INDIA the Economic Scenario
Total Page：16
File Type：pdf, Size：1020Kb
` ` 7/2020 INDIA Contact: Rajesh Nath, Managing Director Please Note: Jamly John, General Manager Telephone: +91 33 40602364 1 trillion = 100,000 crores or Fax: +91 33 23217073 1,000 billions 1 billion = 100 crores or 10,000 lakhs E-mail: [email protected] 1 crore = 100 lakhs 1 million= 10 lakhs The Economic Scenario 1 Euro = Rs.82 Economic Growth India's economy will spring back to normal sooner than expected and may even make a sharp V- shaped recovery in the next financial year as per the Finance Ministry, dismissing forecasts of a sharp contraction in GDP in the current fiscal. Monetising of the fiscal deficit by the RBI was not currently on the table. Direct and indirect tax collections in the June quarter were encouraging and daily e-way bill data is also showing a positive trend. All these developments are actually giving an encouraging signal that the economy is coming back to the rate sooner than what was being anticipated. If the current uptick continues without additional shocks, the sharp contraction forecast by several agencies for the current fiscal won't come to pass. Localised shutdowns on account of Covid-19 outbreaks have prompted the further lowering of GDP estimates. It is expected that there will be a 9.5% contraction in GDP in the current year against its initial 5% shrinkage estimate, citing a setback to the recovery seen in June due to the mini lockdowns. The government was open to borrowing more to boost spending on infrastructure but monetising the fiscal deficit by the RBI was not under consideration. The revenues are going up and the government has also mobilised some extra revenues through excise duty. Income tax collections for the first quarter of the ongoing fiscal, which includes advance tax and tax deducted at source, were 80% of the year-ago level. These numbers should be seen in the context of corporate tax being cut to 22% from 30%. Goods and services tax (GST) collections of € 11,098 million (Rs 91,000 crore) in May were at about 70% of the year earlier. This is expected to have improved in June, the pace of transactions had risen compared to the previous months of lockdown. India's nationwide shutdown began on March 25 and was progressively eased in May. VDMA-Newsletter “India”, Edition 07/2020 Contact: Oliver Wack, Phone: +49 69 6603-1444 2 Indian Economic and Industrial Scenario, 7/2020 VDMA INDIA Office The Tamil Nadu government has signed eight new Memoranda of Understanding (MoUs) worth € 1268 million (Rs 10,399 crore). The cumulative investment envisaged in the projects will create 13,507 jobs across the state in solar cells, data centres and industrial parks. The MoUs will bring in investments in the areas of solar cells and modules manufacturing, agrotech and iron foundry, among others. The memoranada of understanding were signed in the presence of Chief Minister. Of the eight MoUs, five were signed in the presence of the CM, while three were done through video conferencing. The projects will be implemented in Kancheepuram, Chengalpattu, Ranipettai, Coimbatore, Viluppuram and Erode districts. A high powered committee, chaired by the Chief minister, will expedite various clearances and also establish a Special Investment Promotion Task Force under the chairmanship of the Chief Secretary. Industries Minister and Chief Secretary were present during the signing of the MoUs. Commerce and Industry Ministry informed that the government has identified eight more sectors where India can become a supplier to the world, in addition to the 12 industry sectors already zeroed in. There were 12 sectors earlier, now the government has identified eight more sectors where India can become leaders to supply to the world. Food processing, iron and steel, electronics, industrial machinery, furniture, auto parts, and leather and footwear, are among the12 industry sectors identified earlier with potential for import substitution and boosting exports. The move is part of India’s aim to become self-reliant, which leads to the country engaging wherever it has a competitive edge and skills. The only way to remain competitive is by harnessing new technologies. Some jobs may need reskilling but on the aggregate, the government will add to jobs and work opportunities. As per the Ministry, lack of effective technology intervention has triggered inequality in many parts of the world. The Reserve Bank of India (RBI) ended the loan repayment moratorium and unveiled a loan- restructuring programme as a first step toward nudging industry and banks to return to normalcy, while keeping interest rates unchanged, balancing the need to shore up the Covid-hit economy with inflation vigilance. The Monetary Policy Committee (MPC) unanimously backed the status quo on rates amid elevated price pressures, but acknowledged the need for action to aid economic growth, which remains fragile in the wake of Covid-19 pandemic and the closures that followed. The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth and mitigate the impact of Covid-19 on the economy, while ensuring that inflation remains within the target going forward. The policy repo rate, at which the RBI lends to banks, was kept at 4% and the reverse repo rate, at which it pays banks for parking excess deposits, stayed at 3.35%. All other rates also remained unchanged, in line with market expectations. India and the European Union (EU) recently announced the launch of a high-level economic and investment dialogue to work out a bilateral trade and investment pact as countries and firms look to decouple and diversify supply chains from China. After 13 years of negotiations, India and the European Union have sealed a civil nuclear cooperation agreement. Both parties recognized that the post-covid economic recovery priorities offer the opportunity to unleash the full potential of India-EU economic ties. India invited European firms to invest in India taking into account its efforts to improve ease of doing business and regulatory environment and an aim to integrate India into global value supply chains. Both EU and India reaffirmed their commitment to work towards balanced, ambitious and mutually beneficial trade and investment agreements, opening markets and creating a level playing field on both sides. On the strategic front, the two sides unveiled a road map for cooperation over the next five years, announced a maritime dialogue, agreed to boost cooperation between their navies and conclude an agreement between Europol and the Central Bureau of Investigation. Data protection, artificial intelligence and clean energy were other areas that the EU was looking at deepening cooperation with India. VDMA-Newsletter “India”, Edition 07/2020 Contact: Oliver Wack, Phone: +49 69 6603-1444 3 Indian Economic and Industrial Scenario, 7/2020 VDMA INDIA Office Industry Scenario Infrastructure Demand for structural steel products surges in May-June due to lockdown induced labor shortage Domestic demand for structural steel products accelerated in May-June as construction companies increasingly opted for the customizable building material for high-rise structures, apartments and quarantine facilities in the face of labour shortage due to the lockdown. Apart from companies like L&T, Tata Projects, Doosan, Toshiba, DLF and Reliance which have placed orders, Indian Railways, too, is replacing most of its old concrete materials to steel structures. JSPL forayed into the construction materials & solutions business with its steel fabrication facilities of 240,000 MT/annum in Punjipatra, Raigarh, Angul and Raipur.High-rise steel buildings have a market potential of 80,000 metric tonnes. Tata Steel’s smart steel structures in form of quarantine wards and testing kiosks are available in kit-like solutions, wherein walls, roof panels and internal partitions, are assembled onsite. They can be dismantled, packed and shifted to other sites too and does not need too much labour. Government sets up single-window clearance mechanism to expedite aviation sector proposals The civil Aviation Ministry has set up a single-window clearance mechanism to expedite various investment proposals in the domestic aviation industry. MoCA has an Investment Clearance Cell (ICC) for prompt assistance and clearance. The setting up of the ICC was announced by the government in 2020-2021 Union Budget in February this year. The ICC has been mandated to serve as a single- window system for attracting investment and its terms of reference include accelerating investments, bringing projects to the Empowered Group of Secretaries (EGoS) which require special incentive, policy interventions, expeditious clearances and systematic references, among others. Besides, the ICC will also identify policy and regulatory issues that come in the way of investments and engage with potential investors to bring the proposal for consideration of EGoS. Indian Railways to start private train services by 2023, all 151 by 2027 The first set of 12 private trains will be introduced in 2023, followed by 45 more in the next fiscal, according to an initial timeline drawn by the Railways which plans to roll out all 151 such train services by 2027. In a formal kick-start to its plans to allow private entities to operate passenger trains on its network, the Railways earlier this month invited proposals from companies to run 151 modern passenger trains on 109 pairs of routes across the country. The project would entail a private sector investment of about € 3659 million (Rs 30,000 crore). As part of the plan for private trains, the Railways has planned to introduce 12 trains in 2022-23, 45 in 2023-2024, 50 in 2025-26 and 44 more in the next fiscal, taking the total number of trains to 151 by the end of FY 2026-2027. The request for qualification (RFQ), which was floated in July, is likely to be finalised by November, the financial bids will be opened by March, 2021 and selection of bidders is planned by end of April 2021, according to a timeline for introduction of private passenger trains prepared by the railways.