September 2019: GST Mop-Up Lowest in 19 Months

The Goods and Services Tax collections declined 2.67% year-on-year to ₹91,916 crore in September, the lowest in 19 months, bearing the brunt of the slowing consumption demand.

Experts said the latest official data is indicative of the slowdown faced by the economy.

During the April-September period, domestic collection of GST grew 7.82% from the year ago period, but GST on imports declined in the first half of the fiscal. The total GST collection has grown 4.90% year on year.

Out of the total GST tax collected, CGST accounted for ₹16,630 crore, SGST stood at ₹22,598 crore, and IGST was at ₹45,069 crore. The rest came from cess.

Economists said this adds to pressure on the fiscal. 

A slew of Divestments lined up

The government is getting set for a series of blockbuster divestments — lining up strategic sales in four blue-chip, state-run companies and firming up plans for embattled Air India.

A group of secretaries have cleared strategic sales in Bharat Petroleum Corp. Ltd, BEML, Container Corporation of India and Shipping Corporation of India. Stake sales in THDC India and Neepco, both power companies, have also been approved. These could be taken over by state-run NTPC.

The Air India expression of interest paperwork is also likely to be finalised and issued soon, setting in motion the formal process for the state-owned airline’s sale, two government officials familiar with the process said.

The government proposes to raise ₹1.05 lakh crore from disinvestment in the current financial year. It had exceeded asset-sale targets of ₹1 lakh crore in FY18 and ₹80,000 crore in FY19.

The Air India EoI with all relevant details for investors is in the process of being finalised and could be cleared by the special mechanism headed by home minister Amit Shah over the next fortnight, the official said.

“About ₹30,000 crore debt (in Air India) would be taken over by the government,” the second official said. “The EoI would provide completely clarity to investors looking to buy.” While BEML has the requisite approvals in place, the Department of Investment and Public Asset Management will take proposals for BPCL, SCI and Concor soon to the special mechanism set up to approve their disinvestment.

At the current market value, the government stake in BPCL is worth about ₹55,000 crore, but the actual realisation may be higher if it gets a control premium from the strategic investor. The government expects up to ₹65,000 crore. Another official said the sale of the government’s stake, currently at 53.3%, will not require parliamentary approval. “We have got the issue examined… The law has been repealed,” he said. “Parliament will only need to be informed.”

The government expects the open bidding for BPCL to be aggressive in view of the company’s extensive retail network.

The government’s 54% stake in BEML, a state-run entity under the defence ministry, is worth about ₹2,100 crore at current prices; the 54.8% stake in Concor about ₹20,000 crore and the 73.75% stake in SCI could fetch ₹1,300 crore. Share prices of these companies closed 1.38-2.27% higher on the BSE Monday.

With barely six months left in the fiscal year, the government is keen to push through strategic sales and public offers aggressively, hoping to make the most of the buoyancy in the markets following corporate tax cuts. The initial public offer of the Indian Railway Catering and Tourism Corp. opened on Monday.

India gets its first excess monsoon in 25 years

India experienced its first excess monsoon in 25 years, with the season officially ending on Monday with a countrywide rain surplus of 10% on the back of a once-in-100-years rain surge in September that threw all forecasts off target.

September ended with a staggering 52% higher-than-normal rainfall. This was the wettest September the country has seen since 1917 and the second wettest in India Meteorological Department’s records since 1901.

Overall, this was an “excess” monsoon year, which is defined as June-September rainfall at 10% or more above the long period average. The season ended with a countrywide rainfall of 968.3 mm against a normal of 880.6 mm, which is the highest since 1994 — the last time India had an excess monsoon — when 1,001.6 mm was recorded.

The intense rains in September, and in August to a lesser extent, clearly came as a surprise because none of long period forecasts captured it. The IMD had predicted a normal monsoon with seasonal rainfall at 96% of LPA (4% below LPA). The forecast had a 4% error margin on either side. In the event, the monsoon ended 10% higher than the upper end of the forecast.

Private forecaster Skymet was even wider of the mark, having forecast a below-normal monsoon with season’s rainfall pegged at 93% of LPA.

Both IMD and Skymet had correctly forecast a pick-up in monsoon’s performance in the second half of the season (August-September) but came nowhere close to gauging the magnitude of rainfall.

The big gaps between actual rainfall and the forecasts in the regions highlights the extremely hazardous nature of long range monsoon forecasts, which undertakes the scientifically challenging task predicting rainfall over a period of four months.

Pai said what made the difference were the low pressure systems from Bay of Bengal that persisted over the land for a long time, bringing copious amounts of rain. “These are inter-seasonal random events that no seasonal forecast can capture,” Pai added.

Interestingly, this was the first time since 2013 that the monsoon ended up higher than IMD’s forecast.

Malaysian PM Calls India An ‘Invader In Kashmir’

Malaysian Prime Minister Mahathir Mohamad while addressing the United Nations General Assembly on Saturday (28 September) indirectly called India an “invader and occupier” in Kashmir thus drawing a sharp reaction from Indian social media users.

During his speech Mahathir Mohamad alleged that “despite UN resolution, Kashmir has been invaded and occupied. There may be reasons for this action but it is still wrong”.

He then urged India to work with Pakistan and draw out a peaceful resolution for this dispute and also dubbed Kashmir as a separate country.

Such a statement by Mahathir Mohamad who had recently displayed cordial relations with India and Prime Minister Narendra Modi, led to various social media users demanding exemplary action against the country including placing a trade embargo.

Mamallapuram Gets a Facelift : Modi-Xi Informal Summit

The seaside highway leading to Mamallapuram from Chennai is a lot quieter now with the message of Swachh Bharat being echoed all the way as the ancient temple town decks up for an informal summit between Prime Minister Narendra Modi and his Chinese counterpart Xi Jinping. Both flanks of the highway have turned a plastic-free zone. Grass mowed to precision, wild shrubbery chopped off, flickering street lights replaced, and petty shops and hawkers removed — the town is a lot cleaner and greener ahead of the October 11-13 high-profile event.

About 30 km from Chennai, Mamallapuram was declared a UNESCO world heritage site for its monuments of 7th century AD. Restoration work was expedited and cleaning completed as the two leaders are expected to visit Arjunar Tapas, which depicts Arjuna’s penance to please Lord Shiva; Krishna’s butterball or the mythical drop of butter for Lord Krishna simulated by a large boulder perched precariously on a rock slope as if it might roll down any moment; the Five Rathas or the five monolithic temples built in the reign of Pallava king Narashimavarman-I; and the famed Shore Temple, a sea-facing monument dedicated to Lord Shiva. A statue of Buddha has come up outside the Shore Temple for a cultural connect.

The whole town has gone under a security blanket for the summit. This is the second edition of the Modi-Xi informal summit. The first one was held at Wuhan, Hubei, in April 2018, which was considered the flashpoint that revived ties between the neighbours after the Dokalam standoff.

There is, however, a discontent among the residents. While the beautification has made them happy, they are displeased with surfing schools being asked to stop all activities for 10 days, fishermen barred from venturing into the seas from October 4 and roadside shops knocked down. 

June Quarter : CAD Narrows to 2%

India's current account deficit – or the excess of imports over exports — contracted to 2% of the gross domestic product in the three months to June, paced by higher remittances and services income that helped offset the impact of a wider trade gap.

In the year-ago quarter, CAD was 2.3% of the total output.

In dollar terms, CAD for the quarter amounted to $14.3 billion, compared with $15.8 billion in the year-ago period, according to the preliminary statistics published by the Reserve Bank of India.

Net services inflows increased by 7.3% over June last year, mainly on the back of a rise in net earnings from travel, financial services and telecommunications, computer and information services. Private transfer receipts, which essentially comprise of remittances by overseas Indians to their relatives back home, rose to $19.9 billion, increasing 6.2%.

As a result, CAD narrowed despite higher trade deficit during the quarter at $46.2 billion, compared with $45.8 billion in the year-ago quarter.

The capital account rose to $27.9 billion, compared with $4.8 billion in June 2018. This includes foreign investments, comprising foreign direct investmen and portfolio flows, overseas borrowings and banking capital. Net FDI of $13.9 billion and rise in overseas borrowing of $9.81 billion helped bolster inflows, compared with outflows worth $4.2 billion in the same period last year.

The overall balance of payments, comprising current account and capital account flows, ended in a surplus of $14 billion, compared with a deficit of $11.3 billion in the same period a year ago. But India’s foreign exchange reserves rose $17 billion during the quarter on account of valuation gains, compared with a $18.8 billion decline in the same period a year ago, due largely to a valuation loss of $7.5 billion in the 2018 June quarter.

August 2019: Core Sector Output Shrinks 0.5%

India’s core sector output contracted 0.5% in August after growing 2.7% in July, marking the lowest point in growth since April 2015 and reinforcing the slowdown that the economy is facing.

The contraction, as per commerce and industry ministry data released, suggests lack of any recovery in the second quarter after GDP growth plunged to a six-year low of 5% in April-June. It could lead the Reserve Bank of India to cut rates further when it reviews its monetary policy later this week.

The Index of Eight Core Industries, popularly called the core sector index, measures output of eight infrastructure industries. The core sector had expanded 4.7% in August last year. The government on Monday revised upwards the core sector growth for July to 2.7% from 2.1%. The government on Monday revised upwards the core sector growth for July to 2.7% from 2.1%, based on an upward revision of steel output to 8.9% from 6.6%. April-August core sector growth was 2.4%, as against 5.7% a year ago.

Output of coal, crude oil, natural gas, cement and electricity contracted 8.6%, 5.4%, 3.9%, 4.9% and 2.9% respectively in August. Only refinery products (2.6%), fertilisers (2.9%) and steel (5%) posted positive growth in August.

The eight infrastructure industries of coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity have a 40.27% weight in the index of industrial production. Low core sector growth suggests moderation in industrial growth from better-thanexpected 4.3% in July. Economists expect IIP growth to be anaemic in August and even fall below 1%.

RBI is expected to cut its key policy rate by 25 basis points (one basis point is one-hundredth of 1%), following the 110 basis points cut already announced in 2019 so far.