Not just the government, its companies and undertakings also have sustained their robust capex pace in the first quarter of 2017-18. The central public sector enterprises (CPSEs) and departmental undertakings (DUs) with annual capex plans of Rs 500 crore and above have invested Rs 57,500 crore in April-June this year — though this was only 18% of the annual target, in no year has Q1 capex by these entities been anywhere close to this year’s. Riding on defence projects, the Centre’s budgetary capex grew a whopping 58% to Rs 52,536 crore in April-May this year.It is unclear whether the spending by the Centre via budget and its firms has helped arrest the decline in gross fixed capital formation (GFCF) witnessed in the fourth quarter of the last fiscal, as private investments have hardly recovered. Nevertheless, the data from the specified CPSEs and DUs signal that public spending, which was the principal growth driver in 2016-17, retained that role into the current financial year.These entities had reported a record annual capex increase in 2016-17 with investments of Rs 2.54 lakh crore. In the first half of the last financial year, their investments from own resources and borrowings were, however, just around Rs 60,000 crore. Their capex target for the current year was set at a comparatively lower Rs 2.36 lakh crore, but going by the Q1 figure, that did not result in any slowing of the investments. In addition, these entities will get Rs 69,600 crore this year as budgetary capex support.Among the government entities, the National Highways Authority of India (NHAI) was the largest investor in Q1FY18, followed by Power Grid Corporation (PGCIL), Indian Oil and ONGC (see chart). The NHAI, which aims to construct 3,500 km of highways this year, invested about Rs 20,000 crore, or 35% of the total investments by these entities in the first quarter.PGCIL, which is aggressively participating in railway electrification projects and other transmission works, came in second with a Rs 6,333-crore investment in April-June of 2017. NTPC, which has about 24GW of capacity under construction, invested Rs 5,070 crore, or 18% of its annual target of Rs 28,000 crore, in Q1 of 2017-18. Of the 40 government undertakings which reported capex of Rs 500 crore and above, eight including Bharat Sanchar Nigam Nigam (29%) and Steel Authority of India (29%) achieved more than 20% of their annual investment targets in Q1 this year. BSNL, which is a key player in the government’s scheme of expanding digital infrastructure in rural areas, has plans to invest Rs 4,300 crore in 2017-18.The issue of stalled projects is proving to be sticky. In the June quarter of this year, these were above 12% of under implementation projects, much the same as the level in FY17. According to CMIE, private sector has announced projects worth Rs 84,300 crore in Q1FY18, lowest since June 2015.
The government collected a total Rs 2,35,307.75 crore last fiscal by way of a host of cesses, including those of education, Swachh Bharat, Krishi Kalyan and other surcharges, Parliament was informed today. In a written reply to the Lok Sabha, Minister of State for Finance Santosh Kumar Gangwar said the total revenue generated from education, Swachh Bharat, Krishi Kalyan and other cesses and surcharges in 2016-17 under direct tax was Rs 46,939.17 crore.The amount generated from the aforesaid cesses and surcharges under the indirect tax category stood at Rs 1,88,368.58 crore last fiscal. In the Budget 2015-16, Finance Minister Arun Jaitley had proposed to levy a Swachh Bharat cess of up to 2 per cent ‘on all or certain services, if need arises’. The cess kicked in from November 15, 2015. Also, to a separate query, Gangwar said that till mid-June 2017, 413 benami transactions were identified since coming into effect of the amended Benami Transactions (Prohibition) Act, 2016.“Provisional attachment of properties under the Act was made in 233 cases. Value of properties under the attachment is Rs 813 crore,” the minister said. The benami properties attached include deposits in bank accounts, jewellery, immovable properties and the like, he added. The Benami Transaction (Prohibition) Act, 1988, was comprehensively amended through the Benami Transactions (Prohibition) Amended Act, 2016, to provide for an effective regime for prohibition of such transactions. The amended Act came into effect from November 1, 2016.To another query, the minister said the Enforcement Directorate has registered 2,349 cases under the Prevention of Money Laundering Act, 2002 (PMLA), conducted 736 searches and issued 789 provisional orders attaching property worth of RS 2,299 crore. It has arrested 130 persons and filed 370 prosecution complaints till June 30, 2017, under the PMLA. As on July 12, 2017, the Ministry of Corporate Affairs has removed 1,62,618 companies from the Register of Companies by following the due process under the Section 248 of the Companies Act, 2013, Gangwar replied to a separate question.
The Goods and Services Tax was not an “easy reform to implement” but it has evoked “great” public support with the government deciding not to blink in the face of opposition to the new taxation measure, Union Finance Minister Arun Jaitley said today. “We have today reached a stage of history where there is a great amount of popular support behind reforms because people have become restless. They are not willing to be satisfied with a situation wherein India cannot reach up to its potential,” he said here. Jaitley was in the city to address a GST Conclave organised by various industry bodies like CII and FICCI.“I can say with a reasonable expectation for the future that it (GST) was not a very easy reform to implement. Occasionally, there are people who try and prevent any reform from happening,” he said. Jaitely said he had learnt in the last few years that one should not blink if convinced that a reform was in the national interest. “If you pause, blink, go into a reconsideration mode, then those who want to trip you will never allow those reforms to take place,” he said.However, this time there was “great amount of public support” for the Goods and Services Tax as people have become “restless,” he said.The finance minister said the pressure was on those who were blocking important legislations, disrupting parliament or when there was a time gap when the GST amendment was not allowed to be passed. Such ‘public pressure’ existed even on governments to continue to act and act correctly, and the popular opinion in the country was undergoing a “transformational change,” he said. “Therefore, let me say, that it is the people who have compelled this reform and brought the Centre and states together,” he said. The finance minister said the Centre was aware of several issues being raised, adding that he was “conscious” of the difficulties, and therefore, constant interactions were happening on GST.
British consumer morale has sunk back to depths hit just after last year’s Brexit vote and worse may be to come as households’ view of the broader economic situation dropped to a four-year low, according to a survey on Friday. Market research firm GfK’s consumer confidence index fell to -12 in July from -10 in June, a one-year low and slightly below the median forecast in a Reuters poll of economists. The figures are likely to strengthen the conviction of Bank of England officials who want to keep interest rates on hold ahead of next Thursday’s policy decision. “All bets must now be on a further drift downwards in confidence,” said Joe Staton, head of market dynamics at GfK. The component of the survey which measures households’ assessment of the economic situation over the past year – a good guide to official data on household spending – hit its lowest level since July 2013. This was around the time Britain’s economic recovery started in earnest. Although unemployment is running at its lowest level since the 1970s, Staton pointed to a growing squeeze on household finances. The Brexit vote in June 2016 led to a big fall in the value of sterling, which has pushed up inflation, eating into consumers’ disposable income this year. “If Brexit negotiations continue to deliver more questions than answers, it’s unlikely the overall index score will find any tailwinds for some time,” Staton said. Although the minority of BoE rate-setters who want to hike interest rates think exports and investment will soon compensate for a consumer slowdown, others are wary about how long the downturn will last. Britain’s economy failed to build much momentum over the past three months after almost stalling at the start of the year, reducing an already slim chance that the BoE will soon reverse last year’s emergency interest rate cut.
The Reserve Bank is expected to go for a 25 basis points (bps) repo rate cut in its policy review meet on August 2 as inflation is likely to have reached a new normal of 4 per cent, says an HSBC report.According to the global financial services major, inflation in India has fallen dramatically, and though the excessively low level it witnessed this fiscal is not sustainable, the rebound may not be too sharp either.A cut in key policy rates is likely as the country’s inflation differential with the world is normalising, inflation expectation is moderating and food prices are also receding, the report said.”All considered we continue to expect a 25 bps rate cut in the August 2 meeting. We expect the central bank to maintain its neutral stance, which we believe is consistent with moderate rate cuts,” HSBC said in a research note. The report noted that inflation may already be at a new normal of 4 per cent. “We’ve said this before, and we have found new evidence since India may have already become a 4 per cent inflation economy,” HSBC added.Beyond August, we see a risk of a further 25 bps rate cut later in the year if CPI inflation (without the direct impact of the seventh pay commission housing) continues to undershoot the 4 per cent target, even in the second half of FY18.”For now, however, we see it rising to the 4 per cent handle over the second half, but much will depend on reservoir levels and price of perishable food items from here on,” the report added. The retail inflation, which the RBI mainly factors in while deciding interest rate, has declined to a historical low of 1.54 per cent in June. The wholesale price inflation for the month to has dropped to eight month low.In the monetary policy review in June, the RBI left key rates unchanged with Governor Urjit Patel noting that the central bank wanted to be more sure inflation will stay subdued.Despite inflation moderating sharply in April, the Monetary Policy Committee (MPC) decided to leave policy rate unchanged as a “premature action at this stage risks disruptive policy reversals later and the loss of credibility”.
Britain’s economy grew by just 0.3% in the second quarter of 2017 after what government statisticians called a “notable slowdown” in the first half of the year. The expansion in the three months to June followed 0.2% growth in the first quarter and was in line with City expectations for the eagerly awaited first estimate of the economy’s recent performance. Official data for gross domestic product showed that of the three big sectors of the economy, only services were bigger at the end of June than in March, posting growth of 0.5% over the quarter. “The economy has experienced a notable slowdown in the first half of this year,” said Darren Morgan, the ONS’s head of national accounts. The British economy has been in the grip of a slowdown this year as inflation has climbed to a four-year high, pinching consumer spending and raising import prices. Responding to the figures, Philip Hammond, UK chancellor, said the government was “not complacent” about the economy as the country begins its EU exit talks. “We need to focus on restoring productivity growth to deliver higher wages and living standards for people across the country. That is why we are committed to investing in infrastructure, technology and skills to deliver the best possible base for strong future growth”, said Mr Hammond. Today’s second quarter GDP estimate was just below the Bank of England’s expectations of 0.4 per cent growth but was in line with an average forecast from private sector economists. The BoE will be revealing its latest outlook on the economy next week, in its first Inflation Report since three members of the rate-setting committee voted in favour of an interest rate hike in July. Darren Morgan, head of GDP at the ONS said the UK economy has “experienced a notable slowdown in the first half of this year”.
The Federal Reserve moved into the ready position Wednesday for the next phase of its retreat from its post-crisis economic stimulus campaign. In a statement after a two-day meeting of its policy-making committee, the Fed said it would start reducing its bond holdings “relatively soon” so long as moderate economic growth continues. The Fed remains officially sanguine about lower than expected inflation. The stance is likely to reinforce market expectations that the Fed will take action to increase borrowing costs at its next meeting, in September. Rather than raising its benchmark rate, the Fed is expected to announce it will begin to reduce its bond holdings. The Fed accumulated more than $4 trillion in Treasury securities and mortgage-backed securities as part of its campaign to reduce borrowing costs for businesses and consumers. Under its exit plan, which it described in June, it would gradually reduce those holdings — initially at the slow pace of $10 billion a month. The Fed has held borrowing costs at low levels since the financial crisis to increase economic activity by encouraging borrowing and risk-taking. The agency is now trying to raise costs to reduce those incentives. By the end of the year, the Fed projects that interest rates could return to a level that would neither encourage nor discourage economic activity. So far, however, markets have largely shaken off the Fed’s retreat. Borrowing costs remain low and loan terms have shown little sign of tightening. Some measures show financial conditions have eased since the Fed began its retreat.