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FPIs infuse Rs 8,500-crore in capital markets in just 8 trading sessions

Foreign investors have pumped in over Rs 8,500 crore into the Indian capital markets in the last eight trading sessions on improvement in crude oil prices, stabilising rupee and better corporate earnings. The latest fund infusion comes following a net inflow of over Rs 2,300 crore in the capital markets — equity and debt — last month. Prior to that, overseas investors had pulled out over Rs 61,000 crore during April-June.

According to the latest depository data, foreign portfolio investors (FPIs) pumped in a net sum of Rs 2,373 crore into equities during August 1-10 and a net amount of Rs 6,208 crore into the debt market, taking the total to Rs 8,581 crore (USD 1.2 billion). The inflows can be attributed to the improvement in some of the underlying factors such as weakness in crude oil prices, improvement in rupee against the dollar and better earnings from Indian Inc, said Himanshu Srivastava, Senior Research Analyst at Morningstar.

Indian economy to grow at 7.2 per cent in 2018-19, says India ratings and research report

Indian economy is projected to grow at 7.2 per cent in 2018-19, India Ratings and Research (Ind-Ra) said. The rating agency earlier forecasted India’s economic growth at 7.4 per in current fiscal. The key reason for this, Ind-Ra said, is the upward revision in the estimation of inflation for 2018-19 due to increasing crude oil prices and the government’s decision to fix the minimum support prices of all kharif crops at 1.5 times the production cost (A2+FL). The rating agency in a report titled ‘Mid-year FY19 Outlook’ said it believes the other headwinds lurking on the horizon are rising trade protectionism, depreciating rupee and, no visible signs of the abatement of the non-performing assets of the banking sector.

“Furthermore, it is taking a tad longer than expected to resolve cases under the Insolvency and Bankruptcy Code. “This simply means ‘bringing the stuck capital back into the production process to enhance the productivity of capital’ will be a long drawn-out affair,” Ind-Ra said. Ind-Ra said it expects private final consumption expenditure to grow 7.6 per cent in 2018-19 compared to 6.6 per cent in 2017-18.

The rating agency pointed out that government capex alone will be insufficient to revive the capex cycle, as its share in the total capex of the economy was only 11.1 per cent during 2012-17. “On the other hand, the share of private corporations was 40.9 per cent. As private corporations in combination with the household sector command 77.5 per cent of the total investment in the economy, their capex revival is a must for a broad-based recovery in the investment cycle,” it observed.

Noting that India will face continued headwinds on the exports front, the rating agency said although it expects the annual value of exports to touch USD 345 billion in the current fiscal, crossing the peak of USD 318 billion attained in 2013-14. Ind-Ra said it expects average retail and wholesale inflation in 2018-19 to come in at 4.6 per cent and 4.1 per cent, respectively, as against 4.3 per cent and 3.4 per cent forecasted earlier. “Ind-Ra expects CAD to widen to USD 71.1 billion in 2018-19 from USD 48.7 billion in 2017-18,” it said.

Draft policy expects e-commerce platforms, search engines to store data locally

A draft e-commerce policy wants online retailers such as Amazon.com, search engines like Google and social media platforms to locally store data generated by users in India, with the government having access to such data for national security and public policy objective. According to the 19-page draft policy, “a level playing field needs to be provided to domestic players by ensuring that foreign websites involved in e-commerce transactions from India also follow the same rules, including procedures for payment systems, such as two-factor authentication, as in case of domestic companies”.

The draft policy recommends strengthening regulatory vigilance for payments system, curbing discounts in online retail and a single legislation to encompass all aspects of e-commerce with a single regulator to govern the industry. The draft has been criticised in some quarters, prompting the commerce ministry to tweet on Saturday that “another round of consultation with stakeholders” will be done to address their concerns.

“We would like to discuss and consider the inputs from all stakeholders on the upcoming draft-e-commerce Policy,” Commerce Minister Suresh Prabhu had tweeted on August 11. Stating that data is the oil of the digital economy, the draft policy said that communication over mobile phones using mobile applications and other real-time exchanges, not only generates a vast array of data, including physical location, financial details, and consumer preference but also creates a dynamic profile of the individual user.

“The individual’s profile can be used for a variety of commercial purposes, such as precision marketing, targeted advertisements, and creditworthiness assessment. The history of browsing and search by consumers also generates rich information on consumer preferences and, at times, their potential purchasing power.

“By tracking the search history, online retail websites are able to target consumers with tailor-made marketing content. Data generated by activity in one area can provide a competitive edge for a new business in another area,” it said, adding that access to data has emerged as one of the main determinants of success of an enterprise in the digital economy.

The draft wants “data generated by users in India from various sources including e-commerce platforms, social media, search engines etc” to be “stored exclusively in India and suitable framework developed for sharing the data within the country”. Such data should be shared with startups, meeting the stipulated criteria.

India’s economic growth to improve in coming quarters: CII-ASCON

India’s economic growth will improve further in the coming quarters due to recovery in domestic demand as also the investment cycle, according to the CII-ASCON Industry Survey. It said the demand and investment will be supported by better consumption patterns on account of favourable monsoon, moderation in inflation and the onset of festive season.

The survey tracked the performance of 70 sectors during the first quarter of the current fiscal, as against the year-ago period. “The ASCON Q1 FY19 Survey results reflect steady progress in economic growth. What is especially significant is that there has been a perceptible increase in the share of sectors recording higher growth,” CII Director General Chandrajit said.

The survey witnessed fewer sectors anticipating negative growth trends, which clearly points towards improvement in the economic environment, he said. It showed a sharp increase in the sectors witnessing ‘Excellent’ growth (>20%) in April-June 2018-19, over the year-ago period.

The share of sectors witnessing ‘Excellent’ growth has improved to 14.3 per cent (10 out of 70 sectors) in Q1 FY19 from 5.7 per cent (4 out of 70) in Q1 FY18. At the same time, the share of sectors recording ‘High’ growth and ‘Moderate’ growth has improved marginally while the share of sectors witnessing ‘Low’ growth (<0%) has come down substantially.

With respect to issues and concerns impacting growth, ‘Competition from Imports’ (50 per cent), ‘Regulatory Burden’ (42.9 pc) and ‘Lack of required infrastructure’ (41.7 pc) have been reported as the top three most important issues for the industry. Exuding optimism on the near-term growth outlook, 63.6 per cent respondents expect the business situation in their respective sector to improve moderately where as 31 per cent expect the situation to remain same in the next six months.

Doubling of overdraft facility to micro insurance scheme – what pm Narendra Modi may announce in his independence day speech

Prime Minister Narendra Modi is expected to announce benefits for about 32 crore Jan Dhan account holders in his Independence Day address this week to provide a boost to the government’s financial inclusion drive, official sources said. There could be a doubling of overdraft facility to Rs 10,000 under the Pradhan Mantri Jan Dhan Yojana (PMJDY) account holders as part of the government’s effort to fund the unfunded, they said.

Besides, the government may announce attractive micro insurance scheme on the occasion, the sources said. The free accident cover under the RuPay Card holders could be increased from Rs 1 lakh. The Phase II of PMJDY will come to an end on August 15 and the scheme would be due for a revamp with further goals, the sources said, adding that the Prime Minister’s Independence Day speech would be the best platform to make announcement.

PMJDY, the flagship financial inclusion drive, was launched in August 2014. The first phase ended on August 14, 2015 was focussed on opening basic bank accounts and RuPay debit card. In the last four years, 32.25 crore PMJDY accounts have been opened with Rs 80,674.82 crore outstanding balance.

In addition, the government may raise the pension limit under Atal Pension Yojana (APY), announced in 2015-16, to up to Rs 10,000 per month from the existing slab of up to Rs 5,000. In order to address the longevity risks among the workers in the unorganised sector, and encourage them to voluntarily save for retirement, the government had started the Swavalamban Scheme in 2010-11.

However, coverage under Swavalamban Scheme is inadequate mainly due to lack of clarity of pension benefits. The APY was focussed on all citizens in the unorganised sector, who would join the National Pension System (NPS) administered by the Pension Fund Regulatory and Development Authority (PFRDA) and who are not members of any statutory social security scheme.

Under the APY, the subscribers would receive the pension of Rs 1,000-5,000 per month at the age of 60 years, depending on their contributions.

Salary costs at headquarters to attract 18% GST for services given to offices in other states: AAR

Salary for services like accounting, IT, human resource, provided by the head office of a company to its branch offices in other states will attract 18 per cent GST. According to an order passed by the Karnataka bench of the Authority for Advance Ruling (AAR), the activities between two offices is treated as supplies under the GST law.

It said the valuation of supply will include all costs, including the employee cost provided by one distinct entity to the other distinct entities. “The activities performed by the employees at the corporate office in the course of or in relation to employment such as accounting, other administrative and IT system maintenance for the units located in the other states as well i.e. distinct persons as per Section 25(4) of the Central Goods and Services Tax Act, 2017 (CGST Act) shall be treated as supply as per Entry 2 of Schedule I of the CGST Act,” the AAR said.

Experts said the ruling will mean that companies, which have offices in multiple states, will have to raise Goods and Services Tax (GST) invoice for functions performed by employees in head office that has helped branches in other states. Although the GST charged on such supplies can be claimed as input tax credit (ITC), companies which are exempt from GST will not be able to claim credit. Also this will increase compliance burden for companies as they have to raise invoice for all such inter-state services made.

AMRG & Associates Partner Rajat Mohan said this GST charged would be available as tax credit, except for sectors which are exempt from GST like education, hospitals, alcohol and petroleum. “This cross charge on account of supply of services is expected to be taxed at rate of 18 per cent, sending shockwaves across conglomerates in India,” Mohan said.

Abhishek Jain, Tax Partner, EY says: “This Ruling opens a Pandora box especially for those businesses who are into exempt or non GST supplies; as these companies with this Advance Ruling may need to charge GST on notional head office employee costs as well with credit of such GST not being available to the recipient branch/ Company”.

RBI MPC minutes: retail inflation may rise in October-March; trade war likely to impact India’s exports

The inflation risks continue to remain elevated and governed by factors such as MSP, crude oil, monsoon, and GST, RBI said in the minutes of August MPC meeting. Persistent core CPI doesn’t augur well for inflation, RBI Deputy Governor, Viral Acharya, said. He also said that it’s prudent to prepare for elevated and volatile oil prices. CPI inflation may encounter ‘soft patch’ in July-September period. The retail inflation may resume upward trajectory in October-March, he added.

As various economic growth indicators suggest, the economic activity has remained strong, RBI said. The progress of the monsoon so far and a sharper than the usual increase in MSPs of kharif crops are expected to boost rural demand by raising farmers’ income, RBI said in the MPC minutes released. The increased FDI flows in recent months and continued buoyant domestic capital market conditions bode well for the investment activity, RBI added.

However, due to several uncertainties, RBI maintained a neutral stance in its last policy outing, RBI Governor Urjit Patel said.

Against the above backdrop, the MPC decided to increase the policy repo rate by 25 basis points. The MPC reiterated its commitment to achieving the medium-term target for headline inflation of 4 per cent on a durable basis.

“Rising trade protectionism may impact domestic investment and growth prospects by dampening India’s exports. Overall, economic activity appears to be buoyant with GDP growth for 2018-19 projected at 7.4 percent, same as in the June policy; and 7.5 percent for Q1:2019- 20,” RBI minutes also said.

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