18 Jan, 2017
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Indian Economy News
January 17, 2017
ND has initiated a new section of daily news, where our news desk compiles the latest news on the Indian economy, to keep our readers abreast and updated on daily economic state of affairs.
The economy news compilations bring business news reports that are relevant today and tomorrow, based on the new pattern of current affairs, and for English awareness. This gives vital inputs on the various sectors of the Indian Industry and trade.
· India fuel Consumption
· GST to rollout on 1 July
· New credit card users rise
· “Nagaland Health Project”
· Danone nutrition business to double India revenue by 2020
India fuel consumption expected to reach 200 million tonnes in FY17, as per oil ministry
IBEF: January 17, 2017
India’s demand for petroleum products is increasing at the fastest rate among large economies of the world. The fuel consumption for 2015-16 increased 10.9 per cent to 183.5 million tonnes and is expected to reach 200 million tonnes in 2016-17, as per Mr A K Shawney, Additional Secretary, Ministry of Oil. The expected consumption for 2016-17 would be the highest such demand in past 16 years.
Stage set for GST rollout on 1 July
Livemint: January 17, 2017
New Delhi: The goods and services tax (GST) is set to be rolled out from 1 July after the centre and the states struck a consensus on the contentious issue of sharing of administrative powers.
The way is now clear for the Union government to table the associated bills in the second half of the upcoming budget session of Parliament commencing from 31 January. To be sure, there are other issues that need addressing; for instance, the GST council will have to also resolve the various tax slabs.
At the end of the ninth GST council meeting on Monday, both sides agreed to work towards meeting the new deadline and sharing administrative control over small and big taxpayers in a fixed ratio.
Both, but especially the centre, conceded some ground to generate a consensus on this long-pending issue that was threatening to derail the implementation of the singular piece of tax reform which will, for the first time, economically unify the country.
The centre had earlier targeted a rollout on 1 April.
“There was a significant headway in today’s meeting,” said Union finance minister Arun Jaitley, adding that the council was of the view that it may not be easy to implement GST from 1 April given the work that is remaining.
“Industry also needs to be given time to prepare for GST rollout. So GST council is of the view that 1 July may be a more realistic target.”
There will be an estimated 8 million taxpayers under GST.
As per the agreement arrived between the centre and the states, small taxpayers with an annual revenue of less than Rs1.5 crore under GST will be divided between the states and the centre in the proportion of 90:10 for the purpose of scrutiny and audit. This will be done randomly.
All taxpayers above this revenue threshold will be equally shared (again randomly) between the centre and the states. The divisions will also not make a distinction between goods and services.
For intelligence-based assessments, powers of scrutiny and audit will be shared between the centre and the states.
Further, through a special provision of the law, states will also be empowered under integrated GST (IGST) law to administer taxpayers in the ratio mentioned above. At present, the power to levy and collect IGST is with the central government.
The centre also yielded to the states’ demands for taxation powers in territorial waters up to 12 nautical miles in the IGST law.
All states except West Bengal agreed to this new formula, said Jaitley, adding that West Bengal finance minister Amit Mitra “disagreed to the limited extent of sharing of small traders in the ratio of 90:10 and wanted the division to be 100:0”.
- Pandiarajan, Tamil Nadu’s representative in the GST council, said the division is reflective of the on-ground resources of the centre and the states, though some states would have preferred a larger pool of the bigger taxpayers.
In the next meeting of the GST council on 18 February, the council will finalize the draft laws—the central GST law, the state GST law and the IGST law—after incorporating the changes that have been agreed upon. Thereafter, the time-consuming task of assigning items to different tax slabs will begin. Information technology systems also have to be readied to meet the implementation date.
Finalizing the rollout date helps the government incorporate GST revenues in its budget calculations.
“Excise and service tax collection will be budgeted for three months and GST for the remaining 9 months,” said a senior finance ministry official, adding that the GST numbers will be calculated on the assumption that the rates will be split equally between the centre and the states.
Harishanker Subramaniam, national leader, indirect tax, EY India, said the stage is now set for introduction of GST bills in Parliament and state assemblies in February/March. “It is now clear that the new date for GST implementation will be 1 July 2017, which gives some time for industry to prepare. It’s indeed a very positive development and takes GST journey forward,” he said.
New credit card users rise post demonetisation; SBI issues record cards in December
Economic Times: January 17, 2017
Mumbai: The second largest card issuer in the country SBI card has seen a significant rise in new card issuances post demonetization. In the month of the December alone SBI added 1.15 lakh new credit card users and its total card issuance tally has now reached 47.5 lakh. “Demonetisation has given the card business a leg up the increase in transactions has been exponential and we believe if we continue to put more and more transactions on the electronic platform then it will bode quite well for the card business,” said Arundhati Bhattacharya, Chairman, SBI. “After 9th November we are aware that there has been a change in the way people do their financial transactions more and more transactions are happening on the digital platform.”
According to RBI data till October, HDFC Bank had issued 8.3 million credit cards, while SBI Card had issued 4.1 million credit cards. Likewise ICICI Bank which is the third largest player in the credit card market had issued 4.06 million credit cards; Axis Bank had issued 2.89 million credit cards.
Prior to demonetization SBI Card which holds 15% of the total credit card market added 85000 credit card users on a monthly basis this number was around 65000 card additions per month in 2015. The average spends on SBI cards have also increased by 25-30 per cent post demonetization. SBI Card has also launched a co-branded credit card with Future Groups fashion and lifestyle departmental store Central to offer benefits to consumers in the premium lifestyle and fashion space.
“Since demonetisation card transactions have gone up to 85 per cent from 61 per cent in Central. We are looking forward to much more,” Future Group CEO Kishore Biyani said here. “We are targeting revenue of Rs 3,500 crore for 2017-18, and are adding 16 more stores next year,” he added.
The Central SBI SELECT and SELECT+ Cards offer an accelerated reward points structure, where cardholders earn 20 reward points for every Rs 100 spent in Central stores.
Dining and entertainment spends earn the cardholder 10 points per Rs 100 spent, while all other categories earn them 2 reward points per Rs 100. It also offers up to Rs 5,000 to cardholders.
India Signs Financing Agreement with World Bank for US$ 48 Million for “Nagaland Health Project”
Press Information Bureau: January 17, 2017
New Delhi: A financing agreement for IDA credit of US$ 48 million (equivalent) for the ‘Nagaland Health Project’ was signed with the World Bank here today. The Financing Agreement was signed by Mr. Raj Kumar, Joint Secretary, Department of Economic Affairs on behalf of Government of India and Mrs. Genevieve Connors, Acting Country Director, World Bank (India) on behalf of the World Bank. A Project Agreement was also signed by Dr. L. Watikala, Principal Director, Directorate of Health & Family Welfare, Government of Nagaland and Ms. Genevieve Connors, Acting Country Director, World Bank.
The Objectives of the project are to improve health services and increase their utilization by communities in targeted locations in Nagaland. Communities in targeted locations will benefit from project activities at the community and health facility levels while the population of the state as a whole will benefit from improvements in higher-level facilities as well as system-wide investments. The project will directly benefit about 600,000 people. It will support and complement existing systems and mechanisms involving communities under the National Health Mission.
The closing date of Nagaland health Project is 31st March, 2023.
Danone bets on nutrition business to double India revenue by 2020
Livemint: January 17, 2017
New Delhi: Danone SA, Europe’s largest yogurt maker, will focus on its nutrition business, and not dairy, to double its revenue in India by 2020, said Rodrigo Lima, managing director, Danone India Pvt. Ltd, the local unit of the French company.
Besides launching products in the existing infant foods business, the maker of Farex baby food and Protinex supplements will enter the medical nutrition business by June. It is also exploring entering the drinking water market on its own with products from its global portfolio.
“We want to bring the water business to India. But it’s too early to say how soon,” said Lima. Water is Danone’s third largest business globally, generating €4.7 billion in revenue in 2015. The comparatively smaller medical nutrition business contributed €1.5 billion.
Interestingly, this is not the first time the €22.4-billion-firm is trying to tap the drinking water market in India. Danone earlier sold flavoured water B’lue, and mineral water Qua in the country through a joint venture (JV) with the Rahul Narang Group. But the partners called off the JV after they got into a legal battle.
Danone set up its dairy business in India in 2010, and started selling yogurts. But dairy remained a small business, contributing just about 20% of Danone’s revenue in India. Globally, dairy is Danone’s largest business, posting revenue of €11 billion in 2015.
The company declined to disclose its revenue from India but claimed it had a 12% share in the infant foods market with Farex and about 45% share of the protein supplement market with Protinex. The so-called early nutrition or infant foods business generated €4.9 billion in revenue for Danone globally in 2015. About 80% of Danone’s business in India comes from the nutrition segment.
In July 2015, Danone merged its nutrition and dairy businesses. Its business in India includes the Wockhardt Group nutrition business that Danone acquired in 2011.
Danone, which launched Aptamil—an infant formula brand—on Monday in India, plans to launch 10 new products in 2017 to support its target of India doubling revenue by 2020, said Lima.
Next in line is Neocate—a hypoallergenic medical nutrition product for infants and children with diagnosed allergies which will be launched in June. Danone was not able to launch the product earlier due to regulatory hurdles. In August last year, India’s food regulator Food safety and Standards Authority of India (FSSAI) decided to allow imports of special food items meant for children with “inborn errors of metabolism”, which are only manufactured by a few companies such as Danone, Swiss packaged food firm Nestle SA and American healthcare company Abbott Laboratories.
Danone has not been able to make a mark in India’s organised dairy market, which is estimated at Rs 80,000-90,000 crore. While the company has a presence in 20 cities with products available across 200,000 retail outlets, its flagship yogurt is available only in six cities. Interestingly, more than two-thirds of Danone’s business in India comes from chemist shops. Lately, it has started tapping the e-commerce channel to sell nutrition products.
“The challenge with fresh dairy is logistics and supply chain. In any case, we are into the value-added segment. To maintain the quality, we have our own trucks and own supply chain. And, that’s not very easy to manage,” said Lima.
Danone’s India portfolio consists largely of flavoured yoghurt, lassi and mishti doi – which have been developed by its researchers in India. The yoghurt and baby foods segments are growing rapidly. In 2014, yoghurt was a $931 million market in India, with a compound annual growth rate of 34.5% during 2009-14.
Baby foods grew at 14% on an average during the five years between 2009 and 2014 to become a $478 million category, according to an August-2016 report by consulting firm KPMG in India.
For Danone, India is the fastest growing market in south Asia, said Lima. “India is a strategic market for Danone that holds huge potential,” he said. The company also caters to neighbouring Bangladesh, Nepal and Sri Lanka from India. During the past six years, the company has invested Rs 1,800 crore to build manufacturing facilities in Haryana and Punjab.
“Nutrition, fortified food and fortified beverages are growing very fast in India. Every company, essentially the multinationals who have such products in global portfolio, are looking at this segment which is estimated at around $2.1 billion at present and is projected to reach $6 billion in the next few years. It is logical for Danone to give a push here as the market is still at a nascent stage. While they will continue to play a niche game in the dairy segment, nutrition could actually be the growth driver,” said Rajat Wahi, partner and head (consumer markets), at consulting firm KPMG in India.
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