIKELY TO BE WELL-DISTRIBUTED SPATIALLY ECONOMY EXPANDED 8.7% IN 2021-22 Hiring picks up pace across sectors in May NEWJOB POSTINGS in May 2022 have risen over 33% against the pre-pandemic baseline of February 2020, suggesting a rise in demand for hiring across industries, according to job site portal Indeed, reports fe Bureau in Mumbai. Last month, marketing roles saw the strongest demand with a 188% month-onmonth jump in requirement over April 2022, as the brands and companies have restarted spending on digital experiences to tap customer demand. WTO talks: India wants e-comm tax relief to end INDIAWILL OPPOSE any further extension to a moratorium on customs duty on electronic transmission at the next ministerial of the WTO next month, seeking a change in status quo prevailing over the past 24 years, official sources said on Tuesday, reports Banikinkar Pattanayak in New Delhi. A 2019 study by UNCTAD pointed out that developing countries are losing $10 billion in potential revenue annually, including $497 million by India, due to the moratorium. Special Features Growth slows to 4.1% in Q4 Monsoon cheer: Expect 3.7 10 4.9 20.1 4.1 FY21 FY22 Q1FY21 -20 -6.6 -30 -23.8 Q1FY20 FY22 vs FY20 (pre-pandemic year) Q4FY22 (% change) 1.5 2.9 1.4 6.3 3.8 GDP GVA Pvt consumption Govt consumption Fixed investment Source: MoSPI 2019-20, the year immediately before the pandemic, as few sectors other than “trade hotels and transport” lagged behind. The economic recovery was helped by a nascent pick-up in the long-elusive investment demand,a fleeting consumption binge and an eagerness of the manufacturing and construction sectors to be back on foot. Continued on Page 17 Core sector output rises to 6-month high of 8.4% in April WITH ITS NET tax and non-tax revenue being 4.3% higher than the revised estimate (RE) presented in February,the Centre managed to narrow its fiscal deficit moderately to 6.71% oftheGDPinFY22,againstREof6.9%,reports fe Bureau in New Delhi. A higher nominal GDPsize also helped. ■ Page 2 INFRASTRUCTUREINDUSTRIESGREWtoa six-monthhigh8.4%onyearinApril,reports feBureau in NewDelhi.The core sectorhad witnessed an exceptionally high growth of 62.6% in April 2021 mainly due to the low base effect as Covid had disrupted economic activities in theyearago month. ■ Page 2 Relentless outflows FPIs offload $27 bn in 8 months YOOSEF KP The selling spree by foreign portfolio investors extended for the eighth straight month in May, having cumulatively offloaded a colossal $27 billion during the period. At about $5-billion withdrawal, May also marks the third-highest monthly sale from the Indian equity history, with two of them falling in 2022. The highest monthly sale of $8.4 billion was recorded post Covid-19 outbreak in March 2020, Bloomberg data show. Also, India's overweight position within the emerging market funds is currently at near multi-year lows. However, despite heavy sell off by the FPIs, Indian markets remained remarkably resilient as local investors strongly absorbed overseas selling with equal amount of purchase. 9.56 FPI flows Nov 2020 (Monthly, $ billion) 1.37 0 -3 -9 -12 Mar 2020 -4.87 -8.39 Jan 2020 Interest rates becoming normal need not be antigrowth move. V ANANTHA NAGESWARAN CHIEF ECONOMIC ADVISER GDP to hit record double-digit growth in Q1 on base effect Manufacturing falters but agri shines despite heatwave Source: Bloomberg May 2022 ● ALSO SEE, PAGE 2 99 AFLOURISHING ILLEGALtrade in a newunapproved herbicide-tolerant variety has come to occupy nearly a fifth of the genetically modified (GM) cotton seeds market in India. Over three dozen seed companies, which are authorised to sell the transgenic Bt cotton by licenceholder Bayer Crop Science-Mahyco, warn that the illegal seeds,first seen in the market in 2019, could contaminate the regular Bt seed and lead to“heavy losses”for cotton growers. However,farmers’organisations say since the unapproved seeds help them in weed management and cut costs,theywould continue to use it. Sources say the illegal seeds are beingsoldata60%premiumoverthe government-fixed price of `810 per packet forregularBt cotton. Central to the issue is the refusal of the regulator — the Genetic Engineering Appraisal Committee (GEAC) — to consider the BayerMahyco’s application for the new herbicide-tolerant Bt (HTBt) cotton. The illegal seed manufacturers, who are mostlybasedout of Gujarat, claim the presence of herbicide trait in the seeds they sell are capable of controlling pink bollworm.Farmers also seem to endorse this claimfrom THE INDIA METEOROLOGICAL Department (IMD) on Tuesday said that monsoon rainsthisyearwillbemorethan predicted byit inApril at 103% of the benchmark long period average (LPA) with an 81% chance of the rainfall being either “normal” or above. The rains will also be well distributed spatially across the four broadregionsandmostpartsof the country,the agencysaid. The revised forecast augurs well for the summer (kharif) crops. If the prediction comes true, higher supplies of agricultural commodities could help ease the elevated food inflation over the next few months and boost exports of rice and several other items. In its firstApril forecast,the IMD had predicted that the quantum rainfall during the four-month monsoon season (June-September) at 99% of LPA. Both forecasts have a model error of +/- 4%. If the forecast holds good, India will receive normal monsoon rainfall forthe fourthyear 80 2018 ‘19 2013-14 2016-17 2020-21(P) 2021-22(P) 0.02 5.47 11.03 8.94 12.2 11.4 191 467 510 511 451 469 (million tonne, crop year July-June) 2017- 2018- 2019- 2020- 202118 19 20 21 22 *Third advance estimate Source: Agriculture ministry in a row. Key kharif crops are paddy,moong,arhar,soyabean and coarse cereals. About half thethecountry'scropareaisstill rain-fed. Importantly, rainfalls over the monsoon core zone comprisingrain-fedregionsare seen to be ‘above normal’ or Continued on Page 2 LIC’s gains from equity investments improve 16.6% them, is to make the seed capable of facingfreshpestchallengesandthereby,improveyield.Critics,however,say thisisalsoattimesastrategybythese firms for ever-greening of their patents/exclusive marketing rights. Since its introduction two decades ago, Bt cotton has led to a dramatic rise in India’s cotton yield and thereby, production (see chart), but overthe last two-threeyears,the yield has come down marginally. LIFE INSURANCE CORPORATION (LIC) has made gains of `42,000 crorefrominvestmentsin the equity market in the Raj Kumar, LIC financial year ended managing director March 31, 2022. This is 16.6% more compared withthe`36,000-croregainsmadeinFY21,managingdirectorRajKumartoldreportersadayafter the insurer announced its first quarterly results afterlisting.Ofitstotalassetsundermanagement (AUM),25% remains in equities,while the rest is allocated to bonds and other instruments.“Our investment strategy is based on the regulations prescribedandwearemandatedtoinvest50%in governmentsecurities,” Kumarsaid onTuesday. ThemanagementfurthersaidthatLICwould focus on non-participating products in the future to boost growth.In FY22,29% of the new business,in terms of premium,came from nonparticipatory products, while the sale of insurance policies contributed 7% to the new business.Going forward,LIC plans to focus on ULIPs (unit-linked insurance products), health insuranceandgroupprotectionproducts.LIC’sclaims paidinFY22stoodat`1.2trillion,aspikeof19% y-o-y,mainlyduetotheresidualimpactofCovid andalsoduetopaymentsmadeagainstmaturity of several products. Continued on Page 2 Continued on Page 17 8.62 25.88 35.9 32.57 35.24 34.04 ■ But farmers say warn illegal seeds these seeds help could lead to 'heavy them cut costs, they losses' for growers will continue to use it their cropping experience. TheapprovalforHTBtcottonwas first sought by Bayer (then Monsanto) in 2015, but it withdrew the application in the subsequent year, citing delays in the process.Though the applicationwas re-submitted by Bayer-Mahyco in December last year,theregulatorisyet totakeacall. GM crop varieties are regularly modified by the proprietary companies to reverse yield losses that start surfacing after a fewyears of the first use of avariety.The idea,according to more than106% of LPA. Normal rainfall during monsoon months also helps boost soil moisture, which is beneficial for the rabi (winter) crops such as wheat, chana, mustard and coarse cereals. “Current scientific parametersforassessingmonsoonrains are more favourable than those in April,”Mrutyunjay Mohapatra, director general, IMD, said, citing the reason for upgradation of monsoon forecast. On the IMD’s declaration of onsetofmonsoonovertheKeralacoastonSunday,hesaidthat more than 70% of the weather stations in the state reported adequate rainfall besides the depth of westerly winds was adequate.Privateweatherforecaster Skymet on Monday alleged that IMD declared monsoon onset prematurely. “Conditions are favourable for further advance of Southwest monsoon into some more partsofthecentralArabianSea, some more parts of Karnataka, some parts of Konkan & Goa, somemorepartsofTamilNadu, remaining parts of southwest Bay of Bengal, northeastern statesandsub-HimalayanWest Bengal and Sikkim during the nexttwo-threedays,”according to an IMD statement. FE BUREAU Mumbai, May 31 Source: DES, CCI, trade, million hectare (mh), *170 kg/bale, P: provisional ■ Seed companies ‘21 ‘22^ Foodgrain production Area under Productivity Total cotton Bt cotton (kg per production (mh) hectare) (million bales*) 2007-08 ‘20 *Long period average rainfall of 87cm, 96-104% of LPA is ‘normal.’ ^ Forecast Yield of cotton farms grew 2.7X between FY03 & FY14, but has declined since 2002-03 103 90 91 Illegal variety occupies about a fifth of GM cotton seed market SANDIP DAS New Delhi, May 31 6 -6 Stagflationary risk to India is quite low compared to other countries. 109 100 SANDIP DAS New Delhi, May 31 -10 110 110 285.01 FY20 Higher revenues, nominal GDP moderate fiscal deficit to 6.71% 3 120 0 INDIA’S GROWTH RATE slipped to a four-quarter low of 4.1% in the January-March period as a resilient post-pandemic rebound was disrupted by the Russia-Ukraine war that inflated prices of oil and other keycommodities,and impeded the globalsupplychains. Yet, in 2021-22, the country re-captured the fastestgrowing major economy tag from China after a five-year gap, by reporting a gross domestic product (GDP) expansion of 8.7% in real terms, according to the data released by National Statistics Office (NSO) on Tuesday. The GDP in 2021-22 came in at 1.5% bigger than in 9 Monsoon (% of LPA)* Raises forecast from its April prediction 314.51* Q1FY22 20 310.74 8.7 297.5 30 285.21 (% change in real GDP, y-o-y) KG NARENDRANATH New Delhi, May 31 12 more rains, says IMD India recaptures fastest-growing tag ■ Illegal seeds sold at 60% premium over govt price of `810 a packet for regular Bt cotton ● SN SUBRAHMANYAN, CEO & MD, LARSEN & TOUBRO Section 80C tax deductions can be reversed ‘Tech spends can be the only possible deflationary force’ Tax deductions can be reversed on breach of holding period rules for certain investments ■ Personal Finance, P7 Engineering and construction major Larsen & Toubro is expanding its technology businessportfolioandplanstoinvest in data centres and startups. SN Subrahmanyan, CEO and MD, in an interview with FE’s Rajesh Kurup, said that going forward,thecompany’stechservices portfolio will grow to 26% from the current 21% by FY26,while projects and manufacturing businesses would possibly shrinkfromthepresent68% to 64%.Excerpts: Microsoft Digital Crimes UnitAsia's Mary Jo Schrade on what must be done to bolster cybersecurity ■ eFE, P7 QA How do you plan to go about making L&T a tech company andwhythis changeinfocus? In this inflationary world, techspendscanbetheonlypossibledeflationaryforce.Weview Howwill this change the present revenue mix? Projectsandmanufacturing businesses that contributed about68%torevenuesinFY22 will possibly shrink to about 64% of the targeted group revenues in FY26.Some additions totheprojectsandmanufacturing portfolio over time will be greenhydrogenEPCopportunities, electrolysers for hydrogen and batteries for grid scale applications. Through ourlisted subsidiariesLTI,Mindtreeand LTTS,we have incubated two new platforms — EdutechandSufin—and wewillinvestindatacentres.Thus,ITand tech services will grow from 21% of revenues currently to about 26% by FY26. The remaining portfolio of about 8% in FY26 willcomprisebusinessessuchas financial services, realty and green energy.We will exit from roads and powerconcessions in the near term and would have substantially de-risked the Metro byFY26. Could you elaborate your plans of entering the startups domain? We will be entering into manufacturingofelectrolysers used for green hydrogen production.We propose to set up 500 MW capacity by 2026 which could be ramped up to 1 GWby2028.GreenenergyEPC should also give us plenty of opportunities. On a selective basis,we will also target green ❝ We have a significant presence in the IT space through our listed subsidiaries. Finally, we have incubated edtech and B2B e-commerce platforms too. ❝ ❝ ❝ Multi-factor authentication is critical to security technology-driven solutions to beadifferentiator.Forinstance, oursmartworldandcommunicationsbusinessareinvolvedin executingmanysmartcityprojects across the country. Our financial services portfolio will transform over time into providing a lot more retail services through the digitisation push.We also have a significantpresenceintheIT & and technology services space via our listed subsidiaries. Now, we have also incubated edtech and B2B ecommerceplatformswhichwill growovertime.Inthemediumto-longterm,ourbusinessportfolio will largely comprise EPC projects, manufacturing and serviceswith tech being a common thread. energy BOO (build, own, operate) opportunities. We will be looking for 5 GWh of advanced chemistry cell manufacturing capacity and 3 GWh battery module capacity by 2027.This willbeachievedwithatechnologypartneron board. We will also add a new business around data centres. For data centres,we are looking to New Delhi setupapilotplantof2.5MWin the near term and intend to set up capacity of 90 MW by the end of the current plan period. What’s the update on the monetisation plans for Hyderabad Metro? The Telangana government isgivingusasoftloanof`3,000 croretomaketheprojectviable. We are also in talks with some equityinvestorsforastakeinthe Metro.Thenthereisthetransitoriented development (TOD) monetisation which we are exploring in the SPV.The daily passengertrafficisalsoimproving,whichishelpinguscoverthe operatingcosts.Sinceitisalong concession of around 60 years, hopefullywewillbeabletomake a complete exit overtime.