Tag: India economy news

No new Rs 1,000 notes are being printed: Shaktikanta Das

After reports surfaced of new Rs 1,000 and higher denomination notes coming into circulation, Economic Affairs Secretary Shaktikanta Das has refuted it.

Earlier on Wednesday, Das took to Twitter to issue a clarification on the aforementioned matter. “We have no plans of introducing new Rs 1,000 notes,” stated Das.

“The focus will be on increasing production and supply of Rs 500 and other notes of lower denomination,” Das further clarified. In a tweet that followed, Das assured India Economy News that the request to monitor the withdrawal of cash is being assessed.

“I request everyone to withdraw only the amount that is required, since excessive withdrawal of cash deprives cash for others,” Das urged. In December 2016, new Rs 500 notes were released for circulation, aiming to ease the situation post demonetisation, the initiative taken by Prime Minister Narendra Modi-led government in order to curb circulation of black money in the economy.

After circulation of Rs 500 and 1,000 notes came to a standstill, rumours surfaced regarding a possibility of the introduction of completely new notes.

Google Doodle honours inventor of worldwide standard time Sanford Fleming

Indian budget airline SpiceJet is poised to order at least 92 Boeing 737 jetliners, as the carrier plots rapid expansion in the world’s fastest growing aerospace market.

The transaction, which would more than double SpiceJet’s 49-plane fleet, may be closed within weeks after lengthy talks that pitted Boeing against rival Airbus Group SE, people with direct knowledge of the decision said.

The deal includes firm orders for at least 50 of Boeing’s 737 Max, and renegotiated terms for 42 of the single-aisle jets that SpiceJet originally ordered in 2014, said the people, who asked not be identified India company news. The 92 Max jets would be valued at about $10.1 billion at current list prices, before the discounts that are customary for large purchases.

The order would be a record for SpiceJet, which was forced to shut down operations for a day two years ago after it ran out of money, prompting co-founder Ajay Singh to bail out the low-cost carrier. The airline may boost the total if final talks yield bigger discounts and favourable maintenance contracts, one of the people said.

Boeing would gain a stronger toehold in India, where Airbus dominates narrow-body fleets, after a string of order victories. IndiGo, Go Airlines India and the local unit of AirAsia Bhd all fly variants of the Airbus A320. “We expect to complete these negotiations and place the order this financial year,” the airline said in an e-mailed statement. A Boeing spokesman declined to comment.

The order would help SpiceJet compete with market leader IndiGo, which has ordered hundreds of Airbus jets to tap surging air-travel demand from a fast-growing middle class. While IndiGo controls about 42 per cent of a market that has seen local carriers almost double to 11 in the past four years, SpiceJet’s share is about 13 per cent.

SpiceJet shares closed up 0.63 percent at Rs 63.55 on Friday, after jumping to their the highest intra-day level since November 30. Boeing shares were little changed at $158.71 in New York on Thursday. India is crucial for Boeing and Airbus, and both offered aggressive discounts to SpiceJet, Bloomberg News reported in July.

Boeing, whose jets dominate the current SpiceJet fleet, has the advantage of close financial ties. As the carrier’s financial condition worsened, Boeing provided assistance with payments to help it cope with the situation. That earlier deal, which is still on the manufacturer’s books, will now become a part of the new order, the people said. SpiceJet operates a fleet of 32 Boeing 737 jets and 17 Bombardier Q400 turboprops, according to the company.

Trump targets Toyota over Mexican-built cars, Nissan faces bigger risk

US President-elect Donald Trump has threatened Toyota Motor Corp over its Mexican-built cars, but the biggest risk from a punitive tariff would be for its compatriot Nissan Motor Co, the largest automaker operating in the country.

Trump has criticised US companies like General Motors and Ford Motor Co which manufacture abroad, accusing them of costing US jobs. On Thursday he took on Toyota, warning the world’s largest automaker that it would face a “big border tax” if it exported Mexico-built cars to the US market.

But it is Nissan, Japan’s second-largest automaker, which would be the bigger victim of any tax punishment. Nissan built its first overseas plant in Mexico in 50 years ago and now produces more than 8,00,000 cars there, mainly its entry-level Versa and Sentra sedans.

Nissan’s production dwarfs that of Toyota, Honda Motor Co and Mazda Motor Corp in Mexico. It exports roughly half of its output to the United States, where it also has production plants.

Vehicles made in Mexico comprise roughly one-quarter of Nissan’s total US vehicle sales, industry experts say, compared with around 30 per cent for smaller rival Mazda, but less than 10 per cent for Toyota and Honda.

Japanese automakers together produced around 1.4 million vehicles in Mexico in the year ended March, nearly 40 per cent of the country’s total output. According to the Japan External Trade Organization, they plan to ramp up production to 1.9 million by 2019.

Current production in Mexico is dwarfed by the number of cars they produce in the United States, their single largest market, where Japan’s top three automakers alone produced around 4 million vehicles in 2015.

Trump has said he plans to renegotiate the North American Free Trade Agreement between the United States, Canada and Mexico, and has vowed to impose a 35 per cent tariff on cars exported to the United States from Mexico.

According to JP Morgan estimates, an increase in tariffs on cars exported from Mexico to the United States to even 10 per cent would hit Nissan’s consolidated operating earnings by 10.3 per cent, more than 5.5 per cent at Mazda. Toyota would see a hit of 0.7 per cent, while Honda 2.2 per cent.

All four Japanese automakers building cars in Mexico said they have no immediate plans to change operations. But Nissan and Renault SA (RENA.PA) CEO Carlos Ghosn told Reuters he was watching the incoming Trump administration closely and would respond to whatever policies it adopts.

“I don’t want to preempt or try to guess what’s going to happen Donald Trump,” Ghosn said in an interview on Thursday, on the sidelines of the CES (Consumer Electronic Show) technology show in Las Vegas, Nevada.

“It’s not a question that we are afraid or not afraid, we’re dealing with 160 markets in the world, different powers, different policies, different approaches, so we are used to adapting our strategy to different policies,” he said.

One Asian auto executive told Reuters his company long ago made a strategic decision to make Mexico a production hub in North America, and that it is tough to alter its strategy overnight.

“We can’t turn back the clock on these decisions,” said the executive, who did not have clearance to speak to media and so declined to be identified.

“What we need to explain more clearly (to Trump) is that most automakers are not cutting production capacity or jobs in the United States to make Mexico an additional production hub.”

Still, analysts said automakers would likely think twice about expanding production in the country in the coming years.

“As long as this administration is in place I suspect (Nissan is) not going consider any additional capacity there,” CLSA analyst Chris Richter said.

Trump’s criticisms come just as Japanese automakers are shuffling their production portfolios to boost supply of popular, higher-margin sport utility vehicles (SUV) and trucks for the U.S. market.

Honda last year announced it would expand its U.S. production capacity to build more of its CR-V SUV, while shifting production from Mexico.

Toyota has said that its Guanajuato plant under construction in Mexico will produce the entry-level Corolla sedan, a vehicle segment currently produced at its plants in Mississippi and Ontario, Canada. Demand for the cars has slumped in recent years as cheap gasoline prices has prompted drivers to buy more SUVs.

“We’re always considering ways to increase production in the United States, regardless of the political situation,” Toyota President Akio Toyoda told reporters on Thursday.

Five dead in shooting at Florida airport

At least five persons were killed after a gunman opened fire at the Fort Lauderdale-Hollywood International Airport in Florida on Friday, officials said.

The shooter has been taken into custody. The motive for the attack is yet to be known, according to law enforcement officials, CNBC reported.

All flights were grounded and additional areas of the airport were being evacuated.

The Broward County sheriff’s office tweeted that there were unconfirmed reports of additional shots fired on airport property and it was conducting an active search.

President-elect Donald Trump and Vice President-elect Mike Pence tweeted about the situation.

Trump tweeted: “Monitoring the terrible situation in Florida shooting. Just spoke to Governor Scott. Thoughts and prayers for all. Stay safe!”

“Our thoughts and prayers are with the victims, their families and our first responders in Fort Lauderdale, FL,” Pence wrote on Twitter.

In a news conference, the law enforcement officials said the situation was “fluid and active”. They confirmed the shooter was unharmed and in custody. Law enforcement did not fire any shots, officials said.

The Transportation Security Administration warned people at the Fort Lauderdale Airport to shelter in place and described it as an active shooter situation.

The airport tweeted the shooting, in which five persons lost lives, took place at the Terminal 2 baggage claim area in the lower level. It said the airport would be closed for an extended period of time.

Hundreds of passengers and airport workers could be seen gathering and evacuating via the tarmac.

The airport has four terminals and serves more than 73,000 travellers every day. It ranks 21st in the US in total passenger traffic, with more than 650 commercial flights a day.

CSO pegs growth at 7.1%, skirts note ban impact

The Central Statistics Office (CSO) projected India’s economic growth at an optimistic 7.1 per cent in 2016-17, lower than 7.6 per cent in the previous financial year.

Economists expect a significant downward revision in the number once data for the months after November is made available. However, the finance ministry said the estimates are based on ‘real statistics’ and not ‘anecdotal evidence’.

The forecast does not take into account the full impact of demonetisation, with projections based on some datasets up to October. The government will release the revised second Advance Estimates for 2016-17 and the quarter ended December on February 28.

Gross domestic product growth (GDP) in the second half of the financial year is forecast to slow down to seven per cent from 7.2 per cent in April-September, Advance Estimates released by the CSO showed on Friday. If the overestimation concerns hold true, they are likely to affect Budget assumptions. The Budget has been advanced by a month to February 1.

“The GDP estimate does not factor in the note ban. Detailed information for most indicators is available up to October. The impact of demonetisation is yet to be understood and could last for several years,” said T C A Anant, chief statistician of India.

“Being a statistical organisation, the CSO has to go on real statistics and we cannot expect them to go on the basis of impressions and anecdotal evidence,” Economic Affairs Secretary Shaktikanta Das said.

GDP growth essentially seems to be driven by a sharp rise in government spending and agriculture. The CSO has projected a sharp slowdown in manufacturing growth in the second half of 2016-17 to 6.7 per cent from 8.1 per cent in April-September.

Manufacturing, a focus area for the government, has been estimated to slow down to a growth rate of 7.4 per cent in 2016-17 from 9.3 per cent in the previous financial year. Industrial growth as a whole, including mining, manufacturing and electricity, is estimated to slow down to 5.2 per cent during 2016-17 from 7.4 per cent in the previous year.

The Advance Estimates are based on industrial production and bank deposit data available till October and a clutch of other data points, including inflation, government expenditure and subsidies up to November.

“The surge in bank deposits was an outlier, hence, India economy news November data was not used to compute financial services data. There was a high degree of volatility in November bank deposit data due to cash curbs,” said Anant.

Growth during the October-December quarter is expected to be the weakest in years, with spending affected by currency curbs. There have been reports of static industrial activity and low winter sowing. The purchasing managers’ index for services put out by Nikkei contracted in November and December due to demonetisation.

Public administration, defence and other services, largely government spending, are projected to grow 12.8 per cent in 2016-17, about double of the 6.6 per cent rate of the previous year.

Agriculture is estimated to expand by 4.1 per cent in 2016-17, up from 1.2 per cent a year ago.

Gross fixed capital formation is estimated to contract by 0.2 per cent in 2016-17, against a 3.9 expansion in the previous financial year. Lending rates have begun to decline with banks flush with deposits after the currency ban.

Consumption, the bright spot in the first half of 2016-17, appears to dwindle. Private final consumption expenditure has been estimated to grow by 6.5 per cent during the financial year, lower than 7.1 per cent in the first half.

Has cash ban reversed the gains of PM Modi’s pet MUDRA scheme?

In his first full-fledged budget in February 2015, Finance Minister Arun Jaitley had announced the setting up of MUDRA (Micro Units Development & Refinance Agency Limited). Consequently, Prime Minister Modi announced the Pradhan Mantri Mudra Yojana (PMMY), a scheme meant to provide easy capital up to Rs 10 lakh (Rs 1 million) to small and micro enterprises.

The disbursements under this scheme since its inception has been rather impressive. But for reasons unknown, the money given out under this scheme has not increased overall credit offtake among small and micro industries in the economy since its launch in March 2015.

Under the scheme, Rs 1.32 lakh crore were disbursed during 2015-16 to almost 35 million small and micro enterprises. These amounts were divided into three categories: those with loans of up to Rs 50000, those with loans between Rs 50000 and Rs 5 lakh and those with loans up to Rs 10 lakh. Almost 32 million or almost 90 per cent of the people given loans under this scheme fell in the first category. The lowest category of borrowers received almost Rs 62000 crore as credit – almost half of the total credit under the scheme.

But despite these active interventions by the Modi government, overall credit growth in this sector has been falling since 2015. In March 2015, the outstanding credit for small and micro industries stood at Rs 3.8 lakh crore. By March 2016, the outstanding credit fell to almost Rs 3.7 lakh crore. According to the Reserve Bank of India (RBI) statistics, the outstanding credit in November 2016 further slipped to Rs 3.4 lakh crore.

Even though analysts have been pointing to the debilitating impact of demonetisation on the small and micro sector, the overall bank credit offtake seems to have been sliding much before that India economy news. So has this much-vaunted scheme of doling out more credit to micro enterprises failed?

Not exactly if we look at how micro finance institutions have stepped in where banks have feared to tread. Lending to such small borrowers with doubtful credit-worthiness has always been a no-go area for banks. That’s where the Modi government’s scheme has come to the rescue. Most of the lending under this scheme seems to have been done by micro finance companies.

A look at data released under the scheme shows that micro finance institutions (MFIs) have been the biggest lenders to the small and micro sector in 2015-16. Most of these MFIs are also Non-Banking Finance Institutions (NBFCs). There were 39 MFIs that lent almost Rs 44,000 crore to 23 million people during the year. More than 95 per cent of the borrowers took less than Rs 50,000 in loans. It is not clear what these loans are meant for, but given that a majority of people borrowed such low amounts, they indicate credit taken for meeting working capital requirements rather than new investment. Public sector banks (excluding SBI and its affiliates) were not far behind MFIs but lent to a substantially smaller number of people. The 2015-16 annual report of MUDRA also states that most of these loans were incremental.

There also has been a massive jump is credit extended by these MFIs since the Modi government came to power. The Gross Loan Portfolio (GLP) of various MFIs was constant between 2010-11 to 2013-14. In 2014-15, the loans extended by MFIs jumped almost 64%. In 2015-16, the loans extended by MFIs further increased by 40%.

One of the reasons for this buoyancy in lending by MFIs is that they now enjoy direct funding by MUDRA. The refinance agency which is a subsidiary of the Small Industries Development Bank of India (SIDBI) pumped Rs 616 crore in MFIs in 2015-16. Moreover, banks, ever weary of lending to high-risk low profile borrowers, extended loans to MFIs to be further disbursed to small borrowers. MUDRA in turn also helps refinance many scheduled commercial banks to borrow to this sector. In 2015-16, MUDRA refinanced 16 public sector banks to the tune of almost Rs 2400 crore to enable them to lend to the sector at base lending rates.

A look at the geographic distribution of credit under PM Modi’s MUDRA scheme also paints a peculiar picture. More than a third of the credit under the scheme has gone to just three states – Karnataka, Maharashtra and Tamil Nadu. These states are one of the relatively prosperous ones in India and also have a strong penetration of MFIs in the rural hinterland. Backward states like Bihar, Chhatisgarh and Jharkhand collectively got almost Rs 12000 crore, which is just 9 per cent of the total credit under the scheme.

However, the hit taken by this sector because of demonetisation is still unknown. Reports from across the country suggest that it is the small and micro enterprises that have been worst hit by the government’s demonetisation move. With many workers having to go without wages and most of these small borrowers unable to access cash, all the good work started with the launch of Modi’s pet scheme faces the prospect of being undone. Most severely hit was the unregistered sector which largely relies on cash payments. The 2015-16 annual report of Ministry of Micro, Small and Medium enterprises shows that the unregistered sector comprises 60 per cent of all such units and is primarily concentrated in rural areas. This sector contributes almost half of India’s exports and therefore plays a crucial part in employment generation. Their growth since 2010-11 has been in double digits. Data available till September 2015 shows that in 2014-15, the sector registered a growth of almost 19 per cent. The economic survey that will come out a day before the budget on February 1 this year will also reflect these impressive figures. But, the impact of a decline in output in this sector and the number of small creditors who have been pushed into the default zone because of demonetisation would be only known much later.

Full text: President Mukherjee raises concern over demonetisation impact

In his New Year address to Governors and Lieutenant Governors, President Pranab Mukherjee on Thursday issued a note of caution that the Narendra Modi government’s demonetisation decision could likely lead to a temporary slowdown in the economy and hurt the poor.

Here is the full text of President Mukherjee’s address:

My dear Governors and Lt. Governors: 1. Let me begin by extending warm greetings and best wishes to you for a year full of peace, prosperity and happiness.

2. The year that has just gone by was a year of mixed fortunes. It began on a very promising note with the economy performing well, overcoming the weak global economic trends. GDP growth of 7.2 percent in the first half of 2016-17 – same as that of last year – is a pointer to the fact that our economic recovery has been on solid grounds. In 2014 and 2015, below normal rains had caused rural distress. A good monsoon in 2016 is expected to improve agricultural production and increase rural employment and incomes. Though our exports have been affected by weak global demand, we have a stable external sector. Reviving exports will remain a challenge but we can overcome it by improving the competitiveness of the domestic industry.

3. Demonetization, while immobilizing black money and fighting corruption, may lead to temporary slowdown of the economy. We all will have to be extra careful to alleviate the suffering of the poor which might become unavoidable for the expected progress in the long term. While I appreciate the thrust on transition from entitlement approach to an entrepreneurial one for poverty alleviation, I am not too sure that the poor can wait that long. They need to get succour here and now, so that they can also participate actively in the national march towards a future devoid of hunger, unemployment and exploitation. The recent package announced by the Prime Minister will provide some relief.

Hon’ble Governors and Lt. Governors: 4. This year, there will be elections in as many as seven states. The dates for elections in five states have already been announced. The conduct of free and fair elections has made our democracy one of the most vibrant in the world. Elections reflect the attitudes, values and beliefs of the people towards their political environment India economy news. They symbolize the sovereignty of the people and provide legitimacy to the authority of the government. They also serve the purpose of regulation of public policies and mobilization of public opinion.

5. As we have all experienced, elections are usually marked by competitive populism, electoral rhetoric and vote bank politics. Noisy debates can deepen the fault-lines in the society. You, as Governors and Lt. Governors, command respect and attention of the people of your state. Through your interaction and wise counsel, you can play an important role in easing the tensions in the society. Goodwill must prevail between different communities. At times, harmony may be put to test by vested interests. Communal tensions may rear their ugly head. Rule of law must form the sole basis of dealing with any such challenging situation.

Governors and Lt. Governors: 6. In a pluralistic democracy like ours, tolerance, respect for contrary views and patience are a must. These values have to be preserved. India is a multi-faceted nation of 1.3 billion people, 122 languages, 1600 dialects and 7 religions. In the words of Pt. Jawaharlal Nehru which I quote: “It is a country held together by strong but invisible threads” (unquote). India’s strength lies in her diversity. The multiplicity in culture, faith and language is what makes India special. There will always be divergent strands in public discourse. We may argue. We may disagree. But we cannot deny the prevalence of multiplicity of opinion. You can, through your calm influence, inculcate amongst the citizens of your state this fundamental ethos of our civilization.

Hon’ble Governors and Lt. Governors: 7. You are the first citizens of your states. When you assumed this exalted office, you had taken an oath to protect, preserve and defend the Constitution. This pious document protects the liberty of the people and promotes the well-being of the citizens. It decrees inclusiveness, tolerance, self-restraint, and protection of women, senior citizens and weaker sections as essential ingredients of our polity. Our institutions of democracy must operate on these vital features. Strong credible institutions lead to good governance ensuring a healthy functioning of the democracy.

Dear Governors and Lt. Governors: 8. You all have a very important role to play in the improvement of higher education in your states. As chancellors and visitors of various universities, you can work with the academic leaders to effect holistic changes for quality up-gradation in the institutions of higher learning. I have been exhorting the academia to concentrate on attaining excellence through original research and technology development. A look at numerous social problems affecting millions of women and men in our farms and factories clearly shows that humane values have not yet become a dominant driver of our intellectual pursuits. This should receive your focused attention. Our interactions at the conferences at Rashtrapati Bhavan have yielded several positives in areas like: faculty sourcing and development; ICT for pedagogic refinement; research and innovation; industry-academia interface; and alumni involvement. I am aware of the good work being done by many of you in this field. Interaction amongst academic institutions can help spread best practices. These institutions can leverage knowledge and experience to the benefit of all. Your keen interest can rejuvenate a sector that is best positioned to support an innovation-led knowledge economy.

9. Another area where I envisage a role for you is in promoting art and culture in your respective states. As I have said elsewhere, art and culture are our link with the past. They provide the foundation for our current thought and by extension, the platform for our future action. They also provide a stable base to life and make it possible for us to have a joyous existence. With art and culture, we can experience life in its fullest and most meaningful form. They add to the overall happiness and well-being of the society.

Hon’ble Governors and Lt. Governors: 10. Before I conclude, I express my deep appreciation to you all for coming together on this platform for our interaction. Within the limited time available, let us share some of our key concerns. I do look forward to our extended interface in the Governor’s Conference, when we will have the time to hear each one of us in detail.