Centre to change base year for GDP, IIP to 2017-18, for CPI it will be 2018

The government will change the base year to 2017-18 for the calculation of GDP and IIP numbers while for retail inflation the year will be revised to 2018, Union minister D V Sadananda Gowda said today.
“During 2018-19, the ministry is proposing to initiate steps to revise the base years of gross domestic product (GDP), Index of Industrial Production (IIP) and Consumer Price Index (CPI) to accommodate and factor the changes that take place in the economic scenario of the country,” the statistics and programme implementation minister said at a conference on budget provisions.
The statistics ministry has proposed the new base year for GDP and IIP as 2017-18 while for CPI it will be 2018.
Gowda said the ministry will undertake various steps in the next fiscal beginning April that will improve the statistical system that will help meet the data requirements in the emerging socio-economic scenario.
The Ministry of Statistics and Programme Implementation (MOSPI) has been allocated Rs 48.59 billion in the Union Budget 2018-19.

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Centre to change base year for GDP, IIP to 2017-18, for CPI it will be 2018

Why banks will likely fail to recover Rs 3 trillion from loan defaulters

The Reserve Bank of India’s (RBI’s) new framework for stressed loans that would classify any default in one lender bank as a default in all other lenders’ accounts has been labelled by the government as a way to speed up the bad loan resolution process. While this may help in cleaning up the books of many banks that have borne the brunt of loan defaulters, the amount of money recovered by banks to date through insolvency proceedings seems to indicate that banks might have to write off billions of dollars’ worth of loans in the times to come.
Since the Indian Insolvency and Bankruptcy Code (IIBC) was introduced in 2016, some 540 corporate entities have been admitted for resolution. According to information with the Insolvency & Bankruptcy Board of India (IBBI), 10 cases had been resolved as of December 2017. If the recovery amounts from these corporates are anything to go by, the road ahead for banks in recovering depositors’ money from corporate defaulters might not be easy.
Banks, while trying to recover loans from these 10 corporate entities, have had to forgo more than Rs 37 billion. These 10 lenders collectively owed banks Rs 55 billion, but banks have been able to recover just about Rs 18 billion by selling off their assets and other securities that were pledged by companies while taking these loans. That means that banks on an average have been able to recover just 32 per cent of the money under the Corporate Insolvency Resolution Process (CIRP).
Information available with Business Standard Research Bureau states that the amount owed by corporate defaulters (or net non-performing assets) to Indian banks was Rs 4.44 trillion. If all of these were to be brought for resolution, given the recovery record of banks under the new insolvency code, banks could end up failing to recover more than Rs 3 trillion.
What makes it even trickier is that banks usually find it tough to ensure fast-track recovery of money from big corporate houses rather than smaller ones. The IBBI stated in February: “Small corporates generally have simple operating models and clear capital structures. Insolvency of such forms can be addressed more expeditiously compared to a normal period of 180 days.” And the biggest threat to banks may well be coming from large corporate defaulters.
The Reserve Bank of India (RBI), in its latest Financial Stability Report, stated: “The total stressed advances of large borrowers increased by 2.4 per cent between March and September 2017.

Advances to large borrowers classified as special mention accounts-2 (SMA-2) also increased sharply by 56.5 per cent during the same period.” SMA-2 accounts are the worst performing loan accounts where the borrower has defaulted on his loans for more than 60 days. The RBI pegged loans in this category at Rs 2.8 trillion in its report.
Another trend visible in cases that have been resolved under the Corporate Insolvency Resolution Process is that banks are able to recover less money from companies that owe them more. For instance, banks were able to recover just 40 per cent of its Rs 15 billion loans from Kamineni Steel & Power India, a Telagana-based corporate defaulter. The resolution process of Kamineni Steel & Power India was finished on November 27, 2017, and the company was the largest defaulter among all the 10 insolvency cases that have been resolved so far.
The case of Sree Metalik, the second-highest defaulter in the resolved list is even more discouraging. Sree Meetalik owed banks almost Rs 13 billion, of which just 7 per cent was recovered under the insolvency resolution process.
Synergies Dooray Automotive, which was the first case resolved under the new code, saw banks managing to recover just about 6 per cent of their loans.
The amount of money recovered by banks under liquidation falls further and is generally lower than the amount recovered under the insolvency process. In all the resolved cases, the liquidation value was less than half the amount of money actually recovered by banks from selling off the pledged assets of these defaulters.
The IBBI has acknowledged that the path to resolution of banks’ bad loans would be tricky. In its latest newsletter, IBBI states: “A relatively large number of corporate undergoing… Corporate Insolvency Resolution Process (CIRP) ending up in liquidation is on expected lines, as many of them have long-pending defaults and are left with little organisational value. Wherever resolution happens, the realisation for creditors as a percentage of their outstanding claims might not be very promising for the same reason.”
The Narendra Modi government at the Centre last month decided to use Rs 8 billion worth of taxpayer’s money to bail out these banks during the present financial year. In addition, some of the badly hit public banks would be injected with Rs 80 billion worth of recapitalisation bonds. With Rs 3 trillion worth of depositors’ money that could potentially never be recovered from defaulting corporates, the government might have to do a bigger rescue act in the future than it has envisaged for the moment.

Why banks will likely fail to recover Rs 3 trillion from loan defaulters

Auto component makers gearing up for likely disruption from EV mobility

Over the past two years, the din around India’s ambitious plan to convert itself into an all-electric vehicle market by 2030 has been growing louder. Manufacturers of engine and transmission parts, who would be at the centre of the disruption, aren’t worried, however. These companies account for more than half the $43.5 billion revenue of India’s auto component industry, according to Auto Component Manufacturers Association of India (Acma), the lobby for auto parts makers.
Even as these companies are looking to diversify into non-engine parts, scouting for acquisitions to stay relevant in the newly emerging eco-system, they are confident that internal combustion engine (ICE) is here to stay at least for a decade and half, if not more. To be sure, meeting the BS-VI emission norms, which kick off on April 1, 2020, is on top of their priority list.
Take the case of Shriram Pistons & Rings (SPR), one of the largest manufacturers of engine aggregates and parts, that counts almost every other automaker as its client. The company draws two-thirds of its revenue from engine related parts in the personal mobility space. As part of a risk mitigation strategy, SPR plans to strengthen presence in off-highway applications, tractors and such like, which are expected to be insulated from electric mobility. It is also stepping up presence in the aftermarket segments in India and abroad, says Ashok Taneja, managing director and chief executive at the firm. The company is also working towards diversifying into non-ICE parts and tapping into new areas, including braking and light-weighting by way of acquisition.
Others have a similar approach. “I think there will be lot of space for ICE for many years to come,” says Tarang Jain, managing director at Aurangabad-based Varroc Group, which makes lighting systems among other auto parts. Jain points out that transition has been slow even in most of the developed markets.

However, he doesn’t want to be caught off-guard. His company, which draws a third of revenue from engine and emission parts, is working on the electronic motor side of the powertrain. Varroc is also looking for a collaboration with start-ups, and at acquisitions to tap into the EV space, but is not in a rush. “My immediate priority is BS-VI, he says.
The government’s announcement on electric mobility has served as a huge distraction for an industry that has left no stone unturned to switch to world’s strictest emission norms, says Vinnie Mehta, director general at ACMA. Automobile and auto parts makers, and oil refiners are estimated to fork out anything between Rs 700 billion and Rs 900 billion as a run up to leapfrogging from BS-IV to BS-VI emission norms.
Auto component makers gearing up for likely disruption from EV mobility Some see the disruption ahead to reposition themselves. One such is Greaves Cotton, a 160-year-old engine manufacturer that counts most of the automakers in the commercial vehicle space as its customers. “Greaves is transforming itself from an engine company to a powertrain fuel-agnostic solution and services company,” says managing director and chief executive, Nagesh A Basavanhalli. As part of the larger plan, besides upgrading its engines to BS-VI and bringing technologies like CNG that claim to be at least 30 per cent more fuel-efficient, Greaves is working with partners on hybrids and electric.
SPR’s Taneja asserts that while his firm is not holding back any investment, it is a lot more cautious and trying to not set up greenfield plants. It is instead optimising production at existing plants. “While we look for other opportunities, we have to invest a lot in BS-VI and that’s not the end of story as the advance fuel emission norms will require further investments. “Clearly, we have to do some tight-rope walking,” he says.
With companies being cautious on fresh investments in ICE-related parts, the demand is going to outpace supply, says F R Singhvi, joint managing director at Bengaluru-based engine parts maker Sansera Engineering. With so much talk around EVs, no new company is going to invest in a new engine parts unit. This will result in the number of suppliers coming down and capacities will shrink. This will be a positive for existing suppliers like Sansera, he says. “We are in a good situation for the next 15 years,” asserts Singhvi, adding that Sansera will consider investment in EVs only after it reaches critical mass. It doesn’t take long to forge collaborations or buy out a start-up, he feels.
Even as mass adoption of EVs will be slow in India, traditional powertrain component suppliers “must act now, or else risk losing the opportunity to Chinese suppliers,” says Wilfried Aulbur, senior partner, Roland Berger. Indian companies need to acquire technology inorganically, reach global markets swiftly and demonstrate capabilities to global and local automakers, he says.

Auto component makers gearing up for likely disruption from EV mobility

January WPI inflation falls to 6-month low of 2.84%, in line with CPI data

The Wholesale Price Index (WPI)-based inflation rate fell — in step with the consumer price inflation (CPI) rate — to a six-month low of 2.84 per cent in January, from 3.58 per cent in December, on the back of lower increases in the prices of food and petroleum.
The CPI-based inflation rate came down in January to 5.07 per cent, from 5.21 per cent in December. While both are down, the moderation in the latter was sharper.
This, along with the expected rise in the CPI inflation rate from the first quarter of the next financial year, shows that the gap between the two might widen in coming months, according to Icra Principal Economist Aditi Nayar.
While the CPI rate rose in December from 4.88 per cent in November, the WPI rate fell from 4.02 per cent.
The WPI food inflation rate decreased to a four-month low of 3 per cent in January, from 4.72 per cent in the previous month.
However, the rate for vegetables continued to remain elevated in January even as it fell to 40.77 per cent from 56.46 per cent in December.
The rise in onion prices also moderated, but was still high at 193.89 per cent in January, against 197.05 per cent in December.
Every category of food items, barring milk, saw moderation in price rise, or price fall.

The rise in the case of milk prices went up to 3.93 per cent in January, compared to 3.85 per cent in December.
Prices of wheat and pulses increased at lower rates.
The rate for fuel items halved to 4.08 per cent in January, against 9.16 per cent in December.
It was only manufacturing that saw a rise in the inflation rate to 2.78 per cent, from 2.61 per cent in this period.
This led to an increase in the core inflation rate (in manufactured items except food products), widely tracked by policymakers. It rose to 3.4 per cent in January, from 3.1 per cent in the previous month.
“Higher commodity prices and a seasonal reset of prices at the beginning of the year resulted in a considerable uptick in core inflation,” Nayar said.

January WPI inflation falls to 6-month low of 2.84%, in line with CPI data

Sensex ends around 34,300 mark; Nifty near 10,550; PNB crashes 13%

The benchmark indices ended higher on Thursday, taking cues from its key Asian counterparts. The S&P BSE Sensex had hit a high of 34,585 in intra-day deals, but trimmed gains as trade progressed during the day.

Among individual stocks, Punjab National Bank (PNB) countinued its journey south on Thursday with the stock slipping nearly 8%. The management tried to assauge investor concerns a day after the state-owned bank said that it had detected some fraudulent and unauthorised transactions worth about Rs 1.13 trillion ($1,771.69 million) at one of its branches in Mumbai.

 

Punjab National Bank MD & CEO Sunil Mehta on Thursday made it clear that the bank will not spare anyone, senior or junior, who was involved in the fraud, saying the second-largest bank will honour all their bona fide commitments. He also said that the scam was detected by bank officials for the first time on January 25 and they had reported about it to the concerned agencies.

GLOBAL MARKETS

In global markets, Asian stocks gained on Thursday after Wall Street brushed aside strong US inflation data and surged, a counterintuitive move that also saw the dollar pinned at two-week lows even as Treasury yields jumped in anticipation of a quicker pace of US interest rate hikes.

Japanese stocks were higher despite fresh gains for the yen, which had sent the Nikkei Stock Average to four-month lows on both Tuesday and Wednesday. The index was up 1.6% after having fallen in 12 of the prior 15 sessions. Financials were among the big gainers as US Treasury yields hit fresh multiyear highs Wednesday. That included Dai-ichi Life, which jumped 3.7% to erase the week’s decline.

 

Sensex ends around 34,300 mark; Nifty near 10,550; PNB crashes 13%

PMO was aware of the PNB scam almost two years ago: Congress

The Congress on Thursday said that a whistleblower had alerted the government in 2016 about the Rs 115 billion banking fraud by fugitive diamond merchant Nirav Modi but Prime Minister Narendra Modi and Finance Minister Arun Jaitley ignored the tip.

Congress spokesperson Randeep Surjewala said whistleblower Hari Prasad had written to the Prime Minister’s Office as early as July 2016, alerting the government about the “biggest bank loot scam in 70 years” in independent India.

 

“What does the Prime Minister do? Nothing. What does the Finance Ministry do? Nothing.

What does the Corporate Affairs Ministry do? Nothing. What does the Financial Intelligence Unit of the Finance Ministry do? Nothing,” Surjewala told reporters on Thursday.

“You are in power, a fraud is happening under your nose. What were you doing and how did they let the accused escape? Face the truth and answer questions.”

He also asked Prime Minister Modi what the fugitive billionaire was doing with him at the World Economic Forum in Davos in January.

He said the “chhota Modi” was part of a delegation travelling with Prime Minister Modi despite “the complaint against him”.

PMO was aware of the PNB scam almost two years ago: Congress

RBI ready to inject additional liquidity into banks by March end

 

The Reserve Bank of India will be ready to inject adequate amount of extra cash into banks if needed ahead of March-end to give flexibility to lenders to manage their liquidity mismatches that typically happen at quarter-end, it said in a release on Thursday.

 

The Reserve Bank of India said it “stands ready” to provide additional cash “using a combination of appropriate instruments” without giving any further details on specific steps, to address any extra demand for liquidity due to advance tax payments and increase in withdrawal of cash from banks towards March-end.

The 10-year benchmark bond yield briefly eased by 1 basis point to 7.58 per cent, but came back to 7.59 percent as hopes of open market purchases of bonds stayed feeble.

The RBI will also allow standalone primary dealers to avail term repo auctions on March 28, it said.

RBI ready to inject additional liquidity into banks by March end