Daily Financial News Analysis – 6th Jan’20

Table of Contents

Service Sector

India’s services sector activity gained momentum.
It touched a 5-month high in December
Supported by uptick in new business orders that boosted output as well as employment
IHS Markit India Services Business Activity Index
1. 53.3 in December
2. 52.7 in November
2nd strongest rate of increase in output in over a year, after July.

Centre is all set to cut the annual budgetary expenditure for the current financial year.
Spending across most ministries may see a total fall of Rs 2.2 lakh crore or 8% from the budget estimate.
Actual expenditure this year: around Rs 25.6 lakh crore, or 92% of the BE.
The spending reduction from BE level this year could be the sharpest since FY15
The spending curbs being imposed now to avoid a big fiscal slippage.
So basically, government expenditure will be down.
It is not only the Centre, but States are also reducing their capex.
Estimate: the shortfall in net tax receipts in the current financial year could be as high as Rs 3 lakh crore.

They boast about their low tariffs but they have erected huge non-tariff barriers (NTBs).
Most of which are tailored to mask the ferocity of trade protectionism, in a bid to control the imports they deem undesirable.
Analysis of the Indian Commerce Ministry.

Technical barriers to trade (TBT)
1. South Korea (1,036)
2. Japan (917)
3. Thailand (809)
4. India has initiated only 172 such steps
The total number of TBT measures put in place by all RCEP members, including India, stood at 5,909.
Sanitary and Phytosanitary (SPS) measures: These two types of steps are the major sources of non-tariff measures (NTM), making up for over 80% of NTM notifications sent by various countries to the WTO.
Developed countries like the US and those in Europe, too, impose such measures in large numbers.
NTMs are not always aimed at curbing imports
December 23: The NTBs slapped by various trading partners came up for deliberations at an inter-ministerial meeting chaired by commerce and industry minister Piyush Goyal.
Concerned with a surge in inflows of sub-standard products, Goyal has now asked the Bureau Of Indian Standards (BIS) to develop standards for over 4,500 products (HS lines), preferably over the next six months.

Indian tea industry has expressed concern over the possibility of exports to Iran taking a hit.
If there is a conflict, there will be no exports of tea to Iran.
Till November 2019, exports to Iran stood at 50.43 million kg.
While shipments to the Commonwealth of Independent States block was at 52.80 million kg
Last year, the orthodox tea exporters switched over to the Iranian market in a big way because of higher value realisation.
If exports to Iran do suffer, then the industry can take a relook at the CIS countries, but at a lower price realisation.
At present, exporters are worried and monitoring the situation.
Iran is an important export destination for India
India’s basmati rice exports to Iran are likely to be affected.
Domestic trade body AIREA asking exporters not to undertake any shipment till the situation improves.
If shipments get affected then it will impact domestic prices and in turn farmers’ income.
During the last fiscal, India exported basmati rice worth Rs 32,800 crore, of which nearly Rs 10,800 crore worth rice was shipped to Iran.
Basmati rice exports to Iran were hit last year as well following US sanctions on the country.

Bharat Sanchar Nigam Ltd has submitted details of 14 properties worth Rs 20,160 crore to the Department of Investment and Public Asset Management (DIPAM).
This is part of the telecom corporations’ ambitious asset monetisation plans.
BSNL Chairman and Managing Director P K Purwar said, “The corporation is making all out efforts to monetise its assets”.
Purwar said these land parcels are spread across India in locations like Mumbai, Thiruvananthapuram, Chennai, Ghaziabad and other places.
Over the last few weeks, both the companies have launched their VRS plans and thousands of employees of BSNL and MTNL have opted for voluntary retirement.
The scheme will help reduce BSNL’s wage bill by 50 per cent and MTNL’s by 75 per cent.