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INDIAN ECONOMY: OVERVIEW, GROWTH & DEVELOPMENT
Q1 GDP numbers to be out today; India likely to grow at 5.2 to 5.7percent

The Central Statics Office (CSO) is likely to release GDP growth data for the April-June quarter (Q1) at around 12 noon on Friday. Continuing on its downward slide, the economic growth in the first quarter of FY20 is expected to be in the range of 5.2 to 5.7 percent, which is down from 5.8 percent in the previous quarter, predict various polls.

According to a Reuters’ poll, the Indian economy will likely grow at a year-on-year pace of 5.7 percent in the June quarter. Several economists — about 40 percent of total 65 surveyed in the Reuters poll — are even predicting the numbers could be down to 5.6 percent or lower. If that happens, India will clock slowest its growth in over five years, and it’ll be the weakest start of a fiscal year quarter in seven years. HDFC Bank has predicted April-June GDP growth at 5.2 percent, while Axis Bank said the June quarter GDP could be 5.4 percent.

A Bloomberg poll, which surveyed 30 economists, also predicted GDP growth at 5.7 percent for the June quarter. The sub-6 percent growth for the second consecutive quarter will push the economy even further down. The poll also estimates that Gross Value Added could moderate to 5.5 percent in Q1 from 5.7 percent in Q4 of the previous fiscal year.

India Ratings and Research Pvt Ltd also expects the Q1 GDP numbers to plunge to 5.7 percent. The rating agency has even revised its annual growth estimate to 6.7 percent from earlier 7.3 percent.

The agency expects FY20 to be the third consecutive year of subdued growth owing to a slowdown in consumption, uneven monsoon, a decline in manufacturing, the inability of Insolvency and Bankruptcy Code to resolve cases timely, and rising global trade tensions.

Corporate India gears up to ban single-use plastic to align with PM Modi’s pledge

As Prime Minister Narendra Modi is reportedly set to ban the use of single-use plastic by October 2, the corporate India and public sector units have started aligning themselves with the PM Modi’s goal of scrapping single-use plastic by 2022. The reported announcement on October 2 is going to be the first step – and certainly the most ambitious in the world – towards the pledge that the PM Modi took in his Independence Day speech. Corporate entities across the sectors, be it airports, airlines, hotels or start-ups, have chalked out plans to cut down on their use of single-use plastic – which is used to make bags, straws, bottles and cups that can be used just once.

The most recent entrant to the plastic ban club is state-run Air India, which has prepared an action plan to stop single-use plastic onboard its flight. Except two flights across its network, the national carrier plans to replace individual-sized 200 ml water bottles with larger 1,500 ml water bottles in all its flights. “Plastic tea cups will be replaced with sturdy paper cups. Banana chips and sandwiches are presently packed in a plastic pouch, which will be changed to butter paper pouches,” Air India said in a statement.

Air India’s plans come hot on the heels of the full-service carrier Vistara that has replaced small water bottles with paper cups in its flight beginning June. The airline had started using oxo-biodegradable plastic in its in-flight meals. Oxo-biodegradable plastic doesn’t require biological process to degrade and is said to be decomposed in less than two years. In each flight, hundreds of meals are served, and airlines use high amount of plastic cutlery and plastic packaging for food and beverages. To move away from the plastic use – or at least minimising the usage – these two domestic airlines are contributing in their global efforts to minimise the dangers of plastic on the environment.

Number of Rs 2,000 notes in circulation drop in fy19

The Rs 2,000 notes introduced after the Modi government demonetised old Rs 500 and Rs 1,000 notes back in November 2016 have seen a sharp drop in their circulation in the last one year ended in March 2019 (FY19), the Reserve Bank of India (RBI) said in its annual report. The central bank is also mulling the introduction of new varnished Rs 100 notes but on a field trial basis first.

“International experience suggests that varnishing of banknotes is expected to increase their life and durability, reduce the banknote replacement requirements and thereby lower the overall security printing expenditure,” the RBI said in its report.

The RBI in its annual report released on Thursday said the Rs 2,000 notes had shrunk in terms of value and volume in the FY19. There were 3,363 million such notes in circulation at the end of March 2018, 3.3percent of the total currency in circulation in terms of volume. Meanwhile, in value terms, the share of Rs 2,000 notes in total currency circulation was 37.3percent.

However, this number fell to 3,291 million pieces in FY19, 3percent in volume terms and 31.2percent in value terms of the total money in circulation.

On the contrary, the value and volume of Rs 500 notes increased substantially from 15,469 million pieces in FY18 to 21,518 million pieces in FY19, which was 19.8percent (FY19) of the total circulation in volume terms in comparison with 15.1percent (FY18) and 51percent (FY19) in value terms as compared to 42.9percent (FY18).

“There was a sharp increase in the value of Rs 500 banknotes in circulation from 42.9percent to 51.0percent over the year,” the report said.

Thus, the share of Rs 500 notes in value terms is more than half of the currency in circulation.

“In value terms, the share of Rs 500 crore and Rs 2,000 crore banknotes, which had together accounted for 80.2percent of the total value of banknotes in circulation at end-March 2018, increased to 82.2percent at end-March 2019,” the report said.

 

Central bank’s income zooms 146.5percent to Rs 1.93 lakh crore in fy19

The balance sheet size of the Reserve Bank of India (RBI) increased by 13.42 percent to Rs 41.03 lakh crore for the year ended June 30, 2019 from Rs 36.18 lakh crore in the same period last year. The increase was due to rise in domestic and foreign investments by 57.19 percent and 5.70 percent, respectively and increase in gold by 16.30 percent.

The central bank’s income zoomed by 146.59 percent to Rs 1.93 lakh crore during the year 2018-19, as compared to Rs 0.78 lakh crore in the previous year’s period, RBI said in its Annual Report released on August 29. The significant part of the jump was aided by ‘other income’ which surged multi-folds to Rs 86,199 crore from Rs 4,410 crore as on June 30, 2018. The other income comprises of commission, exchange gain, rent realised, profit on sale of rupee and foreign securities and miscellaneous income.

RBI’s interest income jumped 44.62 percent to Rs 1.06 lakh crore, while expenditure dipped to Rs 17,045 crore from Rs 28,277 crore in 2017-18, helped by lower provisions. The expenditure on printing of notes fell by 2 percent to Rs 4,811 crore.

The RBI ended the year with an overall surplus of Rs 1.76 lakh crore as against Rs 50,000 crore in the previous year, a growth of 251.97 percent, which clearly indicated that it has one of the highest levels of financial resilience globally.

This year’s annual report came days after the RBI announced to transfer Rs 1.76 lakh crore surplus money to the government amid the economic slowdown.

Modi govt to woo foreign firms like apple to capitalise on US-China trade war

India is targeting companies including Apple, Foxconn and Wistron Corp with a charm offensive aimed at encouraging them to shift business out of trade war-hit China, according to a source and a document seen by Reuters. Several Indian officials met on Aug. 14 and discussed a list of “target companies” that also include Taiwan-headquartered contract manufacturer Pegatron Corp, a source with direct knowledge said.

The dispute between the United States and China, the world’s two largest economies, has led to higher tariffs on goods worth billions of dollars and disrupted global supply chains, prompting companies to look at other investment avenues to escape higher tariffs.

Amid suggestions that India is late to capitalise on the trade war, government ministries have been asked to submit their policies and incentive structures to Invest India, the country’s foreign investment promotion agency. Nine sectors including electronics, autos pharmaceuticals and telecoms will be targeted.

The document said the government will meet companies between Aug. 26 and Sept. 5 to suggest the best investment zones for their operations. State governments will also participate.

It is not clear whether the government will dole out new incentives or just detail existing ones, but the document shows India wants to explore opportunities and move swiftly, even as some fear it has missed the bus.

Penalty you will pay for not filing income tax return before deadline

The last date for filing your tax returns for assessment year 2019-20 is Saturday, so procrastinators are now beginning to run out of time. Delaying tax filing can prove costly. The penalty for ITRs furnished on or before December 31 is Rs 5,000, but double that amount for later filings.

According to Cleartax, there is a relief given to small taxpayers – the Income Tax Department has stated that if the total income does not exceed Rs 5 lakh, the maximum penalty levied for delay will be Rs 1,000. Keep in mind that the income tax exemption limit for senior citizens in the 60-80 years age bracket is Rs 3 lakh, while that for super senior citizens aged over 80 years is Rs 5 lakh.

However, the taxman has no intentions of letting the big tax evaders off easy. If the tax evaded “exceeds Rs 25 lakh, the punishment could be 6 months to 7 years,” the Income Tax Department says on its website.

“Apart from penalty for late filing, interest under Section 234A at 1 percent per month or part thereof will be charged till the date of payment of taxes,” says Cleartax, adding that the interest computation will start from the day after the deadline, or September 1. So the longer you delay filing, the more you have to shell out as interest penalty.

If you miss the deadline, you can still file belated returns till the end of the assessment year. “For example, the belated ITR of FY2018-19 can be filed until March 31, 2020. If you miss that deadline, you will never be able to file the tax return,” says says Kuldip Kumar, Partner and Leader, Personal Tax, PwC India.

Diagnosis of type of economic slowdown difficult: RBI

The Reserve Bank of India (RBI) released its annual report on Thursday evening. Taking the bull by the horns, the apex bank addressed the economic slowdown in the country. However, the bank did not offer any concrete reason behind the slump and added that a diagnosis of the type of economic slowdown is difficult.

The bank put forth a question in its report and asked if we were dealing with a “soft patch” or is it a “cyclical downswing” or a “structural slowdown”. “The key question that confronts the Indian economy as it looks ahead to the rest of 2019-20 is: are we dealing with a soft patch, or a cyclical downswing, or a structural slowdown? This will determine the policy responses – illustratively, a soft patch can be looked through, while a cyclical downswing will warrant counter-cyclical actions in terms of monetary and fiscal policies, but a structural slowdown will need deep-seated reforms,” it added.

The report mentioned that these conditions are not really easy to disentangle and a precise diagnosis is difficult. “The diagnosis is difficult; these conditions are hard to disentangle cleanly, at least in the formative state. Proximate answers could perhaps be found in the lessons of the experience of 2018-19, with which it could be feasible to assess the outlook for 2019-20 and the challenges that lie ahead,” it said.

Currency notes circulation increased 6.2percent in fy19: RBI annual report

The Reserve Bank of India announced that the volume of currency notes in circulation increased by 6.2 percent during 2018-19. In its annual report, the central bank stated that 108,759 million currency notes were in circulation during the past financial year. “In volume terms, Rs 10 and Rs 100 banknotes constituted 47.2 percent of total banknotes in circulation at end-March 2019 as against 51.6 percent at end-March 2018,” the RBI Annual Report said. Meanwhile, the value of currency notes in circulation increased by 17 percent to Rs 21.11 lakh crore during 2018-19. In value terms, the share of Rs 500 and Rs 2,000 banknotes increased to 82.2 percent at end-March 2019. At the beginning of last fiscal, these two denominations had together accounted for 80.2 percent of the total value of banknotes in circulation.

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