Daily Economic News 20 Feb 2017

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21 Feb, 2017

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Indian Economy News

February 20, 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 will be self-sufficient in pulses in next few years: Radha Mohan Singh

Economic Times:  February 20, 2017

New Delhi: Rural India will gain from strong growth in horticulture, poultry, dairies and fisheries, in addition to bumper farm production that is estimated to hit a new record this crop year, agriculture minister Radha Mohan Singh said.

The government’s focus on making India self-sufficient in food grains will ensure that the country does not import pulses in the years ahead, Singh told ET on Thursday, a day after his ministry forecast major crop output to reach nearly 272 million tonnes in the year through June 2017. The estimated production is 2.6% more than the current record, achieved in 2013-14.

“Due to the concerted efforts of scientists to get early-maturing varieties of pulses and increase in minimum support price, pulses production is on the rise for the past two years. I am hopeful that in the next few years the country will be self-sufficient in pulses,” he said.

The minister is optimistic about the farm sector. “The second advance estimate figure of major crop at 271.98 million tonnes has made me very confident that the agriculture growth can further increase,” he said. “Further, (in) production of milk, egg, fisheries and horticulture, things will be even better,” he added. Agriculture growth remained sluggish at 1.2% in drought-hit fiscal 2015-16.

In the previous year, it was almost flat. Monsoon was 12-14% in deficit those years. Ramesh Chand, a member of the government’s premier think tank Niti Aayog, had earlier said that agricultural growth would touch 6% in 2016-17.

Agriculture accounts for 17% of India’s economy and more than half the country’s population depends on farms directly or indirectly. Healthy growth in agriculture is also good news for the fast moving consumer goods segment, which gets about a third of its sales from rural areas. The minister said during this rabi season, crop sowing had expanded 6%. Sowing of wheat grew 7%, while the increase in pulses was 11% and in oilseeds, it was 6%.

Singh said the entire credit of record production of wheat, rice, coarse cereals, pulses and oilseed goes to farmers, state governments, government officials and agriculture scientists. “The weather was good with the country receiving bountiful monsoon rains. The trend should continue with government policy initiatives targeted to double farmers’ income,” he said.

Government policies initiated in the past two years — from credit to farmers on affordable rates and assured supply of seeds and fertilisers to the Electronic National Agricultural Market and assured prices — will significantly reduce the risks that the farmer faces, the minister said. In the Budget for fiscal 2017-18, the government has increased the funds for rural, agriculture and allied sectors by 24% from a year earlier to Rs 1,87,223 crore, he added.


New FDI inflow record possible at US$ 36 billion in 9 months

Economic Times:  February 20, 2017

New Delhi: Overseas investment in India is likely to surge to a record in the year ending March despite temporary growth hiccups ascribed to the currency swap programme.

This underscores India’s status as an island of economic stability, especially as foreign direct investment (FDI) flows worldwide slumped 13% last year amid uncertainty thanks in part to a backlash against globalisation.

India’s FDI in the April-December period rose 22% to $35.8 billion from the year earlier. With three months to go for the fiscal year end, the government expects fresh inflows into equity to top the $40 billion India got in FY16.

Total FDI — which includes inflows into unincorporated bodies, reinvested earnings and other capital — in the nine months to December is pegged at $48 billion against $55.5 billion for the whole of the last fiscal year.

Services topped the list, accounting for 18% of total FDI in the nine-month period, followed by construction development, telecommunications, computer hardware and automobiles. The government has liberalised the country’s FDI policy in the last two years to bring several sectors under the automatic approval route as part of efforts to encourage overseas investment.

“Foreign investor interest is continuing to grow in India. We have a lot more queries from them than ever before,” said Ramesh Abhishek, secretary, Department of Industrial Policy and Promotion (DIPP).

Invest India, the government’s official investment promotion and facilitation agency, is shepherding proposals worth $62 billion spanning 295 deals, of which $3 billion has already come in.

“The investor has shown confidence in the Indian economy,” said Devraj Singh, executive director, tax and regulatory services, EY.

“Over 90% of FDI is coming in through the automatic route, which has expanded in its scope over the last two years.” According to data released by DIPP on Friday, Mauritius, Singapore, Japan, the UK and US were the top five contributors to FDI inflows.

The surge comes even as the government expects growth to slip to 6.5-6.75% in the current fiscal year from 7.9% in FY16 due to global factors and demonetisation. In the February 1 Budget, the Centre announced its decision to abolish Foreign Investment Promotion Board (FIPB) and promised more reforms to make things easier for overseas investors.

“Increased FDI inflows to India is also a function of the economic situation and spare capacity available in other countries,” said Madan Sabnavis, chief economist, Credit Analysis and Research Ltd.

“There are more opportunities in India and now a lot more effort to ease processes here.” Experts said that investors are waiting for a turnaround in the fortunes of sectors such as infrastructure and pharmaceuticals, which could encourage a further surge in overseas interest.

The government is yet to announce the modalities of the new system of processing applications that fall under the approval route.



Food processing sector to generate 9 million jobs by 2024: Study

Times of India:  February 20, 2017

Mangalore: Indian food processing sector has potential to attract US$ 33 billion of investment and generate employment of 9 million persons days by FY 2024, said an ASSOCHAM-Grant Thorton Research paper.

The food processing is a key contributor to employment generation in India. The policymakers have identified food processing as a key sector in encouraging labour movement from agriculture to manufacturing.

By 2024, food processing sector is expected to employ 9 million people in India and expected to generate about 8,000 direct and 80,000 indirect jobs in the state, the ASSOCHAM-Grant Thornton joint study on ‘Food Retail: Investment: Infrastructure’ noted.

According to the study, Indian food processing industry is pegged close to US$ 121 billion to US$ 130 billion. With the second largest arable land in the world, it is the largest producer of milk, pulses, sugarcane and tea in the world and the second largest producer of wheat, rice, fruits and vegetables.

Despite the massive production, the degree of processing is low and ranges between 2-35% for different produce. India is one of the top rankers in the production of bananas, guavas, ginger, papaya etc., although processing levels in the country remain limited. This indicates an extensive opportunity in the food processing sector, adds the paper.

According to the joint study, Indian food and retail market is projected to touch US$ 482 billion by FY 2020 from the current level of US$ 258 billion in 2015, adds the paper.

With globalisation and increasing trade across the borders approximately about 460 million tons of food valued at US$ 3 billion is traded annually. India has thus a great potential for global trade in agricultural and processed food products. The share of food processing exports in total exports was around 12% in the last few years. During FY 2011-15, India’s exports of processed food related products have been growing at a CAGR of 23.3%.

The unorganised sector accounts for 42% of India’s food processing industry. The sizeable presence of small-scale industries points to the sector’s role in employment generation. As per the study, though the market falls under the unorganised sector in the country, the organised sector has a larger share in the secondary processing segment than the primary one.

Food and grocery constitute a substantial part of India’s consumption basket accounting for around 31% share in the total. In contrast, consumers in other countries spend a much lower proportion of their income on food and grocery — 9% in the United States (US), 17% in Brazil and 25%in China. Food and grocery is the largest segment in India’s retail sector, with a share of more than 60% in India’s total retail market in 2014.

India is the world’s second largest producer of food after China. The arable land area of 159.7 mn hectares (394.6 mn acres) is the second largest in the world (after the US). India has a strong raw material base for the food processing industry. India is one of the largest producers of certain fruits, vegetables, pulses, cereals and dairy products such as mangoes, papaya, potatoes, onions, ginger, check peas, rice, wheat, groundnuts, milk and eggs among others.

Strong demand growth

Demand for food processed food rising with growing disposable income, urbanisation, young population and nuclear families

Household consumption set to double by 2020

Changing lifestyle and increasing expenditure on health and nutritional foods

Food processing hub

Indian benefits from large agriculture sector, abundant livestock and cost competitiveness

Investment opportunities arise in agriculture, food infrastructure and contract farming

Diverse agro-climatic conditions encourage cultivation of different crop

Increasing investment

Govt. expect US$ 21.9 bn of investment in food processing infrastructure by 2015

Investment including FDI would rise with strengthening demand and supply fundamentals Launch of infrastructure development schemes to increase investment in food processing infrastructure


Indian Internet of Things market value to touch US$ 9 billion by 2020

IBEF:  February 20, 2017

New Delhi: The Internet of Things (IoT) which comprises of devices connected to the Internet, other than computers and smartphones, is expected to grow to 1.9 billion units in India by 2020 or about US$ 9 billion, as per a report by Deloitte. The country’s IoT market size is expected to increase about 7 times—from US$ 1.3 billion in 2016 to US$ 9 billion by 2020. The current number of devices are estimated to be 60 million. Industries such as utilities, manufacturing, automotive, transportation and logistics are expected to see highest adoption levels of IoT in India by 2020.


Direct Benefit Transfer leads to Rs 50,000-crore savings for government in 3 years

Economic Times:  February 20, 2017

New Delhi: Savings due to Direct Benefit Transfer (DBT) over the last three years have touched Rs 50,000 cr as on December 31, 2016, as per latest government figures. This amount is equivalent to the subsidy paid out under DBT in this financial year, implying nearly a year’s subsidy was saved.

“The savings figure is expected to significantly rise further in the next financial year as the government will be bringing a total of 533 central payout schemes in 64 ministries under the DBT mechanism by March 31, 2018 as per the directions of PM Narendra Modi,” a top government official told ET.

Presently, 84 schemes in 17 ministries are covered under the DBT, up from 34 schemes as on March 31, 2015. “Under UPA, the talk was only about big scams and several lakh crore rupees of losses. There is no scam now…instead we have saved nearly Rs 50,000 cr by crediting the subsidy amounts directly in the bank accounts of the correct beneficiaries and eliminating ghost beneficiaries,” the top official added. Nearly 33 crore people receive various subsidies directly in their bank accounts now through DBT.

As per government’s interim figures as on December 31, the cumulative DBT savings stand at Rs 49,650 cr, pending information from many states. The top government official pitted this figure against the one of Rs 48,860 cr of subsidy transferred through DBT in this financial year till December 31, 2016. The total DBT payout since 2014 till date has been Rs 1.6 lakh cr. “This implies that nearly one year of total subsidy payout has been saved by the government through DBT,” the official said.

Though the DBT mechanism started in 2013 under the UPA on a pilot basis, it took off in a major way only under Modi government after the LPG subsidy scheme (Pahal) was commenced through the DBT mechanism in November 2014. “We saved Rs 15,192 cr in 2014-15, Rs 20,951 cr in 2015-16 and nearly Rs 14,000 Cr in 2016-17 till December 31, 2016 through DBT,” the official said.

The government says it has saved almost Rs 14,000 cr in its Public Distribution Scheme (PDS) by deleting 2.33 cr ration cards so far and better targeting of beneficiaries through DBT. Rs 7,633 cr is cited as the savings in the MGNREGS scheme by the government so far. Rs 399 cr is cited as savings in the National Social Assistance Programme. The biggest saving of Rs 26,408 cr is cited in the LPG PAHAL scheme, including Rs 4,824 Cr in the first nine months of this financial year. The LPG subsidy payout qualifies as the world’s largest cash transfer programme, Centre claims. The government is sticking to its guns on the LPG subsidy savings figure despite the Comptroller and Auditor General of India (C&AG) poking holes in the same in a recent report saying the savings were “exaggerated”.

C&AG said the government had assumed that the 3.11 cr blocked or inactive customers would have availed 12 subsidised cylinders apiece rather than only 6 cylinders as per national average per capita consumption of cylinders.

The major schemes new on DBT platform over the next one year will include Pradhan Mantri Ujjwala Yojana, Atal Pension Yojana, PM Suraksha Bima Yojana and PM Jeevan Jyoti Bima Yojana, PM Crop Insurance Scheme and PM Gramin Awas Yojana.


Apple to start India manufacturing in coming months with iPhone SE: Report

Livemint:  February 17, 2017

Mumbai: Apple Inc will in the coming months start assembling its lower-priced iPhone SE models at a contract manufacturer’s plant in Indian technology hub of Bengaluru, an industry source with direct knowledge of the matter said on Friday.

Apple’s Taiwanese manufacturing partner Wistron Corp is setting up a plant in Bengaluru to focus solely on assembling iPhones, a separate source told Reuters earlier this month.

Apple’s move comes as it seeks to boost its share in the world’s fastest growing major mobile market, where handsets far cheaper than Apple’s iPhones dominate. It also comes as smartphone sales growth is slowing in Asia’s other massive market, China.

To lower prices, Apple has been seeking to set up local production and has been in talks with the Indian government regarding issues such as tax concessions.

The industry source told Reuters the initial manufacturing of the iPhone SE model was not contingent on those concessions.

Apple did not immediately respond to a request for comment.

The Economic Times newspaper earlier on Friday reported Apple planned to initially assemble 300,000 to 400,000 iPhone SE handsets in India. The industry source told Reuters the numbers would be substantially lower to begin with.

The source also said it was too early to say what other phone models Apple would assemble at the Bengaluru plant.

Apple shipped 2.5 million iPhones to India last year, with a third coming in the December quarter, according to market researcher Counterpoint, which estimates that three-quarters of smartphones sold in India were made locally.

In the fourth quarter, Apple ranked 10th in India’s smartphone market but led the premium segment with a 62% market share, Counterpoint said.

Samsung Electronics Co Ltd and a host of Chinese players including Xiaomi and Vivo dominate India’s smartphone market where the vast majority of phones sold are priced below Rs15,000 rupees ($225).

In comparison, the entry level iPhone SE model sells on Amazon.com’s India site for 28,433 rupees ($424). Reuters


Asian Paints to acquire Sri Lanka’s Causeway Paints

Livemint:  February 17, 2017

New Delhi: India’s largest paints company Asian Paints Ltd on Thursday said it has agreed to acquire Sri Lanka’s Causeway Paints Lanka (Pvt.) Ltd in an all-cash deal.

In a stock exchange filing, Asian Paints said its Singapore subsidiary Berger International Pvt. Ltd will make the acquisition. Asian Paints already operates in Sri Lanka through Asian Paints (Lanka) Ltd. The company did not disclose the value of the deal. The acquisition is subject to certain conditions and statutory approvals.

Founded in 1994, Causeway Paints makes decorative and refinish paints for automotive and industrial clients, apart from other products. The company registered net sales of 5,630 million Sri Lankan rupees (Rs253.60 crore) for the financial year 2015-16, up from 4,094.02 million Sri Lankan rupee (about Rs184.42 crore) last year, an increase of 37.5% from the year before.

Asian Paints operates 26 paint factories in 19 countries. In 2015-16, the company posted net sales of Rs12,545.8 crore, up from Rs11,648.8 crore in the previous financial year.

In 2014, Asian Paints bought the sales business of Punjab-based bathroom fittings and accessories company Ess Ess Bathroom Products Pvt. Ltd. It also bought a majority stake in Ethiopian paint and adhesives maker Kadisco Chemical Industry Plc in the same year. In March 2013, it bought 51% equity stake in Sleek International Pvt. Ltd, a modular kitchen maker.

The Indian paint market is expected to reach Rs70,875 crore by the end of 2019-20 from around Rs40,300 crore in 2014-15, the industry body Indian Paint Association (IPA) said on 6 January.

The decorative paint market is expected to witness compound annual growth rate (CAGR) of 12.7% and the industrial paint market CAGR of 9.5%, IPA said in a release. While the decorative paint market size in the country was Rs30,385 crore, the industrial paint market was Rs9,915 crore in financial year 2014-15, it said.


Ola, Uber see rides rise fourfold in 2016: report

Livemint:  February 17, 2017

Ride-hailing services Ola and Uber together clocked a nearly fourfold increase in the number of rides booked through their platforms in 2016 from a year earlier, according to a report by market research and advisory firm RedSeer Management Consulting Pvt. Ltd.

Ola (ANI Technologies Pvt. Ltd) and Uber Technologies Inc, together completed about 500 million rides in 2016, as against about 130 million rides the year before, according to the study. While Ola and Uber did not comment on the numbers, industry and company executives said Ola clocked about 6 million weekly rides on an average between September and December last year across its offerings of cabs, autorickshaws and shuttle buses.

Uber India president Amit Jain said in an interview in September that Uber’s completed trips had risen from 1.6 million in January 2016 to 5.5 million at the end of August.

Mint could not independently ascertain the number of rides clocked by Uber.

“One of the big things which happened was ride sharing. That was one of the fastest growing sections within the overall cab aggregator segment. Since the costs came down, even people who could not afford a cab, started getting one. The second big trigger was aggressive marketing in cities beyond the top three markets, which are Bengaluru, Delhi and Mumbai,” said Anil Kumar, chief executive of RedSeer.

According to industry executives, Ola was a clear leader until late 2015, when Uber turned on the heat with reduced fares and cash payments.

Jain, a former Rent.com executive who assumed charge of Uber in India in June 2015, said in the September interview that Uber had clocked 165,000 trips a week in January 2015. This implies that Uber grew 33 times in the 20 months between January 2015 and August 2016.

“Uber is growing in India by investing in engineering and technology to ensure we continue excelling where it matters, such as delivering the best experience to riders and drivers and ensuring that cars arrive quickly and reliably. We are delighted to see how ride-sharing is benefiting riders, drivers and cities across India,” an Uber spokesperson said in an email response.

An Ola spokesperson cited several third-party reports published in 2015 and one published in May 2016 to claim that Ola “consistently serves more than 78% cab users in India. Ola’s monthly active users is at least 70% more than Uber’s monthly active users consistently.”

The online ride-hailing market in India has been exploding at the same time. The country of 277 million internet users, which in the first quarter of 2014 was barely a blip in the global market for cab aggregators (in terms of rides), grew into the third biggest market after China and North America in the first quarter of 2016, according to the Internet Trends 2016 report by Mary Meeker, partner at Silicon Valley venture capital firm Kleiner Perkins Caufield and Byers.

Besides, after Uber sold its China business to Didi Chuxing in August, India has become for Uber what it is for another American tech giant, Amazon—a market it cannot afford to lose.

Industry experts say Ola pulled away from its rival after launching Micro, a low-cost offering, in March last year. However, the success of Micro also proves that a change in prices dramatically affects business. “It is pretty much a price game now. There are elite segments which have a view on services, but apart from them, consumers largely look for a cheaper option and that is the only criteria for them. Uber has been aggressive with prices last year. That’s why Ola launched Micro to match the prices and gained some market share. But Uber has stronger financial muscle. If Ola raises another round, they will give a good fight as well,” said RedSeer’s Kumar.

Uber’s most affordable offering, UberGO, is priced at Rs7 per km in Bengaluru, Rs6 per km in Delhi and Rs8 per km in Mumbai, while Ola’s cheapest service, Micro, costs Rs6 per km in all three cities.

According to the RedSeer customer preference index, a survey of 3,107 consumers in more than 12 cities shows Uber has been gaining popularity. While customer preference for Ola surged in the quarter ended March 2016 following the launch of Micro, Uber turned around in the second half.

The customer ride preference index score for Ola dropped from more than 70% in the March quarter last year to less than 60% in the December quarter, the report said.

To be sure, both Ola and Uber have rolled out new services to attract more consumers. While Uber rolled out hourly rentals earlier this month, Ola has been at it since June. In May, it had also launched inter-city cab booking. Apart from this, in an attempt to nurture a loyal customer base, Ola launched a monthly subscription service called Select, where subscribers get a preference in cab allocation and are not subjected to surge pricing, among other benefits.

The company also launched a so-called connected-car experience, called Ola Play, in November last year, where consumers can listen to music or watch videos in tablets installed in the cars.


Isro plans Saarc satellite launch in March, Chandrayaan-2 in early 2018

IBEF:  February 17, 2017

Sriharikota: The Indian Space Research Organisation (ISRO) plans to launch 2 satellites in March and April 2017. The launch vehicle GSLV MARK II would carry the satellite meant for the benefit of the South Asian Association for Regional Cooperation (SAARC) nations, and the GSLV MARK III will inject the GSAT-19, a communication satellite. ISRO also plans to launch Chandrayaan–2, India’s second mission to the Moon, in the first quarter of 2018.


Railways’ target: Laying 9.5 km of tracks every day

Economic Times:  February 17, 2017

New Delhi: Indian Railways has set a daily target of laying 9.5 km of tracks to complete its ambitious line doubling and capacity expansion projects earmarked for the next financial year.

The railway ministry is importing US-made track-laying machines that can lay around 1.5 km of tracks per day as against the 100 meters of tracks the railways lays manually on an average.

The railway ministry has set aside a fund of around Rs 35,000 crore to undertake these works which include construction of new lines, gauge conversion and doubling of capacity.

Of the total budget, around Rs 10,000 crore will be spent on construction of railway lines of dedicated freight corridors that will connect Delhi to Jawaharlal Nehru Port in Mumbai and Ludhiana in Punjab to Dankuni in West Bengal.

“The US made new track laying machines being manufactured by Harsco will be used majorly across India from now on.

“We have the target of delivering 9.5 km every day. It is for the first time that the railways will be working on such a deadline,” a senior railway ministry official said.

For the next financial year, the total track laying target has been set at 3,500 km whereas the track electrification target has been set at 4,000 km.

The target is significantly higher than the current one, where railway is constructing around 2,000 km of new tracks.

Railway minister Suresh Prabhu has also instructed all his officials to wind up the long pending projects on priority basis. The ministry has already sent instructions to zonal railways.

The railway ministry plans to spend `1.31 lakh crore — the highest-ever for capacity expansion — in the next financial year. It has received `55,000 crore from the finance ministry as gross budgetary support.

“We have been told to move to the project-based funding model where all existing projects are to be provided funds immediately so that they are not delayed any more,” the official said.

The ministry is also going to undertake major track renewal works to make the railway network safer in the wake of the recent train derailment cases.

“Around 3,600 km of track renewal will also be taken in the next year,” the official said.


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