RBI Governor Urjit Patel Says, No Impact On Npas Due To Farm Loan Waivers By States
There are no implications on non-performing assets (NPAs) of banks because of farm loan waivers provided by various states, RBI Governor Urjit Patel. Many states have waived agriculture loans, latest being Rajasthan which has launched Rs 8,500 crore waiver scheme last week. “Farm loan waiver has been given through Budget of individual state governments so far. Therefore, implications on the banks’ NPA directly are not there,” he said after unveiling second bi-monthly monetary policy review for the current fiscal.
Karnataka Chief Minister H D Kumaraswamy has also announced farm loan waiver. In his meeting with leaders of farmers’ organisations on May 30, the new CM said the government intends to waive loans borrowed after April 1, 2009. Uttar Pradesh was the first state last year to announce Rs 36,359 crore farm debt waiver for small and marginal farmers. It was followed by Maharashtra and Punjab.
According to a report, the farm debt waivers announced by the five large states together will widen the fiscal deficit of the states by Rs 1,07,700 crore or 0.65 percent of GDP in the current financial year. The combined fiscal deficit of the states for Financial Year 2018 has been budgeted at 2.7 percent of GDP or Rs 4.48 lakh crore. “With several states announcing farm loan waivers, there is a fear that the combined fiscal deficits of the states could be much worse than the budgeted figure,” India Ratings said in a report.
How Paytm Plans To Fight ‘Massive’ Pollution Problem Through This Green Fund
With an aim to build an ecosystem for reducing pollution by partnering with academia, R&D labs, mentors, professionals and venture funds across the country, Paytm CEO Vijay Shekhar Sharma along with venture capitalist Shailesh Vickram Singh are planning to launch a green fund. “Through this initiative, we will provide adequate funding for innovations that can reduce air, water and plastic pollution efficiently on the scale,” Vijay Shekhar Sharma said at the launch of the “Massive Fund.”
The fund aims to undertake investments in startups, companies and individuals working on the agenda of Pollution Reduction aligned with the United Nations Sustainable Development Goals, the company’s press release said.
Over the next few years, this green fund targets to drive an investment worth Rs 150 million in various sectors. Capital for ‘Massive Fund’ will be raised from institutional and high net-worth investors who are aligned with the objective of saving the environment.
“We aim to encourage young entrepreneurs to innovate and build solutions such as pesticide-free food, plastic removal, biodegradable packaging, CO2 absorption, pollution-free cities and sustainable housing which are crucial for our well-being,” Shailesh Vickram Singh, Managing Partner said.
This Fund has also formed an incubator called “GoMassive” which is working closely with leading educational and research institutions such as NRDC, IIT Delhi & IIM Lucknow and Sustainable India Finance Facility (SIFF), the release said. GoMassive is running boot camps and conducting hackathons across Delhi, Hyderabad, Mumbai & Bangalore to groom young startup teams to foster a spirit of green energy-led entrepreneurship.
Meanwhile, Paytm has now come out with a new feature that allows offline stores to accept payments done through its platform. Paytm, considered to be India’s largest payments company has launched a first-of-its-kind ‘Merchant Referral’.
The new feature was launched with an aim of allowing Small and Medium Enterprises (SMEs) community to join the PM Narendra Modi’s cashless revolution. Now, Paytm’s new feature can accept payments from any bank account into their bank accounts at zero transaction charges.
RBI Monetary Policy: Will Rates Be Hiked For First Time Since January 2014?
The decision on the key lending rates will be announced by the Monetary Policy Committee (MPC) on Wednesday after a three-day meet. The key interest rate may be hiked for the first time after four-and-half years on account of rising crude oil prices and high inflation, ratings agencies said. RBI had last raised the short-term lending rate (repo) to 8 percent in January 2014. Since then, rates have either reduced it or maintained status quo. The current repo rate stands at 6 percent. It would be interesting to see if RBI raises rates for the first time since January 2014.
Kotak Research said: “Our call is influenced by persistent shocks of higher fuel prices and weaker rupee along with incipient risk of higher-than-usual MSP increases. We pencil in 50 bps of rate hike (August and October) and expect June policy to strongly signal the same. However, if MSP increases are in line with recent trends, the RBI could have some space to maintain status quo.”
A large number of economists expect RBI to increase key interest rates, Reuters poll said. There are some analysts that think the central bank will stay on hold and use this week’s meeting to prepare for an August hike.
“In our baseline forecasts (Brent future curve), in which the oil price gradually retreats from $ 79 per barrel currently to $72 per barrel towards end-2019, we expect the MPC to hike rates by 50 bps in the rest of FY19 starting from its August meeting. However, a crude oil shock (towards $ 100/bbl) and/or Indian rupee weakness higher than 70 to the US dollar may cause the rate hike cycle to start sooner (June) and be more aggressive (at least another 75 bps from now),” UBS said.
“The June policy decision is a close call; we assign a 40 per cent probability to the MPC voting for a 25 bps hike in June itself, followed by another 25 bps hike in August,” said a Nomura Global Economics report.
One Year Of Gst: From Launch To Rs 1 Lakh Crore Collection; Questions Pm Modi Must Answer Now
In less than four weeks from now, it will be full one year since India woke up to a new indirect tax regime — the GST. In a grand event inside the Parliament’s Central Hall, India launched the Goods and Services Tax at the stroke of midnight of June 30 and July 1, 2017, after 17 years of deadlock. The GST launch became one of the biggest tax reform in the country that subsumed over a dozen different central and state taxes into one, but with several slabs.
Between then and now, on one hand, the GST has been criticised for being complicated and on the other, hailed for its potential in the formalisation of the Indian economy; it has been slammed for pushing India’s GDP to a three-year-low, while praised for hitting Rs 1 trillion collection; it has been censured for too many tax slabs, but is commended as an ‘act of courage‘. But as India’s landmark reform now is about to complete a year, it begs some serious questions.
Interest Rate Hike To Hurt India’s Growth Prospects: Industry
The industry said 25 basis points rate hike by the RBI will hurt India’s growth prospects and exhorted the central bank to revert to the policy of benign interest rates. However, a section from India Inc said the decision of the Reserve Bank (RBI) was a clear hint to the industry to push for growth by taking investment decisions, while some believe the central bank’s hawkish monetary policy stance is here to stay for a while. The Reserve Bank for the first time in four-and-half-years raised key interest rate by 25 basis points to 6.25 per cent on inflation concerns arising from surge in international oil prices. “Given that inflation is being led by supply side issues, CII believes that raising interest rate would hurt growth while proving unequal to the task of tackling inflation,” CII Director General Chandrajit Banerjee said.
He hoped that going forward, the RBI would reassess and revert to the policy of benign interest rates which would be growth supportive. “Going forward, the hardening of interest rate scenario is here to stay at least in the short term, however much we may not like it,” Assocham Secretary General D S Rawat said. “The input cost pressures as highlighted by the RBI policy review would only increase for the exporters with the hiking of the repo rate by 25 basis points,” engineering exporters’ body EEPC India Chairman Ravi Sehgal said. “The rate hike gives a clear hint to India Inc to push for growth, take investment decisions as it can now foresee growth rate to pick up,” said George Alexander Muthoot, MD, Muthoot Finance Limited.
Realtors’ body Naredco’s national president Niranjan Hiranandani said the hike is justified on account of inflationary trends, global hardening of interest rates as also petroleum prices moving upwards. “It will not make a major difference to real estate. However, in the long run, we would prefer rates coming down,” he said.
HDFC Bank said the Reserve Bank is likely to go for more rate hikes like the one today on risks from factors like the minimum support prices for farm produce and firm global commodity prices. In the second bi-monthly monetary policy for the current fiscal, the central bank revised upwards the retail inflation range to 4.8-4.9 per cent in the first half of 2018-19, and 4.7 per cent in the second half. It includes the impact from HRA for central government employees, with risks tilted to the upside.
With all the six members voting for a increase in policy rates, the Monetary Policy Committee raised “repo rate by 25 basis points and kept the stance neutral”, RBI said in a statement here. Excluding the impact of HRA revisions, CPI-based inflation is projected at 4.6 per cent in first half of 2018-19, and 4.7 per cent in H2, RBI said. RBI retained the GDP growth for the financial year 2018-19 at 7.4 per cent.
Is India’s Economy Really A Car With 3 Tyres Punctured? Here’s What Economists Say
The one tyre of the Indian economy that is not punctured is the government expenditure, even former Finance Minister P Chidambaram said it. And the stellar growth registered in the last quarter of the year full of disruption could be attributed to government’s expenditure. Does it mean that the other three tyres of the Indian economy — private investment, private consumption and exports — are punctured? Not for too long, say economists as they see at least investments and consumption picking up in the new fiscal year.
“We will see a positive spillover from the government’s expenditure. As you can see sectors like construction witnessed positive growth, which means there’s been an increase in their order books. In absence of private investment, the government stepped up and investment ought to increase and improve capex. Moreover, as banks’ balance sheet is also expected to improve due to IBC, it will lead to increase in both domestic consumption and private investment,” Shubhada M Rao, Chief Economist, Yes Bank told FE Online.
The uptick in the fourth quarter of the FY18 can be attributed to the strong performance by manufacturing and construction sector. India’s manufacturing GVA growth in Q4 FY18 was an impressive 9.1% as compared to 6.1% in the same quarter last fiscal year and construction GVA growth was 11.5% vs -3.9% year-on-year. The financial and real estate sector also showed strong performance at 5% vs mere 1% year-on-year.
The growth was led by was led by a pickup in growth of Gross Fixed Capital Formation (GFCF) and Private Final Consumption Expenditure (PFCE), which was more than the offset caused by the slowdown in the growth of Government Final Consumption Expenditure (GFCE) and exports.
“Consumption will definitely pick up in coming quarters as when the growth increases, lending increases and when lending increases, consumption has to pick-up,” Saugata Bhattacharya, Chief Economist and Senior Vice President at Axis Bank told FE Online, adding that a lot of public investment will continue to happen in FY19 as well. Other economists see an uptick in rural consumption on the back of normal monsoon.
ICRA expects a healthy consumer demand, government expenditure, and a back-ended pickup in investment activity in FY19. Madan Sabnavis of Care Ratings says that the growth in FY19 is likely to be from “pick up in consumption especially rural consumption with the forecast of normal monsoon, increased public sector spending and the uptick in the performance of the manufacturing sector in the upcoming quarters”, Care Ratings said.
On India’s exports, Federation of Indian Exports Organisation has said that there would be a northward movement in petroleum and commodity prices adding to export growth. “The recent depreciation of Indian Rupee is also supporting exports… Indian exports, which are hovering around $300 billion, should exhibit 15-20% growth so as to reach around $350 billion during the current fiscal (FY19),” FIEO said in a statement.