The uncertainty regarding the US election outcome impacted the Indian rupee which plunged to a two month low mark during Wednesday’s trade session.
The rupee hit an intraday low of 74.88 as there were indications that the US presidential results might be contested in courts.
At around 3.15 p.m., the rupee traded at 74.80 to a greenback.
“Markets would not like a delayed result, which can lead to prevalence of more risk-off sentiment,” Sajal Gupta, Head, Forex and Rates, Edelweiss Securities.
“No matter who wins. Stimulus shall be coming. So expect US dollar to weaken in two week’s time after a clear win.”
At the end of the day’s trade, the rupee stood at 74.7462 from its previous close of 74.4063 to a greenback.
“A lack of clarity on the outcome of the US Presidential Election has created a lot of uncertainties,” said Nish Bhatt, Founder and CEO, Millwood Kane International.
“Global equity and currency market have reacted according to it. With the US Dollar gaining strength, the Indian rupee saw a decline, as it slipped towards the crucial 75 per US dollar mark.”
Rahul Gupta, Head of Research, Currency, at Emkay Global Financial Services, said: “The USDINR spot is respecting the immediate resistance of 75, but the caution and volatility will keep the appreciation intact.”
“For the coming sessions, we expect USD-INR spot to trade in between 74-75.50.”
Lending major State Bank of India on Wednesday reported a rise of 51.88 per cent in its standalone net profit for Q2FY21 on a year-on-year basis.
Accordingly, the lenders’ net profit increased to Rs 4,574 crore from Rs 3,012 crore reported for the corresponding period of the previous fiscal.
Besides, the Net Interest Income (NII) increased to Rs 28,181 crore in Q2FY21 from Rs 24,600 crore in Q2FY20, an increase of 14.56 per cent YoY.
“Bank has delivered a strong performance in Q2FY21 with all round improvement in ‘Profitability, Capital Adequacy and Provision Coverage Ratio, including Additional Provision over Minimum Regulatory Provisions’ required,” the lender said in a statement.
Amid the farmers protest at 32 locations in several parts of Punjab and Haryana, the Railways has lost revenue from freight to the tune of Rs 1,200 crore, the Railway Ministry said on Wednesday.
A railway spokesperson in a statement said the Railways continue to lose revenue as freight operations remain forcibly suspended due to the track blockages in Punjab.
“Till Date more than 2,225 freight rakes could not be operated upon carrying vital commodities. Loss already expected to have crossed Rs 1,200 crore already,” the spokesperson said.
He said that the agitators have continued dharna at platforms and near railway tracks. “Train movement again suspended due to operational and safety considerations as agitators have suddenly stopped some train movements and sporadic blockade continued at various places, especially around Jandiala, Nabha, Talwandi Sabo and Bathinda,” he said.
He said, as per the report at 6 a.m. on Wednesday, the farmers’ agitation was continuing at 32 places — 31 in Northern Railway and one in North Western Railway division.
Farmers are protesting against the three controversial Agriculture Bills that were passed in Parliament in September.
Railway Minister Piyush Goyal had written to Punjab Chief Minister Captain Amarinder Singh on October 26 seeking assurance about the safety of tracks and running staff to resume operations.
The official said that due to the continued blockages at sections of tracks in Punjab, there has been a major adverse impact on the freight movement and, hence, on the availability of vital commodities for the farm, industrial and infrastructure sector as well.
He said that all passenger trains passing through the state of Punjab have been adversely impacted and till date more than 1,350 passenger trains have been cancelled, diverted or short terminated.
“All inward and outward goods transportation, including essential commodities have been affected adversely in Punjab, Jammu and Kashmir, Ladakh and Himachal Pradesh. Number of freight trains, including loaded trains remained stuck as such for periods upto 15-20 days,” he said.
The official also pointed out that many freight customers, after having suffered business losses, are getting diverted to other modes of transportation.
The farmers agitation started on September 24 in Punjab after blocking railway tracks and stations. From October 1 onwards all movements had to be suspended as agitation spread all over Punjab which affected complete train operations in Firozpur Division, partially in Punjab area of Ambala, Delhi and Bikaner Division.
The Railways resumed operation of limited goods trains on October 22. However, within two days the services were again suspended due to operational and safety considerations as sporadic blockade continued at various places, especially around Amritsar, Nabha, Talwandi Sabo, Firozpur, Moga, Jandiala and Bathinda.
Prime Minister Narendra Modi will chair the Virtual Global Investor Roundtable (VGIR) on Thursday.
The VGIR will be organised by the Union Ministry of Finance and the National Investment and Infrastructure Fund. It is a dialogue between leading global institutional investors, Indian business leaders and the highest decision makers from the government of India and financial market regulators.
Union Finance Minister Nirmala Sitharaman, Union Minister of State for Finance Anurag Thakur, RBI Governor Shaktikanta Das and other dignitaries will also be present on the occasion.
The roundtable will witness participation from 20 of the world’s largest pension and sovereign wealth funds with a total assets under management (AUM) of about $6 trillion.
These global institutional investors represent key regions including the US, Europe, Canada, Korea, Japan, Middle East, Australia and Singapore. Some of these include funds like Singapore’s Temasek Holdings, Canadian Investment Fund, Korean funds, JBIC, Australian Super etc.
The event will witness the participation of key decision makers of these funds, i.e., the CEOs and CIOs. Some of these investors would also be engaging for the first time with the government of India.
Apart from global investors, the roundtable will also see the participation of several top Indian business leaders.
Addressing the media here, Economic Affairs Secretary Tarun Bajaj said that Ratan Tata, Mukesh Ambani, Nandan Nilekani, Deepak Parekh, Uday Kotak and Dilip Sanghvi will be the major Indian business personalities present at the roundtable to provide the Indian perspective on investments and opportunities.
The event will focus on discussions around India’s economic and investment outlook, structural reforms and the government’s vision for the path to a $5 trillion economy.
The event will provide an opportunity to leading global investors and Indian business leaders to engage and deliberate with senior policymakers on how to further accelerate the growth of international investments in India.
Further, in the next two weeks, the Prime Minister will also meet global investors on a one-to-one basis virtually.
The upcoming roundtable and the following meetings are part of the government’s push to attract foreign investments and boost the economy.
India’s merchandise exports in October 2020 fell 5.4 per cent to $24.82 billion, as compared to $26.23 billion in the same month last year as Covid-19 pandemic shrank global demand for oil, resulting in sharp contraction of petroleum products exports from the country.
Exports during April-October 2020-21 also declined 19.05 per cent to $150.07 billion as global economies remain subdued affecting trade.
The value of India’s merchandise imports in October 2020 was $33.6 billion, as compared to $37.99 billion in October 2019, a decline of 11.56 per cent. Merchandise imports during April-October 2020-21 were $182.29 billion, as compared to $286.07 billion during the same period last year, exhibiting a negative growth of 36.28 per cent.
India was, thus, a net importer in October with a trade deficit of $8.78 billion, as compared to trade deficit of $11.76 billion, an improvement by 25.34 per cent, a Commerce Ministry statement said.
As the ministry release, in October, the value of non-petroleum exports stood at $23.21 billion, registering a positive growth of 1.84 per cent over October 2019. The value of non-petroleum and non-gems and jewellery exports in October 2020 was $20.28 billion, as compared to $19.07 billion in October 2019, registering a positive growth of 6.34 per cent.
In October, oil imports were $5.98 billion, as compared to $9.73 billion in October 2019, a decline by 38.52 per cent.
Non-oil imports were estimated at $27.62 billion, as compared to $28.26 billion in October 2019, showing a decline of 2.26 per cent.
Major commodities of export which have recorded positive growth during October 2020 vis-a-vis October 2019 are: cereals (369.30 per cent), Rice (112.15 per cent), oilmeal (76.62 per cent), iron ore (73.89 per cent), oilseeds (54.06 per cent), carpet (37.67 per cent), ceramic products and glassware (34.62 per cent), drugs and pharmaceuticals (21.82 per cent), and spices (21.61 per cent) etc.
But, exports in the month largely remained affected due to negative growth recorded in October by petroleum products (53.30 per cent), cashew (21.57 per cent), gems and jewellery (21.27 per cent), leather and leather manufactures (16.69 per cent), man-made yarn/fabrics/made-ups etc. (12.82 per cent) etc.
India has granted tax free status to Abu Dhabi’s Sovereign Wealth Fund (SWF) – MIC Redwood 1 RSC Ltd – to expedite foreign investment in the country’s priority areas during the Covid pandemic.
With this, MIC Redwood has become the first foreign SWF that has been notified and granted 100 per cent income tax exemption for long-term investments to be made in the specified priority sectors in India.
A Finance Ministry statement said that India has gradually opened up the economy for FDI, except for a very few sectors, and has also extended a lot of tax concessions for sovereign funds to attract long-term investments in India’s infrastructure sector.
MIC Redwood has been provided 100 per cent income tax exemption to income from interest, dividend and long-term capital gains for its investment in India’s priority sector. This was part of the Finance Act, 2020.
Now with the Central Board of Direct Taxes (CBDT) notification, MIC Redwood became the first notified SWF which will be availing this exemption.
“This 100 per cent income tax exemption facility was well received by the SWFs and Pension Funds across the globe and a large number of SWFs and Pension Funds have shown interest in making investment in India’s infrastructure sector.”
The CBDT issued detailed guidelines on July 22 to facilitate the process of SWFs’ notification. Notified foreign Pension Funds were also granted similar exemption subject to fulfilment of certain prescribed conditions.
An official closely in the know of the matter said that to expedite foreign investment in India’s priority areas during the Covid pandemic time, the process of notification of MIC Redwood 1 RSC Ltd was completed in a record time.
On September 18, MIC Redwood 1 RSC Ltd made the application for seeking tax exemption notification as per the CBDT guidelines. Amidst the challenges of Covid-19, all deliberations and meetings between the applicant and tax authorities were held through video conferencing and communications were made only through emails.
MIC Redwood 1 RSC Ltd submitted its final replies on October 20 and after that the process of notification including consultation with Ministry of Law & Justice for legal vetting of the notification, etc, has been completed in less than two weeks, and with the completion of all legal and other formalities, the notification granting 100 per cent tax-exemption was issued on November 2.
The Indian government, in order to incentivise long-term investment by the SWFs of foreign governments in priority sectors, had granted through the Finance Act, 2020, a 100 per cent income tax exemption to income of a notified SWF in respect of its investment made in the specified infrastructure sectors.
The income tax exemption to SWFs and the Pension Fund is expected to provide foreign funding to the infrastructure sector and to boost the growth in the infrastructure sector.
The government had issued a notification on July 6 to broaden the scope of this exemption and made all sub-sectors of Harmonised Master List of the infrastructure eligible for this income tax exemption.
The Finance Ministry will soon come up with a fresh round of economic stimulus, Economic Affairs Secretary Tarun Bajaj said.
Addressing the media at the national capital, he said that the Department of Finance has received suggestions and discussions are on in the ministry regarding the next set of measures amid the pandemic. It will be announced by Finance Minister Nirmala Sitharaman, he said.
Bajaj’s statement comes just over a week after he said that the Centre is open for further measures to boost the economy.
Last month, the Finance Minister had also said that the Centre has not closed the option for another stimulus package.
In May, the government came up with the Rs 20 lakh crore ‘Aatmanirbhar Bharat’ economic package. Both the rounds of stimulus so far have received more flak than appreciation from the industry and experts, as many are of the opinion that they are inadequate, more so in terms of boosting demand.
A recent Moody’s report said that that the second round of fiscal stimulus amounts to just 0.2 per cent of the country’s real GDP forecast for the financial year 2021 and in total, the two rounds of stimulus bring the government’s direct spending on coronavirus-related fiscal support to just around 1.2 per cent of GDP.
India is likely to spend around $513 billion on infrastructure by the year 2030 to accommodate its growing population, according to a report by Mace.
A report titled ‘INSIGHTS 2020: Blueprint for Modern Infrastructure Delivery’ said that other large countries will also incur equally large infrastructure spends.
“By 2030, India will be spending $500 billion a year to accommodate its rapidly expanding population, the USA will be spending $665 billion to maintain its status as a global super power, and Peru will be spending $28bn a year to make it more resilient to natural disasters like El Nino,” it said.
During a survey conducted by Mace to find the reasons for impact on projects and programmes across the globe, it found that lack of clarity of outcome when deciding on which schemes to take forward as a major issue. Often decisions are driven by political pressure rather than rigorous cost and benefit analysis, the report said.
“The poor predictive abilities of project teams in their early stages, who are pressured into providing fixed point price estimates and programmes well before accurate predictions are possible or realistic,” it said.
Further, procurements based on ‘cheapest price’ rather than ‘value’ to fit within unrealistic initial budgets. On large and complex projects, ‘cheapest price’ procurement is a false economy, it added.
Jason Millett, CEO for Consultancy at Mace, was of the view that around the world, good infrastructure is vital for socioeconomic prosperity, both directly through investment and jobs, and indirectly through thing like improvements to transport connectivity and access to clean water.
He added that India is no different and, unfortunately, not all infrastructure projects are properly planned and delivered, resulting in delays, cost overruns and under-delivery against expected benefits.
“The negative impact of this is significant, with our calculations showing that, in India, this could result in an additional cost of Rs 10,820 billion by 2030. Globally, the cost could be as much as $900 billion,” Millett said.
This financial burden, combined with a perceived lack of delivery capability due to project delays and mismanagement, risks severely damaging public confidence in the sector, he said.
“With COVID-19 placing greater emphasis on the importance of infrastructure as an economic multiplier, it is more important than ever that we get this right. Our major projects and programmes must have clarity of direction and outcome-focused decision making to ensure they do not become a burden, but rather an enabler for post-pandemic growth,” said Millett.
Commenting on the report, Anuj Puri, Chairman for Anarock Group said: “Construction halt, labour shortage and revocation of toll collection were some of the major challenges India’s infrastructure sector faced due to the COVID-19 lockdown since March.”
He noted that the government’s focus has shifted primarily towards building healthcare infrastructure to accommodate the pandemic’s fallout. “Even now, after a staggered easing of lockdown rules over the last months, major infrastructure work across the country have not resumed usual pace,” Puri added.
“In India, there is a very real need to ensure timely implementation. Many of India’s infrastructure projects were already delayed even before the pandemic,” he said.
In the view of the festive season, the Indian Railways is witnessing a huge demand for rail tickets as out of the 736 special trains currently in operation, 327 are facing waitlisting, officials said.
Addressing a virtual press conference, Railway Board Chairman and CEO V.K. Yadav said: “We are monitoring these 327 trains on a daily basis. Once we determine the nature of the waitlist — for how many days is the waitlist and how long, we will run clone trains on those routes.”
He said that railways have been saying that it will introduce trains wherever necessary. “But they will be only reserved trains and will follow all coronavirus protocols,” the CEO said.
According to data provided by the Railways, the average occupancy of these special trains is around 92 per cent.
The Railways, which had suspended all passenger train services since the lockdown in March, has so far earned Rs 3,322 crore as revenue from the segment, Yadav said, adding that it is 90 per cent less than what it earned during the same period last year.
According to the Railway Ministry, other than the 736 special trains that are being operated, the Railways is also running 200 services of the Kolkata Metro, 2276 Mumbai suburban services, 20 special clone trains and 436 festival special trains from October 20 to November 30.
Yadav said that while the overall occupancy of the 736 trains is around 92 per cent, 19 trains have occupancy below 30 per cent, 44 have occupancy between 30 per cent to 50 per cent, 83 trains have occupancy between 50 per cent to 75 percent and 327 trains which have waitlisting.
He also said that the Railways is geared to begin suburban services in cities in addition to Mumbai, adding that discussions are underway with the West Bengal and the Tamil Nadu state governments in finalising modalities for the resumption of their suburban services.
While passenger trains have all but stalled, the Railways’ freight business seems to be speeding forward with incremental loading of over 14.32 MT over October 2019.
In October this year, the freight revenue was Rs 869 crore more than last year and it also saw the highest ever automobile loading.
The Railway Board chief said that while 320 rakes of automotives were loaded in October 2020, 162 were loaded in 2019, thus meaning a 97.5 per cent increase.
Over all this year, the cumulative automobile loading surpassed last year with 1,156 rakes as compared to 886 rakes till October 2020 which is a 30.5 percent increase, Yadav added.
Gita Gopinath, chief economist of the International Monetary Fund (IMF), has urged policymakers to provide more fiscal stimulus to boost the recovery from the Covid-19 pandemic as the global economy is in a liquidity trap.
“For the first time, in 60 per cent of the global economy — including 97 per cent of advanced economies — central banks have pushed policy interest rates below 1 percent. In one-fifth of the world, they are negative,” Gopinath wrote in an op-ed article in the Financial Times, adding central banks have little room to further cut interest rates if another shock strikes, Xinhua news agency reported.
“It has led to the inescapable conclusion that the world is in a global liquidity trap, where monetary policy has limited effect. We must agree on appropriate policies to climb out,” Gopinath said on Monday, noting fiscal policy must play a leading role in the recovery.
Gopinath suggested that fiscal authorities can actively support demand through cash transfers to support consumption and large-scale investment in medical facilities, digital infrastructure and environment protection.
“These expenditures create jobs, stimulate private investment and lay the foundation for a stronger and greener recovery,” she said.
Gopinath noted that “the importance of fiscal stimulus has probably never been greater” because the spending multiplier, the pay-off in economic growth from an increase in public investment, is much larger in a prolonged liquidity trap.
“Monetary policy has and will remain central to this effort, but with the world in a global liquidity trap it is time for a global synchronised fiscal push to lift up prospects for all,” said the IMF chief economist.
In its World Economic Outlook report released last month, the IMF revised up the 2020 forecast for global economy to a contraction of 4.4 per cent. Despite the upward revision, the IMF said the ascent out of this crisis is likely to be “long, uneven and highly uncertain”.
