India’s 2020 Q1 GDP Growth may Fall 40 bps

The spread of Covid-19 and its collateral damage on the Indian economy could be at the most 40 basis points if China’s economy slows down to 1.2% in the January-March’20 quarter, a study by Bloomberg Economics, the market intelligence arm of Bloomberg, showed. This is lower than the impact on Euro Area,Japan or Australia and some emerging market peers such as Hong Kong, Korea and Indonesia. The analysis points out that India’s limited presence in global supply chain network could help India with only a marginal impact on its economy and the economy could benefit from the fall in global crude prices and US Treasury bond yields. The initial impact is expected to be the least on Mexico and Spain and the most in Hong Kong and South Korea. Covid-19 is slowly spreading to the rest of the world from China and is expected to have adverse economic consequences across the globe.

6000 Indians have ultra high net worth of over ₹215 cr

India has 5,986 ultra high net worth individuals, each with over US$ 30 million (around Rs.215 crore), and it is globally ranked 12th on the list of countries with most such people.

The United States dominates the ranking with over 2.4 lakh UHNWIs, followed by China with 61,587 and Germany 23,078, according to the Knight Frank Wealth Report 2020 . Globally, over 31,000 additional UHNWIs were created in 2019, bringing the total to more than 513,200.

“The number of UHNWIs in India is predicted to grow by a whopping 73% in the next five years, almost doubling the count to 10,354 from 5,986 in 2019,” said the report.

By 2024, Asia will be the world’s second largest wealth hub outperforming Europe, with a five-year growth forecast of 44%. Despite such a steep rise, it will reach only half the size of North America’s UHNWI population, which is predicted to rise 22% over the same period.

Despite wealth growth and record low interest rates in most advanced economies, the global economic slowdown weighed on prime property prices across the globe. For instance, Mumbai saw a tepid growth of 0.5% last year, Delhi 4.7% and Bengaluru 2.1%. Frankfurt and Lisbon topped the list with an annual price change of 10.3% and 9.6%, respectively.

When it comes to luxury properties, Monaco remains the world’s most expensive city where US$1 million (Rs.7.2 crore) can buy you a mere 16.4 square metre or 176 square feet of space. Comparatively in Mumbai, you can buy 102.2 sq m or 1,098 sq ft (approximate size of a decent two-bedroom flat in the city).

Shishir Baijal, chairman & MD, Knight Frank India, said, “While prime property prices have stayed stable in the past five years, the relative stability of the Indian rupee still allows investors and end-users to buy more prime real estate in India today than in 2015. At -1% for 2020, prime property price growth in Mumbai is expected to face challenges, as the current economic slowdown will continue to influence market liquidity.” Equity investments remained the most attractive asset class for Indian UHNWIs with 83% of them in India plan to increase or maintain their allocations in equities, followed by bonds (77%) and property (51%).

So, which are the best cities for UHNWIs to live, invest and do business in? According to the Knight Frank City Wealth Index, New York captured the top spot from London based on wealth, investment and lifestyle. With London in the second spot, Paris, Hong Kong and Los Angeles round out the top five cities.

The Luxury Investment Index shows ‘collectable handbags’ has topped the index, rising in value by 13% over 12 months to Q4 2019, knocking rare whisky off its number one spot. “The index results show that on an annual basis, handbags outperformed both whisky and art, which both recorded growth of 5%. Classic cars, another strong performer in recent years, slipped 7%,” it said.

RBI Supersedes Yes Bank Board

The Reserve Bank of India superseded the board of Yes Bank and imposed a month-long moratorium, it said in an announcement late on Thursday. It expects to arrive at a credible restructuring plan in the next few days.

“The Reserve Bank assures the depositors of the bank that their interests will be fully protected and there is no need to panic,” it said in a statement. This is the first time the central bank has taken such drastic action with respect to a big bank since July 2004 when the regulator got state-run Oriental Bank of Commerce to take over Global Trust Bank to rescue the private sector lender.

The RBI action follows the lender’s inability to raise funds that would have helped it provide against loan losses. Prashant Kumar, former deputy managing director at State Bank of India, will be the administrator of Yes Bank, RBI said.

Depositors will be restricted to a maximum withdrawal of ₹50,000 even if they have multiple accounts, a government gazette notification said. RBI will relax the withdrawal limit to up to ₹5 lakh in the case of some emergencies.

In the event of medical emergencies, higher education fees or marriage expenses a depositor will be allowed to withdraw up to ₹5 lakh. Drafts and pay orders issued so far will be paid in full, RBI said. “In the absence of a credible revival plan, and in public interest and the interest of the bank’s depositors, (the RBI) had no alternative but to apply to the central government for imposing a moratorium,” the central bank said.

“The Reserve Bank will explore and draw up a scheme in the next few days for the bank’s reconstruction or amalgamation and with the approval of the central government, put the same in place well before the period of moratorium of 30 days ends so that the depositors are not put to hardship for a long period of time.”

The central bank said its preferred option had been a market-related solution. “Since a bank and market-led revival is a preferred option over a regulatory restructuring, the Reserve Bank made all efforts to facilitate such a process and gave adequate opportunity to the bank’s management to draw up a credible revival plan, which did not materialise,” the RBI said. “In the meantime, the bank was facing regular outflow of liquidity.’’ The central bank blamed lax governance standards at Yes Bank over the past few years.

“The financial position of Yes Bank Ltd has undergone a steady decline largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits,” said the RBI. “The bank has also experienced serious governance issues and practices in the recent years which have led to steady decline of the bank.”

Yes Bank will be allowed to repay loans or advances granted against government securities or other securities to the bank by the RBI or by any other bank and remaining unpaid as of Thursday. It would also be allowed to operate its account with the RBI.

The lender, which has seen its fortunes slide over the past 18 months, has been in talks with equity investors over the past year, but had failed to come up with a concrete investment plan.

“The bank management had indicated to the Reserve Bank that it was in talks with various investors and they were likely to be successful,’’ said the RBI statement. “The bank was also engaged with a few private equity firms for exploring opportunities to infuse capital. These investors did hold discussions with senior officials of RBI but for various reasons eventually did not infuse any capital.”

Last month, Yes Bank had informed exchanges that about half-a-dozen investors, including JC Flowers & Co., Tilden Park Capital Management, OHA (UK), part of Oak Hill Advisors, and Silver Point Capital, had submitted “non-binding” expressions of interest. Yes Bank had also postponed its December quarter results announcement, citing fundraising talks, to March 14.

The lender turned wobbly due to surging bad loans and management uncertainty when the RBI declined to extend the term of founder Rana Kapoor as chief executive in 2018. Under his successor Ravneet Gill, the bank managed to raise one round of funds through share sales to institutional investors, but that didn’t prove to be enough.

Maharashtra economy grew at 5.7%

Maharashtra’s economic growth rate during 2019-20 will be the lowest since 2012 (the base year) at 5.7%, according to the state’s economic survey released on Thursday. In 2018-19 the actual growth rate was 6% though the estimate was 7.5%.

The figures for the past two years clearly indicate a slowdown in the country’s largest state economy, said officials, but the expected growth rate for 2019-20 is still higher than that for all of India, which is estimated at 5%.

The survey report, tabled in the legislative assembly by finance minister Ajit Pawar on Thursday, shows a decline in estimated growth rate for industrial sector from 5.5% to 3.3% and for the service sector from 8.1% to 7.6%. The worst-hit in industry is the manufacturing sector, where growth rate is set to go down from 6% in 2018-19 to just 2.7%.

In a reflection of the economic slowdown, Maharashtra’s industrial growth rate is set for a sharp decline in the current financial year. The worst hit sector is manufacturing, despite it being a focus of the Make in India campaign. The latest economic survey for Maharashtra estimates that the sector’s growth would decline to just 2.7% in 2019-20 from 6% in 2018-19.

This will be the lowest manufacturing growth rate of one of the country’s most industrialised states in eight years — Maharashtra’s average for the sector was 7.7% between 2012 (the base year) and 2018.

In contrast, the construction sector is set to grow from 5.1% in 2018-19 to 6.1% in 2019-20, according to the survey. But growth in utility services, including water and power supply, is projected to decline from 9.9% to 6.4%. The mining & quarrying sector is set to see no growth at all, a repeat of the 2018-19 situation.

Nationally, Maharashtra has the highest share of approved industrial proposals, accounting for 17.9% from August 1991 to December 2019. Gujarat, in comparison, has a share of 12.5%. However, actual investment generated by proposals was higher in Gujarat, with a 14% share, compared to Maharashtra’s 10.3%. The economic survey also shows that Maharashtra has a 44% rate of conversion for project approvals. From August 1991 to December 2019, 20,501 industrial proposals with an investment of Rs.13 lakh crore were received, of which, 9,099 projects were commissioned.

The IT sector continues to attract the maximum investment in the state, accounting for 30% of total investments, followed by the fuel industry, which accounts for 11%, and the metallurgical industry, which accounts for 8.4%. These three accounted for almost 50% of investments in the state, the survey states.

The survey shows a slide in the state’s FDI inflows for 2019-20. Figures for April-September 2019 show Maharashtra falling behind Karnataka, though it had done better than its neighbour from 2017-19 onwards.

But cumulative FDI inflows (April 2000 to Sept 2019) show Maharashtra garnering the largest chunk — 28.9%. In comparison, Gujarat accounted for 5.5% and Karnataka 10%. The Annual Survey of Industries for 2017-18 showed that Maharashtra was at the top position in terms of gross value added or value of output. At Rs.2.64 lakh crore, it was 18% of the all-India figure. But exports from Maharashtra are set to decline from Rs.5 lakh crore in 2017-18 to Rs.3.51 lakh crore in 2019-20.

Pune Airport: Domestic flyer footfall increases, international traffic down

Domestic passenger traffic at the Pune airport — grappling with problems due to land unavailability — increased by close to 10 lakh in 2019, according to the state economic survey.

According to figures, in 2018, the total domestic passenger traffic stood at 78.92 lakh. Last year, the figure was 88.19 lakh.

When it comes to domestic cargo however, the airport handled 41,515 metric tonne of cargo in 2018, which increased by only 5,763 metric tonne last year.

In addition, the international passenger traffic of the airport recorded a slight dip in 2019. The airport had recorded 2.51 lakh international passengers in 2018, and 2.50 lakh in 2019.

Mumbai airport witnessed a significant drop of 4.5 lakh domestic passengers in 2018-19 as compared to the previous fiscal, the survey showed. At Nagpur airport, passenger traffic had gone up from 20.8 lakh to 26.9 lakh in a year. The increase was marginal at Aurangabad airport which saw 7,000 more flyers in 2018-19 as compared to the previous fiscal.

Sources at Pune airport said land unavailability was a problem. “While the domestic passenger traffic is good, we expected more international passengers. This was affected as many international flights from Pune were grounded last year, while there are no signs of new flights starting anytime soon,” the source said.

“The length of the runway has been a problem and things are not moving forward due to the land issues. This has hit cargo movement,” the source said.

A total of 33 acres of private land was promised for airport expansion. The previous airport director, Ajay Kumar, had said in January that they had been assured of 10 acres for the cargo handling facility. “The current international cargo hold’s location is a hindrance to the construction of the new terminal,” Kumar had said.

Around 114 metric tonne of international cargo was dispatched in 2019, compared to 51 metric tonnes in 2018. Airport director Kuldeep Singh, however, was not impressed by the over 100% increase. “Our plans to shift cargo operations from present location to new location have still not been finalized. I am sure if and when we get a new cargo complex, our operations will witness a huge a surge,” Singh said.

Maharashtra: Aurangabad airport to get Sambhaji’s name

The state cabinet has approved the proposal to name Aurangabad airport as Chhatrapati Sambhaji Maharaj airport. The proposal will be tabled in both the Houses of the legislature and will be sent to the civil aviation ministry. BJP had demanded that the government rename Aurangabad as Sambhaji Nagar.

The airport is situated in the Chikhalthana area of Aurangabad.

Industries minister Subhash Desai said the ruling MVA alliance is committed to fulfilling the promises made to the people of the state. BJP state president Chandrakant Patil had last week reiterated his party’s demand to rename Aurangabad with the Sena claiming that Balasaheb Thackeray had already done so 25 years ago.

February 2020: Services Sector Sees Fastest Growth in Seven Years

India’s services activity marked its quickest rise in over seven years, coupled with a renewed increase in new export orders and strengthening business confidence.

The IHS Markit India Services Business Activity Index rose from 55.5 in January to 57.5 in February. This is the fastest expansion in services output since January 2013.

Service providers saw a marked increase in new work intakes during February, the second-fastest in over seven years. Finance and insurance, and consumer services firms were the most confident during February, as per the survey report.

A return to growth of new orders from abroad contributed to the increase in total sales. The pace of expansion in international demand for Indian services was moderate, but above its long-run average.

Further, the Composite PMI Output Index that maps both the manufacturing and services sector increased from 56.3 in January to 57.6 in February, remaining above its long-run average of 54.6.

Lima said behind the resilience in the trend for business activity stands healthy demand for services from both the domestic and international markets. February data showed that robust increases in both manufacturing and services output pushed growth of private sector business activity to an eight-year high.

Despite experiencing another increase in outstanding work halfway through the final quarter of fiscal year 2019-2020, service providers restricted hiring activity in February. the rate of job creation was modest and the slowest in three months. Employment rose in four out of the five tracked sub-sectors, the sole exception being finance & insurance. Growth was led by consumer services. Further, input costs in the service economy increased amid reports of higher food, labour, material and oil costs.

As per the survey, the rate of inflation softened from January. Anecdotal evidence suggested that lower prices for onions, and fuel helped curtail inflation. Only a modest increase in selling prices was recorded in February, one that was softer than in January and much weaker than noted for input costs.