Reserve Bank of India Governor Shaktikanta Das (Photo: IANS)
Persistently high inflation fanned in part due to supply side disruptions along with seasonal factors led the Reserve Bank of India to maintain the key lending rates.
Accordingly, the Monetary Policy Committee of the central bank in its penultimate meet for 2020, decided to maintain the repo rate – or short-term lending – rate for commercial banks, at 4 per cent.
Besides, the reverse repo rate stands unchanged at 3.35 per cent, and the marginal standing facility (MSF) rate and the ‘Bank Rate’ at 4.2 per cent.
The MPC voted to maintain accommodative stance, thus opening up possibilities for more future rate cuts.
It was broadly expected that the RBI’s MPC might hold rates as recent data showed that retail inflation has been at an elevated level during June.
“The MPC evaluated domestic and global macroeconomic and financial conditions and voted unanimously to leave the policy repo rate unchanged at 4 per cent,” RBI Governor Shaktikanta Das said.
“It also decided to continue with the accommodative stance of monetary policy as long as necessary – at least during the current financial year and into the next year – to revive growth on a durable basis and mitigate the impact of COVID-19, while ensuring that inflation remains within the target going forward.”
Continued focus on reform measures ushered in by the government even as the country faces one of its toughest crises during the pandemic, will trigger a faster recovery of the economy with the industry reposing confidence of a bounce back sooner than expected, Confederation of Indian Industry (CII) president Uday Kotak said.
Talking about the state of the economy post the unlock phase, Kotak said there was now a big departure from the depressed mood that had gripped the industry during the early stages of lockdown.
“The industry now sees their sectors seeing a better pick up and capacity utilisation than what they had projected in March 2020. While in the first few weeks post the lockdown, the pickup was attributed to pent up demand, the sustenance of demand particularly in some non-essential sectors have lifted hopes of a faster recovery,” he said.
The CII president said that the determination by the government to meet the challenges by pushing through some long pending reforms like the labour reforms and those for the farm sector apart from the call for an Atma Nirbhar Bharat have helped improve the confidence of the industry.
With the further easing of restrictions and successive unlocking of the economy initiated from June, most of the high frequency data points have shown a continued normalisation in activity levels, as compared to the multi-year lows seen in April.
“The robust performance of merchandise exports can be largely ascribed to the industrial units being able to function with greater capacity in September, as restrictions on mobility were eased and local lockdowns were fewer. Slowly improving global trade is also helping on the margin,” said Kotak.
Prime Minister Narendra Modi
The fewer localised lockdowns have also resulted in the industrial activity now moving into an expansion territory. On a sequential basis, manufacturing purchasing managers index (PMI), which is a widely tracked indicator of business activity jumped to 56.8 in September – a eight year high – from a low of 27.4 seen in April.
“This is indicative of the fact the manufacturing sector is slowly but steadily moving towards stabilization and portends well for the recovery prospects of the critical sector,” Kotak added.
The improvement has also been seen in services PMI, with the index value recuperating from a low of 2.0 in April 2020 to 49.8 in September. The improvement seen in domestic PMIs is broadly been in line with the recovery process seen in global PMIs as well.
Among the specific manufacturing sectors, significant improvement in construction equipment has been witnessed after poor performance in April.
After a 30 per cent jump in sales in July, August was one of the best in 40 years. Big demand from the rural sector and investments flowing into the rural sector are translating into sales.
The sales of passenger vehicles have also bounced back to record a year-on-year growth of 14.2 per cent in August, which might get a further boost due to the forthcoming festive season. The improvement in sales of construction equipment and passenger sales point towards recovery process in investment and consumption respectively which has been set in motion.
“This year, the agriculture sector has emerged as a beacon of hope for India’s economy, with a normal and largely well-distributed monsoon and record food-grains production cushioning the rebooting of the economy. A concerted action plan from the government to support the rural sector in the form of Agri-Infrastructure Fund and other key reforms in the sector have also supported the sector”, highlighted Kotak.
While agriculture does not have the heft to offset the sharp contraction in non-agricultural sector (accounting for 85 per cent of GDP), it punches more than its weight in GDP – its share in employment remains the highest at 44 per cent and is a critical supplier of much-needed nutrition during the pandemic. The high frequency indicators in the sector, such as fertiliser sales, tractor sales have all shown an improvement in September over the lows seen in April.
Union Finance Minister, Nirmala Sitharaman. (File Photo: IANS)
Specifically, the tractor industry is now producing at full capacity with bullish sentiment across villages. The tractor sales have recorded an impressive jump over the months, with August seeing a jump of 75 per cent from -79 per cent in April. However, the supply chain disruptions are still a cause for concern.
The bulwark of the economy, the services sector has shown some encouraging signs of recovery as well. With a contribution of over 60 per cent in GDP, for the economy to stage any meaningful bounce-back, the services sector must take the lead.
Despite Covid-19 inflicting deep pain in certain sub-sectors of services like tourism, hotels & hospitality, aviation among others, early signs from the sector are pointing towards resurgence in a few pockets.
For example, railway freight traffic improved 15 per cent in September, with further improvement expected in the subsequent months due to growth in movement of goods on the National Highways.
The latter also resulted in electronic toll collections picking up pace to Rs 17.1 billion in August 2020 from Rs 2.5 billion seen in April 2020.
“Though still early, these are indeed promising signs, pointing towards some semblance of a recovery process taking shape in the various sectors. Going forward, we expect economic activity to continue to normalise further in the coming months,” added Kotak.
Specifically, resilience in the rural economy, helped by a buoyant monsoon season and government spending coupled with an accommodative monetary policy environment is expected to cushion economic activity.
However, our expectation hinges on the fact that there will be no second wave of the pandemic in the ensuing months, he said.
The Indian real estate sector seems to be recovering from a slump in demand during the nationwide lockdown as sales during the July-September quarter jumped over 100 per cent on a quarter-on-quarter basis across seven major cities, according to a report by PropEquity.
Housing sales across these seven cities during the third quarter of 2020 stood at 50,983 units, compared with 24,936 units in the previous quarter.
NCR-Delhi witnessed 295 per cent home sales growth in Q3, while other cities like Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan Region, and Pune clocked 86, 131, 159, 89, 70, and 72 per cent respectively.
However, on a year-on-year basis, sales fell by 35 per cent and new launches were down by 30 per cent.
“The Indian real estate sector is showing some recovery as many projects were launched in the last quarter. With various schemes and offers, developers were able to clear significant inventory. As we move into the festive season, we forecast this recovery to continue with more offers, discounts, and attractive payment schemes to attract more customers,” Samir Jasuja, Founder and Managing Director at PropEquity, said.
Speaking on the National Capital Region market, Ankush Kaul, President of Sales and Marketing at Ambience Group, said: “The NCR market, being one of the biggest in the country, continues to be resilient and presents a new level of optimism to the industry. Being well-supplied across all segments of housing, it caters to all categories of home buyers like those seeking affordable, premium, or luxury homes. This remains the biggest USP of this market. On account of the upcoming festive months, it is likely that the sector will see a further revival in terms of sales numbers.”
Reliance Industries Limited and Reliance Retail Ventures Limited (RRVL) announced that a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA) will invest Rs 5,512.50 crore into RRVL, a subsidiary of Reliance Industries.
This investment values RRVL at a pre-money equity value of Rs 4.285 lakh crore. ADIA’s investment will translate into a 1.20 per cent equity stake in RRVL on a fully diluted basis.
With this investment, RRVL has raised Rs 37,710 crore from leading global investors including Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG and ADIA in less than four weeks.
Mukesh Ambani, Chairman and Managing Director of Reliance Industries, said, “We are delighted with ADIA’s current investment and continued support and hope to benefit from its strong track record of over four decades of value creation globally. The investment by ADIA is a further endorsement of Reliance Retail’s performance and potential and the inclusive and transformational New Commerce business model that it is rolling out.”
Hamad Shahwan Aldhaheri, Executive Director of the Private Equities Department at ADIA, said, “Reliance Retail has rapidly established itself as one of the leading retail businesses in India and, by leveraging both its physical and digital supply chains, is strongly positioned for further growth. This investment is consistent with our strategy of investing in market leading businesses in Asia linked to the region’s consumption-driven growth and rapid technological advancement.”
Established in 1976, ADIA is a globally-diversified investment institution that prudently invests funds on behalf of the Government of Abu Dhabi through a strategy focused on long-term value creation. ADIA has invested in private equity since 1989 and has built a significant internal team of specialists with experience across asset products, geographies and sectors.
Hyderabad based Magfast Beverages has won the battle against beverages MNC, Pepsico for the use of trademark, Mountain Dew.
Magfast Beverages Chairman Syed Ghaziuddin said that they started selling packaged drinking water named ‘Mountain Dew in the year 2000.
“In 2000, I started a company to sell water to the people of Hyderabad as well as India. And that is when I started my idea into work as ‘Mountain Dew’ for my packed drinking water. Due to the quality of the product, this brand name has reached national recognition,” he said.
Ghaziuddin added that in 2003, Pepsico launched a soft drink under the same name and now, the court has dismissed their claims on the trademark.
According to him, its after a 15 year legal battle, Hyderabad court has dismissed the suit filed by Pepsico and rejected the claim on the trans border reputation and infringement claim.
“Though we won the case in December only, I waited till now for the court order. And now regarding compensation, in 2004 the PepsiCo has filed an undertaking by stating that if the case filed is lost by the PepsiCo company, then the company is ready to pay the required compensation to Mag Fast Beverages,” the Hindustan Times quoted Ghaziuddin as saying.
This win is to all the Indian companies who believe in the Make in India campaign by Modi Government, said Syed Ghaziuddin.
Ride-hailing major Ola has failed to get its licence renewed in London due to public safety concerns raised by the city’s transport regulator. The company will continue its operations in the city despite the legal hurdle.
Ola said that it will appeal against the decision of Transport for London (TfL). Under the rules, a company is allowed to operate while appealing the decision of TfL.
The India-based ride-hailing major which began operating in London in February believes that it has corrected all the issues raised by the regulator and hopes to demonstrate them on appeal.
Ola was told by TfL that the company was found not “fit and proper” to hold a private hire operator’s licence, Sky News reported on Sunday.
“At Ola, our core principle is to work closely, collaboratively and transparently with regulators such as TfL,” Marc Rozendal, Managing Director, Ola UK, said in a statement shared with IANS.
Rozendal said that Ola has been working with TfL during the review period and has sought to provide assurances and address the issues raised in an “open and transparent” manner.
“Ola will take the opportunity to appeal this decision and in doing so, our riders and drivers can rest assured that we will continue to operate as normal, providing safe and reliable mobility for London,” Rozendal said.
Besides, London, Ola operates in several other UK cities including Birmingham and Coventry.
Ola’s rival Uber last week won a legal battle over its London licence as a judge ruled in favour of the ride-hailing major, while overturning a ban on the app by the city’s transport regulator.
Uber London Limited brought the appeal against the decision of TfL last year not to renew its London private hire vehicle operator’s licence over passenger safety
Bombay Stock Exchange (BSE) CEO Ashishkumar Chauhan (Photo: IANS)
“The number of people trading in Indian markets increased initially due to the lockdown. So effectively, we see a lot of people coming into the market not only for equities but for the trading part of it because people are sitting at home and want to trade,” says Bombay Stock Exchange MD and CEO Ashishkumar Chauhan
Despite COVID-induced moderation, India’s economic fundamentals remain strong, thereby retaining investors’ interest, contended the chief of the Bombay Stock Exchange.
In a conversation with IANS, BSE MD and CEO Ashishkumar Chauhan pointed out that rising investor participation in the equity segment along with recent industrial recovery trends clearly show the resilience of the Indian economy.
“Overall, I believe that despite a moderation caused by the COVID-19 pandemic, the fundamentals of Indian economy remain strong and GDP growth is expected to rebound from the second quarter of FY 2020-21,” Chauhan said.
“Indian government is seen not only as reformative, but transformative in approach, as seen by the recent farm and labour bill enactments. Foreign investors, in my view, are focussed on such reforms.”
According to Chauhan, India’s economy has shown signs of stability in the last few months with manufacturing and services gradually improving even as coronavirus cases escalated across the country.
“Activity in India’s dominant services sector is picking up and manufacturing has bounced back into expansion due to government push after four successive months of contraction,” he said.
“So clearly the real economy is on the path of recovery, as the markets have indicated. It is early days to predict full recovery but current indications are good.”
Besides, he cited that in the last 1 year, BSE brokers have opened 1.5 crore investor accounts.
In the last 6 months alone, more than 80 lakh investor accounts have been opened on BSE.
Consequently, the stock exchange major has reached a landmark of 5.47 crore investor accounts registered on its platform.
“The number of people trading in Indian markets increased initially due to the lockdown. So effectively, we see a lot of people coming into the market not only for equities but for the trading part of it because people are sitting at home and want to trade,” Chauhan said.
Besides, he pointed out that organised markets’ ability to provide instant liquidity is one of the core reasons for continuance of their operations despite the lockdown.
“The government did not force the markets to close which allowed people who were in need of funds to sell their assets like stocks or mutual fund units, collect their money, use it for other purposes and that would not have been possible if we had closed down the markets,” he explained.
“So, there is a tremendous trust that has been built up in terms of the market’s ability to provide you liquidity albeit at a lower price. Even if the market asset prices had gone down, they also started going up.”
Furthermore, he elucidated that India has been a preferred destination of Foreign Institutional Investors over the past few months.
Bombay Stock Exchange. (File Photo: IANS)
Since the FII outflows in March, the following six months till September 2020 has seen net inflows of over Rs 21,000 crore.
India has continued to receive FII inflows, whereas emerging market peers recorded outflows. For instance, South Korea FII outflows stood at $2.3 billion and that of Taiwan at $2.2 billion.
In terms of IPOs hitting the market in FY21, Chauhan predicted that offerings this year are expected to be more than last year’s listings and amount raised as stock markets are flush with liquidity.
“Several firms had to keep their IPOs on hold due to lockdown curbs, which have hit the markets as the lockdowns have eased,” he said.
“As long as pricing remains fair, public confidence in the IPO market will be there, which in turn will increase the prospects of upcoming IPOs. It will also be crucial for companies to showcase their resilience to the pandemic and how they adapt to the emerging situation.”
In a bid to support Indian app developers, leading digital payments platform Paytm on Monday launched an Android Mini App Store to support local developers take their innovative products to the masses.
Paytm said it will provide listing and distribution of these mini-apps within its app without any charges. For payments, developers will be able to give a choice of Paytm Wallet, Paytm Payments Bank, UPI, net-banking and Cards to their users.
The move comes after its own app was removed by Google from its Play Store recently.
More than 300 app-based service providers such as Decathlon, Ola, Park+, Rapido, Netmeds, 1MG, Domino’s Pizza, FreshMenu, NoBroker have already joined the programme.
“Paytm Mini App Store empowers our young Indian developers to leverage our reach and payments to build new innovative services. For Paytm users, it will be a seamless experience that doesn’t require any separate download and enables them to use their preferred payment option,” said Vijay Shekhar Sharma, Founder and CEO, Paytm.
Mini apps are a custom-built mobile website that gives users app-like experience without having to download them.
Paytm has created the digital infrastructure to enable small developers and businesses to set up low-cost, quick-to-build mini-apps which can be built using HTML and javascript technologies.
The company provides Paytm wallet, Paytm Payments Bank account and UPI at zero charges and levies a 2 per cent charge for other instruments like credit cards.
The company said that the local India’s app store aims to drive the ‘Atmanirbhar Bharat’ mission.
Paytm Mini App Store offers direct access to discover, browse and pay without downloading or installing separate apps.
It comes with a developer dashboard for analytics, payments collection along with various marketing tools to engage with the users.
This app store has been running in beta with select users and witnessed over 12 million visits in September.
“I am proud that we are today launching something that creates an opportunity for every Indian app developer,” Sharma said.
Google recently pulled the Paytm app from the Play Store for not complying with its gambling policies.
Paytm alleged that it was “arm-twisted” by the search engine major to comply with what it called “biased Play Store policies that are meant to artificially create Google’s market dominance”.
The Paytm app was restored on the Play Store after a gap of a few hours.
Daring Google, the financial services platform this week brought back the Paytm Cricket League with UPI cashback and scratch cards.
Paytm said that the cashback was being given following all rules and regulations set by the government.
After a face-off with Paytm, Google also sent notices to Zomato and Swiggy for running cashback-based IPL games and both the food aggregator platforms decided to pause their virtual gaming leagues.
While Zomato was running Zomato Premier League on its app, Swiggy offered ‘Match Day Mania’ during the ongoing IPL 13 matches.
Confederation of Indian Industry (CII). (Photo: Twitter/@FollowCII)
The business fraternity expects a steady recovery in the Indian economy during the second half of the financial year 2020-21, shows a poll of CEOs done by CII.
A statement by the industry body said that India Inc is estimating a capacity utilisation of over 50 per cent during October-March in FY21.
“A steady recovery of the Indian economy is on the anvil as corporate India restarts business and economic activity with lockdowns being increasingly relaxed in many parts of the country. For the first time since the advent of the pandemic in the country in early 2020, India Inc is now estimating a capacity utilisation of more than 50 per cent in the second half of this financial year,” it said.
CEOs of top 115 companies who met at CII’s National Council recently, indicated revival of positive business sentiment and gradual rise in expected corporate performance.
The CEOs of top companies who took the poll included representatives across sectors from metals and mining to manufacturing, auto, pharmaceuticals, health, energy, infrastructure, construction and leading services sectors including ITeS, health, hospitality, tourism and e-commerce.
The apex body also had a large representation of the medium and small sector apart from start-ups, it said.
The statement said that the unlocking of almost all economic activities, along with the reform and revival measures announced by the government and the Reserve Bank of India (RBI) have contributed to the gradual improvement in business sentiments in the second half of the current financial year.
“While in most cases, the performance – revenue or capacity utilisation – is estimated to be lower than the comparative figures in 2019-20, a large percentage of the CEOs polled have shown confidence in the days ahead indicating that the worst may be behind,” it said.
On consumer demand, while 32 per cent of the CEOs are hoping for better prospects, another 27 per cent of them expect no change when compared to the second half of the last financial year.
However, only 31 per cent of the CEOs expected their revenue growth to be in the positive territory in the second half of the current financial year compared to last year. Regarding exports, 40 per cent of the CEOs expect better prospects on exports and 24 per cent of them expect no change in prospects during the second half of the current fiscal when compared to the same period last year.
Apart from the agri-sector that has been in the positive territory there are now clear indications of a smart recovery in some sectors like automobiles, FMCG, consumer durables and construction equipment, the CII statement said.
According to CII, both the Centre and State governments would need to focus on livelihoods in addition to lives and hence efforts need to be made to stall the practice of sudden and ad hoc lockdowns announced by states as well as districts.
These not only further disrupt the revival of economic activities but also do not yield the desired results on lives either, it said.
A report by the Department of Economic Affairs (DEA) claims that various signs of economic improvement were seen in India in the month of September. The report also gives credit to the packages put forward by the government.
The ‘Monthly Economic Review’ for September 2020 cited the estimated growth in the Kharif foodgrain output for 2020-21 to show a recovering economy.
“The implementation of Aatmanirbhar Bharat (AB) package and unlocking of the economy have ensured that economic recovery in India has gained momentum. This is seen in agriculture with production of kharif foodgrains in 2020-21 estimated to go past the previous year’s level,” it said.
It noted that the growth of demand in the rural sector is reflected in registration of two wheelers, three wheelers and passenger vehicles along with tractor sales reaching or surpassing previous year levels in August.
Automobile sales largely recorded improvement last month compared to September 2019, a major reason being the low base – low sales during the year ago.
The report also said that other high-frequency indicators have also improved in sync with global activity. Increase in global demand has led to expansion of India’s export at 5.3 per cent in September on YoY basis, it added.
The recovery in rail freight enabled revenue earnings clocking positive year-on-year growth for the first time since March in the months of August and early September.
The DEA report said that easing of inter-state movement restrictions, quarantine policy and unlocking were accompanied with recovery in rail passenger earnings as well.
At the same time, the report also said that the overall credit growth continues to remain muted amid weak credit demand and heightened risk aversion among banks.
Credit to medium enterprises, however, has witnessed an uptick, according to the Monthly Economic Review for September 2020.
“Bank credit growth continued to moderate in the first six months of this year to reach 5.3 per cent as on 11th September 2020. Bank credit to the commercial sector recorded a growth of 5.4 per cent, mirroring weak credit demand and increased risk aversion in the banking system,” it said.
As per the report, while credit growth to the services sector declined from 10.1 per cent YoY in July to 8.6 per cent in August, credit to trade services picked up significantly to record 12.5 per cent YoY growth.
Growth in personal loans also moderated in August, it said.
However, credit growth to medium enterprises picked up to 2.8 per cent as on August 28 as compared to (-) 3.1 per cent as on July 31.
The report noted that the overall credit to medium enterprises and credit to micro and small enterprises under priority sector lending in August may be attributed to the Emergency Credit Line Guarantee Scheme announced in May under the Aatmanirbhar Bharat economic package of the government and the Reserve Bank of India’s (RBI) liquidity support measures.
As on September 29, the total amount sanctioned under the scheme by public sector banks (PSBs) and private banks to MSMEs and individuals stands at Rs 1.86 lakh crore, of which Rs 1.32 lakh crore has already been disbursed.
